Startups to Watch: Cocoon unravels the complexities of arranging employee leave
Originally published by The Business Journals, January 20, 2022
Editor note: In our 2022 Startups to Watch feature, the Silicon Valley Business Journal and San Francisco Business Times present startups and founders doing unique things in the San Francisco Bay Area. Cocoon is one of 20 that we have profiled.
Most private-sector workers in the U.S. have access to unpaid leave benefits, and Congress is considering four weeks of guaranteed paid family and medical leave as part of the Build Back Better spending package.
Having that flexibility, ideally paid, is a critical benefit for many workers, but that doesn’t automatically make it an easy process to manage.
“We started to hear nightmare stories from friends and colleagues who had taken leaves,” said Mahima Chawla, CEO of Cocoon. “We were shocked to learn how bafflingly complicated leave is in this day and age.”
And as remote work becomes the new normal for many businesses, being able to manage a myriad of state labor laws could become a time-consuming and complicated task for HR departments. It’s also a potentially stressful, highly bureaucratic process for employees who would rather focus on caring for a family member or healing from a medical issue themselves — the whole reason they took leave in the first place.
Its customers currently include Carta, Benchling and Notion.
- Founded: 2020
- Founders: CEO Mahima Chawla, COO Lauren Dai and CTO Amber Feng
- What it does: Developing a platform to streamline employee leave benefits
- HQ: San Francisco
- Employees: 32
- Total funding: $26 million
- Investors: Dash Fund, Magnify Ventures, SemperVirens Venture Capital, XYZ-Ventures, First Round Capital, Index Ventures
Describe what your business does for someone from Mars? Cocoon is an employee-leave platform designed to address every type of employee leave and empower companies to better support their team members through life’s most pivotal moments. Whether that’s starting a family, recovering from an injury, or caring for an aging parent, we ensure leave is taken care of so that it’s one less thing employees have to think about.
What was the “aha” moment behind your startup? We started to hear nightmare stories from friends and colleagues who had taken leaves. We were shocked to learn how bafflingly complicated leave is in this day and age. We realized we have an opportunity to build something new and impactful and revolutionize an industry that hadn’t seen innovation in decades, yet affects nearly every working person.
Does Cocoon only provide services for companies that offer paid family and medical leave? Or can unpaid benefits also be supported? We support both paid and unpaid leaves and marry the employer policy with the federal, state and local legislation that applies to a particular employee.
Even if a company doesn’t offer paid caregiving leave, for instance, an employee may still be entitled to some government benefits in the form of time or pay. Cocoon helps that employee understand what time and pay benefits (employer, government, insurance) they’re eligible for and how much they’ll get paid (and from whom). We apply for those benefits on their behalf so the logistical burden is lifted and the employee can focus on what’s most important.
Is Cocoon also trying to simplify managing benefits for employees who are spread across potentially dozens of states, each with their own labor laws? Yes, exactly. A lot of our customers had employees in maybe a handful of states before the pandemic and now are juggling an employee population that might be in 30 or 40 states. Trying to figure out all of the state and local regulations is a massive burden that also poses a significant compliance risk for employers.
The real magic of Cocoon for the employer is that we’ve codified all of these federal, state and local laws into the product. No longer does a member of an HR team have to work with their legal team to figure out what their obligations are for each employee going on leave. Cocoon does that for them, makes sure they’re compliant, and automates as much of the process as possible with support in all 50 states.
Will Cocoon eventually expand into new products that serve other HR matters beyond leave? What’s the next product that you’d like to offer? Right now, we’re laser focused on nailing all types of leave for as many people as possible across the US and Canada. The market is massive because this is a problem faced by every employer regardless of size of industry and the majority of the workforce experiences a leave at some point in their careers. After that there are a lot of adjacent areas that pose really interesting opportunities for Cocoon.
What was the biggest challenge you faced in building your startup? We’ve had to scale very quickly but also try to balance that with ensuring we’re never sacrificing the experience for our own team members and ensuring we’re always delivering a delightful experience for the employers and users. This is something we pay hyper attention to and it’s definitely a hefty challenge scaling that quickly while not compromising in these areas that are so important to us.
How different is the company you have today compared with the company you first envisioned? The company we have today really closely resembles the original vision for Cocoon. Before starting the company, we did months of research to make sure we were confident we could build something new and impactful in the space that meaningfully addressed real pain points. We spoke to hundreds of employees and HR folks at every level and type of company.
When we started to actually conceptualize the company and the product, we knew exactly what we were solving and who we were solving it for. With our early partners and customers it became clear immediately that we had really strong product-market fit.
As we continue to build Cocoon and develop our long-term vision, it still always comes back to our users — what is going to make this even easier? What is going to make them feel cared for?
Who was the first person or organization you asked for money? Mark Goldberg at Index Ventures was the first individual who invested in Cocoon and went on to co-lead our seed and Series A. Mark was an early believer in the team and mission of the company, and we felt immediately aligned with him. He was also a parent who had gone through a rough leave experience and understood exactly what we were solving for plus the massive opportunity given this is a problem every employer faces and most employees experience at some point.