Kinside
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Childcare benefits startup Kinside launches with $4 million from investors including Initialized Capital
Childcare is one of the biggest expenses for American parents — and it’s not just families that are taking a hit. Childcare issues cost the United States’ economy an estimated $4.4 billion in lost productivity each year and also impacts employee retention rates. Kinside wants to help with a platform that not only enables families to get the most out of their family care benefits, but also find the right providers for their kids. The startup announced the public launch of its platform today, along with $3 million in a new funding round led by Initialized Capital.
This brings Kinside’s total raised since it was founded 18 months ago to $4 million. Its other investors include Precursor Ventures, Kairos, Jane VC and Escondido Ventures.
Founded by Shadiah Sigala, Brittney Barrett and Abe Han, Kinside began its private beta with 10 clients while participating in Y Combinator last summer. Over the past year, it has signed up more than 1,000 employers, underscoring the demand for childcare benefits.
“Getting meetings with employers has not been the hard part,” Sigala, Kinside’s CEO, tells TechCrunch. “Any subject line that says ‘do you want childcare for your employees?’ immediately gets a response. We hit a nerve there and when we talked with them, we found that the biggest pain they expressed was that their employees were having a hard time finding childcare.”
Kinside co-founders Shadiah Sigala, Brittney Barrett and Abe Han
The U.S. is the only industrialized country without a national law that guarantees paid parental leave. Companies like Microsoft, Netflix and Deloitte offer strong family benefits in order to recruit and retain talent, but offering similar packages remains a challenge, especially for small to medium-sized businesses. As a result, many employees, especially women, leave their jobs to care for their children, even if they had planned to continue working.
“The worst case for bigger, more mature companies is a delayed return to work, which has a real impact on the bottom line because of lost productivity, but the deeper pain is when we lose the women,” Sigala says. “It’s documented that 43% of women in the professional sector will leave the workforce within one to two years of having a baby.”
Other startups focused on early childhood care that have recently raised funding include Winnie, for finding providers; Wonderschool, which helps people start in-home daycares and preschools;and London-based childcare platform Koru Kids.
Before Kinside, Sigala co-founded Honeybook, a business management platform for small businesses and freelancers. When she got pregnant, Sigala began developing the company’s family benefit policies and became familiar with the hurdles small companies face.
While in Y Combinator, Kinside focused on streamlining the process of using dependent care flexible spending accounts (FSA), or pre-tax benefits, for caregiving costs, after its founders saw that the complicated claims process meant only a fraction of eligible parents get full use of the program. Kinside still helps parents with their accounts by partnering with FSA administrators. Now their app also includes a network of pre-screened early childcare providers, ranging from home-based daycares to large preschools across the country.
The startup pre-negotiates reserved spots and discounted rates for its users and gives them access to a “concierge” made up of childcare professionals to answer questions. Parents can search for providers based on location, cost and childcare philosophy. Sigala says the startup’s team found that many childcare providers have a 20% to 30% vacancy rate, which Kinside addresses by helping them manage openings and find families who are willing to commit to a spot. In addition to its app, Kinside also plans to integrate into human resources systems.
Initialized was co-founded by Alexis Ohanian, also a founder of Reddit, and a vocal advocate of paid parental leave. One of the areas the firm focuses on is “family tech,” and its portfolio also includes startups like the Mom Project, a job search platform for mothers returning to work.
In an email, Initialized partner Alda Leu Dennis said the firm invested in Kinside because “we have this fundamental problem of gender inequality which can be partially attributed to imbalances in the workplace and at home. We have a gender wage gap and domestic responsibilities, still, largely falling on the mother. By solving a problem that men and women have—access to affordable and high-quality childcare—we can improve this situation.”
Dennis added, “the business model innovation that Kinside brings to the table is to involve employers in the process of bringing peace of mind and stability to their employees’ home lives and in turn making their employees more productive.”
Sigala says Kinside sees itself as part of the benefits equity movement, including paid parental leave and, eventually, universal childcare for all working parents. The platform’s users are split equally between men and women, highlighting that the need for caregiving benefits cross gender lines and impact an entire household.
“It’s a complex issue. Our infrastructure and society is still designed for single breadwinner households and yet the economy means that for most households, being able to pay the bills depends on having two parents working,” she adds. “I see this as a movement. It’s the right time.”
