Care.com is the largest babysitting platform in the U.S., their largest shareholder is Google, their CEO advised President Obama, and they have facilitated at least five deaths and dozens of child abuse crimes. I first heard of Care.com after my friend received death threats from scammers on the site. In the eleven months since then I have launched an investigation into Care.com and what I found is troubling:

· Care.com approved babysitters are linked to the deaths of at least five children (two of these babysitters had prior criminal histories, another was operating an unlicensed daycare)

· Care.com babysitters have repeatedly abused children

· Care.com’s caregiver screening appears to be nonexistent. For example, I was able to sign up and apply to babysitting jobs as Harvey Weinstein:

(I was later upgraded to Care.com’s second highest level of authenticity)

· Care.com’s background checks have approved convicted felons, prostitutes, and people on probation

· Scamming is common on Care.com and some babysitters have received death threats

· Care.com bills users for unused services and repeatedly bills customers after they cancel their accounts

· I believe Care.com creates fake “parents”/job opportunities so babysitters will upgrade so they can apply to nonexistent jobs

· Care.com sells user data to advertisers. This is buried 7,000 words deep in its privacy policy and is not disclosed to investors.

· I believe Care.com’s key investor metrics are incorrect. Care.com claims to have over 9 million U.S. babysitters, but its own search feature suggests a number 80% lower. In addition, web traffic to Care.com is declining while it claims 100%+ user growth and Care.com’s numbers have other inconsistencies.

· Care.com quietly acquired a staffing company in California. Without this acquisition I believe Care.com’s revenue growth would be negative.

· After I signed up as Harvey Weinstein and tweeted out a photo of Care.com’s safety loopholes, Care.com’s CTO, David Krupinski, called my college and said I was manipulating the market for Care.com stock. He sold $700,000 in stock over the next three days.

· Over 1,000 pages of consumer complaints against Care.com regarding unauthorized billing, safety concerns, and fake check scams are summarized and available at the very end of this report

· If you have information on Care.com please contact me at edorsey@stanford.edu

· Disclaimer: I am personally betting against Care.com stock.

Safety

Care.com babysitters are linked to the deaths of at least five children. On any large platform, unfortunate incidents will occur, but what makes Care.com particularly troubling is that babysitters often have prior criminal histories when they register on Care.com. Four of the five deaths related to Care.com babysitters are below:

1. Care.com babysitter Sarah Gumm was convicted of murder and sentenced to 23 years in jail for beating a 3-month-old to death. Prior to registering on Care.com she had two DUIs, a “battery incident,” and a felony charge — all of which went undetected by Care.com’s background check.

2. Care.com babysitter Sarah Cullen was convicted of murder and sentenced to 70 years in jail for killing a 4-month-old child. She had a DUI prior to registering on Care.com.

3. Care.com babysitter Aisling McCarthy Brady had no prior criminal history prior to registering on Care.com, but had overstayed her visa. A one-year-old died in her care. She was found not guilty in a criminal charge, but the family was later awarded $4 million in a new lawsuit.

4. An unnamed Care.com babysitter had a child die in her care. It is unclear what happened to the babysitter, but she was running an unlicensed daycare while advertising on Care.com.

5. (There is a fifth publicly disclosed case around June 2011 that I decline to identify out of respect for the family.)

Care.com’s lack of oversight is not limited to the above. In November 2012 NBC Chicago did an investigation into Care.com’s background checks. They found Care.com approved a woman convicted on several counts of prostitution and Care.com approved a man convicted of reckless conduct. Care.com said, “we are deeply disturbed by these findings.”

In March 2015, a family hired Care.com babysitter Ann Guadagnino, only to discover she was a drug addict that had been charged with possession of heroin, possession of drug paraphernalia and was issued summonses for speeding and driving while in possession of a controlled dangerous substance. Care.com said, “There is no centralized database encompassing all criminal convictions … therefore, [databases we use are] sometimes missing or omitting recent criminal record charges.”

In December 2015 the Boston Globe launched an investigation into Care.com babysitter Stephanie Lee Fox after she stole $280,000. A Boston Globe review “found 28 criminal cases against Fox, which included 111 charges… Fox was convicted of numerous charges including larceny, identity fraud, forgery, and receiving stolen property.” The Boston Globe also found Ms. Fox “was still on probation when she registered as a nanny on Care.com.” Care.com said, “The safety of our community is of paramount importance to us.”

