MISSION LOCAL, September 4, 2024
Michael Lai, a frontrunner in the District 11 supervisorial race, tells voters that he’s an “educator,” “a school builder” and a “community organizer.”
On the campaign trail and on his website, Lai promotes his experience as the founder of Tinycare, a network of at-home daycares established in 2019 that, he says, “provides housing for teachers” and has expanded to more than 30 locations across the Bay Area and Arizona. Per Lai’s campaign filings, in which he lists himself as CEO, the company is worth more than $1 million.
However, in February 2023, Lai sold Tinycare to another company, a large Montessori school network called Higher Ground Education. On Aug. 1 of this year, all employees were laid off with three weeks’ notice, losing both their homes and their jobs, according to a teacher and a mid-level manager.
By Aug. 31, 2024, all of the educators formerly employed by Tinycare had quit or been laid off, and what remained of the daycare’s San Francisco and Walnut Creek sites closed. Looking back, one teacher reflected, they should have seen it coming.
High tuition, near-minimum wage salaries
Initially, Lai’s vision for a new daycare model attracted many teachers and families to Tinycare. It was unique: A network of micro daycare centers that would provide childcare in intimate, at-home settings. Teachers, who obtained licenses under their names, were hired to live and work from apartments leased by the company, in exchange for partially or fully subsidized rent.
Over time, though, that vision soured for many: Mission Local interviewed four parents and nine teachers formerly employed by the daycare network. While a couple of the teachers still defend the concept, most say they were underpaid, overworked, and struggled with chaotic conditions.
Six former teachers said that their wages and subsidized housing agreements with Tinycare were less attractive than they’d been led to believe: They had to contribute between $500 and $2,000 per month toward their rent, the teachers said. They were then paid between $17.75 and $19.81 an hour, only a few dollars more than San Francisco minimum wage at the time, but higher than the average going rate for daycare teachers in California.
Seven former teachers said that they received minimal support from Lai and his upper managers, whom they described as “unavailable.” All described working more hours than they’d been contracted for. And several described Lai as an ideas man unfamiliar with day-to-day aspects of childcare, since he had never been a full-time educator.
Four parents who had sent their children to Tinycare told Mission Local they loved its premise. They loved the idea of in-home daycare, and learning in small groups. They loved their teachers. They loved it so much that they were willing to pay as much as $4,387 a month per child at a site Lai later said was one of Tinycare’s “least profitable locations,” according to one family’s 2022 agreement.
According to Lai, the average tuition for a full-time child was around $3,300 a month. San Francisco’s Children’s Council estimates that a family would on average spend $1,732 a month per child for at-home childcare, around half of Tinycare’s rate.
Lai was first contacted for this story by Mission Local on Aug. 29. After being informed by text that the story was about Tinycare, Lai did not respond until midnight. When reached by phone on Aug. 30, Lai declined to be interviewed on the record, but directed Mission Local to Tinycare’s former head of education, Adam Nadeau, two former parents, and a former teacher who asked to remain anonymous. Lai later sent written answers to questions.
“Our lead teachers were W2 employees, with subsidized housing, health benefits, and stock options (the only childcare network in the country to do that),” he wrote. “Their total compensation was higher than a lead teacher at a childcare center, and they could live in San Francisco.” He added that teachers told him that the housing had changed their lives.
Nadeau said that Tinycare’s sites were operating at “very, very low margins” because the student-to teacher ratios were so low; at most, six children to two teachers.
By law, privately funded childcare centers have a maximum ratio of four infants to one teacher or 12 preschoolers to one teacher.
A confusing model
Some of Tinycare’s former teachers, meanwhile, said they found their contracts with Tinycare confusing, and struggled to take home a living wage.
Former teacher Nuria Santos said the overwhelming responsibilities at Tinycare, combined with a lack of clarity about her wages and rent, were too much for her. “Michael, you told me I was going to make $90K. You told me this is free housing … I was making $19 per hour,” Santos said, describing her thoughts at the time. She quit a year after being hired, as soon as the lease she co-signed was up.
