Our October 2022 Newsletter
Why We Invested in Acelero
By Rahul Bhide
Early childhood education (ECE) is critical for educational outcomes; 90% of brain development happens before the age of 5. Studies have shown that high-quality ECE interventions result in improved academic achievement, cognitive development, emotional development, and self-regulation. Furthermore, ECE benefits accrued over children’s lifetime include improved earning potential and economic opportunity, as well as reductions in public and private healthcare expenditure. The absence of ECE is also strongly felt; a child without ECE is 25% more likely to drop out of school, 40% more likely to become a teenage parent, 60% more likely to never attend college, and 70% more likely to be arrested for violent crime.
The supply of ECE in the US is severely hampered, with existing providers lacking adequate capacity, further exacerbated by the COVID-19 pandemic. 51% of Americans live in a child care desert, largely low-income and minority communities.
Solution
Acelero is an ECE platform serving low income communities, as a direct operator of Head Start (HS) centers (Acelero Learning) and via tech-enabled services to other HS operators (Shine Early Learning) and states and municipalities (Shine Advance).
Acelero started operating HS centers in 2005, focusing on closing the Achievement Gap by delivering high-quality educational outcomes, and have been nationally recognized for their results.
Building on their years of direct teaching and operating experience, they launched Shine Early Learning in 2011, sharing best practices and providing critical infrastructure to other Head Start operators nationwide. Small-scale studies of educational outcomes with Shine Early Learning partners results have been extremely positive. Looking to make a deeper impact on the early childhood education system at scale, in 2019, they launched Shine Advance to support state and municipal governments to improve the quality of early education providers under their jurisdiction, through IP and tech-enabled services.
Acelero operates 54 centers in 4 states, directly serving 5,000 children annually; and through their work with state agencies, child care centers, home-based providers, private and public pre-K and Head Start and Early Head Start programs, they impact more than 150,000 children and their families across 28 states and territories.
Why We Invested
Acelero’s CEO, Henry Wilde, was a co-founder of the organization 20 years ago. He is extremely mission-aligned, knows the early childhood space very well, and is backed by a veteran management team of 28 comprised of recognized and diverse leaders in the field committed to the outcomes-based business model, leading curriculum development and comprehensive support for teachers, families and students, with 1500+ other employees.
Acelero has a strong and proven direct center business model built over their 20 year history, along with a unique solution set. They have developed a strong, four-pronged early learning framework, comprised of educational content, teaching, family engagement, and data-driven management. Acelero operates in a large, but heavily fragmented early childhood education and childcare market, where both quality and technology adoption levels are highly variable. This positions an established, technology-forward player like Acelero well to succeed in this market.
Beyond directly operating Head Start centers, the organization is uniquely positioned to serve Shine clients from other Head Start providers to a diverse set of state and municipal governments, and the strong traction they have achieved to date speaks to that.
Impact
We believe that high-quality early childhood education imparted directly (via Acelero directly-operated centers) and indirectly (via Shine Early Learning/Advance) will be critical in closing the achievement gap for low-income children, and contributing to increased economic mobility. We have confidence that they will be able to do this because they are one of the only players in the space with best-in-class externally validated outcomes, with Acelero students outperforming the Head Start standards by 2.9 - 4.7x on the Peabody Picture Vocabulary Test. The impact of the Acelero/Shine model has also been demonstrated at scale. They have been repeatedly recognized as a Head Start exemplar by the Office of Head Start, and studies performed by the Annenberg Institute at Brown University have regularly measured the improvement in outcomes delivered by Acelero since 2015, including some of the highest ever outcomes gains ever recorded in a Head Start program.
Furthermore, we believe that Acelero, through its rigorous professional development model and upskilling program for Acelero employees, enables increased economic opportunity for employees in low-income areas. At a systems change level, we also believe that proving that a high quality, for-profit, PE-backed model can work in early-childhood education will catalyze the space and education investing in the US.
Why We Invested in Dandi
By Rahul Bhide
Workplace diversity, equity, and inclusion (DEI) is important not only because it is the right thing for organizations to do but also because it can deliver improved business outcomes: HBR has been writing about that linkage since 1996. Employees also care about DEI; 76% of employees and job seekers said diversity was important when considering job offers. Amidst successful votes for racial equity audits at firms like McDonald’s, Apple, Johnson & Johnson and Home Depot, it is increasingly clear that there is a significant appetite to understand where to focus future efforts and whether DEI initiatives are generating meaningful results.