On March 2018, Care.com babysitter Jonathan Tavara-Nima was sentenced to 25 years for raping a seven-year-old girl he met on Care.com. Care.com said his account “would be removed and blacklisted.” Care.com didn’t mention that he had been arrested for child pornography charges five years earlier.

Despite numerous abuses by Care.com babysitters, coverage almost always stops at the local news level. Below are just a sampling of stories on abuse by Care.com babysitters:

Care.com babysitter Kelcher Foreman, Care.com babysitter Dana Cash, Care.com babysitter Brittney Lyon, Care.com babysitter Moriah Gonzales, Care.com babysitter Colin Cutler, Care.com babysitter Jonathan Tavara-Nima, Care.com babysitter Nephi Henderson, Care.com babysitter Ashley Zimmer, Care.com babysitter Brenda Floyd, Care.com babysitter Ryan Michael Spencer, Care.com babysitter Bryan Petersen, Care.com babysitter Guillermo Mendieta, Care.com babysitter Susan Conway-Lall, Care.com babysitters Brandi Leonard, and Richard Hennis (DOJ Announcement), Care.com babysitter Joshua Stephen Lapin-Bertone, Care.com babysitter Susan Devereaux, Care.com babysitter Joanne Simmons, Care.com babysitter Catherine Oppen, Care.com babysitter Joseph Lamica, Care.com babysitter Gina Groves, Care.com babysitter Ashley S. Hodgdon, Care.com babysitter Daniel Harker, Care.com babysitter Stephanie Fox, Care.com babysitter Benjamin Evan Nelson, Care.com babysitter Ann Guadagnino, Care.com babysitter Patricia Kathleen Soldeholm, Care.com babysitter Caleb Storey

Harvey Weinstein Babysitter

To test the security of Care.com I decided to apply as Harvey Weinstein. I was asked for a home address and birthdate. In both cases I did not use Harvey Weinstein’s actual home address or birthdate. I was also asked to consent to a background check. At the end of the process I was told, “Your profile has been submitted and is being reviewed for approval (within the next 72 hours) by our member care team.” To my amazement I passed Care.com’s review process. After adding a bogus Facebook and Twitter account (each with 0 friends/followers) I started applying to babysitting jobs.

I successfully applied to multiple Care.com babysitting jobs as Harvey Weinstein:

If Care.com had a human screen the profiles or just verified house addresses, names, or birthdays (very easy) this would not happen. Based on my experience it looks like anyone can sign up as a Care.com babysitter under whatever name they want.

It gets worse. Care.com has three levels of babysitters: Newcomer, CareForce, and CarePro. Care.com was so convinced I was legitimate, my Harvey Weinstein profile was able to join the “CareForce” meaning I would show up in search results:

I was also able to get CPR and First Aid certified without providing any evidence[1].

This is not an isolated incident. In one case an Atlanta family hired the Care.com babysitter “Regina Christopher” to watch their 8-year-old son. However, “Regina Christopher was really Gina Groves, who had warrants out for her arrest in four Georgia counties for various charges.”

According to the article, when [the family] spoke to someone at Care.com, the representative noted that she’d only paid for “one of the cheaper background checks.”

When criticized on its safety procedures Care.com claims to be just a “marketplace” for caregivers. However, the word “marketplace” does not appear once on its homepage. In its legal filings, Care.com claims to do “basic caregiver screening” on all users and offers background checks on individual caregivers for extra cost. But what type of “caregiver screening” wouldn’t catch Harvey Weinstein? Or, at minimum, verify a name? Or check a sex offenders list? What type of background check wouldn’t catch DUIs? Or Felonies? Or a woman on probation? Or a convicted prostitute?

Scammers & Death Threats

Legitimate Care.com babysitters who sign up for the site often encounter scammers and some even receive death threats. The most common type of scam on Care.com is a fake check scam. Scammers pretend to be parents on Care.com and post a job for babysitters. The scammer says they are about to move to the area and send a fake check for to a caregiver as a first month’s payment. Then, the scammer “changes plans” and asks for the check back hoping the babysitter will send a real check before her bank realizes the original check is fake (takes 5–7 days). Below is a police report from a fake check scam where the babysitter ultimately received a death threat:

(Source: San Antonio Police Department Public Records Request)

I first heard of Care.com after my friend had a similar experience and went to the police to deal with the death threats. Others online have complained about similar incidents:

“My daughter applied for a dog-sitting job that was a total scam- she wound up getting threats that someone would “slice her up” if she didn’t cash a fraudulent check. No help from care.com, but we did go to the police.” — July 2017 (Source)

“I started receiving death threats to my cell phone, the sender had my HOME ADDRESS. I still lock the doors, terrified, every night. The care.com team did nothing but send an automated, impersonal response to my complaint.” — July 2017 (Source)

Many other Care.com users had similar experiences with scammers, but without death threats:

(Source: Massachusetts Attorney General Public Records Request)

(Source: Illinois Attorney General Public Records Request)

I received these complaints by sending public records requests to state attorney generals. You can find over 50 similar complaints at the very end of this report.

