Jessica Chang of Upwards on Solving the Labor Shortage through Democratizing Child Care

All CEOs, me included, we don't actually know what we're doing. They're all sharks, so all you gotta do though is know shark behavior.

I don't think we've ever talked about this before, guys.

We can capture all of the wallet share. First place you start is with the product. That's just the first nugget. This is The Capital Stack. Hey everybody, this is David Paul, the host of the Capital Stack podcast, where I talk to founders, operators, and investors about all things value creation in startups. Today I am speaking to Jessica Chang, who is the founder and CEO of WeCare, which is a tech-enabled marketplace that assists, uh, employers with, uh, childcare. And not just You know, the, the cushy, bougie, you know, top 1% childcare. We're talking about the rest of the planet that has to work a job, working paycheck to paycheck, and needs somebody to watch their homes that don't have family members immediately around them. She is a mission-driven entrepreneur, a mission-driven founder with a very eclectic background. And with that, I want to introduce Jessica Chang. Jessica, how are you doing today?

Thanks, David, for bringing us on. I'm doing good. I mean, my kids are in summer camp right now, so I guess as good as we can be.

Nice. Yeah, my— we have all of our kids in some type of camp or, you know, direct kind of like supervision during the day because my wife at some point, like, she just had to— she just has to kind of get them out of the house despite feeling lots of feelings of mom guilt. I think it's also best for them too, to be around other kids, right? But yeah, I was sharing with Jessica before the show how I, you know, had to bring my youngest to the ER because I lifted her up by her arms and swung her around because that's what fun dads do. And I dislocated her elbow and I felt like a failure. I thought they were gonna lock me up, to be honest. But they didn't. And I have another day to fight. But anyway, Jessica, tell me a little bit about yourself. And kind of what made you want to go to the We Care mission?

Yeah. So, you know, I spent a lot of years as an entrepreneur, but even before that, I spent years being in finance. So I like to say I gave my time helping other people become rich, and now it's time to give back and make it better for my soul and for everyone else, too. And so, you know, when we founded We Care in 2017, it really was a combination of learnings as a parent and also as a business owner as well. So, you know, really what really started We Care was my own personal journey of finding childcare and not being able to find anything that I could afford or anything that had any availability. I'm talking 6 to 2 year waitlists. And I was like, when So when am I supposed to actually put my kid on the waitlist? They're like, well, when you're thinking about having a child, it's like, how would you know? How would you know that you're actually going to have a child? But then really the part that probably hurt the most was really finding out that, you know, when you are an entrepreneur and you're gung-ho, you're top of your class, you work hard. You— I mean, I used to work 100 100 hours a week. But when you decide to start a family, that choice is no longer yours. And that actually hit hard for me when I decided that I want to start a family and I also want to have a career. Well, society was like, too bad. Guess what? You're a mom. You're going to stay at home. And unfortunately, our childcare industry is broken, so it's going to be you. And so that really was like a whoa. It was the first time in my life where I was like, I don't have the ability to determine my future. That future has been decided because I wanted to do something great, which was start a family. But long story short, I ended up actually becoming a preschool owner and operator. And what I found from that experience was that the other side is really, really suffering too. Yes, parents can't find affordable, convenient care, but guess what? The average preschool teacher gets paid $20,000. A year to do one of the hardest jobs out there. And no wonder why they're like, I can't do this. I can't even be paid to support myself. Why am I doing this? Like, I love kids, but I can't even put food on the table. And so you're seeing the struggle, the real-time struggle of families struggling. But you're also seeing the other side, which if we don't have like caregivers, you can't make the situation better and they're really, really struggling. And that's actually why we started We Care was we were— well, we still are same mission for the last 6 years and will continue to be the same mission is how do you make care accessible for all? Right. How do you make it so you're supporting that family, that, that hourly worker that has to go to work or they don't put food on the table, they don't get out of poverty. But at the same time, how do you support that childcare provider to actually want to join the industry and stay in the industry?

That's, you know, it sounds like you're kind of like shifting. And this sounds very cynical, but, you know, it probably is a very— like you're taking one hourly worker and you're putting them there and then putting another hourly worker and you're putting them into the childcare setting. So what's got to give, right? There's got to be dollars somewhere. So how does, how does the marketplace work to create that, that value?

Yeah. So, you know, when we first started the company, we were a B2C childcare marketplace. And essentially what we were saying is like, hey, look, let us create a platform. Let's create a marketplace where it's easy for families to find care that works for their schedule and what they can afford. But then also at the same time, let's make it so efficient for that childcare provider where we'll help them start their own licensed home daycare. And then they do so, they can be paid 3 to 5 times more. And by giving them an actual wage—

Because they have scale, like they can see more than one kid at a time, or—

Well, yes. So a licensed home daycare can take care of up to like 14 kids in the household, right? So you're essentially saying, let me help you open a micro preschool, get you licensed the same way as a large childcare center would be, but you get to do it in a residential setting. So that really offers a lot more convenience and you're getting rid of that overhead cost that is associated with a commercial childcare center.

