Why we invested in Cocoon…
We’re thrilled to announce our investment in Cocoon, a company simplifying and automating the administration of paid leave for employers and employees. Springbank is built on the premise that investing in the missing infrastructure to serve women, caregivers and working families is a massive opportunity. Cocoon is a perfect example of this infrastructure. We are proud to join forces with incredible founders Mahima, Lauren, and Amber, as well as great investors that we both enjoy personally and deeply admire professionally at Index, First Round, XYZ, SemperVirens, and Magnify.
We have been studying the leave management space for 2+years — a category that is necessary to support an inclusive workforce. 5% of workers go on leave every year. 80% of those leaves are taken to care for someone other than a newborn baby. And each leave costs a company ~25 hours of administrative work. That is hundreds of millions hours of administrative work annually and billions of dollars of cost every single year.
When we met the Cocoon team, the list of things we were excited about was long: their deep experience building products people love at Square and Stripe, their knowledge of fintech, their in-depth market understanding, and their incredible speed of execution. We had the opportunity to hear them pitch to employer prospects, and to hear existing and potential corporate clients rave behind their backs about what they were building and the massive pain point it solves.
Cocoon makes it cheaper and easier for employers to offer leave and do it in a delightful way for employees. It makes taking leave to care for those we love feel human, normal and doable instead of a Kafkaesque paperwork nightmare. It makes it more likely that companies will offer more types of leave, take better care of their caregiving employees (who are 75% of all employees), and reduce the conflict between caregiving and dignified paid labor. In doing so, Cocoon will join the ranks of other companies that have had the guts to reimagine the underlying plumbing of some of the most manual and hated processes in large organizations, just like Carta, Plaid, Docusign, PromisePay and other category-defining companies have done.
Here’s how we thought about the problem, the solution, and the opportunity that Cocoon has in front of it.
Why is this even a problem?
First, leave is complex. Without a federal paid leave policy, the US is a patchwork system of private and state-level policies that are hard for both companies and their employees to navigate. The crux of the issue is the claims paperwork that needs to be filed by companies and individuals to get paid out under things like short term disability policies, companies’ own balance sheets and/or state-funded benefits. This messy system means that in many cases people and/or their employers don’t get paid — making taking leave hard and expensive. Friction translates to lower economic growth, lower uptake of leave, and fewer caregivers remaining in the workforce.
Second, the types and amounts of leave are growing. Companies, increasingly concerned about attracting and retaining a diverse workforce, are expanding the length and type of leave they are offering. Companies are adding things like paternity and non-birth-parent leave, longer leave offerings, caregiver leave, bereavement leave for miscarriage, etc. This is great for the portion of the workforce lucky enough to get these benefits, but it also increases the cost and burden on companies, adding even more friction.
How do we fix it?
Simplify. While it’s complex, it’s not rocket science. Process automation, rules engines, and delightful user experiences are things the tech sector knows how to do very well. It’s time to bring them to this problem. We have been so impressed with what Cocoon has built and the fact that, of the leaves that have been managed by them so far in 2021, the vast majority of them have been administered with zero human intervention.
Humanize. Leave is deeply personal, confidential and at times scary. By making it hard, we inevitably deter and even shame utilization. This becomes a barrier to caregivers persisting in the workforce and when that happens we all suffer. Cocoon has built the modern UI that people have come to expect, and baked in the privacy and empathy that they deserve.
This is just the start
The addressable market for solutions like Cocoon’s is huge. It’s literally every company. Multi-billion dollar companies are built on the promise of solving niche problems for certain segments of the economy. Cocoon’s solution impacts all US employees and every single company that employs them.
The time is right. People management as a function is finally getting the respect and resourcing that it deserves, and spending on solutions that are employee-facing is particularly in-focus as the Great Resignation gets underway.
And, down the road there are opportunities not just in making it easier to administer leave, but also to pay for it. Today much of leave is paid for by short term disability insurance policies that cover women after childbirth. That doesn’t work if the leave is being taken by dads or other non-birthing parents, for example. It’s time for a rethink. Cocoon will have an incredible data set to bring to bear on true insurance innovation. Stay tuned…..