According to CultureAmp’s 2022 Workplace DEI Landscape report, although most organizations (83%) are collecting DEI data, only a handful are analyzing pay equity (only 15% do it more than once a year) and performance equity (only 29% do it once per cycle, all others less than once per cycle or never). Data sharing is limited: only 34% of companies share DEI data outside of the executive team. Most importantly, less than half of organizations actually used DEI data to make decisions, despite wanting to do so. Organizations keen to make data-driven DEI/HR decisions are hampered by existing HR information systems’ data sharing limitations and static analysis that often relies on analysts manually gathering data and running analyses periodically.
Solution
Dandi is the data analytics platform for DEI, enabling organizations to make data-driven DEI decisions. Dandi starts by pulling in information from any major HR information system or data store, and then allows anyone from CEOs to DEI teams to analyze the organization at a macro level and drill down for specific intersectional insights. Dandi is also launching a user-friendly tool to allow non-technical employees the ability to import new data files/feeds, and define new metrics.
Why We Invested
The founding team at Dandi is one of the strongest we've seen in the DEI space. Building on extensive technical backgrounds and a deep knowledge of the HR tech space, they’ve developed a best-in-class product. Dandi is able to work with all major HR information systems and data stores, and includes powerful dashboards to move from high-level to granular analysis, exportable reports, and regularly refreshed data.
Despite not having officially launched, Dandi has secured several early customers through the founding team’s network and received sustained inbound interest from companies very interested in what they have to offer, building early traction while being extremely capital efficient.
Impact
We believe that Dandi will enable employers to become more diverse, equitable and inclusive by enabling more accurate, more granular, more automated, and more accessible DEI analysis. There is also the potential for Dandi to collect the data to be able to link business performance to DEI at a granular level, which could be game-changing from an impact perspective. Additionally, as Dandi reaches significant scale, its aggregated (and anonymized) dataset will be an enormously valuable source of insights for HR/DEI teams, leadership teams, and policymakers.
We’ve seen Dandi in action and the results are significant for early applications; after one client engaged with Dandi, they identified and reduced gender pay gaps from 10% to 2.5%. After being deployed at another company, voluntary data collection for ethnicities went from 25% to 90%+ in a quarter. At another client, Dandi identified pay gaps between those who identified as primary caregivers and those who didn’t, and was able to support the client in addressing those.
A New Golden Age for Environmental Impact Investing?
Sector Spotlight: Environmental Sustainability Investing
Sector Spotlight is a periodic series highlighting each of the individual impact areas we invest in.
This month we sat down with Impact Engine Vice President Chris Wu to learn about his speciality, environmental sustainability investing.
Why are you personally drawn to environmental sustainability investments?
Prior to Impact Engine, I spent the majority of my career focused at this intersection between the natural and the built environment. I studied civil & environmental engineering in college. My first job coming out of school was as a structural engineer designing buildings in New York City. I was really fortunate, my first project would end up becoming the first LEED Platinum skyscraper in the world, the Bank of America Tower at One Bryant Park. That experience went a long way towards seeding my interest in all things sustainability.
What’s an example of a recent E.S. investment we’ve made here at Impact Engine?
I’m really excited about our recent investment in a company called Circuit, which is an on-demand microtransit solution provider that uses fleets of electric vehicles specializing in pooled rides to fulfill the first/last-mile gap that's experienced by municipalities around the world.
Circuit’s last mile solution has demonstrated that it can serve as a connector to public transit systems or mass transit hubs, and has effectively addressed transit deserts in places like West Dallas. The company has strong business traction with a diverse set of customers including cities, municipal partners, private inter-city rail companies, and real estate property owners. Circuit has delivered over 5 million rides to date, and in 2021 alone they served over 650,000 riders, reduced congestion by over 1,000,000 vehicle miles traveled, and prevented 535 tons of CO2 emissions. They are able to deliver all this to cities at a much lower cost than current options. Fixed route bus systems with low ridership can cost a city over $35 per ride, whereas Circuit successfully serves Pompano Beach, FL at just $2.28 per ride.
When you’re evaluating a potential investment in this space, what are some special aspects you consider? Things you like to see in a company?
In general, I’m typically looking for a strong mission-driven team with a compelling and differentiated product that is addressing a large social or environmental challenge, which also represents an attractive market opportunity. I really like to see a founder who is steeped firsthand in the problem they’re trying to solve, and I look for companies where the impact is baked into the core DNA of the business so that the impact scales in lock-step as their revenue grows
In the sustainability space, I think it’s particularly important to have a team who can demonstrate that they are strong at customer acquisition because they may be selling to governments, utilities, or large enterprise clients where the sales process can be very long and challenging. Another special aspect to consider is the changing regulatory landscape, and how new legislation can help open up or accelerate new markets for sustainability companies.
Are there particular challenges to investing in the environmental sustainability sector?
Climate change touches every aspect of our economy, as a result sustainability is a very broad space that can cover everything from food & ag, transportation, and energy, to the built environment and the industrial sector. So it’s important to stay up to speed on a wide range of topics, but that’s also part of what makes investing in environmental sustainability so fun!
