The federal government has struck deals with several provinces to expand $10-a-day daycare nationally.DARRYL DYCK/The Canadian Press
Canada has produced a string of startups that sell online software to small and medium-sized businesses to help run their operations. Online merchants have Shopify; restaurants, bike stores and golf courses use Lightspeed; and Clio is popular with lawyers. Medical practitioners use Jane; landscape businesses and painters have Jobber.
As these Canadian vendors have replaced pen, paper, rudimentary spreadsheets or ancient, desktop programs with time-saving mobile platforms, they’ve expanded rapidly, raised money, and in many cases achieved billion-dollar-plus valuations.
Now, a Toronto company is hoping to do the same thing for another technologically overlooked niche of the small and mid-sized business world: daycares. On Thursday, Hi Mama Inc., branded as HiMama, is announcing it has raised $70-million, led by Bain Capital’s Double Impact fund to fuel its North American growth. The funding, most of which will go to the company with the balance to early shareholders, was also backed by Round 13 Capital and Business Development Bank of Canada, which previously invested a combined $12-million in HiMama.
“We love companies bringing digital solutions to legacy industries, and child care is a great example of that,” said Brahm Klar, a partner with Round 13.
It’s also “a large growing industry” that is getting a boost from government efforts to help women return to the work force after leaving in droves during the pandemic, he said.
In Canada, the federal government has struck deals with several provinces to expand $10-a-day daycare nationally, while U.S. President Joe Biden’s “Build Back Better” spending plan would increase funding for early education and child care. Although Ontario hasn’t reached a daycare deal with Ottawa, the province recently allowed for electronic record-keeping by daycares, which has expanded HiMama’s market opportunity.
“It’s a critical time for the space, and a lot of the additional funding in Canada and potentially the U.S. is a really important part of that,” said Iain Ware, managing director with Bain. HiMama “is about making the daycare centres’ lives easier, it’s about creating tools and resources for teachers and creating those touchpoints and feedback loops back to parents so they can stay deeply involved.”
The eight-year-old company’s core offering is a mobile app that enables daycares to share photos and daily activity updates of children in their care with their parents. They use the software to track children’s attendance and developmental skills and progress, manage staffing, plan programs, bill and process payments from parents, and automatically generate tax receipts, reducing paperwork to pixels.
The company says it has more than 6,800 child-care centre clients in Canada and the U.S. that pay $1,000 to $2,000 per facility they operate annually. More than one million parents have used the app. Revenue is running at $15-million to $20-million annually, up 400 per cent over the past three years.
HiMama has two rivals – private-equity-backed legacy software provider Procare, and startup Brightwheel – and a potential market estimated at more than one million daycare operations in North America.
HiMama also has many fans, which “was really important to us and came through in some of our conversations with operators,” Mr. Ware said.
“We frequently get inquiries from new and prospective families that mention HiMama in some way,” added Ryan Eickmeier, owner and chief executive officer of the Helping Hands Daycare chain east of Toronto. “It’s actually one of the first points of contact we have with parents now when they inquire. We feature it pretty heavily on our website because it makes a difference with parents.”
He added using HiMama saves his staff several hours a week at each of the Pickering, Ont.-based company’s nine centres.
Like other “vertical” subscription software providers to small business, HiMama, which has 140 employees, has recently made a big push into payments, which holds the promise of a revenue boost.
Less than 10 per cent of HiMama clients use its payments processing offering now, and that should rise to more than 50 per cent, said HiMama CEO Ron Spreeuwenberg, in an interview. “We really want to start scaling up payments,” and also invest in product development, operations and customer onboarding with the new funding, he said.
“There was an old adage that the only two things you still pay for with cheques was your rent and daycare,” said Mr. Klar at Round 13. “That was our view going into HiMama, and you’ve seen massive uptake of digital payments in the industry over the last couple of years.”
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.