FundAmerica Releases New Tech for Capturing Investor Leads

Hello, Republic Community!

Thank you so much for all your wonderful questions — and for your patience at my sometimes long response time. I have seen a bunch of the same questions appear multiple times, and while I’m happy to answer them, it occurred to me that if so many people have the same questions, I should probably just make an FAQ document outlining the most common questions and my answers to them. So, here goes.

QUESTIONS ABOUT OUR BUSINESS MODEL

How do you prevent people from taking their relationship with their sitter “offline”? 

This is probably the #1 question we get from investors, and it’s such a big issue with marketplace platforms that there is an official term to describe it: disintermediation.

Recognizing that parents are more likely to try to disintermediate than sitters, our approach to preventing it focuses on making sure sitters are incentivized to stay on the platform. We give them many protections they don’t get when parents book them outside the platform. First, our insurance covers every engagement. Second, sitters get cancellation protection when they’re booked through Nanno — meaning that if the parent cancels within 24 hours before a job starts, the sitter still gets paid something. And they get hours protection (if the parent comes home early, the sitter still gets paid for the entire amount of the booking). Finally, when sitters are working with a lot of families through Nanno, they don’t WANT to have families trying to message them outside the platform. And they’d rather receive job opportunities that they can choose to not accept than personal text messages that they have to reply to and decline if they’re not available (or ghost on the parent).

We have heard from sitters that they would rather families not try to book them outside the system. And we further incentivize this by making it our policy that if a sitter DOES accept a booking outside the system, they are automatically kicked off the platform and can no longer receive jobs from other families.

We also do some things on the parent side to deter disintermediation: First, our product is meant to be quicker and easier than booking outside the system, and generally results in the parent having a sitter engaged within 15 minutes. Also, when a parent does find a sitter they like (which is most of the time), they can “favorite” them, and the next time they book, the booking request will go to their favorites first, increasing the likelihood that they’ll get the same sitter. Finally, if the parent wants to book the same sitter on a recurring basis (i.e. every Thursday afternoon), we facilitate that.

All that having been said, we are continuing to work on ways to improve our disintermediation strategy specifically — and we believe that every new feature we add to our product to improve users’ overall experience will contribute to its “stickiness” and cause people to naturally prefer to use our simple platform instead of resorting to the bad old days of using the painful back-and-forth calling/texting that Nanno was invented to avoid.

Do you vet parents too, or just sitters?

Indeed, we DO vet parents as well as sitters. The background check we do on parents is less comprehensive and only searches digitized criminal databases (incidentally, this is the same level of background check UrbanSitter does on its sitters), but we think it is an important protection for our community.

How old must sitters be to join the platform?

All sitters must be at least 18 years old.

Do you have sitters with special needs experience?

Yes! Parents can tell us when they book that they require a sitter with special needs experience, and because we target teachers and nurses specifically with our recruiting efforts, 80% of our sitters have some sort of special needs experience.

Do you offer training for sitters?

We do not provide training directly, but we do sometimes offer free CPR certification classes for sitters. One of the great ideas that I’ve received from investors on this platform is that we should start offering more optional resources for sitters, including everything from body safety and emotional intelligence training to information on how to handle difficult situations with kids and/or parents. We definitely want to do this in the future!

How do you see the risk of future litigation, if something were to go wrong during a Nanno booking?

On the subject of potential future litigation, there are two considerations, legal costs and reputational costs. We carry robust insurance to deal with the former. On the latter, as both business owners and moms ourselves, we stand by our commitment to having the best vetting process in the industry and doing everything possible to prevent a tragedy. The world being what it is, there is no way to guarantee that a tragedy won’t happen on our watch. But what we can do is know and be able to articulate that we have done everything possible to prevent it.

How many potential babysitters are there in the country? Is the demand for babysitters eventually going to be too high for this to expand?