Looking forward, what’s got you excited in the environmental sustainability space? Big opportunities on the horizon?
It’s a really exciting time to be investing in the environmental sustainability space. There’s a confluence of different factors all converging to drive strong tailwinds, including the passage of the Inflation Reduction Act, the SEC’s proposal to require publicly traded companies to disclose climate-related financial risks, seeing that 80%+ of global GDP is now covered by net zero commitments and 20% of the world’s largest companies have adopted net zero targets, as well as consumers shifting their sentiment towards more sustainable purchasing behavior. I’ve also seen an influx of new talent entering the space, I’ve met a lot of first-time entrepreneurs who come from traditional engineering and science backgrounds and are applying their expertise to help develop novel, highly scalable solutions to some of the biggest environmental challenges we face. Taken all together, it’s a great time to be building a climate tech startup, and I look forward to supporting them.
I also think the environmental sustainability space has a big opportunity in terms of driving more equity and inclusion. Disadvantaged communities and people of color are often on the frontlines of climate change, and are disproportionately impacted by its negative effects related to health, quality of life, and economic outcomes. Climate justice is becoming more top of mind for folks in the space, as demonstrated with initiatives like Justice40 as well as the work of organizations like the Greenlining Institute and Browning the Green Space, and I look forward to seeing more progress on this topic moving forward.
Browse our environmental investment portfolio.
Summer Reading at Impact Engine
Why Investing in Impact Growth Equity is Critical & Our Maternal Health Study
The next healthcare horizon: improving maternal health through innovation and technology
By: Sophia Friedman and Gabrielle Bunney, MD
Each year, Impact Engine selects key themes within Health Equity to focus on. These themes reflect areas with significant unmet need and high potential impact that are ripe for investment. We focus on solutions that strive to make access to healthcare more equitable to all, with a focus on populations that have historically struggled to receive equal access to care. One such area is women’s health. While women make up roughly 50% of the population, women often struggle to access healthcare services and face gender biases in healthcare settings, leading to poor health outcomes. This issue is especially acute within maternal health: maternal mortality is staggeringly high in the United States when compared to other developed countries. We wanted to better understand these trends, the systemic factors leading to inequalities in access to care, and how the private sector can play a role in addressing these challenges.
Maternal mortality, defined as deaths during pregnancy and up to 42 days postpartum, reached 23.8 per 100,000 pregnancies in the US in 2020. The US now ranks last overall among industrialized countries in terms of maternal health outcomes. While the topic of maternal mortality has often been overlooked in the US, the Supreme Court’s recent overturning of Roe v. Wade has brought more widespread attention to the issue. Some worry that the recent overturning of Roe v. Wade could worsen maternal health outcomes and exacerbate health inequalities in the US, making the need for innovation in this space all the more critical. While the statistics are grim, women’s health, and maternal health specifically, is an area that investors are increasingly beginning to explore to fund solutions that close the gap between the US maternal mortality rate and the rest of the world.
The medical causes of maternal mortality are multifaceted, ranging from hemorrhage, infection, hypertensive disorders, cardiac conditions and others. While some disorders are unavoidable, many complications can be addressed by providing women with early access to care. Screening and early monitoring can help detect hypertensive disorders and cardiac conditions and also reduce C-sections. However, prenatal care is not just about showing up for visits. While the US standard of prenatal care dictates that 12-14 visits are required, we know that women who are uninsured or are on Medicaid are more likely to attend less than 10 prenatal visits. This leads to the conclusion that attending more visits must therefore be better. However, our European counterparts have better maternal outcomes and average recommending nine prenatal visits, significantly fewer than the US recommendation. Therefore, impact will not only come from getting women to attend appointments, but also from examining the quality of care that is delivered in -- and between -- those visits.
While medical causes have often been the focus, morbidity and mortality also stem from other causes, including mental health and the social determinants of health. These require a focus on multidisciplinary care, going beyond the health care provider and including those in the mental health professions, social work, dieticians, doulas, midwives and more. One argument for the success of prenatal care in Europe is that women have more social support and financial benefits, suggesting that a more integrative approach to care may be important.
Racial disparities account for a large portion of the maternal mortality rate. Black women have a much higher mortality rate when compared to women of other races in the US. Black women receive less prenatal care as they are less likely to initiate care, less likely to access timely and affordable care, and less likely to utilize care by the end of pregnancy.
The key social factors that impact maternal health outcomes include income, lack of social support and child care, food instability and education, all of which disproportionately affect black women. While these are important drivers, a greater emphasis needs to be placed on culturally competent care. When providers understand the background of the patients they care for, it allows for them to build trust, leading to a therapeutic relationship and ultimately better care.
