Rover partners up with Petco to reach more dog owners, gets $3.5M strategic investment

By Michael Carney , written on July 30, 2013

From The News Desk

In the war to own the dog-sitting market, it’s been a battle between technology and familiarity. On one side, there’s Rover and DogVacay, venture-backed startups with designs on bringing software-based convenience, efficiency, and affordability to this multi-billion dollar market. On the other side, there are hundreds of local small business kennels and pet care services, as well as and little Timmy, the neighbor who lives down the block.

Kennels and boutique dog sitting services are familiar, but expensive and not always the most comforting place to leave your pet. Timmy has the advantage of being local, working for pennies, and not requiring any tech-savviness to book, but also doesn’t offer insurance or many amenities. The startup marketplaces often offer the best of all worlds, including affordable prices and a friendly dog-lover to take care of your furry family member, as well as insurance, 24/7 veterinary consultations, pet geo-tracking, and photo- and video-based doggie diaries, but trail in awareness relative to more traditional care options.

“Our view is that there’s a big difference between having a place for your dog to go and having a place where someone will love having your dog be there,” says Rover CEO Aaron Easterly.

Today, Rover took a big step in raising its profile among non-techie dog owners through an exclusive promotional partnership with Petco. The pet retailer also led a $3.5 million investment into the Seattle startup, bringing its total capitalization to approximately $13 million. The company’s existing backers also participated in the round, including Foundry Group, Madrona Venture Group, Rolling Bay Ventures, and Crunchfund. (Disclosure: CrunchFund is an investor in PandoDaily.) Petco VP of Business Development Ted Root will join the company’s board of directors.

According to the Humane Society of the US, there are 78.2 million dogs owned in the US, with 46 percent of households owning at least one dog. Despite its early success, Rover has barely made a dent in this market with only 150,000 members to date. The company has also built a community of 25,000 sitters in 4,300 US cities, including more than 1,000 sitters in each of the Top 20 US markets. Given high levels of customer satisfaction – more than 94 percent of its transactions receive a 5-star rating – the biggest challenge for the company going forward will be to increase awareness of the product.

Petco operates 1,200 “super stores” and 200 “specialty stores,” as well as an ecommerce business, which collectively reach millions of consumers. In each of these channels, the retailer will promote Rover’s services, putting the young company in front of entirely new communities of pet owners each time they buy dog food, treats, toys, and leashes.

Strategic investors aren’t always a good idea. Union Square Ventures General Partner Fred Wilson railed against deals with corporate VCs during a recent PandoMonthly fireside chat, and he’s not alone in his skepticism. Easterly acknowledged that bad scenarios can arise, but expressed his optimism about the relationship with his new partner. Unlike its competitor PetSmart, Petco doesn’t currently offer pet care services in its stores, Easterly points out. For that reason, it’s not directly competitive with Rover. At the same time, the promotional partnership directly addresses Rover’s biggest shortcoming: consumer awareness.

Rover didn’t need additional funding at this stage, Easterly says, noting that the company had closed a $7 million Series B round in February of this year. The conversation with Petco is one that has been ongoing since Rover launched in 2011, the startup’s CEO says, but things kicked into high gear following its most recent financing. This deal comes at a time when Rover has grown revenue 20X in the last 12 months and 4X in the last three months, according to its CEO, although the company declined to disclose specific revenue figures.

When asked to compare Rover with DogVacay, Easterly said both offer strong solutions, but that Rover offers more amenities such as 24/7 veterinary consultations, pet geo-tagging, and a custom music video highlighting each stay.

We reached out to DogVacay founder and CEO Aaron Hirschhorn for comment on the competition between two companies, receiving the following comment by email:

Rover and DogVacay are both based on the same positive mission of providing a better experience for dogs. DogVacay has always focused on quality first, with a 5-step host vetting process, free pet insurance, and 24/7 customer support. We have significantly more active users and revenue than Rover, and we are growing both metrics faster. We've booked hundreds of thousands of "doggy nights" and our customers are highly satisfied with their DogVacay experience – the average host rating is an incredible 4.97 out of 5 stars.

Pet care is the fastest growing segment of the pets industry, and yet, it has far less market penetration than traditional products like pet food and accessories – only a fraction of dog owners use commercial pet-sitting services today. Rover, and its competitor DogVacay, offer a technology-based marketplace to connect dog owners with local dog lovers who wish to pet sit. It’s a simple solution, yet an enormous market opportunity. Both companies are racing to grab as much market share. While they are comparable on price and service offering, Rover took a major step today in terms of distribution with its Petco partnership. At this point, the bone is in DogVacay’s court.