Silicon Valley Discovers an Age-Old Child Care Hack: The Neighbors

It was an enticing new option for pandemic-era child care, and almost infuriatingly simple: What if stay-at-home parents watched the children of parents who had to work?

Helen Mayer, an entrepreneur based in Boston at the time, came up with the idea after she had to shut down her college-focused company at the start of the pandemic, joining the millions of women who were pushed out of the work force. Overnight, she became a stay-at-home parent to her toddler twin boys.

As she searched for jobs, Ms. Mayer, 26, became more and more frustrated by the lack of affordable, quality child care options. At one point, she had to turn down a job offer because the company did not include any child care benefits. As she witnessed versions of her story play out across the country, she started to get “really mad,” she said. “It shattered the anchors that I had as a woman, going through college and believing that I would have a level playing field if I ever decided to start a family.”

Harnessing her outrage, Ms. Mayer became a kind of matchmaker: By the end of 2020, she had helped 400 families find child care by linking them up with nearby stay-at-home parents who could provide it. She called the service Otter (her mother’s favorite animal), and it soon attracted the kind of investor attention that has been rare for a start-up focused on child care and rarer still for start-ups led by female founders.

After a group of angel investors gave her $300,000 to start, Andreessen Horowitz, known for backing tech giants like Facebook and Airbnb, gave her a total of more than $4 million. Then in July 2021, Sequoia Capital, another powerful venture capital firm, raised $23 million for her business. This year, Otter expanded into two cities.

As the chances of Congress or the White House addressing parents’ mounting difficulties finding — and affording — child care grow increasingly slim, investors are beginning to see a ripe opportunity in the industry. Parent-tech companies with V.C. funding attracted about $1.4 billion in 2021, according to the venture capital research firm PitchBook, a total much higher than the previous four years combined. That could mean more options for parents.

But some are more skeptical of new interventions from Silicon Valley. Besides, isn’t this hot new platform based on an age-old premise — leaving the kids with the neighbors?

“A lot of people, when they first hear about it, will ask, ‘Wait, hasn’t this been done before?’” Ms. Mayer said. “To me that is an indicator that they’re excited — like, it’s so obvious that it’s exciting.”

An industry waiting to be overhauled

In 2019, about 18 percent of children younger than 5 were cared for in residential-based centers, which often provide a lifeline for parents who work nontraditional hours or live in rural areas. And since time immemorial, parents have leaned on a network of friends, family members and neighbors — the so-called village — to step into caregiving voids.

But even if the idea behind Ms. Mayer’s service wasn’t completely novel, it caught on fast, most likely because child care was already hanging by a thread long before the pandemic. Child care centers run on precariously thin profit margins, yet the service is prohibitively expensive for a majority of parents, and workers often earn low wages without benefits. As Covid-19 strained the industry, workers quit, enrollment dropped and the costs of running a center surged.

In its early phases, Otter wasn’t so much an attempt to fix the problems of the child care industry as it was a way for parents to get around them. While her sons were napping one afternoon, Ms. Mayer stumbled across a Facebook group of parents in New York discussing how to coordinate child care swaps, and she decided to jump in and help. She created surveys for parents to determine each household’s Covid rules and parenting style, asking, for example, how often they would allow their children “to have input into family rules” or “explain the consequences” of their child’s actions. She would use that data to match nearby households whose answers were aligned; then she would jump into each family’s digital calendars, look for open slots and schedule drop-offs and pickups.

Initially, none of the parents in the swaps were being paid. But when she introduced the paid concept, the number of hours that working parents left their children with stay-at-home parents jumped, she said. By word of mouth alone, more families were signing up to be matched every week — the only week that sign-ups were flat, Ms. Mayer said, was in the middle of January 2021, when she moved from Boston to New York. By the end of that month, she had made 1,000 matches.

At first Ms. Mayer saw some hesitancy among potential investors when pitching Otter. How, they’d wonder, can parents trust a stranger with no license or training? Establishing trust, and liability, is part of the reason that each state has strict regulations around who should be looking after children, and where. In Massachusetts, for example, a person would need a permit to get paid for looking after even one child in their home. In New York, laws around providing at-home child care kick in after three or more children, so child care swaps of one or two children aren’t subject to the same training requirements or caregiver-to-child ratios as day care centers.

Because of the patchwork of regulations around child care, Ms. Mayer acknowledged that Otter was not a service that could swiftly be rolled out in every state and said the company was therefore “focused on expanding into states where this kind of care is possible.”

After a brief hiatus last summer to catch up to the pace of the company’s growth, Otter relaunched in late May in San Francisco, where Ms. Mayer now lives, and Santa Clarita, with 15 employees and a total of about $27 million in venture capital. In the three months since, close to 250 parents have signed up and about 12,000 people have asked to be notified when Otter would be introduced near them.

