March 15, 2017 CT-WebDesigners

How the ‘Airbnb for Pets’ Became a $70 Million Business

How the 'Airbnb for Pets' Became a $70 Million Business

In 2010, Aaron Hirschhorn went on vacation, leaving his dog Rocky at a kennel in Los Angeles. When he returned, the goldendoodle was severely traumatized.

“She was hiding under my desk for two days afterward,” the science teacher-turned-VC remembers. Figuring he could provide a more personal service, Hirschhorn naturally did what any entrepreneurial dog-lover would: He started his own pet-boarding business. The venture was successful, to say the least; in one year, he generated around $35,000 in sales. “We started realizing that if we–who have no real experience–can do this, then pretty much anybody can,” he says.

Back then, the sharing economy–or what was then known as “collaborative consumption”–was still in its infancy, but Hirschhorn recognized it as a major opportunity. By March 2012, he had launched DogVacay, an online service connecting pet owners to sitters in L.A. and San Francisco; by the following summer, he expanded to several other U.S. cities and Canada. Today, the website books more than $70 million in annual sales and aims to significantly reduce reliance on kennels much as Airbnb has captured millions in revenue from the hotel industry.

The cost to board a pet with DogVacay is around $30 per night, and the startup takes a 20 percent transaction fee. That’s generally cheaper than kennels, which range from $25 to $45 per night depending on your location, according to the pet pharmacy PetCare Rx.Besides dogs, DogVacay provides sitters for cats, as well as less common house pets such as chinchillas, ferrets, and even chickens.

DogVacay is the latest in a series of tech startups taking aim at the traditional pet care industry, and the market opportunity is great. In 2016, Americans spent roughly $60 billion on their pets, according to research firm IBISWorld, which expects that number to increase by 7 percent annually through 2021. In addition to the more standard boarding and grooming, startups are now offering niche products and services, including wearable fitness trackers, game consoles, and even sex dolls. (If your canine just can’t stop humping the furniture, consider buying him an inflatable toy from the French online retailer Hot Doll.)

Investors agree that the future of the industry is bright. “There’s a macro trend that Americans are having children later in life, and related to that is that there are more dogs than there are children in the U.S.,” notes Ben Ling, an investment partner with Khosla Ventures who has invested in DogVacay. “So unless that trend materially reverses, it is a fact that [pet tech] is here to stay, and not a fad.”

Although even Hirschhorn concedes that some pet tech is nothing more than “silly gadgets”–think webcam-equipped treat-dispensing devices–many businesses have lately drawn the attention of venture capitalists. Between 2012 and 2016, as much as $486 million was invested in the global pet tech sector across 172 deals, according to CB Insights data. DogVacay has raised more than $47 million to date, from investors including Andreessen Horowitz, First Round Capital, and Benchmark Capital.

“2016 was a strong year for pet-tech financing,” notes Alex Paci, a tech industry analyst with CB Insights. “Investors are betting on early companies in the space and clearly see promise.”

A complex platform

Of course, as with many young companies in the sharing economy, DogVacay faces significant obstacles, including handling its rapid growth. The company facilitates as many as 40,000 pet stays a night, and counts more than 60,000 registered hosts on its platform. “It’s a simple business model, but the actual management of it is extraordinarily intense,” says Hirschhorn.

To his point, the startup now has more than 100 employees, many of whom are engineers tasked with continuously refining the platform. For example, a pet owner can search for a sitter who has experience with specific conditions–say, a pet that gets separation anxiety–and who is available on certain dates.

Unfortunately, bad apples can get through, despite a rigorous vetting process that involves background checks and online training seminars. In August 2016, an Oakland couple was devastated to learn that their six-year-old dog, Pippen, had died while in the care of a DogVacay sitter, who had left the animal in a hot car. “In situations like that, we do our very best to support our customers through it,” Hirschhorn says, adding that the sitter was immediately kicked off of the site. DogVacay also offers pet insurance, which covers up to $25,000 for any kind of accident or injury a pet sustains during its stay.

The company faces stiff competition, including from Rover.com, the Seattle pet-sitting service that reportedly generates more than $100 million in annual sales. Hirschhorn says he isn’t concerned, given that other startups account for a small percentage of the overall pet-sitting market.

“We don’t even necessarily view [other sites] as competitors,” he says. “We’re all working to accomplish the same mission of making dog ownership easier. To me, the competitor is the local kennel, or your neighbor, or your mom.”

Hirschhorn declined to comment on whether DogVacay is profitable, though the company said last year that it expects to be in the black in 2017. Beyond this year, it plans to focus on expanding its core business, which now operates across the U.S. and in parts of Canada. The startup also recently expanded to include dog walking and day care, and soon it plans on partnering with wearable fitness trackers–so owners can monitor Fido’s body temperature, breathing, and heart rate.

The company’s success has been good news for Rocky the fearful goldendoodle, who no longer has to spend her time in kennels. Hirschhorn, speaking while on vacation in the Dominican Republic, says that she’s currently boarding with a DogVacay sitter. “From the pictures I’ve gotten of Rocky at the beach, on a hike, and passed out in her bed,” he adds, “I’m pretty sure she’s having as much fun on vacay as we are.”

 

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