Before she moved to San Francisco from Vallejo to work for Tinycare, former teacher Mahini Adams said that conversations with Lai and other Tinycare managers made her think that her housing would be completely subsidized. That pitch is what drew her, like many of the other teachers Mission Local interviewed, to the company.
In reality, these teachers said they typically contributed up to half of the rent for their spaces, subletting from or co-signing leases with Lai. Several said their share amounted to around $2,000 a month for a couple of bedrooms in the house where they operated a daycare. A review of two teachers’ contracts, and conversations with six others about their rents, showed variation in what the teachers earned and what they contributed to housing.
Nadeau said that wages were based on an “equity calculator” that took into account teachers’ experience. According to Nadeau, teachers had to pay rent only if they needed multiple bedrooms or had families. Otherwise, he said their housing contributions were taken into consideration when calculating an individual teacher’s hourly wage. The wages might seem lower than market rate, Nadeau said, because housing was provided by the company.
“We were upfront with how teacher’s compensation & housing subsidy worked, but it wasn’t the right model for every teacher. Do I wish early educators were paid even higher? Yes,” Lai wrote in his response to written questions.
After this story was published, Lai explained that Tinycare’s system of calculating teachers’ rent contribution into their initial compensation, rather than having the teachers pay for rent out of their wages, allowed them to pay lower taxes so their “total compensation was much higher than the market average.”
Even Nadeau acknowledged that the system was confusing. Much of his time was spent trying to figure out how to explain the “complicated” model to prospective teachers, he said. “In talking to teachers about this, I don’t think any of them would have ever said, ‘This is surprising because Tinycare was misleading us,’” he added. Nadeau said that teachers left the company in two or three cases because their incomes didn’t align with their “personal budgets.”
Former teachers who spoke to Mission Local disagreed.
Mahini Adams was paid $19.81 an hour, according to her 2020 contract — $3.74 above San Francisco’s minimum wage at the time.
After she was charged $500 for monthly rent, $200 for monthly parking, and a discounted Tinycare tuition for her son, “I only had, like, $60 to my name,” Adams said. “At that point, we were just, like, ‘This isn’t going to work.’”
Adams quit in September 2022, after being advised by her doctor that the stress of her job was bad for her pregnancy, she said.
Another teacher with 15 years of experience, who declined to be identified, said she was paid $17.75 an hour after being hired in 2021. She contributed $2,000 for rent, and said she often wondered if she had made the right decision to leave her $1,200 a month studio apartment and former job.
To supplement her Tinycare income, she said she worked weekends as a cosmetologist. But even this became untenable because of the amount of overtime Tinycare required.
The former teacher recalled that, one night, kept awake by anxiety over her job, she calculated how much Tinycare was making from her site. Then she added up all the work she did. The daycare could not operate without her, and the license was under her name. Still, contractually, Tinycare could ask her to move out with 72 hours’ notice.
She realized she was often distracted at work, wondering, “When are they going to tell me to leave?”
“That’s when I was, like, ‘Okay, it’s time to leave.”
Long hours, extra responsibilities
Money wasn’t the only issue for disillusioned former teachers. Some felt the operation lacked an ethos of care, despite what they described as Lai’s professed commitment to early childhood education.
Several felt that there had been poor communication from the beginning. Tinycare’s onboarding process, from confirming a start date to finding a site, was disorganized, they said.
Once they were hired, the former teachers all recalled working long hours. More responsibilities fell to them than expected: Budgeting, ordering supplies, cooking, cleaning. While they were paid time-and-a-half overtime, in at least one case a contract showed that overtime was capped at one hour per week. Other former teachers said they were advised by Tinycare management not to work overtime because the company could not pay them for the extra hours.
But there were still toys to be picked up, groceries to buy, and parents to communicate with outside of operating hours. Because the teachers’ licenses were under their names, they would have sole legal responsibility if something went wrong. Teachers couldn’t attend to operational tasks while the kids were asleep during naptime, as Nuria Santos said her managers advised, because they’d be held personally liable for not watching over the children.