Ms. Mayer’s initial ad hoc matching process is now streamlined through its site: Onboarding — whether that’s a care seeker or a caregiver — can be done in a few clicks, and Otter walks users through a parenting styles quiz, gathers children’s medical information and verifies users by scanning a government-issued ID.

An algorithm proposes potential matches once those steps are complete, but all final matches are made by humans, Ms. Mayer said. Otter also works with a third-party company to run background checks on all parents and surveys each parent on the baby-proofing measures in their homes.

One goal of the platform is to ease the burden on caregivers to navigate the regulations of their states and on parents to search, vet, interview and schedule their own help, said Jess Lee, a partner at Sequoia Capital.

“When I interviewed my nanny, I didn’t know what to ask,” she said. “The way now that we can call an Uber — what if I could do that and get child care with someone I trust in my neighborhood, immediately?”

‘Uber’ for child care?

“Uber for X” is now a familiar pitch for start-ups looking to break ground in new industries. It is also music to investors’ ears in Silicon Valley, said Alexandrea Ravenelle, a sociology professor at University of North Carolina, Chapel Hill, and author of “Hustle and Gig: Struggling and Surviving in the Sharing Economy.”

“Uber was a unicorn, so now when investors hear ‘Uber for blank,’ that’s like dollar signs,” Ms. Ravenelle said. But that business model, which has fueled the multibillion-dollar gig economy, can come at a price for workers, who usually get few — if any — protections and benefits.

“I’m from the generation where there was a house in the neighborhood that had a stay-at-home mom, and that’s where all the kids gathered in the summer because there were homemade cookies in the afternoon and fun activities,” Ms. Ravenelle said. “But there’s a big difference between parents that are trading child care back and forth and one parent who is essentially the employee of another.”

On Otter, as on Care.com, another popular child care service, each caregiver is a contractor who can determine how much to charge by the hour. The company makes money through service fees — currently 15 percent on Otter — for each transaction between parents. Ms. Mayer said her company also had protections in place for the caregiver if a parent canceled, including paying out the caregiver, and other tools to help “caregivers to get paid in a predictable way.”

Claudia Goldin, a Harvard labor economist whose research helped inspire Ms. Mayer, said she believed that part of the “genius” of Otter was that it was “awakening” a new population of workers — stay-at-home parents, in most cases mothers — to the value of the unpaid and undervalued care work they do. Companies like Otter might also expand the labor pool, Ms. Goldin said, in a manner similar to Rover.com, where parents can book pet sitters and walkers nearby, or Etsy, where independent artists and crafters sell their products.

But applying the sharing economy model to the child care industry risks “oversimplifying” its problems and could further destabilize a sector in which workers have long been paid poverty-level wages with few opportunities for career development and growth, said Nicole Jorwic, chief of advocacy at Caring Across Generations, an organization that pushes for policy interventions to fix the care economy.

“The creation of this app reflects the significant and urgent need for affordable, high-quality and available care,” Ms. Jorwic said of Otter. “It does not replace the need to address the underlying systemic issues and the lack of investment in a care infrastructure that supports everyone.”

The precarious nature of the job has already led to an exodus of talent during the pandemic. Employment in the child care industry is about 8 percent below prepandemic levels, according to an economic analysis by Wells Fargo, leaving more than 300,000 families without reliable options. Some workers have seen their paychecks grow in recent months — the median hourly wage for child care workers in 2021 was $13.22, up from $11.65 in 2019. But “you can still go and work at Costco or Taco Bell or somewhere and make more money,” Ms. Jorwic said.

Playground decisions

Rachel Franco, who had her first child in August 2020, has struggled to find stable, affordable care providers for her son since she went back to work at the start of last year, she said. She and her husband decided to move counties to be closer to her mother-in-law, in large part because she had offered to help babysit.

“We moved about 70 miles, I changed jobs, we made this massive transition and really, the root of that, was child care,” Ms. Franco, 33, said. At the same time, she was also searching for backup options to give her mother-in-law a break every now and then.

Last summer, she saw Otter’s web address written in chalk at a playground in Los Angeles and decided to sign up.

After creating a profile on the site, a local coordinator from the company helped facilitate interviews between Ms. Franco and two stay-at-home parent caregivers in her area. She said she had immediately clicked with one and had since bonded closely with that caregiver, inviting her over for a house party she hosted and going to local events together. She now leans on the caregiver to look after her son about two or three times a month.

Using Otter is easier, Ms. Franco said, than other day care options, which require you to “have a day rate, and you can kind of come and go, but then you’re paying for a full day even if you only use five hours.”

Because her husband’s work schedule changes often, she likes the flexibility of going on the site and sporadically booking the caregiver, rather than having a rigid schedule in place.

As a bonus, her son gets along with the caregiver’s son — “they even hug each other, it’s really cute,” she said.