No one is ready to dust off those Pets.com sock puppets and put that erstwhile mascot back to work. But the online pets industry apparently is enjoying another life, along with renewed interest from VCs.
“Investors still have this perception that because Pets.com ran a Super Bowl ad and was not successful that the pet business isn’t viable,” Greg Gottesman, a managing director at Madrona Venture Group, tells Venture Capital Journal, an affiliate publication of peHUB.com.
“But this is a massive market,” Gottesman says, “and to think there isn’t a huge online opportunity around this category doesn’t make any sense.”
What would make many a VC scurry with their tails between their legs is Pets.com, the poster child of the dot-com bubble. Known for its sock puppet advertising, the company raised some $50 million from Hummer Winblad Venture Partners, Bowman Capital and Amazon.com Inc., went public and then flamed out nine months later in late 2000 and is often called one of the worst VC investments of all time.
But new breed of venture-backed pet-related tech startups—including Petflow.com, Dog Vacay, Rover.com and Doggyloot.com—is trying to prove that the online pet business can pay dividends.
As VCJ reports in the upcoming July 2012 issue, perhaps the most compelling argument is the size of the market. Last year, Americans spent more than $50 billion on products and services for their beloved animals, according to the American Pet Products Association. But online transactions only accounted for a fraction of those sales. PetSmart, for instance, is one of the largest retailers of pet supplies worldwide. But, according to data from its annual report, less than 1% of its total revenue comes from online sales.
It’s not just that the traditional big box players in the pet industry don’t get ecommerce. It’s that they don’t understand the changing relationship between people and their pets, argues Millie Tadewaldt, managing director at Sandbox Industries, which incubated and funded a daily deal/private sale site for dog owners called DoggyLoot.com.
“Consumers are starting to think about their pets as a regular member of the family,” she says. They don’t want to give their pets crappy chew toys. They don’t want to feed them mystery meat. And they don’t want to stick them in a grungy kennel when they go on vacation.
“That’s why we’re seeing things like eco-friendly materials and grass-fed beef and travel accommodations for pets,” she says. “The entrenched players in the pet space don’t get this trend very well, and they don’t cater to it.”
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Photo of the Pets.com Sock Puppet courtesy of Wikimedia Commons.