Deal Team: Victoria Cheng, Adi Sivaraman
We recently announced our investment in Cleo’s $40M Series C. We are thrilled to be partnered with a leading startup providing employee benefits to working parents and wanted to share a few insights from our deal memo highlighting why we invested in Cleo.
A Seismic Shift in the Workplace
Macro cultural and economic tailwinds are increasing the number of women in the workplace and the importance of their promotion in companies. Dual-income households are a necessity in today's economic environment for lower, middle, and upper-middle class families. Women in the US are having children later in life leading to greater health risks and higher health costs. The increasing prioritization of family benefits over time is expected across industries, and we are witnessing the beginning of that wave today. COVID has highlighted the importance of providing family benefits to employees who today are forced to navigate a fragmented and complex market of maternity and childrearing resources. Many of these resources remain unknown and digitally inaccessible.
D&I at the Forefront for Enterprises
Corporate America recognizing the importance of women in the workplace has led to the rise of numerous initiatives for diversity and inclusion – after all, talent is evenly distributed, but opportunity is not. The number of female CEOs of F500 companies hit an all-time high in 2020 – although, at 7%, there is still a long way to go to reach 50%. Mercer reported that, in 2019, 40% of employers offered paid paternal leave for both the birth and non-birth parent, up from 25% just a few years ago in 2015. This increased awareness of benefits for working parents is both a function of a cultural change, but also reflective of the underlying economic reality. Between 1960 and 2000, dual earner households rose from 25% to 60% as dual earner households became a necessity and not a choice; over this same time period, a main driver of women leaving the workforce has been a disproportionate expectation that they be the caregiver in their families. The pandemic made this difference even more stark. This is all despite the fact that the legal climate has shifted and made it clear to employers that terminating working mothers would no longer be tolerated and the expectations in society after the MeToo movement has demonstrated that all across America, employees are fighting for workplace equity.
Talent Remains Key
At the turn of the last decade, 43% of women with children left their jobs. Nearly a decade later, the COVID-19 crisis has again highlighted this discrepancy: working parents in general, and working mothers in particular, saw major labor force participation declines driven primarily by childcare demands. This is an acute pain point for employers from a talent attraction and retention perspective, and Willis Towers Watson reports that 59% of employers today say that family-friendly benefits are important to their talent strategy, and this number expected to grow to 77% by 2023. Employers have started to respond to these realities, even before COVID. Employers increased the availability of lactation rooms, lactation support and on-ramping programs for parents from 2015-2019. While this is all progress in the right direction, this simply is not enough to address the reality of the changing nature of the workforce and employee demands. Employees need better solutions and support as working parents, and employers need the ability to better attract and retain talent.
Rising Healthcare Costs
For many employers and health insurance carriers, maternity and healthcare costs continue to rise. When it comes to maternity, the only growing segment of fertility in the US is for women over 35, defined as geriatric pregnancies, which can be higher risk than those under 35. Women over 30 having children has gone up by 24% in the US. As women in the US receive higher education, enter the workplace, put off having children, the costs of fertility, pregnancy, mental health, and post-natal care can increase, and even more so, if benefits are not provided to support them. 25% of hospitalization in the US are pregnancy and childbirth related care. Maternal near death comorbidity cost billions of dollars in annual costs, yet research has shown an opportunity in improvement of care in 44% of life-threatening complications, and US women are 5x more likely to undergo a hysterectomy than in other industrialized countries. Furthermore, we have seen minimal support for women post-birth in the US. In fact, the US is the only OECD country without a national statutory paid maternity, paternity, or parental leave.
Cleo is the leading benefit helping working families meet their career and family aspirations. Cleo serves as a platform for working parents to make the best possible healthcare decisions, navigate the complicated administrative processes, meet a community of other parents, and provides expert guidance at critical moments in the parenting journey, from family planning through post-natal care and parenting children. Cleo is differentiated in its approach by incorporating the non-birth partner. Every account can have up to 2 registrants, which allows the non-birth partner (or another person, such as a family member) to be educated, involved, and changes the weight of responsibility placed on the birth partner, which has been shown to improve outcomes. After all, the greatest leverage a new mom has is to have her partner step up and be more involved in the maternity process and childcare.
Cleo pairs member families with a coach who helps them navigate the ins and outs of family planning, pregnancy, caring for a newborn, and managing on-going childcare. This support is provided in parallel with external resources for working parents to thrive in the workplace, whether the parent in question is the birth parent or not. Through Cleo’s app, parents can access a network of certified professional experts including therapists, lactation consultants, doulas, sleep trainers, nutritionists, physical therapists, and other key resources. In addition, Cleo provides a curated library of personalized content and a social network of like-minded parents also navigating their own careers and parenthood.
The results are clear from the data. Cleo members have a 47% lower low-risk C-section rate than the national average, and 92% of Cleo members return to work after parental leave. What really amazed us was that 85% of Cleo customers reported that Cleo’s support made them more confident to return to work, which we see as evidence of amazing product-market fit. Furthermore, racial equity and healthcare are key priorities for this administration and increasingly for many companies. Within the US, there are dramatic differences in the outcomes of black women and white women. Cleo’s solution works to address the unique systemic obstacles, health risks, and societal biases that these employees may encounter through a variety of ways.
Today, Cleo is serving more than 100 leading employers in over 55 countries. The company grew membership by 8x YoY from employers across verticals as diverse as tech, food & beverage, retail, and financial services. Cleo also saw strong growth within existing customers like Salesforce, which rolled out the Cleo Kids product supporting working parents with children up to 12 years old.
Hopefully, this helps in understanding why PruVen chose to back SJ Sacchetti and the rest of the team at Cleo. We are excited to be a part of the important journey Cleo is on to create better, fairer workplaces around the world. Congrats again to Cleo!