Overbilling & Selling User Data

Parents and caregivers can join Care.com for free, but most of the platform requires upgrading to paid one, three, or twelve-month subscriptions. Once the subscription term expires Care.com “auto-renews” the plan until the user cancels. This practice has generated 100s of complaints (which you can find at the very end of this report) but is generally permissible and practiced by other businesses — like gyms and software companies. What is troubling is that Care.com has repeatedly billed users after they canceled their subscriptions. One women had such difficulty getting Care.com to stop billing her that she wrote a letter to Care.com’s CEO and the Massachusetts Attorney General asking that her account be closed and to stop being billed. She also claims that after she closed her credit card account Care.com began charging her husband’s credit card without any authorization:

(Source: Public Records Request to Massachusetts Attorney General)

Complaints about billing after cancellation are common. You can see three more complaints below and you can find dozens more of similar complaints at the very end of this report.

(Source: Public Records Request to Massachusetts Attorney General)

(Source: Public Records Request to Illinois Attorney General)

(Source: Public Records Request to Illinois Attorney General)

Care.com also sells user data to advertisers. I found this after Care.com sent the Michigan Attorney General an internal screenshot of a user’s email preferences on an unrelated matter. Highlighted in red, “share information about me with third party communication facilitators so they may send me direct mail solicitations on behalf of other companies”:

(Source: Public Records Request to Michigan Attorney General)

Care.com never mentions selling user data during its sign-up process, or in its investors filings, or in its terms of use. (At 13,482 words Care.com’s terms of use is twice the length of the U.S. Constitution.) The one place Care.com does briefly mention sharing user data is at the very end of its 7,244 words Privacy Policy: “We may use third-party communications facilitators working on behalf of Care.com to send you marketing communications from third party advertisers that we think may be of interest to you.” (These are words 7,162 to 7,190 of its 7,244 word Privacy Policy — the very end.) Some data Care.com gathers on users is number of children in a household, gender of children, age range of children, and general data on wealth (e.g., the pay range you offer sitters).

Fake Accounts

I believe Care.com may be creating fake accounts to entice users to pay money so they can upgrade and apply to nonexistent jobs. I want to be clear: I do not have proof Care.com is faking job postings, however numerous complaints online and to state attorney generals reference fake jobs postings and Care.com’s CEO previously worked for a company accused of creating fake job opportunities.

Below are just some complaints people sent to their state attorney generals alleging fake job postings (you can see more complaints at the very end of this report):

(Source: Public Records Request to Massachusetts Attorney General)

(Source: Public Records Request to Massachusetts Attorney General)

Here are some complaints from users online about fake jobs on Care.com:

“After two months of paying for premium membership and contacting dozens of “employers” I didn’t receive a single response and realized that those job ads were all fake. Dating sites use the same tactics. They create fake profiles that are too good to be true to encourage people to subscribe.” — February 2015 (Source)

“I believe Care.com has set up fake accounts with no families to respond back. I set up an alias account to respond to and vice versa and what do you know… no messages went through and both accounts were taken down with no explanation…” –April 2017 (Source)

“Fake Profiles and Job Postings!!! I just started using their services about 3 weeks ago and I’ve applied to MANY positions and only heard back from 2 individuals. The rest never replied and don’t appear to have even looked at my profile (there is a tab where you can check who has viewed your profile). Is each job posting getting so many applications that the users don’t even bother looking at some applicants? I find this doubtful.” –February 2016 (Source)

“I feel like the site is a farce and that many of the ‘adverts’ are fake and aimed at certain postcodes in order to get people to buy credits and apply. Avoid” –May 2017 (source)

“I think there are a lot of bogus jobs advertised on the site. Can’t prove it but when you apply for over 50 and get 0 responses, something’s up.” — October 2017 (Source)

Before founding Care.com, founder/CEO Sheila Marcelo worked at TheLadders.com, a pay-to-join job site accused of faking job profiles:

I did not find any convictions of TheLadders.com for improper conduct, but I view the extreme amount of complaints against the TheLadders as a negative. Please note that Care.com CEO Sheila Marcelo was not accused of any wrongdoing, but she was VP and General Manager at TheLadders.

