The Covid pandemic showed the world more clearly than ever that childcare plays a crucial role in society - while we have always had an underlying interest in the space, we have been following it more closely since the pandemic. Many of the issues are structural and therefore complex to address, but we are optimistic that technology can help fix the broken market, benefiting parents, children and childminders.
We recently spent some time looking at the European childcare market and observed some interesting new solutions that are trying to disrupt the space from different angles. We are still at the beginning of the disruption so we expect to see a few dominant Edtech players in Europe progressing quickly in the next few years.
Please note that given our expertise in the education space, we are focusing this high-level research on increasing/re-upskilling the supply of childminders/nannies and allowing these professionals to find job opportunities. We are convinced that Edtech solutions can play a big part in (a) creating a larger supply of professionals in a faster and more efficient way, and (b) placing these professionals, which would result in better service delivery and potentially more affordable childcare services for parents. While the education angle is an important variable of the childcare equation, we don’t necessarily see education being helpful with creating physical nurseries like Babilou in France or Bright Horizons in the US, as we consider this to be mainly a real estate play. (It’s important to highlight that Babilou made an interesting bet in the education space as well by investing in different training programmes, including taking over a childcare school in Paris (l’École Paul Strauss) to train and place >200 childminders per year.)
(a) Why we believe in this market
There are 4 major drivers that make us believe in this market opportunity in Europe
Driver #1: Massive increase in demand for childcare services
We believe that there are two key sub drivers for this increase in demand:
(1) The cost of living (e.g. housing, food, childcare, etc.) for a family has increased considerably in recent years, which usually requires both parents to work in order to maintain their preferred standard of living. In 1990, the adjusted cost of living for a European family of four was €1.4k/month vs. €2.5k/month in 2023 (source).
(1) More parents are focused on their careers than a few decades ago. For a long time, the default childcare solutions was seen as “stay-at-home” parents. Today, the world has evolved and more parents, particularly mothers, are opting to enter/ stay in the workforce. Indeed, according to the European Commission, the female employment rate in the EU-27 was 67.7% in 2021, compared to 33.1% in 1970 (source).
Driver #2: Not enough nurseries to match this growing demand
There is an estimated 10m+ children under the age of three in Europe (source) competing for ~6.5m available childcare spots (source). It means that as of today, there are 3.5m children in Europe (e.g. 1m in Germany, 700k in France, 600k in Italy, etc. - see recent French government announcement to create 200k new spots by 2030) who do not access childcare services. Often, these parents opt for “plan B” by involving grandparents, becoming stay-at-home parents resulting in career adjustments, and extending parental leaves (often that are unpaid!), among other alternatives. It’s definitely challenging.
Driver #3: Staff shortages
In Europe, we are short of childminders (note: it is difficult to get a precise figure. We have seen several estimations from different sources, varying from 800k to 1.2m), resulting in pressure on services which leads to perceived lower quality service (issues, safeguarding, misconduct). On top of that, being a childcare specialist is often perceived with low esteem in society which tends to be reflected in low pay and poor working conditions. It is unsurprising, therefore, that it can be challenging to attract and retain people in the field. For instance in France, a new reform was introduced in 2022 allowing nurseries to hire non-qualified staff who have received intensive and accelerated training programmes (totalling ~120 hours). The French government lifted the diploma requirements in order to address the shortage (source) and this reform triggered strong protests from both parents and childcare professionals.
"Over the past 20 years working globally in the education sector, I've seen more and more evidence building on the importance of high quality early years education to ensure children are able to be successful in school and close the achievement gap. There is also growing demand for this from parents and governments as more women go to work and can no longer count on family members to provide as much informal care. However, there is a massive supply shortage of early years educators in almost every country in the world, mostly because the pay and conditions are nowhere near the professional levels required. I am a firm believer that regulated home nurseries, called childminders in the UK, are the solution as they enable more flexible settings, work in any geographical area and ensure more income goes into the hands of the practitioners rather than the overheads and costs associated with bricks and mortar nurseries. At tiney, we're building a vertical childcare software and marketplace to ensure more childminders enter the market and that they can run successful businesses and unlock the potential of every child." Brett, CEO and cofounder of Tiney (UK)
Driver #4: Finding affordable childcare is a challenge
Nursery costs have been increasing for the past 20 years and according to a 2022 EC report, the average cost of childcare for a child under the age of three in Europe is €650 per month vs. €350 per month in 2002 (source). This explains partly why in many European countries, childcare is heavily subsidized by the governments, especially in countries like France, the UK and the Nordics. For instance, the UK government announced that children aged between 3 and 4 can access 15-30 hours of free childcare a week and tax-free childcare in order to cope with the rising costs.
(b) There are already several players trying to take advantage of this nascent opportunity
Disclaimer: It is by no means an exhaustive list. Please feel free to suggest companies that we have missed (dg@brighteyevc.com).
