Founded date: 2015
Closed date: 12th April, 2018
Company description: Provides on-demand childcare
Crunchbase profile: crunchbase.com/organization/poppy
Location: Seattle, Washington, United States
Total mount raised: $2M (Part of YCombinator Cohort 2016 and received $120K)
Last Funding Type: Series A
Founders: Avni Patel Thompson, Richerd Chan
Number of Employees: 1-10
Founder Twitter: @APatelThompson
Reason for failure: Could not figure out economies of scale
Submitted failure story: On-demand childcare startup Poppy shuts down despite building ‘rave-worthy’ service for parents
(original post on geekwire.com/2018/demand-childcare-startup-poppy-shuts-despite-building-rave-worthy-service-parents)
As a Seattle transplant and mother of two young children, finding childcare was a frustrating experience for Avni Patel Thompson — so much so that the entrepreneur set out to create a technology-powered solution on her own.
With just $180 in a bank account, Poppy was born. Patel Thompson knew she wasn’t alone with this problem and her hypothesis proved right: the Seattle childcare startup would go on to facilitate 36,000 bookings between thousands of families and caregivers over the next three years.
But despite creating a “rave-worthy” service and raising more than $2 million, Poppy announced Monday that it will shut down this week.
In an interview with GeekWire, Patel Thompson said the company was unable to find a sustainable and scalable business model that could keep prices low for parents and pay caregivers adequately. The unit economics with its on-demand marketplace and larger macro issues with the childcare industry — what parents are willing to pay and what caregivers expect to earn — made it difficult for Poppy to grow revenue and margins, even with the help of technology.
“The economics weren’t sustainable to not only continue, but to scale, which is important for us as a venture-backed company,” Patel Thompson said in a phone interview.
Poppy raised money from angel investors, Madrona Venture Group, and Y Combinator, the famed Silicon Valley accelerator that accepted Poppy as part of a cohort in 2016.
The company matched parents and caregivers by analyzing information about households and childcare needs or preferences. It used a 7-step vetting process for sitters — in-person interviews; references; experience; background check; CPR/first aid certification — to ensure quality level.
Caregivers were paid between $11.90 and $23.80 an hour, depending on qualifications and number of children or infants. Rates for parents ranged from $14 per hour for a “Poppy High Schooler” to $28 per hour for five children with a “Poppy Pro” sitter who had more experience in formal childcare roles. Parents also paid $8 per month for a Poppy membership, which allowed for unlimited requests.
Poppy tried to differentiate itself from other online childcare services by helping facilitate matches with a more hands-on approach in a “managed marketplace” versus “open marketplace” competitors such as UrbanSitter or Sittercity — and Seattle-based pet sitting juggernaut Rover — that let supply and demand find each other organically.
“The level of service necessary for that is much higher and while the opportunity is very interesting to be able to make real impact in solving problems, it’s also that much harder to operate,” Patel Thompson said.
Poppy, a “Seattle 10” selection in 2016, employed 12 people. It is partnering with Sittercity to offer Poppy families and caregivers an alternative childcare option, Patel Thompson wrote in a blog post.
“We’re heartbroken that our journey ends here, but we’re committed to ensuring our incredible families and caregivers can connect so they can continue working together,” Patel Thompson wrote in the post.
Customers were disappointed with the shutdown.
“So sad to hear this,” wrote one user on Facebook. “We have loved every Poppy we had and cherished this service so so much.”
“I’m so sorry to hear this,” posted another. “Just so you know, my family absolutely loved you guys and used regularly.”
That sentiment is not lost on Patel Thompson, a vocal advocate for women in entrepreneurship who previously worked in senior roles at Starbucks and Julep before making the startup leap.
“We are very proud of the impact that we made,” she said. “In some ways, that makes this decision that much harder because we created something of significance. It’s a painful process.”