9Yards Capital
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9Yards Capital

Brightwheel: Software To Manage The Next Generation

9Yards is excited to announce our investment in Brightwheel’s Series C led by Addition and alongside existing investors Bessemer and GGV.

Childcare centers are challenging to open, run, and manage. Providers are often forced to play cross-functional roles akin to classic SMB owners. From managing staff and communicating with parents to planning curriculum and collecting tuition, childcare providers have a broad set of unique needs. However, childcare centers have been plagued with archaic, expensive, and limited software that force providers to piece together disconnected systems and run most of their business via manual processes. Amid heightened requirements following COVID-19 and a generational shift among providers & parents, childcare centers need a modern-day, vertical software suite that solves all of their complex needs.

Enter Brightwheel. Brightwheel is the leading software provider for early education — covering nearly 30,000 preschools, daycares, nursery schools, and camps. Their vertical SaaS platform enables providers to more effectively run classrooms, manage staff, interact with parents, bill tuition, maintain compliance and administer programs. Recognizing that the existing value chain was broken, Brightwheel has created an end-to-end solution that serves and connects the owner, administrator, teacher, parent and child. On the back of this, Brightwheel is now used to manage hundreds of thousands of employees and students. Meanwhile, their parent communication platform has been downloaded 300,000 times and enables over 100 million messages to be exchanged between teachers and parents every month.

The early education market is a large and attractive opportunity. A recent study by IBIS estimates that the US daycare market represents $60B of annual spend across 850,000 centers. These centers service 20 million children under the age of 4 and employ 1.6 million people. Globally, the early education market is expected to grow from $248B today to $676B by 2030 (an 11.8% CAGR), accoridng to the same study. This expansion is driven by a number of powerful tailwinds:

  1. Early Education Impact: There is a renewed attention on the importance of early education to a child’s long-term development. Scientific studies have confirmed that the first 5 years are the most impactful in preparing children to succeed in higher education, while minimizing risk of social, emotional and mental health issues.
  2. Overall Development Focus: Parents are focused on overall development vs. strictly education. Parents wish for their children to take part in co-curricular activities that will allow them to grow and prosper in any field that they wish to. This increases the demand for more niche schools and more co-curricular programs.
  3. Working Families: In the United States, 65% of families have both parents working — a number that continues to increase year over year. Childcare centers act as an important resource to help parents balance both work and family, especially as we see an expanding birth rate post-COVID.

Despite this market size, childcare centers have been forced to use a disconnected suite of software, services and manual processes. In the core SaaS market, we believe Brightwheel is attacking a multibillion-dollar opportunity in the United States. This market expands meaningfully when we account for tuition billing, payroll, expense management, education programs and insurance. As a result, we view Brightwheel as one of the most exciting verticals to SaaS. In comparison to the 850,000+ childcare centers in the US, there are ~600,000 restaurants (Toast), ~700,000 repair & maintenance shops (ServiceTitan), ~150,000 gyms and spas (Mindbody), and ~40,000 general contractors (Procore).

As we have seen with our other vertical SaaS investments (Toast, Built, Qualia, Kojo and many more), Brightwheel is executing on a powerful, proven playbook. By focusing on a vertical market, these companies tend to trade market size for market share. In vertical markets, one or two vendors dominate and capture most of the value. Historically, these companies have captured share by (1) attacking an underserved vertical, (2) addressing an overlooked problem and/or (3) unseating sleepy incumbents.

In the case of Brightwheel, the company has done all three to emerge as the category leader in just 5 years. While many companies have attacked the larger K-12 and graduate opportunity, the early education market remained underserved with only one, archaic incumbent. Moreover, Brightwheel recognized that there was a missing piece in the tech stack — administrator, parent and teacher communication. Brightwheel used this communications app (originally funded on SharkTank!) as a wedge into the market and has since expanded up and down the tech stack.

As we have seen with other best-in-class vertical SaaS companies, Brightwheel has also started to execute on product layering. The company recently launched payments and already processes ~$4B of annualized tuition payments with >50% customer attach rate. Brightwheel is following the P&L and customer feedback with their next product addition — education.

At the core of Brightwheel’s business is a relentless dedication to their customers. Every strategic decision is informed by the administrators and teachers that they serve. The result is a fierce customer loyalty — honestly, probably the strongest we have seen to date. These childcare centers are stretched thin without the proper tools to run their business and enrich our children. Brightwheel has emerged as the brand that is in their corner, a company that finally listens and respects the important work that they do every day.

At the helm of Brightwheel is CEO and Founder, Dave Vasen. He is a emblematic of a true leader — driving the company forward with determination and kindness. We are excited and priviledged to partner with Dave & team in their Series C led by Addition, with participation from existing investors Bessemer and GGV.

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