Increasing/upskilling the supply of European childcare professionals
We have formed four main observations while crafting this market map:
Observation 1: The market is clearly divided into four categories of players:
(1) Solutions fully focused on training childcare specialists (e.g. Nana Academy, Youschool, Avail Learning Academy, Gazouyi, Edumiam) → Creating the supply
(2) Solutions mainly focused on job placement (e.g. mytamarin, babysits, bsit, nounou-top) → Placing the supply
(3) Solutions offering comprehensive approaches from training to job placement (e.g. The Village, Bubble, Nordland) → Both creating and placing the supply
(4) Solutions offering an additional dimension to support childminders/nannies in their day-to-day businesses such as billing, enrolments, marketing (e.g. Tiney, Koru Kids) → Creating, placing, and empowering the supply
Observation 2: It’s a relatively nascent market in Europe with a low level of funding. Surprisingly, there are only three European players who have raised more than €10m, which are Koru Kids, Tiney, Youschool (a generalist training provider with a childcare-certified training programme). Most players (e.g. The Village, Bubble, myTamarin, etc.) have raised seed rounds (<€4m) or are bootstrappers (e.g. Momji, Avail Academy, Nanna Academy, etc.). It is hard to tell at this point who is the dominant player in Europe, even though KoruKids seems to have a head-start. It’s worth mentioning that we found more mature players in the US such as Otter, Kindside, Wonderschool, Care, Urban Sitter, among others, who are further along and have raised larger rounds of financing.
Observation 3: A few players are finding a distribution “workaround”. There are many different local companies that are doing a great job at connecting parents with childminders/nannies by leveraging a B2C marketplace approach. These players include Momji (FR), Babysits (NL), Bsit (BE), Le Cicogne (IT), among others. Interestingly, we are seeing a few players such as HeyNanny (GE), MyTamarin (UK), Bubble (UK), Wepartum (FR) who are also going through employers (B2B) to position childcare services as an “employee benefit”. This strategy has the potential to not only facilitate the discovery aspect for parents (e.g. finding a childminder) but also to unlock the financial accessibility to childcare services thanks to employer support, special discounts, etc.
Observation 4: The market standard for certification varies highly according to geographies and local regulations. Being a fully accredited childcare specialist has different importance in different countries. For instance in France (despite this recent measure taken by French government to address a massive shortage) and in the UK, being a fully accredited childminder is highly valued and in most cases required in order to be able to work. There are a few local players such as Tiney (UK), Youschool (FR), Gazouyi (FR), Edumiam (FR) who offer training programmes that deliver accredited certifications to people who want to become childminders.customers feel seen and heard by the brand.”
(c) Where we believe the [potential] opportunities are:
Based on this high-level analysis of the space and on interactions with a number of founders in this new space, we found four interesting themes to potentially unlock the childcare opportunity in Europe. We are currently excited by the following topics (and beyond!).
(Disclaimer: we tried to imagine possible business ideas/models and we might be completely wrong but it was fun to try at least!).
Improving the discovery process for parents - It is still a massive challenge!
A high percentage of parents are not only struggling to find the right childminders/nannies and broader childcare solutions but also to retain them over a long period of time. The matchmaking process offered by most B2C marketplaces is not optimized and in most cases results in a not-so-great experience for parents and poor matching results (i.e. bad fit, turnover, etc.). As of today, we would argue that the two most efficient ways - while not being perfect - to find a childminder/nanny are (a) referral from someone who knows this person and (b) working with a childminder/nanny for another family (i.e. a childminder/nanny you meet in the playground). While there are potentially many ways to improve the discovery process - especially the matchmaking algorithms (becoming more like dating apps?) - one possible solution could be paying for a “childcare concierge service” (similar in some ways to an Airbnb concierge service). These coaches could help you navigate this complex process from not only finding the right childminder/nanny or even the right nursery that fits you and your child's needs, but also unlocking local financial help if available, designing a pedagogical project for your kid, finding new local activities to do with the childminder, etc. A yearly membership model to access this type of much-needed assistance could be viable.
Taking the health & safety game to the next level.
Given the unfortunate incidents that happen every year in nurseries across Europe (and the world), safety can still be considered as a major issue in the childcare space. Safety and health are definitely two of the main aspects for parents when making a decision regarding childcare and where to send their children. As Brett from Tiney mentioned, it is critical to differentiate from regulated and quality-assured childminders vs. unregulated babysitters/nannies/au pairs. Perhaps specialized training on childcare health and safety, providing comprehensive solutions, could be an interesting way to tackle the issue for childminders, nannies and nurseries.
Think “safefy coaches” who help with:
training childminders and the rest of the staff frequently on medical topics such as medication administration, and first-aid, among other critical topics
preparing and optimising physical spaces to increase safety and creating fully child-proofed spaces
preparing and delivering an independent safety certification (e.g. ISO certification fully focused on child health and safety)
managing potential incidents thanks to just-in-time help (crisis mode), incident reporting, safety processes and procedures, among others.
