According to PYMNTS.com, IAC has agreed to purchase Care.com for $500 million in cash at a 13% premium. What could be more local than a company that helps consumers find caregivers for their parents, children, and pets? Care.com is a marketplace that matches caregivers with care seekers.
Sheila Lirio Marcelo founded Care.com in 2006 with the goal of building a comprehensive marketplace within a highly fragmented ecosystem.
According to the company, some $336 billion is spent on care in the United States. This figure is bound to grow considerably as the baby boomer generation continues to move from their working to their senior years. Today, there are 54 million Americans 65 and older. In just 20 years, that number will swell to 80 million.
Even now, the demand for quality senior care far outpaces the supply of quality caregivers. Just ask anyone who is involved in helping their parents find quality care today. So IAC is making a bet on Care.com to garner a healthy slice of the $336 billion (and growing) pie.
But if the market is so big, why is Care.com’s valuation relatively small?
One possibility is that caregiving is a dicey space. There are only so many risks a matching service like Care.com can engineer out of the equation.
If you review its recent investor presentation, it highlights measures focused on safety and cybersecurity. With 70% of its users relying on mobile devices to interact with the platform and providers, the company can leverage technology to mitigate some of the hesitancy those looking for providers might have.
To me, this means raising the level of transparency on both sides of the marketplace equation — those needing care and those offering care. That means more and more of care providers’ backgrounds — training, experience, skills, certifications — will necessarily be exposed to those seeking help.
At the same time, those seeking help will need to be truthful and transparent. After all, in most of these cases, people are entering our homes and are often, if not always, taking care of our most prized possessions — our parents, children, or pets.
I didn’t really answer my own question above. So let me offer some possibilities.
Perhaps the modest valuation has something to do with news reports earlier this year that suggested the company wasn’t doing enough to screen its care providers.
In fact, Care.com pulled some 46,000 listings from their site. Around that time the company took a 70% valuation hit, dropping from around $25 to just $7 in early August. Since that low point in early August, the company’s valuation has steadily climbed and was around $13 before being sold at around $15 per share.
It strikes me that IAC can put in the necessary tools and technology to substantively raise Care.com’s trust factor. If it can make this marketplace sing, IAC will have picked up Care.com for a song.