One of the key problems affecting women and families today (that sadly Covid-19 has made even more urgent) is the lack of retention and acceleration of truly inclusive workforces, as well as the failing outcomes around maternal and urgent pediatric health conditions—impacting a wide and growing set of working parents across the U.S. When you really think about what a working family is struggling with these days, there are so many gaps in our traditional healthcare systems, for example, in risk detection for things like perinatal mental health, and in birth equity (the risk of pregnancy-related deaths for black women is 3 to 4 times higher than those of white women). Because of this, there are also related and growing gaps in getting people back to work. A report by the UN Women has shown that, on an average pre-Covid-19 day, women already spent about three times as many hours on unpaid domestic work and care work as men. Due to the pandemic, we’ve seen a horrific exodus of working mothers out of the workforce. 17 out of the 24 OECD countries reported an overall increase in unemployment in 2020—women were the most affected. Even if they don’t leave the workforce, women today earn just 49% of the typical men’s dollar, which translates into a loss of 39% of lifetime earnings after just one year out of the workforce. McKinsey’s analysis shows that Black Americans are almost twice as likely to live in the counties at highest risk of health and economic disruption, if or when the pandemic hits those counties.
Cleo—a family benefits platform that brings proactive, holistic health, career, and wellness support to working parents and their families, is on a mission to support all stages of parenthood by connecting all the dots, from family planning to expecting a child to parenting children up to age 12. Their customers span the Fortune 500 and include membership of working families in 55 countries globally. Cleo pairs member families with an individual coach that proactively guides them through every up and down of family planning, expecting a child, and raising a family—all while enabling working parents to thrive in their workplace. Through its app, working parents are able to access personalized content, a supportive parent community, and a global network of certified experts including therapists, doulas, lactation consultants, among others.
The company today announced a $40 million Series C investment led by Transformation Capital, with participation from Glynn Capital, PruVen Capital, and Gaingels and existing investors Greylock, NEA, and Felicis. This round brings Cleo’s total funding to $83 million.
Since its founding in 2016, Cleo has become one of the industry’s most complete and high-impact family benefits platforms. In the last year, the company saw eightfold membership growth and over 100% increase in revenue from employers across several verticals, including Fortune 50 technology companies, food and beverage companies like Schwan’s Company, and companies with large, distributed workforces like Learning Care Group.
“We support the health and well-being of our working families and ensure that they can succeed both at home and at work, while we drive the outcomes employers care about most: better health outcomes (and related lower costs), and retention of their working mothers. For example, we look at careers and the support families need around big transitions in life and help to successfully navigate them, like welcoming a new baby and the path to coming back to work, ready, healthy, and supported in all dimensions. We also help members navigate the myriad of existing policies, benefits and logistical supports working families need like childcare; navigating to other health benefits, or mental health benefits. You can think of Cleo as an all-in-one solution that can support all of these dimensions and bring families, not just back to work, but actually help them thrive in this new era of working families that has drastically changed in the last decade,” Sarahjane Sacchetti, CEO of Cleo, shares with me in an interview.
Cleo is one of the many companies today within a growing family health industry. While families have always faced challenges, the pandemic put these challenges front and center and urged employers to wake up and identify solutions to combat this crisis. Health tech as a category unsurprisingly saw massive growth last year: in total, health tech drew around $10 billion of U.S. and European VC investment in the first three quarters of 2020, compared to $8.8 billion in the same period in 2019, according to data from Silicon Valley Bank.
Sacchetti joined the team at Cleo in late 2019, and to say that her first year with the company was interesting would be an understatement – she only had two and a half months in the office with her team before the pandemic started. “This was also my first year with Cleo, which was quite interesting to be the new CEO—in addition to being a first-time CEO—during a global pandemic. I also learned that we have so much further to go—the fact that we saw a massive exodus of women leaving their careers because of Covid-19; or that 1 in 4 of our own members is citing not just their own mental health needs, but fears around the mental health, education, and specialization needs for their children. That is sadly going to be something that I think stays with us for a long time to come, and was accelerated by Covid-19. I think it’s one of the lasting imprints that more people are aware of now and are ready to focus on. So yeah, while it’s been one of the longest years of my life, it’s also been one of the most productive and inspiring.”
“I think employers are realizing that there’s no perfect solution to meet the specific needs of every employee, and a more holistic and adaptable approach is needed: one that supports not just an employee’s physical wellness, but their mental and emotional health, as well as their ability to thrive at work. Connecting the pieces, vs. just being another piece to the puzzle, will change the utilization of necessary programs but also ladder up to the outcomes we’re all looking for: better health outcomes, higher retention rates of parents, and more inclusive teams at the top of our companies by 2031,” explains Sacchetti.
