Rover Cuddles Up to $12 Million

Today, Rover announced that Menlo Ventures has led a new $12m round of financing. As is our style, we participated, but we’re excited to have a new partner to join us, Madrona, and Petco in this fast growing adventure.

Lots of VC firms are once again talking about online marketplaces. Some get it; many don’t. Being systematic about what it takes to build and scale a marketplace effectively and make it an enduring enterprise is difficult.

We learned this dynamic in the early 2000’s with our investment in ServiceMagic. We invested in the company in 1999 during the ascension of the Internet bubble. We loved the two founders, Michael Beaudoin and Rodney Rice, but knew very little about marketplace businesses or the home improvement category. But a lot of people were funding marketplaces and other online “things” in this arena – well over $500 million of VC capital went into the home improvement market alone.

It was an unmitigated disaster for almost every company except ServiceMagic. In 2000, Michael and Rodney cut the business drastically, changed the business model to a lead-fee system, which they pioneered online. By 2003 nearly all of their competitors had failed, the companies that went public pre-bubble were trading sub-$1 / share, but ServiceMagic was growing like crazy and was very profitable.

Before ignoring vanity metrics became trendy, ServiceMagic ignored them. Michael and Rodney were data obsessed, getting hourly reports with key metrics. They understood the different dimensions of the business and were laser focused on drivers of supply and demand in each market they operated. They eschewed slick marketing, were systematic about growing headcount, learned how to master local expansion models, and stayed obsessively focused on the quality of transactions, instead of simply the quantity, moving through the marketplace.

We invest early in the life of a company. While we weren’t the first investor in Rover, when Madrona partner Greg Gottesman called and told me that I had to meet Aaron Easterly, the co-founder of Rover, I happily obliged on my next trip to Seattle. In ten minutes I knew I wanted to back Aaron as he had the same characteristics as Michael and Rodney. And, while after 10 minutes I knew nothing about the dog sitting market, as a dog owner I instinctively understood and appreciated the problem.

So – our first order sort in the case of Rover was Aaron and the team. We loved what we saw. No bullshit. Total quants. Deep domain love. Complete lack of interest in marketing nonsense and overpromotion.

And yes – after a little more exploration it was clear that Rover had a huge addressable market. Current commercial solutions are generally despised and the opportunity for a two-sided marketplace is enormous. Best of all, there are very obvious RAM (remnant asset monetization) dynamics to the marketplace.

Sure enough, a year after our initial investment, our premise for the investment in Rover shows clearly in the data. All of the underlying marketplace metrics – including activation, fill rates, and repeat usage – are accelerating rapidly. Dogs owners trying the service now will spend twice as much monthly as those trying the service 18 months ago. Sitters joining the marketplace now will earn 50 times more money in their first three months than those signing up 18 months ago.

Oh – and Michael Beaudoin from ServiceMagic joined the board last year as one of our outside board members.

If you are a dog owner, or want to be a dog sitter, try Rover out today.

  • JLM

    This is evidence of a very orderly thought process, something that is not as common as one would think in the startup business.

    Well played.


  • Your post begs the question for me, with you cutting back (out?) travel, how do you meet the next Aaron?

    • Ah – well – therein lies the mystery of my life. I spent 10 minutes with Aaron in Seattle. The next few hours with him were in Boulder. I could have easily spent the first 10 minutes with him via videoconference.

  • Good-looking site and UX — two clicks and I’m looking at a well-formatted list of sitters. Nice.

  • Michael Byrne

    Yep, this is a great business. 50 million households, 80 million dogs, and idiots like me who spend a ton of money on their beagle. And if you look where the pet care revenue goes now, I would say that this service will greatly expand the pie, not just take away from existing pet care/housing options–(your RAM concept).

    I have used this type of service repeatedly. Now add uber-style dogwalking so you have a DAILY marketing touchpoint with the consumer (instead of the infrequent boarding interaction) and hook into marketing vet services, pet supplies and you’ve got a mega-platform.

    Right now it’s Coke and Pepsi, I think Rover has a better name and the other guys have much better branding and UX –and also better on mobile, which what Jason Mendelson says is the “killer app” for your Marketplace theme.

    Anyway, it’s early, but I am sure you will be barking all the way to the bank.

    • Thx. And look for rapid iteration on mobile.

  • CamiloALopez

    Another gold nugget: “No bullshit. Total quants. Deep domain love. Complete lack of interest in marketing nonsense and overpromotion.” Awsme!!

  • Andrew Russakoff

    When it comes to these remnant asset monetization opportunities, how do are people evaluating/approaching the potential for participants to disintermediate the marketplace, especially in buying relationships that incorporate repeat business?

    Uber and StubHub can sustain over the long-term because it’s difficult if not completely impractical for two participants to conduct repeat business out-of-band following the initial transaction conducted through the marketplace. AirBnB is similar. With Rover, I would have thought it pretty easy for customers to circumvent the network on follow up. Curious how many people actually do that and what Rover does to combat that, in addition to delivering what seems like a great value prop to both sides of the marketplace.

    • That’s a key part of the business. The marketplace has to provide so much value to the people on each side (supply/demand; buyer/seller) that there is no incentive to transact outside the marketplace. We feel like we are off to a strong start at Rover and have many things in the works to reinforce the dynamics of the relationship.

      • Andrew Russakoff

        I’m sure – wish I could see under the hood 🙂 Any strategies/recommendations specific to marketplace businesses for testing the strength of that value prop in the early product development phase to see if you’re past the tipping point?

        Could you ever see merit in pairing a little “stick” with the “carrot”? For instance, spot checks on the service providers to see if they try to disintermediate the platform. For people who rely on the service for income, the possibility of being kicked off could be a powerful deterrent. Flip side is that it could alienate some and be a culture killer. Could also depend on the marketplace culture, i.e. Uber psychographics will be different from Rover.

        • We obsessively focus on slippage. There are lots of positive ways to handle it without needing a stick. Mostly it’s around providing customer delight on both sides of the marketplace.