“We really needed them,” another teacher said of upper management. “They were silent, and we had to figure it out on our own.”
“We absolutely responded to any teacher concerns and were constantly trying to improve,” Lai said in a written statement, adding that he cut his own “limited salary first” to keep all the teachers on payroll during the 2020 pandemic.
“I would argue that there wasn’t a lack of support, but there oftentimes was kind of a lack of support in the place that people wanted,” Nadeau said. Some teachers, he said, had a “very positive” experience, but others had “mismatched expectations,” despite management’s efforts to be “transparent” and “values-forward.” According to Nadeau, expectations included taking on additional responsibilities teachers wouldn’t normally have at a childcare center, like creating menus and attending to operational tasks during their regular hours.
A revolutionary vision, a youthful leader
Lai, now 32, was still in his 20s when he began to develop his vision for Tinycare.
After graduating from Harvard University in 2014 with a degree in government, Lai filled his resume with experience in education — educational startups, that is.
He worked at Minerva University, a college offering online instruction, and was an “entrepreneur in residence” at Promise Venture Studio, an accelerator for entrepreneurs in early childhood development.
In 2019, he founded Tinycare with the goal of helping to “solve the childcare crisis in America,” Lai said in a 2022 interview with ULU Ventures.
Shirley Chen, who had taught for 20 years, became one of Tinycare’s first two “founding teachers” in June 2019. When Lai offered her a job, Chen said, she couldn’t resist the opportunity to help create her own curriculum, provide an intimate childcare experience, and receive free housing.
So Chen obtained a license to operate a daycare out of a home for which she and Lai cosigned a lease. Families paid Tinycare tuition and Tinycare paid Chen. Her site in Mission Bay, which doubled as her home, served up to six children at a time, supervised by Chen and an assistant teacher, from around 8 a.m. to 6 p.m. New sites opened quickly under the same model.
But the experience didn’t turn out to be everything Chen had hoped: “The vision that I thought Tinycare had — I didn’t feel like that’s what was practiced.”
As Tinycare expanded, there was less support for individual teachers and less time for collaboration, multiple former teachers said. Chen remembered feeling frustrated that her input wasn’t taken seriously; that she was only hired to “look good on paper.” Lai had “good ideas,” Chen added, but “didn’t have the experience that a lot of teachers had.” She quit in April 2021.
Other teachers hired after Chen expressed similar disappointment. On paper, they said, the Tinycare model seemed ideal, especially for women with their own children who were hired as teachers at the beginning of the pandemic. One former teacher who later accepted a management role at Tinycare praised Lai’s involvement.
But another former teacher described Lai as a “nice guy” who let day-to-day aspects of his business “fall through the cracks.” To Mahini Adams, Lai’s experience volunteering in a classroom did not mean he knew how to work with kids under five or understand the needs of teachers.
“[Lai says] he’s so passionate about teachers … and being able to pay them what they deserve,” Adams said. “But then, like, when the ‘ish hits the fan, per se, he backpedals on everything.”
After experiencing the reality, most of the former teachers Mission Local spoke with had quit within a year and a half. Nadeau estimated that most stayed a year and a quarter.
In his written statement, Lai said his focus was developing the business and hiring a team with “decades of early childhood classroom and management experience.” He said he personally had two years of experience volunteering in early childhood classrooms.
After sale, teachers left en masse
While there were always bumps along the road, Tinycare’s sale in February 2023 to the Montessori network Higher Ground was particularly rough, according to several parents and former teachers.
Lai announced his company’s acquisition on a staff Zoom call in early February of last year. The CEO was all smiles, according to one former teacher. The educators, meanwhile, were shocked. They began asking questions, two former teachers present said: How long had Lai known he was going to sell? Were they still going to have a place to live? A job?
When they received few satisfactory answers, they began expressing their concerns to the parents with whom they had worked closely.
