Why I love the Care Space

Startups are attacking just about every vertical.  However, I’ve been surprised to see one industry where there hasn’t been much startup activity.  Perhaps because it’s unsexy and support calls may be life or death situations.  It is an $84B industry in the US. 
The Elder Care Industry
An $84B industry represents an estimated 3M+ individual workers in the industry.  People may be hesitant to enter this market because of difficulties working with Medicare and Medicaid.  I can only imagine how difficult it is to work with them.  But there is plenty of reason for optimism.  Estimates are that there are nearly 1M workers that fall in the “grey market” – the term used here for home care aides paid out of pocket through private arrangements.  
Just for reference, there are 233,000 taxi and limo drivers in the US. 😉 

And let’s take a look at how much the workers earn. 
So, why do I like this industry so much.
Massive industry fragmentation.
As of 2010, there were 82,239 different home care agencies.  Tons of franchises exist to help people start a home-care business with little money down, usually a $75K franchise fee to get things going.  Lots more individual providers advertise their services on Care.com, Craigslist or any other local services directory.  It’s incredibly hard and time-consuming for a customer to go through all these options and find a qualified provider. 
Unsatisfied customers
I’ve talked to many people who have gone through the process of finding home care for an elder parent or relative.  Every story I’ve heard is similar.  They interviewed many dozens of providers and had a very hard time finding reliable and high-quality caregivers.   When they did find someone they liked, they frequently lost the person later because caregiver retention is incredibly low. 
I don’t have any hard data on customer satisfaction in the industry, but I’d be willing to bet that the NPS scores are terrible.  
Unsatisfied workers
For elder caregivers that are working at an agency — the main benefit is client acquisition and stability of work.  They are all working independently anyway, so they’re not getting much else.   For that privilege, the agency takes about 50%.  If you assume for a moment that the typical customer will end up using the service part-time (10 hours per week) for 6 months, the profit from that relationship for the agency is $2,400 — 24 weeks * 10 hours per week * $20 hourly rate * 50% agency fee = $2,400.  That should be way more than enough to cover acquisition costs.  
I believe that a mobile-first service leveraging good logistics and workflow could drive down the


cost while at the same time paying the best caregivers more money and offering higher utilization.  More money and faster pay to caregivers = happy caregivers = happy customers. 

Highly recurring needs
Most in-home care is highly recurring.  It needs to happen at least every week and sometimes every day.  This puts it in one of those rare categories like taxis or food delivery that is needed very frequently.  
Baby boomers
In case you haven’t been paying attention.  America is aging.  The market for in-home care is expected to grow rapidly for the next few decades as the baby boomers start needing care services. 

Some big challenges
One problem is the “monogamous relationship” aspect of elder care and the relatively high degree of trust required.  This may make disintermediation a big challenge.  I suspect that this is an issue, but there are a few things that mitigate these risks.
1) Value-add from the mobile app.  The convenience factor that comes from the parent being able to book, schedule, and pay through the system may be enough to keep all of the work on the platform.  A geofence around the elders home could give simple push notifications to alert the adult that the caregiver has arrived or has left.  
2) Ability for on-demand / flexible workers.  While it may be natural to have a monogamous relationship with a primary caregiver, there are surely times when the schedule doesn’t work out and a substitute is needed.  Making this process easy and convenient should be enough to prevent disintermediation.
3) Value in guaranteed work / payments.  The brilliance of the oDesk hourly model rested on the guarantee of work.  For those that don’t know, the work diary feature of oDesk takes screenshots every so often, therefore guaranteeing that work was being performed and billing is accurate.  The same opportunity exists in elder care.  
4) Value add for trust.  A marketplace should be able to optimize for the trust and quality of caregivers far better than the individual family reviewing their options.  Just for reference, a current search on Care.com yields 1,800+ caregivers just in LA.  That’s not good at all.  How am I supposed to choose out of those 1,800?  I also believe a marketplace can build a brand around trust and quality by being very proactive about curation and adding standard services like certifications, background checks, and insurance. 
If you’re working on something in the space, I’d love to hear from you.
PS – In a future post I’ll explain why I’m bearish on Care.com.