A Columbus fintech startup has raised $5 million from Drive Capital LLC to expand its platform aimed at the enormous staffing crisis in childcare centers.
Tandem pivoted in the fall to professional credentialing and job-matching for childcare workers. For the previous three years, it had built a service for individual families to hire babysitters, pet sitters and help with odd jobs.
Preschools and daycare centers organically started asking to use the service to find workers, and upon investigation that was a much bigger market, co-founder and CEO Olivia Weinstock said. Not only was the need dire, but the startup's revenue turned from a trickle to a flood.
"We are all-in on childcare centers," Weinstock told Columbus Inno. "They are so short-staffed that they have no time to run their business. (Administrators) would answer their phone from a classroom – acting as a teacher because they had no staff."
This is the first outside capital for Join Tandem Inc. since a $5 million seed round from Drive in 2019. The round will go toward hiring, especially in sales, and expansion to new markets, she said. When not working remotely, Tandem incubates within the VC firm's Short North office.
Nationwide, tech companies are on pace for the lowest amount of investment since 2017, according to PitchBook and the National Venture Capital Association.
"The team at Drive has seen the evolution and the hard work that’s gone into our mission – which was from day one to create better solutions for the childcare industry through technology," Weinstock said.
Weinstock, who started a childcare camp at age 11 in her backyard, founded the company with Natalie Amling and McKenzie Kennelly. Tandem was one of Columbus Inno's Startups to Watch for 2022.
One in eight Central Ohio childcare workers left the industry since 2019, largely leaving for higher-paying jobs when centers closed early in the pandemic, according to the advocacy group Action for Children. As of November 82% of childcare centers in the region reported staffing shortages, with nearly 2,000 vacancies.
About 300 centers have registered and 100 use the platform regularly, connecting with hundreds of credentialed workers. The service works throughout Ohio, with most of its clients in Columbus, Cincinnati, Cleveland and Dayton. Soon it will expand to Florida, and future states would be determined by market demand and the regulatory landscape for entry.
"We have a lot of untapped market in Ohio – there are 6,000 centers here," Weinstock said.
The digital, on-demand platform for temporary or full-time work at a center competes with "antiquated and very contractual" traditional staffing agencies, Weinstock said.
"We're hearing from centers that it's a crucial service," Weinstock said. "They can keep their classrooms open. ... They can start to take people off their wait list."
Besides job matching, Tandem creates a digital "folder" for caregivers to upload the required documents they need for Ohio credentialing, including fingerprinted background check, vaccination and other health records, and high school diploma. Each state has different requirements.
The average wage in the seven-county region is less than $11 hourly, according to Action for Children. Jobs matched through the Tandem app pay $12 to $24 hourly, according to the website; Weinstock said the average is about $15.
The old Tandem was free to both workers and families. Childcare centers pay a fee based on hours worked.
"Pivoting has basically taken our revenue from zero to 100, in a sense," Weinstock said. The amount is not disclosed.
Tandem is structured as an online bank, simplifying direct daily payments to the caregiver's account, held at an undisclosed partner bank.
Before the startup's only revenue was a fraction of the standard transaction fees that merchants pay when caregivers spend from their debit cards. That model was predicated on building a huge volume of users.
Families, sitters and workers were loyal once they used the platform, Weinstock said, but there were always more workers than families looking to hire them.
"What we didn't quite figure out was scaling that demand side," she said. "It's been sad to turn off that side of our business we worked so hard on for three years."
Still, the bank structure proved advantageous for the new model with credentialed childcare workers.
"Our ability to give them daily access to their earnings, what we call daily pay, is one of our biggest value propositions and motivation for our workers," Weinstock said.
With the pivot, Tandem halved its staff to eight, she said, and now is ready to grow under the new business model.
"We've proven out this new hypothesis," she said.