With so much turnover in upper management, one former teacher added, they didn’t know who to turn to for help. Lai, she said, had become defensive instead of sympathetic during the call.
A few days later, on another Zoom call with more than a dozen families, Lai told parents about the impending sale, explaining that Tinycare’s business model had become challenging to sustain. Now, he said, he believed that integrating its at-home system with a larger school network was the future of childcare. Lai would stay on as an advisor.
In a recording reviewed by Mission Local, parents expressed concern that sites would be shut down and teachers evicted from their homes. “I feel like there’s a huge disconnect between what you’re telling us and what we’re hearing,” one parent said.
“That’s, like, pretty shocking to me, and we haven’t heard anything to that effect,” Lai responded, adding that the teachers’ pay would be the same with Higher Ground. While their contracts said teachers had 72 hours to move out, Lai said that this didn’t happen in practice. “You didn’t involve them in this acquisition at all, and you’re surprised that they don’t want to join. I’m surprised that you’re surprised,” another parent said.
Lai directed their questions to the new owner, Higher Ground. Higher Ground did not respond to a request for comment for this story.
Things moved quickly after the sale was finalized. On Feb. 12, 2023, new offer letters were sent to teachers, to be signed within five days by those who wished to continue under new management. By Feb. 21, 2023, according to documents reviewed by Mission Local, the transition would be complete.
“I give a lot of credit just to the teachers running the program, because they were doing almost everything by themselves at that point,” a parent said. Lai “was out of the picture, and he didn’t really help make that transition go smoothly for parents.”
For his part, Lai said in a written statement that it was no longer his role to make operational decisions after the acquisition, but that he did what he could to help teachers who reached out to him.
Since she was hired in 2021, one former teacher said, there had always been a lot of staff leaving Tinycare, “like it was a revolving door.” But, “the week after the acquisition, people just left. They didn’t even say anything. They packed some of their stuff and left.”
Several said they opened their own at-home daycares. They were followed by loyal parents who opted not to remain with Higher Ground. Some of the Tinycare sites were taken over by other teachers, but most simply closed.
Another former teacher said she felt like she had no choice but to stay with the company: She couldn’t afford another place to live on her salary.
The end
A few former teachers Mission Local interviewed chose to stay on for the daycare’s final year of operation. They had positive experiences with Tinycare, two said, and wanted to keep their housing.
But overall, things started to go further downhill after the acquisition.
The teachers’ monthly budget was cut, according to one former teacher. It now seemed there was no one to ask for support, said Joanna, another former teacher. In a year and a half, she had taken just three days off; under Higher Ground Education, the teachers no longer received federal holidays off.
Joanna was the only former Tinycare teacher Mission Local spoke with who hadn’t cosigned her lease; only Lai’s name was on it. In May 2024, she received a notice that her rent hadn’t been paid. She refused to cover the cost — around $4,000 a month for a one-bedroom apartment. Joanna said she was still unsure who had previously paid her rent, Lai or Higher Ground Education, or if it had been paid at all. Joanna said she now plans to open an at-home daycare in the building next door.
On Aug. 1, 2024, all remaining former Tinycare employees were laid off. Parents received an email telling them that all the daycare sites would be shut down by Aug. 23. With the sites closed, teachers had neither jobs nor homes, and families were left scrambling for last-minute care.
Lai, meanwhile, has been focused on running for supervisor.
In a blog published in February 2023, Lai said that managing Tinycare wasn’t always smooth sailing: “Having previously worked only in a tech startup-culture, I struggled to manage teachers with high rates of trauma and mental-health challenges,” he wrote.
But, he added, “Being a teacher means caring immensely about relationships with the specific children & families you are serving.”
Two parents who’d enrolled children at Tinycare said Lai could have exercised more of that care toward his employees.
“My sense from hearing from Michael and reading about his story is that he thought daycare was going to be an industry he could ‘disrupt’ and turn around a company,” said Bud Caddell, whose child’s site was closed after the acquisition.
“But I think he was forgetting that it was a company run by human beings, who you have to take care of, and who require communication.”
