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Honor Raises $140 million to Fuel National Expansion

Honor — the technology-enabled home care startup that partners with independent agencies through the Honor Care Network — is gearing up for a major expansion.

Those expansion plans are built around a substantial infusion of new capital, too. The San Francisco-based Honor announced Tuesday it has raised $140 million in Series D funding, led by Baillie Gifford, plus funds and accounts advised by T. Rowe Price Associates Inc. Rocks Springs also participated in the fundraising round, in addition to existing investors Andreessen Horowitz, Thrive Capital, Prosus Ventures and 8VC.

To date, Honor has raised $255 million since its launch in 2014.

Timing wise, the Series D news comes at a time when home-based care is more important than ever due the COVID-19 virus and all the challenges it presents in terms of facility-based care and senior isolation, co-founder and CEO Seth Sternberg told Home Health Care News.

“We’re in an environment right now where caring for the elderly in their homes is super critical,” Sternberg said. “And caring for the elderly in a completely safe way, with completely consistent protocols and completely consistent standards.”

Originally founded as an on-demand home care company, Honor has since pivoted its business strategy to one based on partnerships with independently owned and operated home care agencies. Honor has also teamed up with other aging services entities, including senior living communities.

Through its partnership model, Honor uses its technology infrastructure to take over billing, scheduling, staffing and other back-office functions for a negotiated share of agency revenue.

The startup currently partners with more than 40 home care agencies in six states, serving more than 1,000 total communities. Its “Care Pros” have helped provide more than 5 million hours of care to older adults and others.

“We believe investing is about identifying companies that can deliver transformational growth on the back of long-term structural changes,” Baillie Gifford’s Anika Penn said in a press release. “Honor has demonstrated their ability to leverage technology to elevate and expand services to older adults who want to remain in their homes and to improve conditions for home care aides. We are excited to partner with the team as they scale up and drive improvement throughout the ecosystem of this $30 billion industry.”

Sternberg declined to comment on Honor’s revenue or whether the startup is currently turning a profit.

‘Primary guides’ to expansion

Among Honor’s home care partners are Cypress HomeCare Solutions in Arizona, TheraCare in California and Affordable Home Care in Michigan. Its network also includes New Mexico, Ohio and Texas.

While Honor will use the newly announced $140 million to ramp up its geographic expansion efforts, the startup does not have a specific number of new markets it hopes to branch out into next year, at least one it’s willing to share publicly. More so than a numerical goal, Honor’s growth is driven by need and the supply of high-quality home care partners.

“The questions that guide our expansion are: ‘Where do we believe that Honor can have the biggest impact on helping the elderly and their kids? Where are there partners for Honor, really great partners that we can help expand and grow their business?’” Sternberg said. “Those are our primary guides, if you will.”

Besides growing the care network, the Series D funding will be used to further develop the company’s technology, which has been a strength for Honor, particularly around recruitment and retention. In the past, Honor has touted strong results in using its technology to predict turnover and find caregivers for difficult-to-staff shifts.

Across the home care industry, caregiver turnover hit 64% in 2019, according to data from market research and education firm Home Care Pulse. During the ongoing public health emergency, staffing challenges have only gotten worse for many home care agencies, with some caregivers choosing to leave the field and others forced out of their daily roles after coming into contact with the COVID-19 virus.

In an October survey of 288 home care professionals conducted by myCNAjobs, 57% of respondents said their agency is struggling with recruitment, with 87% noting the COVID-19 virus has made finding caregivers more difficult. More than 70% of the survey respondents said their agency has either had to turn away a new case or raise hours from a current client because of staffing challenges.

“We built Honor in such a way that the Care Pros really have agency over their own lives,” Sternberg said. “They control their schedule. We tell them [which clients] are okay for them to work for. Then they have the ultimate say of, ‘I’d really like to work with this person,’ as long as it’s a good match.”

Still, there are always certain markets that are more difficult to staff.

“In general, we are able to find sufficient Care Pros throughout the Honor network, but we’ll have certain pain points like Orange County in California,” Sternberg said. “That’s a particularly hard market. We’re still able to get Care Pros, but it’s harder.”

Another pain point is Monterey Bay, he noted

“It almost always has to do with geography,” Sternberg said. “It’s lots of customers who need care and there are not a lot of places where Care Pros might live nearby.”

‘You tune out the noise’

Apart from staffing, Honor’s technology has also provided advantages during its response to the increasingly dire COVID-19 pandemic, which will reshape home care operations for years to come. The U.S. has officially entered into a third surge of the virus, having averaged at least 71,000 new coronavirus cases a day over the past week.

In spring, for example, Honor rolled out a symptom-checker app across its network within two weeks. It also rapidly created network-wide infection-control protocols and launched an acquisition program for personal protective equipment (PPE).

“We were directly sourcing hundreds of thousands of masks, gloves and [other supplies] directly from China, when you literally could not get masks here in the U.S.,” Sternberg said. “We were getting them in bulk, then delivering them to our partners.”

As a result of Tuesday’s news, there will likely be fewer rumors about Honor approaching financial disaster. The company laid off 35 non-caregiver employees in January, a month after Axios reported that SoftBank walked away from a rumored $150 million investment in Honor.

On its end, Honor maintained the layoffs were simply part of a natural, internal reorganization.

“When you’re working on any company, you will always have people who support what you’re doing, love it and think it’s the future,” Sternberg said. “And you will always have people who think it’s clearly doomed to failure, especially when it’s a company that’s trying in a pretty material way to change the way things are done in an existing, very large industry.”

“You tune out the noise,” he added.

Wednesday, October 28, 2020