Great news for Andy Cohen, the founder of Caring.com and the venture investors.
Yesterday Caring.com, a Senior Housing Forum partner, announced they were purchased by Bankrate Inc. for $54 million dollars. This is obviously great news for Andy Cohen, the founder of Caring.com, and the venture investors who bet on Caring.com. It is also great news for the senior living industry. I got a chance to visit with Andy about the deal. He is pleased with the sale because Bankrate is a company that has a history of purchasing companies like Caring.com that help consumers make complex buying decisions. Their mode of operation is to purchase successful emerging companies that have great growth potential and provide additional resources that will help them continue to grow, utilizing the strengths of their existing team. I asked Andy what we should expect to see that would be different. For him and his team the big win is that they will have additional resources to grow Caring.com more rapidly. This means being even better at serving consumers and senior living providers.
Deal Details
Caring.com was founded as a venture backed technology company. As is true with every venture backed company, the big payoff for the venture investors arrives when the company is sold. In high profile cases, like Facebook, Google and Twitter, the sale comes in the form of a public stock offering. More frequently these emerging companies are purchased by a larger company that sees tremendous additional growth potential.
The Timing
When venture investors invest in a winning company they almost never go looking for a buyer, but rather just keep growing and growing; knowing that at some point someone will see what the company has become and what is still to come and make an offer. In this case it was Bankrate that saw the potential and made a terrific offer to the Caring.com investors.
What it means for the Senior Living Industry
Perhaps the most important takeaway from this sale is that online lead aggregation/generation is here to stay. It is likely to become a more important and powerful force in how consumers find senior living options and make move-in decisions. There has been a predominate view that pay for move-in websites are an expensive drain on the senior living sales budget. But what often gets missed is that senior living consumers like and trust these on-line resource websites. As websites like Caring.com become more potent, many senior living companies will find it becomes easier to absorb the cost as they reduce their spend on traditional marketing efforts (direct mail, newspaper ads, print directories) and that the quality of the leads coming from these sites will make the sales team much more effective. Finally, I am predicting that we will see more of these kinds of deals being announced as the industry grows, matures and becomes more sophisticated. The challenge we all face is figuring out how to move with and even take advantage of these changes. What are your thoughts on the impact of this sale to the industry? Steve Moran
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congratulations to caring.com – I wrote about them and gave them a five star review more than a year ago
I believe that Bankrate made a great deal as I believe that caring.com is worth more than $54 milllion
Congratulations to caring.com and hope you will use the money to do some very cool things for seniors who care
Michael Neuvirth
For the companies like caring.com and a place for mom.com, I struggle with the fact that the only one who pays is the senior-living community. I wish there were a shared cost, that the consumer had some skin in the game as well. The consumer is receiving a service as well. I also wonder how much vetting is done on the communities that these organizations represent.
A topic worth discussing, Sharon. Thank you for bringing it up. Very few clients, when they hear the words “free service,” are even aware that somebody is paying for it. As far as the vetting goes, I truly believe it varies considerably, probably from community to community and from person to person. I know senior advisors that visit with communities and maintain regular contact with their service providers, as well as others that seem to never leave their desk. But even then, who knows to what extent they really go? Of course, we like to believe that each of us in the senior care industry gives it 100% all the time. How can we not? We’re entrusted with the care of America’s greatest generation!
Sharon and Kirkland you make great points. It is a tough problem to figure out how to implement. For just one site like Caring.com to implement a policy that required consumers to pay a portion of the fee would likely be a competitive death knell driving consumers to competitive sites. Yet if all the sites got together to shift to a more balanced model, it would clearly be an illegal act and would only inspire a new competitor to use the existing model.
Steve
@Michael
In market terms, $54 million is not a mega valuation (at least when compared with other consumer app companies that got bought recently) as Caring.com has received $23 million venture capital investments. I assume that Andy has gone in for acquisition route rather than taking more VC money for growth.
@Sharon
Getting money directly from consumers is extremely difficult in most information services. Even for a direct health related innovations, consumers are not willing to pay; companies have to fight with the insurance companies. Only service that comes to mind is Angie’s List which charges a fee to the consumer.
I guess consumers understand that the fees are paid by the senior living communities which are nothing but marketing and sales expenses.
@Kirkland
It is impossible to vet all the service providers in any meaningful way. Regulatory authorities are the ones that could share more information in electronically loadable format. Unfortunately most don’t do a good job. Even consumer reviews are not a solution; consumers are not willing to go public with their identity. What the directory service providers can do is aggregate all available information about the communities and make it easy for consumers to access and compare the date.
For example we, are building and testing a service to make apartment / room / bed availability status in senior living facilities. This service will provide near real time availability information to the consumers. But it is extremely difficult to convince the communities. Don’t we get that sort of information in real estate and hotel industries? I guess the industry has a lot to learn in terms of transparency and technology use. And it takes time.
Sharon, I can see how you might think the only one who pays is the senior-living community. I’ve been a family caregiver and worked for a senior-living community and used to feel the same way. However I have learned that communities, consumers and referral companies like ours ALL have skin in the game.
The consumer begins reading about care the minute they experience a shift in a loved one’s ability to care for themselves. They look to “third parties” for help and they begin researching options in terms of home care or housing. Companies like mine (Caring.com) invest considerable amounts of upfront money to provide high quality information about care options, local senior living communities and most of all, matching the right options with the person inquiring and their loved one’s needs and preferences, including in reaching, screening, and educating potential clients for senior living communities. It’s considerably more involved than anyone thinks it is!
More information about the social mission of Caring.com and how we make money is located in this area of our website: http://www.caring.com/about/index.html
Please email me personally – [email protected]. I know we would enjoy a conversation about this topic in light of the shifts now happening in senior housing and care!
Possibly this will serve as a recognition to the capital markets that those focusing on serving the senior population potentially serve a value in the market.
I know that Andy has worked hard for a number of years to create the impact he has had as a leader in the industry
Great point about the capital markets. I do think this is beginning to happen.
Steve
Key to remember caring.com is not profitable and owed $23 million to VC’s who actually have a time line for their payout and the entire $54 million was based on additional factors being met. A Place For Mom’s VC’s also exited when they saw they could not get the return they wanted. Caring.com first had a business model that was 100% ad supported and later switched to lead referrals. VC’s have tough stipulations for ROI and actually want 10x’s their investment back in 3 to 5 years. Once you hit the 7 year mark and there is no exit, the garage sales happen. And if these companies are not profitable, and are spending too much to aquire clients, the business model will change. This sale was a necessity because caring.com spent $23 million and after 8 years still was not profitable.
I have no insider information to the deal itself and the profitability of Caring.com at the time of the sale. But I would say, in fairness, that it is difficult to believe that Bankrate would have made this purchase if the company was not profitable or close to profitable with great prospects to turn into a very solid investment.
Hard for me to see them looking at caring.com and choosing to bail out the VC’s. Maybe that is not what you are implying, but I believe that Caring.com will continue to grow and thrive. In think Bankrate has made a great investment.
Steve
VC’s have stipulations to force an exit and caring.com was not profitable and fundraising And their VC’s had control. Yes, the buyer can be profitable of they buy it cheap enough and Bankrate can tie them in with their other sites and plug the hole on spending. A Place for Mom was a garage sale to Warburg Pincus Equity after they had a class action lawsuit to settle. Warburg Pincus is now working in a profitable business model.