That’s a great question and one we really can’t answer for certain until we start getting close to maxing out our supply side. Here’s what we do know: Most of the sitters on Nanno are teachers, nurses, college students, or child care workers. There are 3.7 million full time teachers, and 1 million substitute teachers, assistant teachers, and paraprofessionals in the U.S. There are another 3 million LPN and nurse assistants and 1.2 million child care workers. So without even including college students (which do account for a big percentage of our sitters), that’s nearly 9 million people in care-related professions available to be part-time caregivers on Nanno. At this time, we’re calculating our ideal parent:sitter ratio at 3:1 (3 parents for every 1 sitter), so to accommodate 34 million families with children (that’s ALL the families with children in the U.S.), we’d need 11.3 million sitters. So, just based on those back-of-the-napkin calculations, I don’t anticipate an obvious supply-side issue at this point.

The whole on-demand, gig economy is being scrutinized from an employment standpoint lately. For example, a big ruling recently in CA says that UBER drivers are W2 employees, not 1099 independent contractors. New legislation is basically aiming to make everyone W2. In your model, are caregivers independent contractors or employees?

There is clear guidance at the federal and state level that occasional babysitting is 1099 work and not W-2 work. Sitters on Nanno are 1099 contractors of the parents (i.e. not of Nanno). We are simply a marketplace connecting the parents and sitters. In California, even under the new legislation, the threshold is that a sitter is not a W-2 employee unless they work more 52 hours for the same family in any 90-day period, which is not our typical use case. At the same time, we are exploring the possibility of offering a W-2-compliant option for people who want to engage the same sitter on a longer-term basis through our platform.

Do parents get to interview a babysitter in any way? 

Because our goal is making quick, on-demand connections, we don’t facilitate parents interviewing in advance, but as soon as a sitter is engaged on a booking, they are instructed to call the parent immediately. The parent can ask any questions they have at that point, and if they are not feeling great about the sitter after that (which is extremely rare), they can cancel that sitter and we will rebroadcast the booking to get a new sitter.

How is Nanno different from other babysitter tech companies, like Care dot com, etc.?

Care dot com is the ultimate directory/registry-based platform. They don’t have any on-demand functionality, and are just starting to introduce robust vetting / background checking on a very limited basis. I think these platforms are very good for finding long-term nannies (where you want to do a bunch of in-person interviewing and eventually pay to run your own background check), but not for booking a sitter on demand.

UrbanSitter – Ultimately, like Care and SitterCity, UrbanSitter is a directory platform, not an on-demand app. In big cities, when you put in an ad for a sitter, you tend to get a lot of responses, so you may be able to fill your job quickly, but there is no actual on-demand functionality in the app. Also, UrbanSitter doesn’t require background checks at this time. They are starting to require them, but even then, they will only be checks of “national criminal databases” — which means criminal records that have been digitized and are available through digital databases. That does not include ALL criminal records, so those background checks are not conclusive that the person has not committed a crime.

SitterCity – As with UrbanSitter and Care, this is a directory/registry of caregivers, with no on-demand functionality. And to my knowledge, they haven’t taken even the initial steps to introduce background checks.

Helpr & HelloSitter – Helpr in L.A., HelloSitter in New York (and a bunch of other nanny agency apps) offer a very similar experience on the parent side to what we do. The difference is their business model and the fact that they’re only available in a few places (L.A. primarily, and to a much lesser extent in the other cities you mentioned). My understanding is that Helpr evolved as an app tied to a single nanny agency. Instead of connecting parents with sitters on a marketplace / Uber-like basis, their sitters are agency nannies. This works well in a single market, but it’s similar to taxi cab apps before Uber/Lyft — the model inherently can’t scale to the broader national market. Although I don’t know for sure, I believe that Helpr’s sitters are W-2 employees to the agency/app, which also has a big impact on their profit margins and revenue model. Ultimately, this sort of model works reasonably well in the employer-sponsored childcare realm, where the margins are bigger, and in a single market. My understanding is that Helpr has actually pivoted their business to focus more on employer-sponsored backup care than parent users, and has never grown.

