Another day, another SPAC. Today, we’ve learned that Seattle online pet sitting marketplace Rover plans to join the public ranks via a merger with True Wind Capital’s SPAC that values the company at a $1.35 billion enterprise valuation.
The deal: Rover will add approximately $325 million to its cash balance as part of a merger with Nebula Caravel Acquisition Corp, a publicly-traded SPAC sponsored by True Wind. That includes $275 million from the SPAC and $50 million from institutional investors via private investments in public equity, also known as a common stock PIPE, which is used to fuel a SPAC as an extra financing round.
Why a SPAC? Rover CEO Aaron Easterly, a former advertising executive at aQuantive, said a public listing will “accelerate the expansion of core service offerings, support other pet types, and continue to grow our geographic footprint.” Rover had long been rumored as a potential IPO candidate.
SPAC attack: Rover’s SPAC — special purpose acquisition company — is the latest in a string of deals in this hot investment arena, highlighted by Seattle area companies such as Porch and Nautilus Biotechnology which also have completed SPACs in the past two months.
SPAC mergers have become popular alternatives to the traditional process for initial public offerings, offering a faster path to going public. Also known as “blank check” companies, SPACs typically do not have an established business and are used to raise funds via public offering for a future merger or acquisition by a specific deadline.
Rover’s backstory: GeekWire was the first media organization to cover Rover, which was sparked by an idea from Seattle venture capitalist Greg Gottesman at a Startup Weekend event in Seattle in 2011. Rover was then incubated inside Madrona Venture Group in its early days. Gottesman, a former Madrona managing director and co-founder of Pioneer Square Labs, remains on the board of Rover.
Financials: The SPAC deal lifts the hood on the company’s balance sheet. It reported $48 million in revenue last year, down 49%, but projects $97 million for 2021 revenue and $201 million in 2022. Rover expects to be profitable by 2022, with $35 million in adjusted EBITDA.
Opportunity: Rover estimates the U.S. pet market at $95 billion, with the commercial pet services market at $9 billion. But it sees its “total scaled opportunity” growing to $113 billion by 2030.
Pandemic challenges: Unlike many tech companies, Rover saw its business plummet as a result of the pandemic with the lack of travel and people working from home. It cut 41% of its workforce last March, with executives also taking pay cuts.
Yes, but: As COVID cases drop and travel rebounds, Rover believes it is well positioned as new pet owners with “pandemic puppies” seek boarding options. Rover’s investor presentation includes a slide titled “converging tailwinds” indicating that U.S. pet adoption increased by 11 million or 35% in 2020. “Even in times of economic change and belt tightening, people don’t skimp on their pets,” Easterly said on an investor call Thursday.
Rover in October inked a deal with Walmart and said its business was recovering. It has more than 500,000 pet care providers on the platform.
Competition: Rover’s main competitor is SoftBank-backed Wag, which has reportedly struggled and explored a sale to Rover in 2019. SoftBank also sold its stake back to Wag that year after it invested $300 million from its Vision Fund. Rover merged with another competitor, DogVacay, in 2017.
Previous investment: Rover has raised $281 million in equity funding to date, including a $155 million funding round in 2018 that valued the company at a reported $970 million. Investors include A-Grade Investments, CrunchFund, Foundry Group, Madrona Venture Group, Menlo Ventures, Petco, Rolling Bay Ventures, TCV, and Spark Capital.
Looking ahead: The combined company will keep the Rover name and will be listed on the Nasdaq under the ticker ROVR. Easterly will continue to lead Rover. Adam Clammer, founding partner of True Wind Capital, will serve as director.
Who is True Wind? The San Francisco-based private equity firm manages more than $2 billion and has public company experience with firms such as GoDaddy and NXP. It participated in its first SPAC last year, taking automated lending platform Open Lending public in June 2020.