Mm-hmm.

Um, but when COVID hit, we saw that like the issue wasn't resolved because we were helping families, we were helping providers, but it was so little on scale. Right. And you were helping a home daycare provider make 3 to 5 times more. Therefore you could take a percentage. And then you are helping families save 40%, but it wasn't enough. And when COVID hit, it was really a strain because now most families couldn't pay for childcare and most providers couldn't be open, right? And there were— or if they wanted to stay open, they were now adding the layer of like, okay, I'm going to risk my life to stay open.

Uh-huh.

And so what we ended up seeing, and this was kind of an aha moment for us, actually If you think about it, if you go into the private and public sector, so employers and government, well, they're actually incentivized to help families get the childcare they need so they can go to work and to support childcare providers, because if they leave, guess what? No one's going to work.

Uh-huh.

And so that's actually when we pivoted into the B2B space and saw a real alignment because employers, government, they wanted people to be retained at work. They wanted more people to go to work. Think about it. Like a couple of months back, the Secretary of Commerce announced the CHIPS Act. What was it about? Right. Well, the CHIPS Act is meant to support like, hey, if you're going to open a semiconductor manufacturing plant and you want government dollars, guess what? To get that, you need to actually have a childcare plan. Well, why is that important? Well, where are you going to find all of these workers that are actually going to work in manufacturing, be made in America?

Right.

Well, women. And why aren't women joining the workforce? Childcare. So it was like, oh, that makes total sense. So like, if we want the economy to be better and if we want employers to be able to retain and recruit, guess what? They have to solve childcare and they're incentivized to do so because that means more women back in the workforce, more productivity. Less time, less, lesser PTO being taken, lesser absenteeism, and better retention.

Mm-hmm.

Yeah.

And I noticed that, like, you know, women are having children at such a later age, like they're embedded in career, right? They're not necessarily like, you know, like getting pregnant right out of college or high school, right? They're, you know, they're working and, you know, they're, they're not built to, you know, they're, they're, they're, they're used to being in the workforce. They want to work. They're productive members of society, right? And so like they want to stay in.

Yeah, but it's incredibly hard to, if you think about it, the average cost of childcare in every single state. So you're averaging California with the likes of Oklahoma, Louisiana, Mississippi is $1,800 a month per child.

Okay.

So if you kind of think about it, it is more expensive than community college is in most states. And we have this, what they've coined a childcare desert, In majority of the states as well. And that means like for every 3 kids, there's either 1 spot or no spot available. So it starts to really add up that it becomes like actually a national strain on the economy when we don't actually have a childcare industry that works.

So do you— so you work with the employers. And so that makes a ton of sense. The employers don't want their employees missing. They want their employees happy. They don't want unreliable childcare because that means they have an unreliable workforce or at least half their workforce. is unreliable, assuming that it's a 50/50 gender split. Right. And so I'm sure that that would make a ton of sense for them to pay. And so how does it work? So do they pay directly into the platform and then you facilitate the matching? And so does it work that way? Like, how does the tech enable it?

Yeah. So we actually created like a really a 3-step process for most employers in government. So the first part is placement, right? They utilize their employees, families, Utilize our platforms and we help them find placement, right? Simple as it is. But I think what's really important, because we actually measure everything from when they come in as a lead to how they tour, to how they enroll, to even how they stay, right? Like, hey, are you doing Monday to Friday, 9 to 5, or are you doing Monday to Friday, like 5:00 PM till 11:00 PM? Right.

Mm-hmm.

We measure all of those points and then we actually provide that data back to employers and government.

Right.

We actually show real time what's going on with your employees. How are they actually consuming childcare? Do they need it for full-time care? Do they need it for weekend care? Can they not afford care and they're just barely struggling? What is it? And then that actually leads us to kind of the second and third point, which is actually affordability, like majority of the reason is affordability. People can't afford it. So we create subsidy and stipend programs for employers and government to help pay for the cost of childcare for their employees. So think about it this way. If you were having to pay $1,800 and suddenly your employer and the government is subsidizing 2/3 of it and you only now have to pay $600, that's a significant difference.

I'll tell you one thing. I think a lot more people would opt to having subsidized childcare than subsidized healthcare. Because younger people don't get sick, right? You know, or they go to the urgent care. Like, I'd much rather give me the money for the babysitter.

