Home care software company ClearCare has secured a $60 million funding round, led by global investment firm Battery Ventures. The investment is a vote of confidence not only in this company but in the well-established home care franchises and independent, locally-owned agencies that use the ClearCare product—and a shot across the bow of tech-forward, startup rivals such as Honor and Hometeam, says ClearCare founder and CEO Geoff Nudd.
Founded in 2011, ClearCare is based on needs Nudd saw during his own family’s interactions with home care providers. The backend software has been built up to offer a range of features, including caregiver scheduling, billing and payroll, point-of-care capabilities and business intelligence components. Today, the company serves more than 3,000 home care agencies on the non-medical, private duty side, including six of the 10 largest providers in the nation, Nudd tells Home Health Care News. The largest U.S. providers include Comfort Keepers, Home Instead and Visiting Angels.
The $60 million investment can be seen as an endorsement of this traditional model of providing home care and, in particular, these large incumbent companies on ClearCare’s client roster, says Nudd.
Considering the scale of the largest U.S. home care franchise companies—Comfort Keepers had nearly 650 locations as of 2013—it may hardly seem that the model needs be defended. But a number of startup home care agencies have emerged to challenge them. These new companies have grabbed headlines with their own funding rounds. Among a few other companies to secure large investments, Honor recently announced a $42 million series B, while Hometeam secured $32.5 million in January.
Each of these companies has a slightly different model, but all are harnessing technology to connect caregivers with clients, provide communication channels among different parties involved in a home care episode, and create administrative efficiencies. As they’ve raised large sums from investors, these companies also have made claims that they are rapidly becoming the largest providers in the markets they serve. But there are some skeptics, Nudd among them.
“I think the Honor and Hometeams of the world are really good at hype,” he says.
He qualifies that by saying that these companies need to be taken seriously, considering the amount of money they have raised and their commitment to expanding their market share. But while the startups have become some of the largest players in their respective service areas, they aren’t seriously transforming the markets or disrupting the client flow to the well-entrenched players, according to proprietary ClearCare data cited by Nudd.
“In these markets where Honor, Hometeam are playing, we aren’t seeing a change in the growth rates of our customer base,” he says. “They really aren’t making an impact. If you actually look at their client counts, given the data we were able to gather, they are no larger than a good-sized home care agency.”
Furthermore, he raises questions about their competitive advantages.
The startups have cited their use of technology as setting them apart from their competition, but ClearCare has been offering similar types of technology for years, says Nudd.
“We’ve been at it far longer than they have. Family portals that they talk about, we’ve been doing for five years now,” he says. “The $60 million investment shows that we have comparable and greater resources. If Honor is the enemy of the traditional home care industry, we’re the partner to them and have resources to go more than measure to measure.”
Additionally, the locally-owned independent or franchise model actually has specific advantages of its own, Nudd says. The owners of these operations depend on them for their livelihoods, and so there’s a big incentive to provide high quality care, with some owners personally going to provide care at off-hours or in the middle of the night, he adds. In addition, he estimates that 90% of referral sources are local and entrenched, and the existing providers have strong relationships already built.
“There are diseconomies of scale to home care,” Nudd says. “That’s why, over the last 25 years, it’s evolved to this owner/operator model with a lot of fragmentation. When you see this huge investment in ClearCare, it’s really a huge investment in the home care incumbents.”
It’s difficult to gauge exactly how much impact the home care startups are having, given that they are keeping information about their scale close to the vest. Hometeam, for example, does not want to publicly release numbers in terms of client count. Going by number of hours of care provided, Hometeam is growing by the size of an average home care company every 10 days, founder and CEO Josh Bruno tells HHCN. He declines to say how many hours the average home care company provides, in Hometeam’s calculations.
Still, there are some hard numbers available. Hometeam now employs about 1,000 full-time caregivers, and if it is placing nearly all of those with clients, could be posting yearly revenues of about $54 million, according to Business Insider. Comfort Keepers posted about $300 million in revenue in 2013.
Questions of market share are not of paramount importance, though, at this point, says Bruno; while nominally Hometeam is competing against existing agencies for clients, he believes the coming age wave means that these businesses will not be fighting too hard with each other to fill their roles. Honor strikes a similar note.
“We’re thrilled that more resources have been put to work to power innovation in products and services for older adults, their loved ones and care professionals,” spokesperson Sue Kwon tells HHCN. “People’s lives will all be better for it.”
Beyond the discussion of how much of a presence the startups have within their markets, there are fundamental differences in Hometeam’s model versus a traditional home care agency, emphasizes Bruno. ClearCare is a tech company that serves home care providers, but Hometeam is a vertically integrated company that both builds its own tech and provides care—hiring and training its caregivers, and striving to create a positive company culture that Bruno believes is lacking in many home care companies, based on his experiences volunteering with several before starting Hometeam.
In other words, ClearCare has built an “impressive” product that many home care providers use, and that Bruno himself has seen in action and been impressed with. But the technology alone won’t necessarily transform home care being provided by all its clients in the ways that Hometeam is striving for, he says.
“All the tech doesn’t matter if you don’t give a home care aide a wonderful place to work,” he says.
Next for ClearCare
As for what the $60 million will go toward, Nudd details a number of plans, including advancing mobile strategies, incorporating APIs and other methods for the ClearCare ecosystem to expand and for clients to be able to tailor it for their unique needs, and features to help integrate home care with the broader health care ecosystem.
Battery Ventures General Partner Chelsea Stoner and Battery Vice President Duncan Gills will join ClearCare’s board, and Bala Krishna Nakshatrala, former vice president of engineering at Mastercard, has joined as vice president of engineering, ClearCare revealed in conjunction with its funding announcement.
“[Nakshatrala’s] skillset is a perfect fit for what we need, given the direction of cretaing a platform and driving that seamless, secure passing of data,” says Nudd.
Broader reforms to the health care system have been based around more coordinated care across the continuum, meaning home care providers are working ever more closely with doctors, hospitals, and home health agencies offering medical care. This is a big driver behind the enhanced ability to share data, Nudd explains. As for whether ClearCare is looking to add features related to Medicare reimbursement, it will likely do so mainly through partnerships, he says.
The latest funding brings ClearCare’s total to about $75 million. Other investors have included Bessemer Venture Partners, Cambia Health Solutions, Voyager Capital, Qualcomm Ventures, Harbor Pacific Capital and McKesson Ventures.
Written by Tim Mullaney