Ittavi Raises $2.6M To Take The Sting Out of Child Support

App developers are dangling thousands of new options before us in our spare time—should we learn a new language before that big trip, join a neighborhood network and share intel about yard sales and lost dogs, or design fabulous outfits by combining the best items from luxury fashion lines?

Sheri Atwood is just one of those many innovators competing to attract users and keep them coming back. But you’d think she might have an edge. Her online offering, SupportPay, may not be as fun as playing Angry Birds, but she sees it as a financial necessity for many people. SupportPay is a record-keeping site for divorced parents, who need to keep meticulous tallies of their child-rearing expenses and child support payments. The consequences of spotty bookkeeping can be severe—from huge unreimbursed costs to court actions for unpaid back support.

But Atwood, just like other entrepreneurs, had to learn what discouraged people from making use of her service, and what drew them in. After founding her company, Santa Clara, CA-based Ittavi, in 2011 and operating SupportPay for about two years as CEO, she concluded that she needed to learn even more from her customers.

To that end, Ittavi suspended monthly subscription fees for SupportPay starting in September, to attract a larger customer base and keep mining it for feedback. Ittavi has just completed a total $2.6 million seed funding round, which will pay for improvements to its record-keeping site based on lessons already learned and new insights to come. The first phase of the seed round in May yielded $1.1 million from Tim Draper’s angel investment fund, Draper Associates, other funds, and wealthy indviduals. T5 Capital Partners led the extended round for another $1.5 million, which was announced today.

Many factors can prevent SupportPay users from taking full advantage of the service, such as technical obstacles and the crowded schedules of busy single parents, Atwood has found. But the biggest hurdle is that every aspect of Atwood’s business moves through an emotional minefield. Parents who split—sometimes bitterly—still have to cooperate on child-rearing and money issues.

“It’s striking how important the emotional part of this is to the entire process,” Atwood says.

Early on, Atwood (pictured above) learned that she needed to skirt the animosity between the exes so she could increase customer sign-ups. Initially, the first parent to register on SupportPay would invite the child’s other parent to join. That resulted in a success rate of only 10 percent.

“The last thing that second parent wants to see in their inbox is something from their ex-spouse,” Atwood says. Now the invitation e-mail comes directly from SupportPay—a move that increased sign-ups to 60 percent, she says. The e-mail explains how the site can help both parents maintain a fair split of costs and avoid clashes that can harm children.

SupportPay works best when both parents participate, though just one parent can also use it. The application keeps track of the basic monthly child support amount paid to the custodial parent, as well as extra expenses—such as the child’s medical care and school fees—that the parents may be required to share. Both parents can maintain records of the amounts they paid and the purchases they made on the child’s behalf. SupportPay sends reminders when child support is due.

Atwood found that ex-spouses don’t like to send checks to each other—not only because a check reveals the account number, but also because former husbands and wives know each other well enough to guess passwords or the answers to security questions on private accounts. SupportPay now allows the parents to make payments through PayPal. Ittavi is also developing other options, such as direct payment from one parent’s bank to the other, funneled through SupportPay. “The other parent won’t see their account information,” Atwood says.

Another future option is a debit card that is used only for the child’s expenses, Atwood says. Transactions on the card would be automatically logged on SupportPay, and the parent would only need to add the receipts to the record. E-mailed receipts can be imported into the application; the parent can scan a paper receipt or take a picture of it with a smartphone.

The emotional nature of shared child support arrangements also caused a change in the staffing plan at Ittavi, Atwood says. Custodial parents—usually mothers—often get little help from understaffed state child support agencies with aging computer systems. The mothers’ bruised feelings spilled over when they contacted SupportPay’s customer support personnel. These female staffers ended up feeling like counselors.

“When it’s a woman talking to a woman, the entire conversation turns to all the evils that the men did,” Atwood says. Ittavi’s customer support staffers are now men. Women share fewer personal details with men, and the calls are now shorter, she says. However, the men are not unsympathetic—they include a divorced father and a stepdad, she says.

“It’s just such an emotional topic,” Atwood says. “You have to understand what they’re going through.”

SupportPay, which had 1,000 subscribers in February of 2014, grew that number to 12,000 by February this year. The application now manages $5.4 million in transactions per month. Ittavi’s current goal is to reach 30,000 subscribers by the end of June.

Atwood says SupportPay’s growth has been accelerated by an increasing number of referrals from overwhelmed state child support agencies and by lawyers, who need detailed payment and expense records when parents want to modify court-ordered child support plans or settle other disputes in court. Ittavi now has a referral network of 2,500 lawyers, mediators, private judges, and other professionals, she says. Some lawyers are also getting clients started on SupportPay as soon as their support order is finalized. So far, more than 100 divorced couples have agreed to use the service to comply with these agreements.

The company has always offered a basic service free of charge, and always will, Atwood says. Parents can enter transactions free, and review a six-month history of the records. SupportPay formerly charged $19.99 per month for a more enhanced set of features before Ittavi opened up a free registration period from September until June.

Ittavi has used this time window to make the SupportPay website and mobile apps as easy to use as possible, so customers will encourage others to sign up, Atwood says. New users get a free phone consultation so Ittavi staffers can walk them through the process of signing up and recording transactions.

In July, Ittavi will start phasing in subscription fees again. The new price for premium service will be $9.99 per month, Atwood says. With the enhanced service, parents will be able to print certified records for use in court. They’ll receive detailed reports to help them prepare tax returns and qualify for child-related tax credits, and will have access to the complete transaction history.

Atwood interviewed customers to arrive at the lower subscription amount. Some parents told her they’d be willing to pay as much as $1 million to avoid ever talking to their exes about money again. But most people surveyed were more comfortable at a lower price level, she says.

“We’ll be doing a lot of testing,” Atwood says. “We know the right price point is somewhere between $9.99 and a million dollars.”

In the future, Ittavi may develop other sources of revenue, such as a dispute resolution service. On SupportPay, a parent can already challenge an expense, such as a purchase, and propose a resolution. But if the other parent disagrees, they might have to hire an outside mediator. Atwood says her company might offer an online option. For about $99.99, SupportPay would assign an online  mediator or legal advisor to make a decision on the issue within 24 hours.

Ittavi may also seek to have SupportPay included as part of the employee benefits package at corporations that provide access to legal advice as a job perk.

Atwood says Ittavi may eventually create new applications for other types of family groups who live apart but share expenses, such as siblings who support their aging parents. A detailed record of their various contributions could be useful to resolve conflicts or determine how assets should be divided when the parents die, she says.

“The overall vision of the company is to be a family financial management platform,” Atwood says.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy

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