Employee leave startup Cocoon launches after raising $20M in new funding

Employee leave benefits are a complicated web of company and government policies, and Cocoon is out to bring clarity and simplicity to both the employer and employee experience.

The platform launched Wednesday across all 50 states and is designed for any type of employee leave, like parental, medical, caregiver or bereavement. It factors in all company government and insurance benefits and manages all facets of the leave from compliance to claims management to payroll calculations.

In addition to the launch, the San Francisco-based company announced it raised a $20 million Series A funding led by Index Ventures, with participation from First Round Capital, SemperVirens, XYZ, Magnify Ventures and a group of individual investors. This brings the company’s total funding to $26 million, co-founder and CEO Mahima Chawla told ProWellTech. This includes a $5.5 million seed round with Index and First Round in December 2020.

Chawla, Lauren Dai and Amber Feng founded the company in June 2020. The idea for the company stemmed from a conversation Chawla and Dai had with co-workers and friends about leave benefits. They thought, at the time, that leave was similar to putting an out-of-office on your calendar, but as they learned that it was more about navigating company, government and insurance laws, especially around how it worked at a particular company, who pays during a leave and how it works, they saw a need to simplify the experience.

“Even extremely benefit-friendly companies are having a hard time,” Chawla said. “We talked to hundreds of employees and HR managers across all industries, and to everyone, it is a nightmare. We thought it shouldn’t be hard for someone to take care of themselves. This impacts everyone, but there is not something to make it easier, so we saw a big opportunity to make an impact.”

Cocoon’s platform has areas for both employers and employees. On the employer side, it handles compliance and payroll complexities so that the company knows what its payroll responsibilities are, but takes all of that work off of the employer’s plate. The employee will go on Cocoon and design a leave from beginning to end via an automated process that Chawla said can be done in under 10 minutes.

Since its launch in January, the platform has collected a rich set of data, including how employees are using their leave benefits and what they are taking it for to create insights for employers to understand how better to craft their benefits.

Cocoon is already working with large employers, like Carta, and Chawla sees its responsibility as taking the pain out of leave. Other companies in the benefits space are coming at the problem of leave in a more piecemeal way, while Cocoon is taking a holistic approach and applying software and automation to reduce the amount of back-and-forth both employers and employees have to do when managing leave.

The new funding will be used for hiring, particularly in engineering, sales and customer success and building out additional products.

“We are seeing massive inbound inquiries through customer referrals and broker relations,” Chawla said. “Next year, it will not just be about expanding the base of employers, but also moving into different industries and employers of different sizes.

As part of the investment, Mark Goldberg, partner at Index Ventures, has joined the company’s board of directors. He says this investment was a personal one for him as he was finishing up a paternal leave and helped write the leave policy for the firm. In fact, one of his colleagues spent over 25 hours on the phone with California’s Employment Development Department during the initial part of her maternity leave trying to navigate a clerical error that threatened her job.

Goldberg has known the Cocoon team for a while, following the co-founders from their previous respective positions at Square and Stripe.

“When Mahima called me and said the band was coming together, I wanted to get involved,” he added. “We are looking for that core talent vortex. If you can get the DNA in the first 10 employees, the next 100 will be top-notch. It’s similar to what we saw in the early Plaid team.”