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America is getting old. Baby boomers born between 1946 and 1964 comprise of 77 million people, approximately 25% of Americans. By 2030 our senior population will increase by 75%, compared to a 15% increase in US population as a whole. This is a shocking disparity in the size of their demographic. They are also the richest group of people, accounting for 50% of all US consumer spending today.

According to AARP, 87 percent of seniors prefer to stay in their own homes as they age, often referred to as “aging in place”, as opposed to moving to a nursing home or assisted living facility.

Our senior population is going through its fastest growth period in our country’s history, so it’s probably no surprise that the numbers of available senior caregivers is increasing as well. In fact, caregiving is now the fastest growing job in America. The number of non-medical senior caregivers stands around 3 million, and this number will grow 70% by 2020.

Supply: check. Demand: check.

A well-acclaimed entrepreneur, investor and partner at Sigma West, Josh Breinlinger, wrote a convincing article last week entitled Why I Love the Senior Care Space. For those who don’t know Josh, he was one of early hires at Odesk, a marketplace for freelance workers with upward $350 million in gross annual revenue. Josh is a very smart guy and he gets marketplaces.

He suggests that the opportunity for a marketplace to disrupt the senior care space is an attractive one, but has been ignored thus far possibly due to lack of awareness, it’s “unsexy” nature, or the difficulty in managing support calls with life-or-death implications. He liked the market for the following factors:

1. Huge market size

He estimates the home health market to be $84 billion.

2. Huge market fragmentation

82,000 franchised home care agencies and broad-serving listing services like Craigslist and Care.com.

3. Huge number of unsatisfied customers

Low trust and horrible NPS scores among brick and mortar agencies.

4. Huge number of unsatisfied caregivers

Agencies keep, on average, 50-60% of caregiver wages.

5. Highly-recurring needs

The average senior requiring in-home care requires shifts 4-5 days a week for 5-6 hours a day.

To point #5, Bill Gurley in 2012 wrote a piece on 10 Factors To Consider When Evaluating Digital Marketplaces where he observed that “Many failed marketplaces attack purchasing cycles that are simply way too infrequent, which makes it much more difficult to build brand awareness and word-of-mouth customer growth.” This does not seem to be the case with senior care. (Mike Townsend actually wrote a detailed critique of HomeHero using Bill’s 10 factors). Overall I believe Josh is spot-on with his analysis, but there are another 5 factors that make this opportunity very special:

6. Ability to handle payments

With customer lifetime values ranging from $12-15,000 and a recurring margin of 15-20% (a steep discount from industry average 50-60%), the economics make a lot of sense.

7. Low backdoor risk

This is one of those rare markets where backdooring isn’t a big problem for agencies. Unlike cleaners, nannies or web designers, it’s more difficult for caregivers to get consistent work without the help of an agency, due to the risk and non-commoditized nature of caregiving. The risk of being blacklisted from an agency after their client passes away is not worth the temporary increase in income, even with a 50-60% scrape. Also, with many agencies the caregiver’s hourly rate increases over time, further incentivizing them to stay on the platform.

8. Network effects

The longer a marketplace exists, the better the experience gets for everyone (I stole this one from Bill Gurley). The more caregivers signing up on the platform, the higher the quality standard becomes. The 10,000th caregiver will be significantly more qualified to work and inevitably gone through a tougher screening process than the 100th caregiver.

9. Technology opportunity

The home care industry is one that is dominated by brick and mortar agencies (the H&R Blocks of the caregiving world), and their logistical operations are cluttered with inefficiencies. Many still use paper timesheets, excel sheets to manage caregivers availabilities, and checks for issuing payments (paid monthly or bi-monthly). They also have limited online presences, poor SEO practices, ineffective online marketing and advertising strategies, and a virtually non-existent mobile presence. Lastly, the opportunity to disrupt this space with a fleet on-demand workers will make it very difficult for agencies to compete. Any web or mobile engineer working in this space should be salivating.

10. Lack of trust and quality

This is probably the #1 industry in the world in the most desperate need of a trusted name brand. The caregiver horror stories I’ve heard are as unthinkable as you can imagine. Our country is waiting for a large company or organization (other than AARP) to positively associate itself with the senior care market.

These are the reasons I believe a marketplace is inevitable in the senior care space, and why our team has dedicated the prime of their entrepreneurial careers to building HomeHero. There’s nothing else in the world we’d rather be working on right now.

If this is an industry you are wildly passionate about, or you’d would like to learn more about our company, email me directly at kyle[at]homehero.org. I’d love to chat.

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