Misleading Investors

I believe Care.com mispresents its key user metrics and barely disclosed a recent acquisition that is its real source of growth.

One of Care.com’s key investor metrics is the number of caregivers on its platform. In its 2017 investor presentation Care.com claimed to have “9.2 million U.S. caregivers.” To test this claim I used Care.com’s own search tool to see how many caregivers are in each of the 25 biggest U.S. cities. The top 25 U.S. cities have about 10% of the U.S. population so you would expect them to have about 10% of Care.com’s U.S. caregivers. As a result, my search should yield about 920,000 profiles, but I found less than 1/5 that amount:

(Care.com search feature)

I believe this is strong evidence that Care.com’s U.S. caregiver base is well below the 9.2 million claimed in its investor presentation.

There are other inconsistencies in Care.com’s user metrics dating back to its IPO offering documents:

(Source: Alexa Analytics)

Alexa analytics for Care.com’s website shows only 2.7 million unique visitors for May 2018, down from the 6.3 million+/month Care.com claimed in 2013. Maybe Care.com’s “unique visitors” declined over 50% over the last 5 years, but that would seem to contradict Care.com’s 100%+ growth in users:

This slide is the bull thesis on Care.com. Who wouldn’t want to own a company growing 60% per year? But there is overwhelming evidence it is misleading. Using Care.com’s own search feature suggests less than 2 million caregivers vs Care.com’s claimed 11.8 million. If you believe that Care.com has 15.5 million families that would represent nearly 60% of families with children under 12 in the U.S. If there are only 3 million jobs posted how can you have 15.5 million families? How can user metrics be growing rapidly while web traffic is declining? Note that all four CAGRs listed in the above chart are overstated using Care.com’s own data. For example, the growth in job applications (top right) went from 1.1 million to 62.8 million from 2008 to 2017. Care.com’s stated CAGR is 66%, when it is actually 57%.

Also, on slide 5 of its most recent investor presentation, Care.com claimed to make “1 match every 3 minutes.” This I down from “we make a care match about once every two minutes” Care.com’s co-founder said in 2014. But if Care.com is growing so fast why would matches become less frequent?

Town & Country acquisition (no press release, no website update, 100% of revenue growth?)

I believe Care.com quietly acquired a staffing company and without this acquisition revenue growth would be negative. According to page 94 of its 2017 10-K: “On January 9, 2018, we entered into an agreement with Town & Country Resources, Inc. … we acquired certain assets for total potential consideration of $6.9 million.”

Based on my research, Care.com put out no press release for the Town & Country acquisition, it was not mentioned in their investor presentation, and the Town & Country website makes no mention of a relationship with Care.com. However, Care.com did mention the acquisition in its quarterly earnings call and in its SEC filings.

Staffing companies are unique in that they typically have high amounts of revenue relative to their market value. A typical publicly traded staffing company trades at about 1/3 revenue. Using this metric alone implies that Town & Country has annual revenue around $21 million ($7million*3). In its Q1 press release Care.com said, “Revenue for the first quarter of 2018 was $47.3 million, an increase of 9% from $43.4 million in the first quarter of 2017.” This is revenue growth of $3.9 million ($47.3-$43.4=$3.9 million). But it is perfectly possible that Care.com’s Town & Country acquisition added more than $3.9 million in revenue. In fact, my basic math implies Town & Country has quarterly revenue of $5.25 million. This means Care.com’s organic revenue is actually declining! (Headline growth of $3.9 million — acquisition related growth of $5.25 million = organic decline of $1.35 million.)

Financial Analysis (Over $10 million in insider sales, Less than $15,000 in buys)

The last time a Care.com insider bought CRCM stock was in June 2016 when a board member bought $13,000. Over the last two years Care.com insiders sold over $10 million in stock. Why so much insider selling and no buying? I believe it’s because Care.com’s consumer business is starting to decline and Care.com executives know it.

In 2013, Care.com’s revenues grew 68%. In 2014, revenues grew 36%. In 2015, revenues grew 25%. In 2016, revenues grew 17%. In 2017, revenues grew 8%. In Q1 2018 revenue “grew” 9% (but without the acquisition I estimate revenues actually declined 3%). This is very problematic because analysts are projecting aggressive revenue growth going forward (Needham, the most bullish, predicts 10.3% revenue growth in 2018, and 13.1% in 2019). Absent any new acquisitions I do not see how Care.com will make those estimates.