Rural areas are also plagued by high maternal mortality. Approximately 15% of annual US births occur in rural hospitals, and rural communities have higher maternal and infant mortality than the national average. Overall there is a shortage of providers in rural areas and births are primarily attended by a family practice physician or midwives, rather than an obstetrician-gynecologist.
It is important to note that Medicaid covers about 50-60% of rural births. Medicaid is an important source of insurance for pregnant women regardless of their location. Insurance status is often linked to employment, and women who are expecting are less likely to be employed during the year they are pregnant. Public insurance is therefore an integral factor for pregnant women. Having coverage by public insurance was associated with a lower likelihood of spending >10% of their income and reducing the economic burden on pregnant women. However, women who do not normally qualify for Medicaid lose their Medicaid insurance 60 days postpartum. Medicaid expansion is done on a state-by-state basis, and therefore solutions that can solve this gap are greatly needed, in addition to lobbying for policy change.
Maternal health is a subset of the broader women’s health and femtech1 categories, which are experiencing significant growth. Some estimate that the women’s health market will be approximately $60 billion by 2027. Specifically, the current challenges in maternal health make this an area that is ripe for investment. In examining the landscape of digital health products addressing women’s health, approximately 19% are in maternal health. Overall, femtech investments are also rising, with increasing capital and an increasing number of deals. There was a notable increase in 2021 in the amount of VC capital that was raised – Impact Engine portfolio company Elvie raised $97M, Maven Clinic raised $110M and Flo Health raised $50M.
Startups in women’s health have been primarily divided between devices, diagnostics, and digital solutions. We focused on digital solutions because that is our primary lens on investing in this space. Digital solutions span online community resources, telehealth, and remote monitoring. Key themes of focus within the maternal health space include:
Software solutions that help to educate and engage women of reproductive age, specifically those who may soon become pregnant or who already are pregnant. Focusing on women who may soon become pregnant is critical, as often women have undiagnosed pre-existing conditions, and improving the health of women before they become pregnant or early on in the pregnancy is critical to improving health outcomes throughout the pregnancy and beyond.
Solutions to pair pregnant women with additional support services such as doulas, midwives, nutritionists and mental health professionals. Given current labor challenges, it will be important for these solutions to also focus on increasing the supply of such professionals, which has a dual impact of increasing economic opportunity while improving health outcomes.
Remote patient monitoring solutions that can be used in the home. These solutions, some of which integrate innovative devices and hardware, can bridge gaps in care as they can aggregate data and take a woman’s vitals (e.g., weight, blood pressure, and even fetal monitoring) to monitor women between visits and escalate issues as they arise, rather than waiting for a regularly scheduled check-up.
While point solutions can target specific parts of the patient journey, it is important to keep in mind the holistic health of the woman throughout the entire process when considering solutions in this space. We believe that the winners will be solutions that address the woman’s whole health and/or integrate with other solutions to support various social and medical factors that may affect a woman’s health throughout her pregnancy and beyond.
The increasing number of firms entering the women’s health space is encouraging. However, many solutions that target maternal health specifically are still early-stage and therefore have yet to show the correlation between the product or service and improved maternal health outcomes. It will be important to evaluate the impact that the solutions will have as well as women’s access to these services (e.g., via insurance coverage) in order for them to make lasting change and improve health outcomes. Hard questions need to be asked: How can we change the delivery of prenatal care to reduce the burden of receiving care? How can we provide culturally competent care to women? What outcomes should we be looking at e.g., reduced C-section rates, reduced preterm birth rates, reduced NICU days? How can we provide access in rural areas without compromising the quality of care? How can we reduce the cost burden on pregnant families beyond Medicaid expansion? These are a few questions that attempt to get at the core of the disparities that pregnant women experience in our current healthcare system and should guide the evaluation of new solutions.
1The femtech industry refers to a range of health software and tech-enabled products to improve healthcare for women across a number of female-specific conditions.
References:
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https://www.cdc.gov/reproductivehealth/maternalinfanthealth/infantmortality.htm
https://www.americashealthrankings.org/learn/reports/2019-annual-report/international-comparison
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Peterson JA, Albright BB, Moss HA, Bianco A. Catastrophic Health Expenditures With Pregnancy and Delivery in the United States. Obstet Gynecol. 2022 Mar 10. doi: 10.1097/AOG.0000000000004704. Epub ahead of print. PMID: 35271537.
https://www.statista.com/statistics/1125599/femtech-market-size-worldwide/
https://www.coyote.ventures/_files/ugd/e768ef_ea188df766ed445db2c3f02b47014c60.pdf
Pitchbook data
https://news.crunchbase.com/startups/femtech-vc-investment-startups-womens-health/