I wanted to write a column about the rivalry between Care.com and Sittercity, two Web sites with Boston connections that aim to be to home-based care services what Match.com has been to dating, or Monster.com has been to jobs. All I knew was that Sittercity at one point had spoken with Matrix Partners, the Waltham venture capital firm that eventually funded Care.com. Care.com founder Sheila Marcelo had been an entrepreneur-in-residence at Matrix.
I thought this was mainly going to be a column about how the two sites are competing with one another to win the hearts of moms and dads looking for high-quality childcare.
Until, talking to Marcelo last Monday, she brought up out of the blue the discussion on TheFunded.com, in which several anonymous posters allege that Marcelo met with them while at Matrix, got an in-depth look at their businesses, chose not to invest, and then went off and started Care. Marcelo posts a lengthy rebuttal under her own name.
It seems like this 2006 dust-up, for whatever reason, is still very much on her mind. I wanted to write about it this week without using a single anonymous source, and using the story (told from three founders' points of view) to illustrate the sometimes knotty relationship between entrepreneurs, venture capitalists, and the entrepreneurs-in-residence who sometimes hang out at VC firms, drawing a salary, while working on their next idea or helping the firm find worthy start-ups to look at.
While most entrepreneurs know that good VCs look at a lot of the companies in a given sector before deciding where to put their money, I think there's less clarity around the role of the entrepreneur-in-residence: Are they an investor? Are they helping with due diligence? Are they about to launch something of their own? Are they incubating it right now, in the VC firm's offices?
Here's some of the e-mail correspondence behind the story, along with traffic data comparing Care.com, Sittercity, and Sitters.com (a Virginia based start-up that also spoke with Marcelo and Matrix about a deal.)
- From Mike Cravens, the founder of Sitters.com, a Virginia company:
I met with Nick [Beim of Matrix Partners] and Sheila regularly, both over the phone, in person in DC, and in-person in Waltham, MA. I attached [to this e-mail] a letter from Nick in which he clearly states that our interactions were more than just a couple of meetings. They do their best to spin this as them just looking around at a few companies. But the reality is that they did a deep dive into my company and then used that information to jump-start Care.com. Nick did communicate that we shouldn't share information that we did not feel comfortable providing. He also always followed that up with saying that if Matrix was in the business of stealing from entrepreneurs that they wouldn't be in business.
- This is from an e-mail that Marcelo sent to Cravens (provided by Cravens, but confimed by Marcelo) in October 2006, in which she asks him to reconsider an acquisition of the site by Matrix that would make her CEO of the company. She mentions Upromise, a college savings program where she formerly worked, based in Boston:
There are opportunities to partner with Disney, Viacom, Motherworks, Clubmom, Upromise...and so many other things... a mobile product version for the babysitters (been talking to some folks about this), etc, etc. There is also a team of people who I worked with at Upromise who are ready to go and love the mission as much as I do. I think that is the DNA that Upromise attracted. :) They are great people not only from skill level, but truly passionate people and life long friends.
Mike please reconsider. My request is not from desperation and hope you understand it is truly because I'm passionate about doing something in business that helps people. And out of respect for what you have done and despite my passion for the broader "care" business, I would not entertain starting it on my own. I would love to work with you. The original proposal is still on the table and it has not changed.
- Marcelo explained her position in a lengthy e-mail to me last week, in which she wrote:
Rather than abandon a vision that I am passionate about, I decided after careful deliberation to go forward and launch the business myself – despite the statement I had made to Michael Cravens. In hindsight, the lesson learned for me during this experience is that I should not have made the blanket statement that I would not launch this business on my own before I had completed the due diligence on [Cravens & Sitters.com].
I did not steal a business idea or business model since these are known business ideas and known business models. Did every online dating site that came after Match.com steal Match.com’s idea? Or do businesses all the time attempt to compete and improve upon similar business models that have been launched by others? My vision and business model were significantly broader than anything we had seen. Babysitting is just one subvertical of one of the many verticals we are targeting. The presence of many players in this niche validates that they do not represent novel concepts. I did not take advantage of confidential information, because little information was shared, and the information that was shared could be roughly estimated on the basis of publicly available traffic and pricing data for those familiar with subscription-based businesses. While I believe that we have built unique and differentiating features into the Care.com service, this is not the type of business that contains trade secrets or significant intellectual property. It’s all about building a service that works well for consumers and assembling a team of people with a shared passion who can execute well. The idea that “trade secrets” gleaned from anyone else’s business helped Care.com or hurt anyone else’s business is, frankly, false.
Finally, I’d like to address the topic of Matrix Partners’ involvement in this. You have probably spoken with many entrepreneurs that have dealt with Matrix, and they have an exemplary reputation, which is why many entrepreneurs go back to them over and over for subsequent start-ups. If the allegations of their unethical behavior had any merit, then Matrix would not be the success it is today. I do hope that you consider talking to other entrepreneurs who have dealt with Matrix and Nick other than me regarding such claims against the firm since I do not think their reputation should be affected by these one-sided allegations from people who clearly are disappointed that a significant competitor has entered their industry.
- Anne Raimondi, a spokesperson for Matrix, e-mailed this statement:
The history of the situation has been on the public record for some time. We can appreciate that the companies in question do not like competition, but we do not believe that their claims of unfair treatment are at all merited because both Sheila and we said from the earliest discussions with these companies that we were considering competitive options and not to share any information with us that they were not comfortable sharing. We care deeply about our relationships with entrepreneurs and believe in being straightforward, respectful and interacting with the highest level of integrity.
Cravens' site, Sitters.com, launched in 2000; Sittercity launched in 2001 in Boston, and later moved with Thiers to Chicago; Care.com launched in 2006. Of the three, Care.com has received the most money from investors: north of $16 million, from Matrix, Trinity Ventures, and individuals like LinkedIn founder Reid Hoffman and TripAdvisor founder Steve Kaufer.
Here's a graph comparing the traffic of Care.com, Sittercity.com, and Sitters.com over the last year, from Boston-based Compete.com:
And here's a 2007 column I wrote looking at a similar issue: "Ex-colleagues, chilly competition."