One option for Care.com would be raising prices. But Care.com already raised subscription prices nearly 30% in mid-2016 and the competition is becoming more aggressive. Sitterycity is even on pricing with Care.com, charging $140/year, and newer competitor UrbanSitter charges only $100/year. (It’s also worth noting that according to Alexa Web Analytics UrbanSitter and Sittercity both have increasing web traffic over the last year, while Care.com is declining).

Above all else, Care.com users do not like the product. According to the online review site SiteJabber Care.com has 1.2 stars from 1,179 reviews and on review site HighYa Care.com has 1.1 stars from 57 reviews. (SitterCity has 2.4 stars from 16 reviews on SiteJabber, and UrbanSitter has 2.8/10 from TrustPilot).

Care.com stock is up over 300% over the last 26 months for one reason: Google. Over the last 26 months, I believe Care.com’s fundamentals have deteriorated, revenue growth is slowing, consumer reviews are still bad, yet the stock is up 300%+ because Google Capital did a preferred stock deal with Care.com in June 2016.

Google is not just the largest Care.com shareholder. According to page 92 of Care.com’s 2017 10-K: “During fiscal 2017 and fiscal 2016, we recorded $1.9 million and $1.6 million of revenue from Care@Work arrangements with Alphabet Inc. and its affiliates, respectively. During fiscal 2017 and fiscal 2016, we incurred $12.3 million and $14.5 million of selling and marketing expenses for internet based marketing services with Alphabet Inc. and its affiliates, respectively.”

It is one thing to make an investment in a public company. But to make an investment in a public company, become a >1% customer, have Care.com join your “job search” feature, and have their advertising costs go down on your platform seems a little odd. (I have no evidence of wrongdoing by Google/Alphabet but I have never seen an arrangement like this.) It’s also worth noting that Google Capital has had failed investments in the past (e.g., Outcome Health and LendingClub).

Another indication that Care.com is in trouble is the large amount of insider selling. In September 2017 all four major executives (CEO, CFO, CTO, & General Counsel) created new 10b5–1 trading plans to dispose of Care.com stock. Below you can see the amount of stock sold in the 9 months since the plan was created compared to the sales in the 12 months before it was instituted.

The bottom line is you have a company customers dislike, that uses aggressive billing practices, that isn’t safe, and that is likely inflating important investor metrics. Quite simply, Care.com does not deserve to trade at four times revenue and 70x profit. I believe Care.com is desperate. That is why they did the Town & Country Acquisition. That is why they got very aggressive with their billing practices. That is why they cut corners. And that is why Care.com’s Co-founder and CTO called my college after I first wrote about Care.com.

First Report

On Monday October 30, 2017 I published a report on Scribd detailing some problems with Care.com. The stock fell 6%, but the report was not well distributed.

On Tuesday October 31, Care.com board member Tony Florence resigned, effective immediately. His VC fund NEA management sold all of its CRCM stock within 6 months. (Please note: I am not implying any wrongdoing by Mr. Florence or NEA management.)

Also, on Tuesday Care.com co-founder/CTO David Krupinski called my college (Stanford) about my article and said I was manipulating the market for Care.com stock.

On Wednesday David Krupinski sold 10,000 shares of CRCM stock (for ~$150,000). Later that day Care.com raised guidance for 2018 on their earnings call.

On Thursday Mr. Krupinski sold another 10,000 shares of stock.

On Friday Mr. Krupinski sold another 20,000 shares of stock.

Since October 30th 2017, David Krupinski has sold ~200,000 shares of CRCM stock for ~$4 million. (He now owns 200,000 shares).

I believe the above facts exemplify two points. First, most Care.com shareholders are not aware of the issues outlined in this report. That is why a board member resigned the day after my report and his VC firm sold all its CRCM stock. Second, Care.com knows they are in trouble. A legitimate company would ignore my report, issue a rebuttal, or contact me directly, but I have never heard of a company contacting a student’s college. Also, Mr. Krupinski’s stock sales were part of an automatic trading plan initiated in September 2017, however, he knew the stock sales were going to occur after he called my college and after Care.com raised its guidance.

Conclusion

I want to be clear about what this report is and isn’t. I believe that the perception of Care.com in the general public and public markets is wrong and I hope this report highlights why. Others will disagree with my view. I’m sure there are thousands of people who have used Care.com and liked it. Reports of abuse by Care.com babysitters have also declined in recent years (meaning Care.com may be improving their practices). That said, I believe the issues highlighted in this report are serious enough to be written publicly and I hope they are taken seriously.