In a time when female-founded companies continue to take a smaller share of venture capital and female representation at the board level for private companies is minimal at best, Cleo has a predominantly female board of directors, and a leadership team that is over 80% female, most of whom are also working parents.
According to Sacchetti, this was intentional, but the work is just beginning and is nowhere near finished. “There are two sides to how I think about the diversity of our leadership team. Number one, it’s always a work in progress. By most tech startup companies’ standards, Cleo is certainly more diverse at the top and throughout our company, particularly in our startup class as a Series C company. I believe that women leaders only raised about 2% of all venture capital dollars raised last year—unbelievable. At Cleo, our leadership team is also a majority of working mothers. Among our leadership team, seven of us have not just children, but young children under age 12, which I think is another atypical trend. That said, our work around the diversity of our leadership and management team is absolutely in progress and not yet representative of the members we serve. Our goal as a business is to not lose sight of the value of representation among the leadership, especially with a product and service like ours. And so I would say that bringing more BIPOC members into our team, especially at leadership levels, is an area where we still have a ways to go,” she adds.
“Bringing in aligned investors who are just as passionate about our mission and vision for working families as we are is so important. In this raise, we brought on Transformation Capital’s Mike Dixon, a veteran health tech investor, to join our board. We also added some really great folks from Glynn Capital who invested early on, at about the same stage that they invested in Lyra Health. They saw the emerging need for mental health benefits just about five years ago and we are seeing some of the same signals here in family benefits. Another new investor is Gaingels, which is an advocacy group of LGBTQ investors and advocates that we’re thrilled to have along with us on this journey. And last but not least PruVen Capital, which is Prudential’s new venture investing firm. Our Series C was also supported by some of our existing investors – including NEA, Greylock, and Felicis.”
Raising this capital during the pandemic was a uniquely intense and accelerated experience for the company and Sacchetti, too. “While getting to know investors over Zoom isn’t easy, I think in some ways, my kids joining these calls made it a little bit easier to connect with the people and get a sense of those that were really aligned with our vision and understood not just Cleo and our market category and our potential, but also what it’s like to support a team of working mothers who are building this company as we build our families. This dynamic also helped me evaluate how people responded to things like hyper four-year-olds popping into the Zoom.” I’m sure any working mother who spent last year running a business, homeschooling her children, or juggling motherhood with work and house chores can totally identify with this—myself included.
So what’s next for Cleo? A lot of product innovation and continuing to move to address the unique and increasing needs of working families. Major areas the company will be investing in this year are in the clinical and logistical gaps that traditional systems have a hard time addressing, including work around the maternity journey, deepening its pediatrics practice, and continued addition of specialized partners in Cleo Marketplace that can support all different care areas that parents need. Also, Cleo will be growing its team, particularly in Product and Engineering, to continue the build-out of its personalization and data engine behind its parenting platform.
Sacchetti predicts that the dependent care benefit that we used to think was sufficient (giving employees and their dependents medical, dental, and vision coverage) will be replaced by dependent care support that won’t just check the box, but will be a strategic investment in what she thinks of as ‘whole family health.’ Employers increasingly being called in to support the household health of their employees presents both a huge challenge as well as a massive opportunity for strategic companies. “Historically, one of the most overlooked identity groups in our workforce and health investments, are working parents.”
“I think this is going to become the standard; family health is not a fringe benefit, but is starting to be a core benefit. I think the reason is that there’s suddenly so much cost around losing these individuals in your population. There are also massive costs around maternity and fertility that have just gone overlooked. So I think the ROI alone is a huge reason. Secondly, I think this is a signal to employees of where a company’s values lie. If employers want to see inclusive populations, and people like me at the top of their companies, they’re going to have to really shift how they provide this personalized and more verticalized support for these parts of their population.”
Sacchetti’s hope is that in 10 years’ time companies like Cleo will have helped shift and shape—not just the conversation—but the expectations and standards for how we support working families by creating action to really change our check-the-box exercise in benefits, leave policies, structural schedules, and more. “I’d like to see a shift to the reality and understanding that we have a massive amount of families that contribute greatly to our companies that aren’t accelerating into leadership levels or representing the communities that they serve. My vision is that we start to see people like me at the top of companies—a woman with a four and a seven-year-old—not as an exception to the rule but as more of a standard,” she concludes.