02/10/2022

Fibas Tech

Only Good Technology

What happened when a bright star in Denver’s startup scene faded

What happened when a bright star in Denver’s startup scene faded

This week, Liz Polizzi Oertle handed over her baby to another female founder. 

Not her real babies. Her kids are 8 and 10 now. It’s her other baby, her startup Nanno, which she cofounded in 2016 when her children “were tiny and I really needed babysitting,” said Polizzi Oertle, whose company provided vetted babysitters on demand to parents in need. 

Nanno was a bright star in Denver’s startup ecosystem. It got its brand out there by offering babysitting services at events from Denver Startup Week to EthDenver, the annual crypto conference. As COVID-19 hit, Nanno’s technology became the tech that helped line up child care for 1,000 essential workers as part of a partnership with the state of Colorado, philanthropists and area public schools.

But the pandemic was brutal on business. The labor shortage was arguably worse. Her cofounder Desi McAdam, a software engineer, left in late 2020.

Before calling it quits, Polizzi Oertle found an alternative outcome in Call Emmy, another female-founded startup with a similar on-demand chore service that included house cleaning, meal planning and home organization. Call Emmy needed Nanno’s tech and Nanno’s customers still needed babysitters. Nanno agreed to be acquired in exchange for equity for its investors. The new Call Emmy app was released this week. 

What happened when a bright star in Denver’s startup scene faded
Arezou Zarafshan, founder of Call Emmy, and Liz Polizzi Oertle, cofounder of Nanno. (Provided by Call Emmy)

“(Liz) and I both agree that together we can have a bigger impact,” said Arezou Zarafshan, Call Emmy’s founder. “We were both addressing the same market and trying to solve the same problem with different things. She was looking at the child care part of the equation and I was looking at household management and it just made sense for us to come together.”

It’s been a tumultuous road for Nanno. Many startups that are winding down — and the venture capitalists who backed them — rarely discuss the end. But Polizzi Oertle, who stayed on as chief product offer to get Call Emmy’s app working, agreed to share the reality of what it was like and how there can be alternate endings to a startup’s exit. She’s come to terms with her decision and believes this is the most promising path for Nanno — and its investors.

“I have a lot of optimism. I really think that this is going to make Call Emmy a wonderful success and I’m really excited to be part of that journey as well,” Polizzi Oertle said. “And my investors, after the whole crazy thing with COVID, they’re like, ‘I can’t even believe you’re still alive, so this is great. You’re actually going to do something with this company that could possibly still end in a great success,’ which is wonderful.” 

The alternate funding route

This wasn’t supposed to be Nanno’s future. 

The company had a reputation for its babysitter-vetting and matching system. It did criminal background checks on sitters, but also behavioral and psychometric assessments to eliminate people who look “wonderful and sweet, but really, they’re a psychopath,” she said.  

By mid-2019, the company had 15,000 customers and even more babysitters nationwide. It was on track to have revenues grow 500% by the end of 2020.

But as Nanno started to raise venture capital in 2019, its timing always seemed a little bit off. It followed the coattails of Sitter, another Denver babysitting app that had earlier raised investment, got acquired and left investors unwilling to back another tech-related child care firm.  

It was a bit of a crowded market filled with venture capital money and acquisitions, according to Crunchbase, which tracks venture capital investments. Nanny sharing site CozyKin, which raised $6 million in 2019, was acquired a year later by Higher Ground Education. Chicago-based Sittercity had raised $48.1 million before getting snatched up in 2020 by Bright Horizons. And Care.com, which raised $156.9 million before going public, was acquired by IAC/InterActive Corp. for $500 million just before the pandemic.  

Even after Nanno got into the well-known 500 Startups tech accelerator and connected with many Silicon Valley venture capitalists, the founders were turned down. Investors wanted more proof that Nanno could be highly successful, which Polizzi Oertle considered a fair request. 

But she left the table wondering if she was treated differently because she’s a woman.

“I think that when you go into a meeting and trying to overcome the gender issue by having a lot more data and having all these snazzy facts, (it) can also be a disadvantage because the more data you give people, the more they’re going to try to poke holes and focus on that rather than focusing on your grand vision,” she said. “There’s got to be bias because the numbers wouldn’t be the way they are if there wasn’t. But you never really know what is affecting the decision.”

The odds do seem stacked against female founders. 

According to PitchBook, which tracks venture capital deals, funding for startups with female founders or cofounders has been on the rise. But it’s still tiny. In 2010, companies founded solely by women received 2.1% of all capital invested in the U.S. Last year, that number barely budged, at 2.2%. Companies with at least one female cofounder went from 7.7% in 2010 to 14.9% last year, according to PitchBook’s U.S. VC Female Founders Dashboard. 

That’s partly why organizations like the Women’s Foundation of Colorado have opportunities geared toward female founders in need of capital. The available funding is typically in the low five-to-six figures. It’s part philanthropic because it’s about investing to make an impact, but there’s still a small return on the low-interest loans with rates around 2%. That’s nowhere near the amount of venture capital in the tech industry, which often expects 10 times or more in return, said Renee Ferrufino, the organization’s vice president of development. It’s investing to make an impact.

“We knew we had to address the space of access to capital for women,” Ferrufino said. “It’s about supporting all women (and) figuring out how we could level the playing field. … We also know that women when they go into this space, they’re not going to get the same access to capital that men get, most likely there are not going to be women sitting in at the decision making table, deciding who gets venture capital.”

Most companies don’t even get past pre-seed rounds, which is investment often from friends and family. And of tech companies that do raise some venture capital, about 70% fail within the first two years, according to an analysis by CBInsights. 

