Eye-wateringly expensive... no longer?
Mirza has a solution for the punishing cost of childcare
Today’s startup wants to help employers deal with the problem of prohibitively expensive childcare costs. London-based Mirza has a huge opportunity in the US, but should find itself welcome in the UK too. Scroll down to read more.
As usual, our lovely paying PreSeed Now members get the full details, including the startup’s plans to expand beyond childcare and find a unique place in the constellation of financial services. You can upgrade your subscription below.
Meanwhile. if you’re anywhere in the UK, chances are you feel like you’re melting at the moment. Get used to it. While political will is the biggest barrier addressing the problem of rising temperatures, startups have a role to play in developing technologies that can help us make great leaps forward.
And one organisation that might be soon helping the UK make more big strides in this field and others is ARIA, the UK's new ARPA-style, big-thinking science funding organisation. Entrepreneur First’s Matt Clifford has today been announced as founding chair. They're also hiring NEDs and a CFO, and they'll be hiring programme managers soon. Read more in Matt’s newsletter.
Mirza wants to beat the childcare trap… with help from employers
If you have kids, chances are you’ve had that heart-attack moment when you suddenly realise how shockingly expensive childcare really is.
Even with the government subsidies available in the UK, from personal experience it can still cost nearly £1,000 per month for full-time nursery care for a pre-schooler. And that support isn’t even available in full until a child is three years old. There’s a good reason why many parents—often women—end up out of the workforce for years after their child is born - childcare simply costs too much for many people.
Looking to change this with a novel approach, London-based Mirza turns childcare into an employment benefit in the form of a financial product.
How it will work
The startup will charge employers an annual fee, which gives their staff access to a platform that helps them work out the cost of care and apply for up to $10,000 of childcare support. Despite being based in the UK, Mirza is prioritising the less-subsidised US market first, although it’s also looking at UK opportunities.
The financial support is a 0% interest loan with three-year repayment terms, integrating with payroll for both loan payouts and repayments. But employers can pay off the loan on behalf of the employee, offering it as a perk of the job if they choose.
“In a nutshell, we’re trying to make childcare affordable,” says Mirza co-founder and CEO Siran Cao. “We work with employers to really bridge the time gap of childcare affordability for their employees, and do so by aligning interests for the company and for the employee.”
The gender pay gap and motherhood penalty
The idea for Mirza was born in a conversation between Cao and co-founder and COO Mel Faxon in January 2020.
“We were just chatting about the fact that women tend to think about our careers and our bodies on very separate tracks. But the intersection of those two things—when you have a child—really impact your financial future, your future career progression, all these things. And so we wanted to start thinking about ways that we could tackle this problem,” says Faxon.
Faxon says childcare felt like the contributing factor to the gender pay gap and the motherhood penalty upon which they could have the most impact. She adds that even in the UK, where government subsidies are available, childcare is a huge burden for a lot of families. “Our thesis is anything that we can do to help alleviate those costs will inherently close the gender pay gap down the line.”
Both previously based in the US, Faxon and Cao met in London when they were both studying for Masters degrees. Faxon had experience working with startups in the hospitality and wellness spaces, while Cao had spent three years at Uber. “I built driver support in New York City,” Cao says. “And that is a very frontline, operational industry. So childcare and the impact of childcare was something that we had to schedule around and still had daily impacts.
“Both of us having really deeply felt these very frontline spaces gave a bit more insight into what are the employer incentives there. And the very real pain points that not a lot of folks really try to tackle in the benefits space,” Cao adds.
Making an impact
Talking to Cao and Faxon, I was surprised this isn’t something that’s already being done as standard. Certainly in the UK, some employers offer support towards the cost of childcare, but in the US that’s not the case.
So in terms of impact, Mirza’s big potential market really is the US. But even in the UK, there’s a benefit to the Mirza approach. A note to me via Mirza’s PR company explains:
“For UK employers, the biggest difference between Mirza and employer-supported childcare is that Mirza enables parents to choose their method of care, giving them freedom and autonomy over their child’s care program vs choosing from pre-approved government programs. This is important when you look at other factors such as culture, location, etc. There's a lot of dignity in giving parents that freedom.”
And employer-run schemes might be too limited for some parents. “Subsidised daycare on site may not be what's culturally appropriate for the family, and may not be what the family wants to use,” explains Cao.
Cao says that Mirza is all about tackling the root problem of affordable childcare. “We're thinking about ourselves as the financial layer that can really play with a lot of the folks who are already in market to just unlock much greater access to affordability.”
Bigger plans for the future
So where is the development of this product going, and how will Mirza fund the journey?