Exactly. Because that's the day-to-day. That's what you're compromising on. Like, okay, well, I can't buy food, or I can buy food, or I can have childcare. Well, I kind of need both, right? And, and it's amazing because once you actually address that subsidy, you're actually paying providers what they deserve. Remember that childcare provider makes $20,000 a year. If they're making $60,000, that's a lot more reasonable. Right. And then on top of that, you're also then addressing the access issue. Right. Like, well, we know we got to pay people more, but if we don't pay them, they're not going to stay. But if we can pay them, then we can actually get them to stay and we can create new providers. And if you create new providers, everyone wins. So it is about that. It's like systematically the way that we're approaching it is everything is tech enabled and we're using that information to actually solve care for good.

So knowing that like everyone gets paid differently, I'm sure that the benefit— there's levers on how much they contribute versus not contribute. What would you say the average, like the average layer of subsidy is, like from a percentage basis that goes like that needs to be layered into this system that doesn't exist from consumer to caregiver? Is it like 20%? Is it like 30% of the payable? Right. Like, like just on average.

Yeah. I mean, we've seen the spectrum. We've seen companies pay 100% to like a lot less, but on average where we see the significant pickup, meaning, oh, this is beneficial, I'm going to use every single dollar, right. Was somewhere around the range of more than 30% of the cost. But it ended translating to about $225 a month per employer per child.

So $225 per employer per month per child, and then the rest is paid for by the employee out of pocket, right?

Correct.

And that creates a sustainable kind of ecosystem.

Correct. And it really depends on like— but this is like average if you're counting every single employer and looking from manager all the way down. We definitely see that there's a step up. Like generally, if you're hourly wage under $25 an hour, that subsidies significantly more, right? But where we see that pickup is where you're hitting that 30% mark. But 30% on our platform is a lot more affordable because our average home daycare ranges between $650 to $850 a month.

Mm-hmm. So that's an incredible mission. And this is a mission that is mission-driven, right? But there is no mission without margin, right? And you talked a lot about, you know, being mission-driven and being able to select your investors and understanding that when you take venture dollars, there's an expectation to burn and to grow, right?

Yeah.

So how did you balance that, right, within the construct of, you know, setting expectations? Is that something you kind of knew in the front, or did you get lucky with your first investors? How did it, how did it work?

Well, I think it's also a self-selection process. When you're talking about childcare, generally you have more women investors that are interested, right? Because they personally felt the pain.

Sure.

So it's a lot harder if you go into a room, investment committee of all men, they're like, what childcare problem? It's like, oh, you are very lucky, sir, because your, your wife took care of everything and you should go home and make sure to bring her flowers. But what we were lucky because, you know, the first day that we pitched is like, this is a personal pain. We went after the investors that got it right. And they were like, this is what we want to see. This is what we want to invest in. But also, you know, if I'm like, if we're talking about it, like, I think having that finance background really helped because whatever we got into, we wanted to make sure the unit economics made sense. Right. Like we wouldn't go into business where we had to fund the growth. And then once you take the growth funding away, everything falls apart.

Right. Yeah.

Correct. Like it had to work for the common person. That is also how we looked at the industry too, right? Like we didn't say, okay, is it going to work for someone that is able to pay $3,000 a month for childcare? Well, yeah, that person that can pay $3,000 a month for childcare doesn't have much issues, right? Because they can pay $3,000 a month for childcare. We said when we first like decided to start the company, who are— who we were actually helping, that family. We said, is it going to work for the common person? Is it going to work for that essential worker, the backbone, the person that is low income and middle income? Because if it works for them, it's going to work for everyone else above. Right. And so that was how we thought about it. But, you know, it took time to build it up and it took a lot of patience. It took a lot of investors that understood that this wasn't low-hanging fruit. You had to build it up with all the different key stakeholders to get to a point. But now that we've gotten to the point, I mean, this year we'll grow 3x, the year before we grew 3x. So we are like every other venture-backed company. We just were very strategic on how we built the company in the start.

Yeah, 2 to 3x is pretty good. I mean, I'm not great at math, but I think you're doing all right. So marketplaces, always, you probably get asked this a lot, but I'm always curious. How did you balance the supply and demand? Where did you have edge? What was more difficult? How did you think about it?

Oof. I think for us, we always knew we had to deal with supply first, right? Like, I think demand is there. And I think at least for our industry, demand was— it was like, you know, it was easier to get to demand because it was families and it was about childcare, right? You couldn't be like—

everyone's like, oh my God, I need to find childcare.

So I'm here. But I think the harder part was supply, right? And being able to either create supply or keep supply. So that's what we've always focused on. And we've always kind of taken it as like, we need to have more supply. So we spent a lot of time acquiring supply and growing that supply. And then once we were able to capture employers and government, we started shifting that over and saying, okay, now we have enough supply. Let's now make sure that we continue to grow the demand. And then if demand needs more supply, then we will go acquire more supply.