Many startups look to local angel investors for their early seed rounds, like Rockies Venture Club, which connects small angel investors to early stage companies mostly in Colorado. Last year, the club continued to increase the amounts invested, though not at the level of growth in the overall market. Colorado companies raised a record $6.5 billion last year, or triple the last record set in 2020. 

Rockies Venture Club is more about getting companies started. That often starts with teaching founders and investors what it means to raise capital, said Peter Adams, its executive director. 

“Venture capital is like a foreign language,” Adams said. “One thing I’ve seen forever is people want venture capital and they think that any capital for their business is venture capital. And that’s not true, of course.”

The organization recently received a $250,000 grant from the state’s Office of Economic Development and International Trade for its HyperAccelerator program, a weeklong training program to teach founders how to raise capital. (Apply here)

“Part of what the HyperAccelerator does is to teach people how it works. Here’s how pre-seed and seed works. Here’s how you model out your dilution. Here’s when you actually go and look for a Series A,” he said. “We figure that education is the best way to get venture capital.”

The club does turn founders down. But Adams said that it’s more like a “Not right now.”  

“There’s still companies who don’t have enough traction even for us,” he said. “We’ll say here are the next steps you might take and give them some transparency and clarity about where they’re going to go. … We want to coach them and say, ‘Look, if you do this one thing, it’ll cost you 10 grand and maybe a couple of months, but then you can come back and have twice the valuation.’ Why wouldn’t you want to do that?”

Rockies Venture Club did invest in Sitter and passed on Nanno. After Sitter was acquired by UrbanSitter in 2019, investors got stock, which Adams joked “is like a lottery ticket.” UrbanSitter has since expanded into the corporate market to provide child care as an employee benefit.

Nanno turned to crowdfunding and raised $1.07 million from 5,500 investors. But Polizzi Oertle said she believed a first venture capital round was in Nanno’s future.

“In retrospect and even at the time, I felt like my discussion with the VCs in the fall of 2019 was just previewing what we were going to do in our Series A. It was great. We were getting tons of guidance and that was the plan for us and we would be doing our Series A in the fall of 2020,” she said. “Obviously, that isn’t the way it went.”

The way it went

Two months after its crowdfunding campaign, COVID-19 business disruptions began. That pretty much cut down on the need to hire babysitters. 

Still, Nanno leapt into action to help build a system to connect essential workers like nurses, custodial staff and doctors with child care, since many schools and child care providers had closed, too. The effort was part of Colorado Emergency Child Care Collaborative under Gov. Jared Polis. Gary Community Investments, a philanthropic impact investor focusing on kids and families, spearheaded a team to figure out how to make it happen.

“Administratively, it just seemed impossible because how could you set up a platform that could allow 500 child care providers across the state and 5,000 families to identify how many spots were available, how many kids there were, in what locations and for what times?” said Michael Johnston, the organization’s president and CEO. “Liz just leaned in and made that miracle happen. Seven days after that first conversation, we were able to open up child care offerings to 1,000 kids statewide with a full network built, envisioned and run by Liz Oertle. Seven days, it was just stunning.”

Kerensa DeHerrera helps Dominic Thomas, 10, to try on the butterfly mask that he has made during a child care session for essential workers at the Southwest Family YMCA on March 24, 2020 in Denver. The effort to connect essential workers, their kids and child care facilities was made possible through the founders of Nanno, a babysitting app. (Kathryn Scott, Special to The Colorado Sun)

A year later as vaccines became more widely available, Nanno felt the pain of the labor shortage as employers competed for workers. Sitters stopped taking gigs or if they did, they didn’t show half the time. Customers were not happy. That’s about when she thought about winding Nanno down.

“It was like what is even the point of this? All we’re doing is pissing everyone off by thinking they’re going to get a babysitter and they don’t,” Polizzi Oertle said. “I used to say that our company lived at the intersection of every horrible thing about COVID, like the shut down, to vaccinations to child care to labor.”

It’s hard to think about it now, but while a lot of VC-backed tech startups did pretty well in the pandemic, Nanno just did not have the financial resources — or enough funding — to survive. 

She laid off the developers.

Then she met with Zarafshan. The founder of Call Emmy had contacted Polizzi Oertle a few years earlier before starting her business in 2020 (originally as DispatchMom). When customers needed babysitters, Call Emmy would essentially hire Nanno.

Zarafshan, a former Hewlett-Packard engineer who later served in executive roles at consumer brands like Otter Products and Crocs, built a simple app for customers to request service. Her support staff connected the incoming requests to Call Emmy’s gig workers. But as it grew, she realized she needed better tech. And hearing more about Nanno’s vetting process was important since trust is such a big factor when it comes to letting a stranger inside your house.

Denver-based Call Emmy, an on-demand chore service, is using the technology of Nanno, a babysitting app that it acquired. (Screenshot)

“At some point it became prohibitive to grow any further,” Zarafshan said. “We had to come up with a backend technology that was robust, that was scalable. And with this acquisition (of Nanno), we don’t need to raise money to build the technology. Now we have the technology and we can spend the money on growth.” 

With Nanno, Call Emmy acquires the tech it needed to help match customers to “fairies,” the term Call Emmy calls its gig workers. It also takes over Nanno’s database of about 20,000 customers and 35,000 sitters. While the acquisition deal was signed in February, it wasn’t completed until this week.

Polizzi Oertle will stay on in an advisory role, but she’s already back at her original job as a startup lawyer. 

“Would I like to have millions of dollars? Yeah, sure, of course. Everyone would,” she said. “But more, I would like to actually see this finally succeed in the way that I know it can and be able to help people do these things, especially working parents.” 


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