It’s said that Series A rounds are raised on promises, and Series B rounds are raised based on delivering against those promises. If this is true, then the behind the scenes numbers at pet services marketplace DogVacay must be pretty stout.
Today, the company announced $15 million of new financing in a round led by Foundation Capital, with participation from existing investors Benchmark and First Round Capital*, as well as new investors DAG Ventures and Sherpa Ventures. This latest round brings the company’s total financing to $22 million dating back to March 2012, with earlier investors including Andreessen Horowitz*, Quest Venture Partners, Baroda Ventures, and Science Inc.
Pet services is an $11 billion market, according to DogVacay CEO Aaron Hirschhorn. And in this market, pet sitting is the fastest growing segment, he adds. But counterintuitively, the majority of this money is spent with family, friends, and neighbors watching our pets, not at professional kennels. The reason for this is that pets – dogs in particular – are considered by most owners to be members of the family, and thus leaving them with an impersonal caretaker is hard to stomach.
DogVacay addresses this through its 10,000 plus person strong community of pet sitters across the United States and Canada who more often than not sign up for the service for the love of animals, rather than for the money. The impact of this carefully curated workforce is evident in the fact that the company’s hosts have received 25,000 reviews with an average rating of 4.97 out of 5, suggests that the pet parents are overwhelmingly satisfied with the service.
The company doesn’t release the details of its financial performance, but has said in the past that it has booked hundreds of thousands of dog overnights to date. At an average rate of $25 to $30 per night, and at a 15 percent fee collected by the company, this is material, but not world beating revenue.
What’s more compelling, according to Hirschhorn, is the fact that the company has seen a steady increase in booking frequency by its existing members, in addition to the steady addition of new members. Further, the company’s own customer research indicates that a large percentage of the spending on DogVacay is not coming out of the existing $11 billion market, but is new incremental spending that has been added to the market because the service is so convenient and affordable.
“DogVacay’s momentum since we originally invested is similar to the trajectory we saw in other marketplace companies such as eBay, Yelp, Uber and GrubHub,” says Benchmark general partner and DogVacay board member Bill Gurley in a statement today. “The remarkable organic traction of its marketplace shows no sign of slowing down, and we’re delighted with the impressive trajectory that lies ahead.”
All in all, it’s not surprising that VCs view pet services as a compelling market. In fact, DogVacay has a near identical competitor in Seattle-based Rover, which has raised its own $15.7 million from equally impressive names, including a strategic partnership with Petco.
As you would expect, the two companies speak positively about each other in public, but have a healthy rivalry behind the scenes. According to Hirschhorn, DogVacay is orders of magnitude larger in terms of total nights booked and has higher customer satisfaction ratings. But what else would you expect him to say?
In all actuality, given the size of the market and the relative paucity of the two early stage companies’ revenues, they are competing less against one another and more against the inertia of consumers turning to the same pet care solutions that they have always know. Both companies have a massive opportunity capture more of the pet care spend by moving beyond dog boarding, into dog walking, daycare, and other complementary services. We should also expect to see both companies expand to serve other pet categories – formally, that is, as DogVacay has already been used to board cats, pigs, and at least one bird – as well as addressing international opportunities.
DogVacay took a major leap down its product roadmap just three weeks ago when it launched its first consumer-facing mobile app (currently iOS-only). The app acts as a communications hub between pet owners and sitters, providing messaging, photo, video, and text updates, and pet location tracking, as well as one-touch customer service. Like Rover, the company offers both pet owner and pet sitters complementary health and liability insurance. Mobile will likely be an increasingly large focus for both companies.
Los Angeles-based DogVacay has nearly 60 employees today and plans to grow that number by 20 to 25 over the next six months, according to its CEO. Hiring is a big challenge for any company, but can be especially difficult for those located in LA when looking to do so rapidly, while not sacrificing quality. The big test for Hirschhorn and his existing team will be whether the company can maintain its unique and familial culture.
The pet services market is just the sort of 11-figure analog opportunity that VCs salivate about disrupting. Like any marketplace business, this is a long term play that will require patience and deft execution for the company to deliver on its early promises. Today’s financing marks a major step toward that objective, ensuring that the company has plenty of cash and time to execute its vision. All things going according to plan, Hirshhorn and his investors will one day be swimming in proverbial doggie treats.
(* Disclosure: First Round Capital is an investor in PandoDaily, as are Andreessen Horowitz partners Marc Andreessen, Jeff Jordan, and Chris Dixon.)
[Image via DogVacay]
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