Trusted — This was a managed marketplace app that directly employed sitters as W-2 employees. They were unable to scale out of the SF Bay area, and last year were acquired by Care dot com to support Care’s employer-sponsored backup care product, Care@Work.

Bambino – This is an app that lets parents connect with sitters connected to other people they know. Parents can communicate with sitters through the app, but again, there is no on-demand functionality. And they don’t do background checks.

Sitter – This app was originally the same as Bambino as far as functionality, but last year they pivoted to becoming more of a back-end software for nanny agencies. It has recently been acquired by UrbanSitter, and my understanding is that the parent version of the app is no longer supported.

SitterFriends – I’ve looked into this one a few times, and it doesn’t seem like it’s actually in operation. If you know anyone who has successfully used it, please let me know.

SittingAround – This is a babysitting coop app, where parents trade “sits” as opposed to booking experienced, background-checked caregivers. So, it’s not at all like Nanno. A very cool idea — just a different take on how people want to address their care needs.

SeekingSitters – This is a relatively outdated website platform available in only a few locations. It’s not an on-demand app.

Zum/HopSkipDrive/Kango – These are ridesharing apps for kids — so, like actual Uber/Lyft for transporting kids, I think between ages 6 and 18.

Bubble – I believe this IS very similar to Nanno — only in England.

PLANS FOR THE FUTURE

Do you have plans to expand internationally?

We do want to expand internationally, but the logistics of building a double-sided marketplace can be challenging (making sure to acquire the right amount of supply, marketing to the demand side), so we’re taking it one step at a time. And we will have to deal with language/translation issues when we begin to expand internationally — even in Canada. But we DO believe there is a need for Nanno in a lot of other countries, and have even spoken with investors in Europe about what expansion there might look like. It probably won’t be for a while, but international expansion is definitely on our roadmap!

When will you have a native Android app?

We’re working on it! We built our web app first, to make sure that anyone on ANY device can use it through their browser. We currently have an iOS native app, but are considering moving to progressive web app (PWA) on both platforms, to enable a totally consistent experience across all platforms. But in any case, we are working on launching a native Android experience (whether it’s a PWA or Android native app) in the near future.

Do you have plans to extend into elder care / pet sitting?

Our plan is to stay in the general kid/family space for the foreseeable future. I’d love to eventually partner with an elder care marketplace (Honor is a big one) to give our users the ability to access other types of care through the same premium membership. I know there are a lot of families that struggle with finding both childcare and elder care, and there is probably a lot of crossover on the supply side (i.e. caregivers).

On pet care, I think Rover and Wag have the market pretty well covered, though I would love to eventually do a partnership with them as well.

What is your exit plan?

We see this as a fragmented market with a lot of growth potential and not a lot of other players in the space. The way I think about the future is that one of two things will happen. We will either become the market leader, or we will be an attractive acquisition opportunity for whomever does. Whichever is the ultimate outcome, the most important thing for us to focus on right now is building Nanno into a strong company and a valuable asset.

QUESTIONS ABOUT THE INVESTMENT

Can I “Gift” My Subscription?

Yes, absolutely! When the deal closes, we will be sending information about how to claim your subscription, and you are welcome to give it to a friend or family member.

How did you arrive at your valuation cap?

We set our valuation cap for this crowdfunding raise to reflect the value that we expect the company to have by the closing date of December 31, 2019. We considered recent comparable seed-stage investments in our space, and the overall trend in seed-stage valuations. (For more on the latter, here is a great resource:  https://www.cooleygo.com/trends/)

And here is a great resource that digs into the methods typically used by angel investors to determine valuation of early stage startups like ours: https://www.lightercapital.com/blog/startup-valuation-methods/.

All that being said, every investor must use their own judgment in deciding whether a valuation is fair.

What do I get for my investment?

Republic is an equity investment platform, so effectively, you’re buying a tiny little part of the companies you invest in through the platform. There are resources on Republic that explain more. (Check out this one: republic.co/investors/why-invest and this one: republic.co/learn/investors/how-it-works.)