Toronto startup CareGuide has raised US$2 million in debt financing from CIBC Innovation Banking to expand its nanny-sharing marketplace and disrupt a childcare market dominated by Facebook and Craigslist.
The funding injection follows the departure of seven senior staff, including several founding employees who have left to start their own businesses.
“You can certainly say it’s been a tumultuous year, especially compared to the years we had previously where we had zero turnover of the [executive] team,” said John Philip Green, co-founder and CEO of CareGuide. “Overall, it’s also very positive, too; it’s just change.”
CIBC Innovation Banking is making a US$2-million bet on the Toronto-based caregiver startup CareGuide, which wants to disrupt the emerging nanny-sharing business with its new marketplace, Nanny Lane. The company is hoping its background-check and payroll services will help it carve out part of a market dominated by job postings on Craigslist and private groups on Facebook.
Founded in 2012, CareGuide has raised over $10 million, according to Green. That money came from venture capital firms like iNovia Capital and Plaza Ventures, as well as from the personal finances of some of Canada’s most prominent tech CEOs, including Hootsuite’s Ryan Holmes and Vidyard’s Michael Litt.
CareGuide’s nanny-sharing marketplace, Nanny Lane, connects parents with nannies, processes background checks and manages payroll. The service is currently available in over 100 U.S. cities and has over 100,000 monthly users.
“It’s the experimental wild card that we have inside the business,” said Green. “We’re spending a lot of money to create it, and it’s creating the future. If we can bring it to scale—and by that I mean several million users a month—it will have a real impact on families and nannies.”
The nanny-sharing market is currently dominated by job postings on Craigslist and private groups on Facebook, according to Green.
“It’s not one that we’ve invented; nanny-sharing has been going on for a long time—it’s become really popular in the U.S. over the last two years or so—but no company has tried to make it easy,” said Green. CareGuide isn’t the only company trying to carve out more of the market from the tech giants. Massachusetts-based Care.com, for example, has 32.9 million members across more than 20 countries.
Nanny Lane isn’t currently a significant money-maker for CareGuide, but it’s growing quickly.
“It’s high-risk, to be honest. We’re not making as much money from it as we are other parts of our business, but it’s growing faster,” said Green.
Following a $6-million Series A in June 2018, CareGuide’s employee base has changed significantly, with seven senior employees leaving the company.
Alyssa Atkins, the company’s vice-president of marketing who has long been the public face of the firm, is leaving at the end of May to start her own business, said Green. Aron Jones, former vice-president of product, also left to start his own business in December 2018. Brian Sharwood left his role as CareGuide’s vice-president of operations in August 2018, said Green, but remains involved as an investor in and adviser to the company. The company promoted Ali Dinani, a longtime employee and former vice-president of strategy, to the chief operations officer role in November 2018.
Other senior staff departures in the last year include Jess Sugar, former head of payroll; Freya Kyrstein, former director of customer support; and Bretton MacLean, the former design director who left in December 2018. Jessica Okorn took over the customer success role in February 2018.
“All of our VPs either grew up in the company or we hired them, and after our Series A and after five years, it’s time to make some upgrades in our executive suite,” said Green. “The company was getting to a point where we needed a proper CFO, for example, and a proper HR functionality. We started to need these things to be done at a much higher level, and we could afford to have experts in each of these domains do them.”
The company hired its first chief financial officer, Ken Scott, in January, and vice-president of engineering Emir Hasanbegovic joined the company in April to replace former CTO Ed Lui, who departed in February. Amin Bashi joined in April as director of product and design to replace Jones and MacLean’s roles. CareGuide’s first vice-president of HR, Jenn Fitzsimmons, joined in October 2018.
CareGuide allows parents to find full-time caregivers for their children and elderly relatives, as well as petsitters or housesitters. In 2016, it spun off a payroll service, HeartPayroll, to help people do payroll and tax services for their caregivers. The company’s growth strategy centres on owning high-traffic domain names like Sitter.com and PetSitter.com, and acquisitions of competitors that it can integrate into its own platform. One of its most high-profile acquisitions was the firm CanadianNanny.ca in 2015, which claims to be the top nanny service in Canada.
CareGuide has raised money unconventionally to fuel these acquisitions, including several funding rounds involving over 70 angel investors—among them Holmes, Litt and Derek Szeto, who sold RedFlagDeals.com to Yellow Pages in 2010. CareGuide secured $1 million in debt financing from RBC in 2015, before banks were aggressively competing to reach the tech sector.
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The company plans to use the CIBC funding to continue these acquisitions, said Green, whose latest acquisitions include Omaha, Neb.-based company Nannies4Hire and the domain Housekeeper.ca. “It’s like real estate,” Green said. “So you can think of the domain name as being the plot of land, and then what we build onto it is our expertise.”
Since its Series A, CareGuide has seen 45 per cent revenue growth. The company had planned to hit 80 employees by the end of 2019. It currently has 43, according to Green. “In the midst of all these changes and all the growing pains we’ve had, it’s pretty good,” he said, of the revenue growth. “We continue to have a good relationship with our board and equity investors.”
Green said the company is not entertaining acquisition offers, despite getting interest almost twice a year from what he called “bigger” competitors.
“Sometimes, they want to buy part of the business, but not the whole thing; sometimes, they want the whole thing,” he said. “We haven’t ever really entertained that. The future is too bright for us right now.”
Correction: A previous version of this article stated that CareGuide recently acquired housekeeper.com. They recently acquired housekeeper.ca. The piece has been updated.