With their products in demand thanks to the pandemic, two local startups are eyeing expansion after they recently closed on respective capital raises.
Fringe, a purveyor of an online employee perks marketplace, closed on a $4 million seed round, while tele-health company AnswersNow completed a $1.8 million haul from investors. Both companies announced they closed on their raises in late February.
The coronavirus pandemic heightened demand for Fringe’s marketplace, where employers pay for their employees to be able to access and spend points on streaming services, grocery deliveries, childcare services, mental health support, meal services and other perks.
Fringe co-founder and CEO Jordan Peace said the company’s recent popularity can be pegged to employers looking for new ways to support employees during the transition to a largely work-from-home experience in 2020.
Fringe saw its client base increase from 15 workplaces in 2019 to more than 70 in 2020, and employee users jumped from a few hundred people to more than 11,000. The marketplace’s vendor roster also increased from fewer than 50 to more than 150 vendors.
Fringe launched in 2018 to shake up the usual fringe benefits packages that workplaces offer with something more individualized.
“My generation and any generation following, we grew up on Starbucks. We walk in and a barista goes ‘hey, what can I get for you,’ and we give her or him some 17-word description of exactly the right customized drink for us,” said Peace, 35. “We’re used to choice and personalization. The employee benefits world has been chocolate, vanilla, strawberry at best for decades.”
With more demand and plans to grow, Fringe is on a hiring spree fueled in part by the capital raise. The company had a team of six in December, and its employee count has tripled since. It wants to increase its headcount to 20 to 25 employees over the next several months.
In addition to the effort to hire more workers, the company wants to tweak its site to introduce new features its user base has expressed a desire for, such as the ability for an employee to spend their points to gift a perk to a coworker and the ability for vendors to test drive products with the Fringe user base before a more public rollout.
Additionally, Fringe plans to add to its vendor roster and the number of countries it operates in, though by how many more hasn’t been determined yet. The company currently operates in 35 countries.
Among companies on Fringe’s client list are Turo, a San Francisco-based car-sharing company, and OneDigital, an Atlanta-based human resources adviser.
“We want to grow by hundreds of new vendors and be able to recommend and filter them based on the users,” Peace said. “We want to do more and we want to provide more vendors in more places and learn what is popular in those places.”
Peace expects workplaces to continue to make remote work a big part of their operations into the future. Looking forward, the company could ink partnerships with vendors who provide more traditional fringe perks to meet the demand of offices looking for a solution to the challenge of a fringe benefits package that will appeal to workers with a range of different workspace preferences, from the five-days-a-week office workers to fully remote workers.
“We’re going to end up in a hybrid (office) situation. I think that’s very clear. I think employers are terrified to demand their employees come back to the office,” Peace said.
He said the average workplace spends $50 per month per employee. Each dollar put into the system translates into five points.
Fringe also has rethought its own office space, moving out of its Startup Virginia office in May to go fully remote. It plans to open a new office, but that office won’t be a five-day workspace for everyone. It will be designed to give the company a place for workers to collaborate on projects or escape home for an afternoon.
The lead investor in the capital raise was private equity firm Sovereign’s Capital. Manchester Story, the Center for Innovative Technology, Felton Group and angel investors also contributed to the round. Fringe also recently added Will Boland to the company’s board of directors. Boland is a co-founder of CarLotz, which recently went public.
Shockoe Bottom-based AnswersNow, which offers virtual, app-based therapy to children and adults with autism, will use its $1.8 million to fuel an expansion beyond Virginia with a round of hiring and marketing to increase its profile.
The company’s tele-health service connects patients with contracted behavioral therapists. The pandemic has created a more favorable environment for tele-health, as insurers have become more willing to cover virtual services, CEO Jeff Beck told BizSense last year.
AnswersNow currently operates only in Virginia. It plans to push into California, Texas, Georgia, Pennsylvania and Florida by the summer. It also plans to increase its number of therapists from about 20 contractors to more than 100 contractors.
The company’s seed round was led by the American Family Insurance Institute for Corporate and Social Impact and CIT. Richmond-based Trolley Ventures, Kapor Capital and K-Street Capital also participated.
The $1.8 million total includes a $250,000 capital raise it completed late last year, a spokeswoman said.
Two other local startups, ArtGlass and Babylon Micro-Farms, also recently completed a capital raise.