What started as a fun project born at a Startup Weekend event has turned into a potential billion-dollar company that is gearing up for an IPO.
Rover.com, the Seattle-based dog-sitting platform, today announced a $40 million Series E round from previous investors Foundry Group and Menlo Ventures, which co-led the round, as well as Madrona Venture Group.
Founded in 2011, Rover has become the leading online pet sitting marketplace, providing a way for owners to connect with people to care for their pets. The cash infusion brings total funding to date for Rover to $91.5 million and will help the 170-person company continue growing its platform that helps 65,000 sitters across 10,000 U.S. cities book more than one million services per quarter.
In an interview with GeekWire, Rover CEO Aaron Easterly said his company is forecasting profitability by the end of 2017. He also said that taking the company public “is our plan of record right now and by far the most likely outcome.”
So why raise money now from existing investors? Easterly, who won the CEO of the Year honor at the 2016 GeekWire Awards, said it’s about the opportunity to continue growing.
“While this may be our last round before a public offering, there is nothing about where we are at that makes me think we are maturing as a business in terms of seeing growth slow down, or that we’ve somehow reached our potential,” he explained.
Rover announced in August that during the first half of this year, it surpassed an annual run rate of $100 million in gross billings. Total revenue so far this year has grown by around 3X from 2015, Easterly said, and Rover’s network of sitters has grown more than 50 percent year-over-year. He added that Rover has reached critical mass in 90 metro areas — more than double what it projected a year ago.
Easterly said the company doesn’t need an additional $40 million to be profitable — “it’s a much smaller amount than that,” he noted. The CEO also said that “after you exclude marketing and variable costs, our contribution margin is growing a lot faster than our fixed costs.”
But there are parts of Rover’s platform that could use some extra firepower.
While Rover’s core business of dog-sitting continues to grow, the company is seeing impressive traction with its newer offering of “daytime services” — dog walking, drop-in visits, doggy day-care, etc.
For example, Rover recently introduced new features for its app that allow puppy parents to see exactly what their pooch is up to when they are away, like a GPS map of the dog’s walk, photos of the dog while in their care, notes of any bathroom breaks, and more.
“The daytime services business is exploding and has taken off a lot faster than we thought,” Easterly said. “We see an opportunity to double down on that, given that the core business is doing so well.”
Those newer services also help drive growth for the other crucial part of Rover’s engine: the sitters. They can now make money on the platform in a variety of ways beyond traditional overnight dog-sitting.
“It’s possible for someone to make a lot more money on Rover than in the early days,” Easterly said.
It started at Startup Weekend
Rover has certainly come a long way since those early days in 2011 when Madrona Venture Group Partner Greg Gottesman helped first conceive the idea at a Startup Weekend event.
“It wasn’t my intent that we would ultimately turn this into a funded company,” Gottesman told GeekWire. “It was a fun project to do.”
But Gottesman, who was managing director at Madrona for 18 years before co-founding a startup studio called Pioneer Square Labs last year, recruited a small group of people to take the idea and run with it — one of which was Easterly, a former executive at online advertising powerhouse aQuantive who was then working as an entrepreneur-in-residence at Madrona.
“They’ve taken it to levels I could have never thought of,” Gottesman said.
Gottesman echoed Easterly’s sentiments about Rover just scratching the surface. He cited stats like how in many cities, there are more households with dogs and cats than households with children, and that people often consider pets as loved family members. When they need someone to watch their pet, Rover provides a better and cheaper experience than alternatives, Gottesman said.
The venture capitalist also said that, simply put, not many pet owners know about Rover.
“The opportunity to build a billion dollar business is sitting right in front of us,” Gottesman said. “This round will hopefully help us get there.”
Gottesman added that helping Rover has been the “most rewarding company-building experience I’ve been involved with” because of the constant customer delight stories he hears on a weekly basis. He is also proud of the team that has worked to build Rover.
“The hardest part about going public is having a team that is ready for that challenge,” Gottesman said. “I can speak for the board and the investors — we have a complete confidence in Aaron, [COO Brent Turner] and the team. If it is a path that ultimately comes to fruition, this is a team that not only can handle that challenge, but can thrive as a public company.”
A ‘category-defining company’
Rover is also thinking about expanding beyond the U.S. while also acquiring other companies that could potentially help Rover provide more services to customers. Easterly said the fresh cash will also be used to add employees — there are 170 people working for Rover today and he expects to reach more than 250 in 2017.
Rover competes with companies like DogVacay, which has raised nearly $50 million and in March said it had 25,000 sitters. Easterly cited third-party research that found Rover growing nine times as fast over the last three years than the “second-place person in this space.”
Much of Rover’s success is due to the way it maintains quality control and helps create trust between pet owners and sitters. The technology is crucial, too.
“We’ve thought long and hard about how you measure satisfaction; how you measure performance; how you help people understand the right choices for them; how you understand which sitters are in demand; how you remove friction; how you create value-add during a stay,” Easterly said. “We’ve seen sitters and owners use our technology proactively to improve the overall experience.”
Other competition comes in the form of kennels, along with professional dog walkers and sitters. There’s also the traditional habit of pet owners asking family, friends, or neighbors to take care of their animals — this is a group that most excites Easterly in terms of growing Rover’s platform. He noted that two-thirds of Rover’s customers come from people who previously used family, friends, and neighbors for pet care.
“We see an opportunity to feed more into that segment and be the de-facto norm for how people care for their dogs,” Easterly added.
There is also opportunity to go beyond dogs. Rover already has seen everything from pigs to shrimp on its platform, but “we haven’t made that experience easy for people,” Easterly said.
Companies like Rover, which also has investment from Petco, and DogVacay often draw laughs from critics who believe they aren’t legitimate tech businesses, harkening back to the dot-com boom days of Pets.com. But just as Uber and Lyft are now upending the traditional taxi cab market by allowing just about anybody to become a cab driver, so too are the online pet sitting marketplaces, transforming how Americans find overnight care for their beloved pets.
“Every once in a while, you have the opportunity to back a category-defining company,” Menlo Ventures Managing Director Venky Ganesan said in a statement. “At Menlo we have been fortunate to back companies like Uber, Siri, Hotmail and Gilead Sciences. Rover is on that trajectory and that’s why we decided to double down and go all in on this investment.”