The shuttering of child care centers forced many parents to leave their jobs, fueling the Great Resignation. And a U.S. Treasury report from September noted the harmful effects of shortfalls in the childcare supply.
For early childhood education, coronavirus stepped on the gas pedal, accelerating trends that were already happening, in good and bad ways.
Market uncertainty during the early days of the pandemic had temporarily halted growth in the early childhood education sector, which had been expanding steadily in the previous decade. But 2021 saw a big increase in spending, estimated at more than half a billion dollars by last August (and closer to $1 billion dollars now).
“COVID dragged us five years into the future,” says Matt Glickman, CEO of Promise Venture Studios, a nonprofit that supports early childhood education and child-care enterprises.
In the last year or so, there’s been an increase in the amount of private capital going towards specialized and innovative solutions in the sector, which has investors hopeful that those new investments will improve access to early education services, especially in the absence of federal aid to the sector.
So the appetite for change is there. The challenge, Glickman says, is to build on that momentum.
Widespread closures early in the pandemic and labor shortages have emphasized how connected early childhood is to everything else, suggests Chian Gong, a partner at Reach Capital. Since then, the country’s employers have shifted to more hybrid work and more work with unpredictable and nonstandard hours.
Childcare companies took a big hit during the pandemic, says Julie Wroblewski, a managing partner at Magnify Ventures. They lost revenue and slots, and they saw plenty of displacement. But some of those companies seem to have weathered the pandemic. For example: WeeCare, a caregiver-focused platform, raised $17 million in a funding round in February, according to SEC filings.
Meanwhile, new tech in childcare has shown promise as a way to help people find available care and to support businesses offering childcare, investors like Wroblewski say. For example: Winnie, an app that connects preschool and daycare services.
Those companies can also provide helpful data on the child care market—the kind of data that governments didn’t have when they were looking to deliver relief funds to the highly decentralized and fragmented childcare system.
However, it’ll ultimately be harder to solve the thornier questions like access and the low pay of care workers.
Childcare businesses operate on razor thin margins, which has made the category challenging, Gong of Reach Capital says. The investor models that are working best are the ones that can creatively draw money into the category, she says. Employer-sponsored child care is one of those areas representing a big opportunity.
Investors like Gong argue that early childhood is still a deeply underestimated category.
Despite being a large market, it’s not seeing the level of investment, innovation, or scale that you’d expect, argues Anna Steffeney, executive director of the FamTech Collaborative, a coalition of family-focused ventures. “I think what we’re trying to do is increase awareness around the opportunities for investment, solutions and innovation,” Steffeney says.
Daniel Mollenkamp is a business reporter at EdSurge. Reach him at email@example.com.