What's the Catch? I don't think there is one...

With so much of technology these days, whenever I hear about a new app, my reaction is generally "why". As in "Why are the best minds of this generation wasting their time solving problems that don't exist?"

But when I heard about Catch, my reaction was "Great! What took you so long?"

I worked in the "gig economy" for many years. I became a freelancer after many years in corporate. I had savings, a 401K, COBRA to ease me into covering my own health insurance...

But for someone just starting out, or relatively new to the game, figuring out how to figure out how things work when you're a company of one can be daunting. Enter Catch:

The startup’s focus: helping freelancers and gig-economy workers who don’t have benefits deal with the headaches of taxes, health insurance, and saving for retirement. (Source: Boston Globe)

Tagline: Benefits for people without benefits.

I like it. 

I also like their story. 

Catch was a struggling Boston/Cambridge startup, with one product (their system), ten employees, and 5,000 customers. But when they went looking for $5M to grow their company to the next level, they were getting zero traction with the Boston VC community.

“Andrew [Ambrosino] and I were nobodies,” [Kristen] Anderson [co-founder] wrote on Twitter recently. “No Ivy League. No previous exit, or failures of note. Great VC firms dragged us along.”

The duo were hoping to raise $5 million for the startup, Catch.

“We were turned down or ghosted by at least 50 VC firms,” including local investors such as Matrix Partners and General Catalyst Partners.

Even though there's a ton of money (much of it insane) out there, attracting capital has always been tough, even back in the day when investors weren't looking for unicorns that were going to earn them billions and before crazy ideas were more likely than sane ideas to become unicorns. At one point in my career, I worked for a small company, and we scrounged around for a while before we found someone to buy us. Admittedly, we were a bad-ish bet, but we were asked to make a number of pitches and almost got to the altar once or twice. So I know something of what Anderson and Ambrosino were going through.

And then they decide to apply to Y-Combinator, a born in Cambridge but now San Francisco-based outfit that specializes in providing small amounts of seed money - and training and guidance - to startups in their earliest stages. 

Applying was something of a Hail Mary: the founders were seriously thinking of shutting their company down.

And they had a well-thought out exit plan that wasn't based on screwing their employees:

“We’d already done the contingency planning of shutting down the company,” Anderson told me. They didn’t want to leave Catch’s 10 employees in the lurch, without a final paycheck and some severance. 

What's not to love?

Catch - because it alreayd had product, employees, and customers - didn't exactly fit the Y Combinator bill. But they were accepted, even though they're "tougher to get into than Harvard or Stanford."

Being asked to participate in Y Combinator doesn't guarantee success, but the program has a good track record, and being blessed by them does pretty much guarantee that companies will get a serious look from VC's. 

For Catch, the immediate payoff wasn't the $150K they got from Y Combinator (which got YC a 7 percent stake). It was the "seal of approval" that enabled them to secure $850K worth of life-saving money from some individual investors. 

The longer run payoff was being able to turn down a Boston VC firm that came through with a $3M offer, and forge a deal for $5M "from a group of California and New York venture capital firms."

Just after that, TechCrunch, the blog of record for the startup scene, wrote a piece calling Catch “one of the hottest Y Combinator startups.” At a dinner at the Four Seasons in San Francisco, Anderson was introduced to a VC who called Catch “the belle of the ball.”

Many of the Y Combinator startups end up staying in California, but Anderson and Ambrosino were committed to keeping their team in Boston. Anderson also appreciated that:

"There isn’t the rock-star status for founders in Boston that there is in San Francisco. It was very humbling. But it’s also one of the reasons I love being here. It reminds you that you’re not as good as you think you are. You’re here to do the work.”

Sounds like the Boston I know and love.

And that work? 

The latter half of 2019 involved “a lot of really unsexy, laborious work” on agreements with insurance companies and the Centers for Medicare and Medicaid Services so that Catch could offer freelancers and sole proprietors health insurance in 38 states.

Excellent!

As for the Boston VC personality, there is something of a downer downside:

“Everyone in Boston, including VCs, starts with the premise of ‘Here’s why this won’t work. I’ve got 14 reservations about it,’ ” she says. “I’m hoping that Boston can suspend a little of its disbelief more, and let some portion of its founders succeed."

That sounds like the Boston I know and love.  (I am, after all, the one who wrote the risk analysis section of every business plan I ever worked on.) But I'm sure hoping that these founders succeed. They're local. And Catch sure beats yet another app that helps you animate cat videos.