Becoming a parent brings drastic change in the household budget. There are big cuts in funding for nights out, trendy clothes, and elaborate meals. And there are massive spending hikes on diapers, convenience foods, and an endless list of gear from strollers to cribs to car seats.
As such, new and expectant parents are a favored demographic among marketers. They鈥檙e particularly receptive to products aimed at saving themselves time while offering stimulation and safety for little ones.
Startup founders and their backers have also taken an interest, applying technology and business model innovation to the increasingly tech-intensive art of watching, feeding, entertaining, and transporting tiny humans. Although baby and toddler tech doesn鈥檛 account for a large piece of the total startup funding pie, it鈥檚 been a relatively active area for seed investment and has produced some high-return exits.
Funding In The Baby Market
Over the past two years, startups with baby- and toddler-focused business models have raised more than $260 million in seed and venture funding, according to an analysis of 附近上门 data. They鈥檙e developing a host of products, including robotics-enabled baby swings, smart monitors that track vital signs, and formula customized for the needs of ill and premature infants. (See our list of funded companies based or marketed in the U.S. ).
Some startups have gone on to raise pretty large rounds. Among the largest funding recipients is , which develops edibles designed to help provide immune system training for babies. Its products are founded on the principle that including potentially allergenic foods as a regular part of one鈥檚 diet can boost immunity. Before Brands closed a $35 million Series B round in March, bringing total funding to $48 million.
Another big funding recipient is, which sells a 鈥渟mart sock鈥 that uses pulse oximetry to measure infants鈥 heart rate and oxygens levels while they sleep. At $300, it鈥檚 probably the priciest sock you鈥檒l ever buy. But investors seem confident parents will pay for the added peace of mind, with Owlet raising $24 million to date, including a $15 million Series B in November.
Companies that have raised large and later-stage rounds are greatly outnumbered by seed-stage startups. While we can鈥檛 say which will prove a hit, here are a few of the investment themes that sound like they could generate a big following.
Getting Smart
Owlet isn鈥檛 the only one pitching a 鈥渟mart,鈥 or tech-optimized version of a traditional baby accoutrement. Five-year-old , for instance, makes a smart changing pad, scale, and a combination night light and sound machine. It鈥檚 also taking pre-orders for a device that tracks the heartbeat of an infant in the womb. For those looking to pair their smart changing pad with a device that detects soiled diapers, Korean startup has rolled out a Bluetooth-enabled sensor that sends alerts at the earliest sign of moisture.
New York-based , meanwhile, has raised more than $6 million to develop a smart monitor that provides wake-up alerts and advice for improving sleep quality. Parents looking to monitoring health of their somewhat older kids also have options. San Francisco-based Good Parents has raised $2 million to develop a health wearable for children age four and up.
Eating Well
Baby nutrition is also big business. Additionally, it鈥檚 a sector that has potential for high margins, given the tiny portions involved and parents鈥 willingness to pay extra for wholesome ingredients in convenient packages.
To date, baby food startups have a history of delivering some profitable returns to investors. , a maker of organic baby foods, sold to Campbell four years ago, providing a favorable return. Around the same time, another organic baby food startup, , sold to Danone in a deal that founders touted as a win for the company. The purchase price wasn鈥檛 disclosed at the time, though Happy Family revealed that its annual revenue had topped $60 million.
The current crop of seed-backed baby food companies include packaged goods and delivery startups. The list includes , a maker of quinoa-based products, , which makes cold-pressed refrigerated meals and snacks, and , another organic food company. 聽Another newcomer is Little Spoon, which offers a baby food delivery service.
Healthcare,聽Mobility, And Entertainment
Other seed-stage startups are looking at ways to improve baby and toddler doctor visits, transportation, and activity planning. On the healthcare front, has raised seed funding for a business providing house calls for babies in New York City. Meanwhile, on the West Coast, Los Angeles-based operates a network of certified drivers to pick up and drop off children. A few startups are also targeting the activity planning space, with , The Kids Passport, and offering tools to find and subscribe to classes.
Probably the biggest exit in the space to date, however, hails from the ecommerce sector. , an online retailer of baby and children鈥檚 clothing, sold to QVC in 2015 for $2.4 billion, a few years after launching a public offering.
Currently, there doesn鈥檛 appear to be any baby-focused companies on the list of talked-about IPO candidates. But consumer products companies and other likely acquirers have shown no signs of losing their appetite for the space. Some startups, such as smart sock maker Owlet, might not even need a big exit to return big profits for investors, given the likely margins on products like $300 socks.
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