« swipe left for tags/categories
swipe right to go back »
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.