DogVacay Venture Capital Investment Comments by Benchmark

Tl;dr: Benchmark invested $6 in DogVacay at the series-a round in 2012. Bill Gurley shared some comments on the company. It is not a memo, but there aren’t enough around to be choosy. 

About the VC investment memo

Basically, Bill Gurley wrote a blog and has applied 10 important factors to DogVacay. This isn’t a memo, but it’s worth reading regardless. Here he writes:

Earlier today, DogVacay, an exciting new startup in Los Angeles, announced that Benchmark has led its most recent round of financing. DogVacay is an online marketplace that links dog owners with passionate dog care providers who open up their own homes as an alternative to the traditional cage-oriented kennel. At first blush, a website that allows owners to book a “Dog Vacation” for their esteemed pet may seem like an unusual choice for a venture investment. However, a more analytical and detailed look at the market uncovers that this is a high potential, high probability online marketplace opportunity.

The most recent Above the Crowd blog post, titled All Marketplaces Are Not Created Equal, outlines ten different ways to judge the potential effectiveness of an online marketplace. You may be surprised how well DogVacay checks out against this list.

After taking a detailed look at the crowd-sourced dog care market; we became quite excited about the opportunity at DogVacay. In addition to our analysis, we had the added benefit that the company had been live since March, and we were able to confirm our analysis by witnessing amazing early traction in the field. DogVacay’s six-month ramp and current monthly gross transaction revenue are very reminiscent of the very best of our previously funded successful marketplaces. From our perspective, DogVacay is a winner in the making.

We are super excited to be working with Aaron Hirschhorn, the founder and CEO of DogVacay. He is not only an amazingly smart entrepreneur, but also a passionate dog owner. We are also thrilled to be working with First Round once again (as in Mint, Uber), and are excited about our first partnership with Peter Pham, Mike Jones, and the team at Science in Los Angeles.

About DogVacay

DogVacay is an online community that connects pet parents with over 20,000 pet sitters across North America, ready to care for your dog like a member of their family. It’s a safe, convenient and affordable way to make sure your best friend is in a loving home while you’re away.

All reservations include pet insurance, 24/7 customer

support, and daily photo updates of your pooch enjoying a “vacay” of his own. With thousands of 5-star reviews and prices that average half the local kennel, you can finally travel with peace of mind.

“DogVacay is a remarkable two-sided marketplace,” says Gurley. “The consumer has an experience that is an order of magnitude better than the traditional solution, and simultaneously the supplier (sitter) receives substantial incremental income with relatively little investment, which creates a sustainable flywheel effect.”

About Benchmark

Benchmark invests in and works alongside entrepreneurs building startups into transformational companies. They focus on early-stage venture investing in mobile, marketplaces, social, and infrastructure, and enterprise software. Founded in 1995, the firm has offices in Woodside and San Francisco, California.

The firm has been recognized for its

commitment to open source and is noted for creating the first equal ownership and compensation structure for its partners. The six equal general partners who take board seats and a hands-on approach to every entrepreneur and company they back, with no junior investment staff. Current general partners are Matt Cohler, Peter Fenton, Bill Gurley, Mitch Lasky, Eric Vishria, and Scott Belsky. Benchmark has had 37 exits since the beginning of 2011; 14 IPOs and 23 M&As representing a total market value of more than $60 billion.

Benchmark’s current portfolio of early-stage venture investments includes private market leaders such as Uber, Snapchat, Tinder, Stitch Fix, Elastic, and Cyanogen; recent IPOs and acquisitions such as Twitter, Instagram, Yelp, League of Legends, Jasper, OpenTable, New Relic, Hortonworks, GrubHub, Zendesk and Zillow; and franchise companies from Juniper to eBay to Red Hat.

Usual caveats

No investment memo made voluntarily public will ever be 100% as it was. The pressure is just too high for VCs to look smarter, and not make founders uncomfortable, etc. I highly praise the VCs that share their thought leadership so we can all learn.

If you’re learning to make a VC investment memo, don’t assume the memos are what you exactly need to do. Information will be redacted. Assume anything “delicate” or sensitive is not in the memos.

The only memo that is 1 to 1 is the Youtube memo because it was in a lawsuit.

Venture Capital Investment Comments

New Experience the Status Quo

(A+) Early users of DogVacay view leaving their pet at a reputable care

owner’s home as superior to the use of a traditional kennel. It’s not simply cheaper or closer; it’s a highly favored alternative. Anxiety is reduced dramatically – which frequently leads to word-of-mouth demand.

Economic Advantage Status Quo

(A+) The economics here are better on both sides of the equation. For starters, the landed pricing is better for consumers (it can be 50% lower!). Perhaps even more interesting, a facilities-based kennel has huge overhead, and limited supply. Neither of these things are an issue with the DogVacay marketplace. Moreover, the earnings for the care provider are highly incremental. The system creates economic opportunity for the supplier out of thin air.

Opportunity for Technology to Add Value

• While some of the high-end kennels offer cameras, or once-a-day photo uploads, supplier mobile apps will allow for constant communication between pet owner and care provider. Furthermore, GPS tracking will allow for instant awareness of the location of your pet. It will be as if you and your pet are going back and forth on Facebook in real-time. Traditional kennels will be afraid of the DogVacay top sitters will roll around in it.

Fragmentation of Suppliers

(A+) As they are creating a new caregiver profession, with passionate caring individuals working from their homes, the supplier base here will be undoubtedly fragmented.

Friction of Supplier Sign-Up

(A+) DogVacay is finding tons and tons of passionate dog lovers that want to provide for overnight dog stays. Interestingly many customers are converting into providers. Supplier friction is quite low. Clearly not a limiter.

Size of Market Opportunity

(B) This isn’t the health care market, but the market is larger than you may think The average dog owner spends close to $274/year  onboarding, and different studies put the market the overall market at somewhere between $2.5-5B. We have high confidence in the market expansion (see be- low) as a result of the service. Lastly, DogVacay scores so well on other fields, there is also high confidence in market penetration

Expand the Market

(A-) If you have tried to make a last-minute kennel booking lately, it is anything but easy. Most kennels require a pre-visit, loads of documentation

on shots, and may or may not have availability. DogVacay federates the qualification, such that even with a new provider is as simple as the click of a button. Making it easier will lead to more frequent usage and an expansion of the market. Non-kennel-using dog owners will be drawn into the market because of lower price points. Expansion is inevitable.

Frequency

(B-) Most people use a kennel 2-4 times a year. This is the one characteristic that is not ideal. Kennel use is typically correlated with and therefore similar to the travel industry- which has obviously launched many successful marketplaces. Ease of use has the potential to expand the market and therefore increase frequency. Single overnight and day-use will be common new use cases in the future.

Payment Flow

(A) DogVacay is in the payment flow, and as the revenue represents a new economic opportunity for the caregivers, the relationship is quite symbiotic and sustainable.

Network Effects

(B-) Network effects typically evolve over time, and therefore it is hard to predict exactly how they will play out here. Caregivers develop a reputation and even in its early state, reputation has value in the marketplace (the proven providers are frequently chosen for more business). The fact that the best providers are rewarded with more work by the system, should encourage the better providers to constantly improve their service level and should make them quite loyal to the network.
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