Celebrating Rover: Best in Show with Nasdaq Debut
My first meeting with Aaron Easterly almost didn’t happen. A fellow investor suggested we connect, but to be honest, I just couldn’t quite get my head around his trajectory. This guy had been managing $3B in advertiser marketplaces as a GM at Microsoft…he would be a great enterprise software founder, but he wants to get into the pets business? My friend convinced me to do the meeting, reminding me that Rover wasn’t unlike many of the companies I’d backed in the past. Rover was a two-sided marketplace (connecting pet owners with pet service suppliers) and had a lot in common with previous companies I had invested in such as Poshmark, Rev.com, and Upwork.
I still wasn’t convinced but I agreed to meet. The first question I asked Aaron was why build Rover, of all the things he could be doing. His answer was simple: Pets bring people joy. At that moment, I realized that Aaron had everything he needed to build an incredible business: leadership experience, deep operational expertise, passion for his product, and a deep emotional understanding of his customers. Of course, we should invest, and we are all so glad we did!
Thus began Menlo’s partnership with Rover in 2014.
Today marks a new beginning, as Rover embarks on life as a publicly traded company. Going public is a huge milestone and it’s one that deserves celebrating. Especially when I think about how far Rover has come. It wasn’t always smooth sailing. But, to their credit, every time they reached a crossroads, the Rover team regrouped, refocused, and seized the opportunity ahead.
The Battle to Become Top Dog: The Category Winner Takes All
When we first invested in Rover, they were competing hard against DogVacay and Wag to win the US pet-services category and it was anybody’s game.
But as a marketplace investor, I knew that the stakes were high. At Menlo, we often cite the “Rule of Marketplaces” which states that Marketplaces tend to be a winner-take-all game or winner takes most (in cases like Uber and Lyft). They are one of the few business models that demonstrate true network effects: supply and demand follow each other. When one company takes charge, it can cater to the majority of supply and demand, generate huge profits, and retain customers while fending off competition. The company that can reach meaningful scale first has a huge advantage.
Knowing how the game was played, we at Menlo worked to help them level the playing field, and guided Rover’s 2017 acquisition of DogVacay (its biggest competitor in the online dog-sitting marketplace) and later their 2018 acquisition of DogBuddy, Rover’s dog sitting rival in Europe.
And Then There Were Two: Wag vs. Rover
Rover’s acquisitions of DogVacay and DogBuddy narrowed the field and put Rover in a position to take on Wag. But, when Wag raised a staggering $300M round in 2019, people thought it was over for Rover. How could this startup compete against a competitor with unlimited funding? Undeterred, Aaron and the team at Rover rose to the challenge. As I like to say, it was at that moment that Rover proved that it’s not the size of the dog in the fight, it’s the size of the fight in the dog. It turns out that massive checks don’t always result in massive businesses. A breakout company wins with a world-class team and solid execution. Aaron has always had a handle on what it means to build a strong marketplace business. Rover—through sheer determination, strong leadership, and solid execution—emerged as the top tog.
That wasn’t the only crucible moment. Soon, Rover would be staring into the face of a once-in-a-century pandemic that sent people across the globe into their homes to shelter-in-place.
The Pandemic Challenged and Then Catapulted Their Business
The pandemic nearly brought Rover to the brink. As COVID-19 spread, the shift to remote work and limited travel decimated the demand for Rover’s services. Almost overnight, their business evaporated. We were sure the business would bounce back—if Rover could stay in business. To survive, the company made the difficult decision to lay off ~41% of its workforce in March 2020 (nearly 200 employees). This decision allowed the company to remain operational while strict shelter-in-place orders were enforced. At the time, we had no way of knowing what was in store. Intellectually, we the pandemic would ultimately be confined to a period in time, while we knew in our hearts that our connection to pets is a constant.
Months into the pandemic, something extraordinary happened: With more people stuck at home, pet ownership soared and the overall market for pet care expanded. It’s pretty wild to think about. I don’t know many other businesses who’ve seen their potential market (in VC speak we call it TAM, which stands for total addressable market) expand so dramatically in response to a world event; nobody could have predicted it. Thanks to the pandemic puppy boom, Rover’s business began to recover. The clouds parted. The future looked bright.
The quality care offered by Rover has never felt more important. Though people everywhere are ready to return to normal, the bonds we’ve built with our pets are undeniable. As we start traveling again and return to work in the office, Rover’s trusted walkers and sitters will make sure our pets are well cared for.
It all goes back to what Aaron told me at that first meeting: Pets bring people joy. It’s that core understanding that drives the team forward at Rover. It’s why their business is beloved by so many people around the world.
Today is a momentous day for Rover because it comes on the heels of one of the most incredible turnarounds I’ve seen in business. Near-death experiences aren’t uncommon in the startup world, but what set Rover apart was their tenacity. During those dark days, they showed their relentlessness, rigor, and resilience. But most importantly, they showed their heart.
From all of us at Menlo to Aaron, Brent, and Tracy, and all those who had a hand in building Rover: Congratulations. We are very fortunate to have been part of your journey. We will continue to cheer you on, alongside a great team of co-investors from Foundry Group, Madrona, Petco, Spark Capital, and TCV. We can’t wait to see where you go from here.