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Kinside wants families to make the most of their dependent care flexible spending accounts
Kinside founders Rob Bircher, Shadiah Sigala and Abe Han
The cost of childcare is one of the biggest financial burdens American families face. Even dependent care flexible spending accounts, pre-tax benefit accounts meant to reduce caregiving costs, can be an extra stressor because they involve filling out many forms. Kinside, a startup in Y Combinator’s current batch, wants to help by automating the claims process. It also serves as a childcare management tool, letting parents pay their care providers with a Venmo-like feature while making it simpler for companies to offer childcare benefits, like matching costs, that can help attract talented employees. Kinside is still in beta, but it’s already been adopted by several tech companies, including Le Tote.
Kinside’s three founders—CEO Shadiah Sigala, COO Rob Bircher and CTO Abe Han—were motivated to launch the startup after realizing that dependent care FSAs (which can also be used for other caregiving-related costs, like elder care) are vastly underutilized.
“Even though upwards of 70% of companies offer this FSA, we found in our conversations with numerous companies that maybe 10% of eligible parents are using this benefit,” Sigala says. “From an employee experience perspective, we are really taking on a very onerous, traditional FSA product and streamlining the payments process, not only for employers to offer this benefit very seamlessly, but also streamlining the process for parents to take advantage of this benefit.”
One reason eligible employees forgo their dependent care FSA benefits is the claims process, which can take weeks to process and involves collecting receipts and uploading them onto a website (snail mail and fax are other options). As parents, Kinside’s founders have experienced firsthand the headache of dealing with dependent care FSA forms at previous jobs.
“Some of the products we’ve seen already look a decade old, with multiple screens of input. They are really clumsy, so from a modern Web app and UX experience, Kinside brings it up to speed,” says Han.
Kinside also takes advantage of the trio’s past experience in the payments and benefits space. Before launching Kinside, Sigala co-founded HoneyBook, a CRM for entrepreneurs in creative fields. Han also worked at HoneyBook as lead software engineer, while Bircher was senior vice president of sales and marketing at healthcare benefits tech company Picwell.
The team’s goal is to not only encourage use of dependent care FSAs, but also relieve the mental load for harried parents. To sign up for Kinside, they enter their childcare provider’s information on its Web app and connect a bank account. Kinside then makes automated childcare payments with funds from their FSAs and bank accounts or sends payment reminders. It keeps receipts and at the end of the year provides parents with a tax form.
“This couldn’t be done five years ago because there wasn’t a modern payroll. There weren’t modern payments services that existed and we didn’t have APIs for payment and payroll services,” says Sigala. “A lot of employers offer dependent care FSAs already, but they are very receptive to our service because they are looking for products that will improve the experience.”
Kinside is targeting other tech companies first, since many are at the forefront of building family-friendly policies. Several, including Netflix, Facebook and Etsy, have made headlines for offering parental benefits that are considered very generous by American standards, like longer paid leave, flex time and childcare subsidies. This doesn’t just help parents. It also helps companies build diverse workforces by attracting more millennials and women (the high cost of childcare is a big reason why many new mothers leave the workforce, even if they don’t want to. They simply can’t afford to work).
“They know that you have to offer more than a trivial benefit like free lunch or a foosball table,” says Sigala. “Childcare is more expensive than healthcare, or as expensive as rent. Childcare is eating up to 20% of a Bay Area family’s income.”
One of Kinside’s selling points is enabling small to mid-sized businesses to offer competitive benefits, too. “You see solutions that cater to larger employers, like on-site daycare centers, that are very inaccessible to smaller to mid-sized companies,” says Bircher. “We want to fill a void that we thought existed for SMBs and this was one way to do it.”
As more companies turn to better family benefits to boost recruitment and retention, it’s conceivable that other startups will also look at ways to make using Dependent Care FSAs easier. Sigala says one advantage Kinside has is the founding team’s prior experience, which means they know the right distribution channels. The startup is looking at ways to help parents get more use out of the money they put in their FSAs by partnering with eligible childcare-related services. It also wants to work with companies that pre-screen providers, so Kinside can potentially address all steps of the childcare process, from finding a trustworthy carer and paying them on time to preparing year-end tax forms.
“Parents are going to pay an arm and a leg for childcare already,” says Sigala. “If we can help them get tax-free dollars toward childcare, that’s what we want to do.”
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