#110 - Avni Patel Thompson and Kat Manalac

**Craig Cannon** (0:00)
Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is with Avni Patel Thompson and Kat Manalac. Kat's a partner at YC. Avni founded Poppy, which helped parents book the best caregivers, and they went through the YC Winter 2016 batch. They also recently shut down. Avni asked to come on the podcast to talk about what the process of shutting down was like. You can find Avni on Twitter at A Patel Thompson and Kat at Kat Manalac.
All right, here we go.
Kat, you haven't been on the podcast in a while.

**Kat Manalac** (0:32)
I haven't been.

**Craig Cannon** (0:32)
So why don't you introduce yourself before we talk about Avni for an hour?

**Kat Manalac** (0:35)
So I'm Kat Manalac. I'm one of the partners at YC. I work a lot on outreach to applicants. So everything we do with an external focus at Y Combinator, and I help a lot of companies in the batch with their launches. I had the pleasure of interviewing Avni at least once.
One of the times she applied to YC. When you rejected me. Yes.
When I had to send her the rejection email. But since then, I've gotten to see her go through YC and go through the process that we'll talk about today. So I'm excited to be here.

**Craig Cannon** (1:09)
Thanks for coming on the show.
Avni, you've been on the podcast before. But for people who haven't heard of you, what do you do? What's your deal?

**Avni Patel Thompson** (1:17)
My name is Avni Patel Thompson. I suppose was the founder and CEO of Poppy. And what we did with Poppy, the mission was to build the modern village. And so how I envisioned that was to find and vet really amazing child care providers and then connect them to families when they had gaps in child care. And so we started that in my neighborhood in Seattle about three and a half years ago, grew it and continue to build it out as a kind of a testing ground for something that could help the millions of families across the country.
And recently decided that looking at all of the things, the economics and everything, that it wasn't a viable, scalable proposition. And so made the hard decision to shut it down in December and kind of going through the process of all that last month, this month, and just think that's something interesting to think about.

**Craig Cannon** (2:11)
Yeah, absolutely.
So there are a million things to talk about here. Yeah, but maybe we can talk about the economics in the beginning, and we can shift towards the emotions, how you felt how it went down. So at what point did it become clear to you that this couldn't scale? Because I think many people would say like, that's a YC, maybe even YC interview question. Like, how do you grow this thing to a massive scale? Why did it take three years for you to realize that?

**Avni Patel Thompson** (2:38)
So I think it's a multi layered kind of question. For me, at least in this space, even from the beginning, I knew that parts of it were against the odds. And so what I mean by that is if you know the category that I'm working within is childcare, it's already an inherently margin challenged kind of category. So what I mean by that is like, what parents are willing and able to pay for this kind of work? And then what caregivers need to make the ones that are like highly skilled and everything like that. So and then can you make some kind of margin in between as a company that then facilitates the stuff. And so even from the beginning, I really kind of built this company and looked at this company as kind of this series of experiments. And so kind of like a mad scientist. And so in that vein, I knew that we were up against kind of challenging economics, but I always thought about it.
Knowing that, we then took a look at pricing from like a membership model and transaction revenue and I can certainly go into the details of that. But it was always understanding that it was going to be a challenging kind of category. It's not where things like travel, maybe the frequency isn't there, but there's high ticket, there's high average value that you can make some good margin. This one had higher frequency, but you had to then believe that you could also make decent margin on that frequency. So that was all the like what the hypotheses were based on.
One other thing that I think is important to note is that what it looks like at a certain scale is very different than what it looks like even at the next level. And so what I mean by that is when you're doing 10 bookings a week, it looks like something with like maybe three caregivers and maybe, you know, 50 families or whatever. It looks very different at the next level when you're starting to do 100 bookings a week and it looks different yet again when you're doing 500 bookings a week. And so, you know, why did it take the three years or whatever to really understand that is because every single time you kind of go through those kind of step changes, it changes. And so, to dig into that a little bit further, when we started doing something like 500 bookings a week, now you're talking about working with hundreds of caregivers and like thousands of families.