Yeah. So how did you get to the individual caregivers? I mean, that must have been a pretty expensive proposition. Like, is that— how did that work?

So some secret sauce in here. But okay, so we spent— we actually tried the marketing route and found it to be completely unsuccessful. So we basically turned it over and said, we're going to acquire everyone organically. And so we've like, if you look at our marketing dollars, it's like so low. I don't even think we spend any marketing dollars. We spend it on team members instead. But what we found from it was, you know, in our industry, it's actually— if you know where to go, you can actually find out all of the information about every single provider out there. And so it was about like being able to get that information and reaching out to them directly.

So really— Oh, wow. Okay.

Yeah, I like having like a real value prop. And the first value prop we had was like, we made you a daily progress app. It was literally a sharing photos and video app because we found that was the thing that was viral with families. Like, it was a great way to acquire families. And it was a great way to save providers time because Families would ask for pictures and videos and updates about their kids all the time. So that's what we did. We're like, here's this—

You just hacked together this app and it worked.

No, we're like, here's this free sharing of videos and pictures. But it's very locked down because you can send it to specific parents, only their kids, and no one else has to see it. And then families ended up sharing it. So it was a great way for us to get more families.

Mm-hmm.

What is one thing that's completely and utterly ridiculous about you that not that many people know about?

Oh, so every single person in my company knows about this because it's a challenge now. I like collecting certifications.

Oh, okay.

So I have this weird habit of like, hey, like, I'm like, so I My family really likes wine. So I was like, oh, you know what, I'll, I'll get— I'll become a sommelier. So I got that certification. And then they were like, oh, you know, like, you live in California, you should do diving. Okay, why don't I just go get my diving certification too? Like, so I'm like a master diver.

Okay.

And then there was like, oh, like, you know, love looking at real estate. It always intrigued me. So I was like, you know what, I'm gonna get my real estate license. So I ended up just like collecting certification and licenses for—

You like to advance. You like to— you like the extension, you like the stamps.

And I was like, it's weird. It's like, I don't know. It's like, it's like the point being like, I want to say that I know how to do this and I know how to do it well. And if I really had time, I probably would end up getting a medical license too. And that's what my husband thinks, that whenever I retire, I'm going to go back, I'm going to go to school, I'm going to go get like a medical degree and become a doctor.

So.

Nice. What is— what's the one book that you like to give often as a gift?

Can I say none?

Yeah, totally.

It's—

what's your favorite book then? Not a big reader.

I don't really have one. I'm not a big reader. And I think it's because when I was— well, first of all, I don't have time. So there's that. I have kids. And I am— I will say that, like, I need things to turn off my brain at the end of the day than to help spur more thought. So I have to watch what I consider trashy Netflix shows.

I like it. Well, what's your favorite Netflix show right now?

So there was one that I recently watched that I just— it was just hilarious. I kept on watching it. It was— it's a Korean one, you know, like All the Korean shows are getting picked up on Netflix, and Netflix spent billions of dollars on Korean content. And it was one that was— it was like Physique 100, and it was basically pitting men and women. And they were like, we're trying to find the strongest person in Korea. And it was like the most hilarious thing to watch. And I was like, wow, people just do this. And it was like, But it was like, well, how would that tiny guy beat someone that literally looks like a sumo wrestler in a physical match? I was like, how does that work? But it was surprising because the person that I didn't think would win actually won. And it was just really entertaining. And every episode took me 5 days to watch because I fell asleep.

Well, I'm gonna have to watch it.

It was great for sleeping.

Jessica, thank you so much for coming on. This has been an absolute pleasure. If you're a big employer and they want to start subsidizing their employees with some great childcare and they're in one of your cities, what cities do you serve? I should say.

We're nationwide.

Nationwide. Got it. Okay. So who has the best way to get in touch with your company? Is there, you know, I guess, information request? How do they get in touch with you?

Actually, they just go onto our site, weecare.co, and go on, and then they'll direct— they'll be directed to exactly where to go after that.

Nice. Awesome. Thank you so much, everybody, for listening to The Capital Stack. We drop an episode every Tuesday, and if you like it, please subscribe. Um, tell a friend and we will see you next week.

Thank you.

Bye-bye. Thank you for tuning in to the Capital Stack Podcast. Make sure to share this with someone you know that can benefit from this content. Remember to support this show by rating, reviewing, and subscribing. David Paul is the founder and general partner at DWP Capital. All opinions expressed by David and podcast guests are solely their own opinions and do not reflect the opinion of DWP Capital. This podcast is for informational purposes only and should not be relied upon for decisions. David and guests may maintain positions in the securities discussed on this podcast.