This could be monetised via a traditional subscription B2B SaaS model for any player in this market (i.e. nurseries, independent nannies, placement agencies, etc.) and this could definitely help in increasing trust in the parent-to-carer relationship. (If you want to go deeper into the health and safety issue, the Inspection Générale Interministérielle du secteur Social (IGAS - French government) recently published a report on the state of nurseries in France.
Training and preparing childminders on 2X speed to address the growing shortage.
As mentioned above, there’s a shortage of 1.2m childminders in Europe and not enough childcare settings to meet the growing demand. Today, it takes on average ~7 months of intense preparation to become a fully accredited childminder in France (and up to 24 months to get specific diplomas like a “CAP Petite Enfance”). We are witnessing (sadly) that many nurseries across Europe are overwhelmed and in some cases are delaying intakes by a few months because of a lack of prepared professionals. Naturally, there are different ways to address this shortage of professionals and we are thinking about three ways but there are certainly many more available:
Launching condensed and accelerated training schools by leveraging new models (e.g. apprenticeships, bootcamp-style, etc.). This strategy of creating a supply of web developers worked relatively well over the past 10 years with coding bootcamps (e.g. Ironhack) and we believe that could work for regulated childminders as well.
Whenever possible, leveraging the “public-private-partnership” approach to help local governments increase their capacity to create that supply of qualified childminders, opening new nurseries and placing these new childminders. It’s essentially what Wonderschool does in the US but for European governments.
Building “accelerators” to help childminders evolve by not only preparing them (e.g. training) or offering guidance on how to launch their nurseries/microcentres/other models but also by offering additional key services such as insurance, financing options, infrastructure, etc. to help them get started in a smoother and more efficient way.
Having said this, no matter which training solutions we choose to increase the much-needed supply of childminders, raising the bar and elevating childminders should be core to the solution. As mentioned above, this space is suffering from a lack of recognition (incl. low pay) and a lot of stereotypes. At Brighteye, we believe that childminders are one of the pillars in our society and changing the current “mentality” towards childcare is paramount. Childcare is much more than looking after kids for a period of time, it is also about educating them on key topics. Changing this overall mentality is the first stepping stone to allow these workers to perform and remain engaged in the long run.
“I believe that childminding can be an incredible profession because: (a) you have the opportunity to educate and nurture young children as they develop - you will see the impact of your work over a long period of time, (b) it's a job that offers a high degree of flexibility, allowing you to work on specific days which can help with work-life balance, and (c) you can make a good living compared to the average salary in the French market.” Victor, cofounder of Gazouyi (France)
"Childcare is pivotal for our society's future, and yet its workforce often faces inadequate pay and recognition. Addressing this isn't merely a matter of market dynamics; it's about understanding the value these professionals bring. When investment bankers and childminders, as employees, are taxed similarly, we have a systemic flaw. Traditional capitalism assumes that in the absence of market-provided affordable care, women will readily offer their services for free. If governments were to compensate for the countless hours mothers invest in childcare, I am convinced that there'd be a radical shift in incentives to improve early educator compensation. Real change demands public-private collaborations, rethinking remunerations and recognizing the true value of caregiving." Aleksandra Kozera, cofounder and CEO of The Village (Poland)
Unlocking “childcare as an employee benefit”.
Helping parents fit both their work and child-related activities together is definitely one way to attract and retain talent for companies while improving their performance. We have seen several interesting ways to help reduce the cost of childcare for employees such as on-site nurseries with flexible hours, special agreements with close-by nurseries, financial help with private nannies/nurseries, tax incentives for both employees and employers, specific discounted deals on a range of private childcare services, etc. Today, these attractive childcare benefits are offered by a few large companies in Europe (e.g. Bouygues Telecom in France, Goldman Sachs in the UK, Boehringer Ingelheim in Germany, Inditex in Spain, etc.). But in reality, it’s still rare to find these types of benefits, especially in smaller companies that can’t afford this. We believe strongly in this approach as it’s a win-win for everyone but at the end of the day, it relies heavily on employers’ willingness, which can be a blocker. We have seen a few examples such heynanny (GE), Vivvi (US), Kindside (US) that seem to be working well.
“As a mother of two children and founder of heynanny, I can only emphasize that we take this support and flexibility for people with private care issues for granted in 2023. Children and parents in need of care should not mean a break in your career. CEOs without children and their own care issues are now also aware of the tense situation in this area. Getting a call from kindergarten in the morning saying “We are closed today” has unfortunately become the norm and is costing companies millions in terms of productivity and staff loss." Julia - CEO and cofounder of heynanny (Germany)
We want to congratulate and encourage all the European entrepreneurs who are building companies in the childcare space. We know it’s a tough market to crack and we would love to receive your feedback on this piece and connect if you are building a solution to tackle this issue in Europe. Let’s chat: dg@brighteyevc.com
Finally, thank you the following founders for their valuable insights and great feedback:
Julia Kahle, CEO and cofounder of heynanny
Aleksandra Kozera, CEO and co-founder of The Village
Victor d’Herbemont, cofounder of Gazouyi
Brett Wigdortz, CEO and cofounder of Tiney
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