A $150 Million VC Pet Fund

Issue #123

November 26th, 2024

Quick Hits:

🐩 The popular '“every 1 human year equals 7 dog years” theory might be completely false

🏆 She joined the company in 2013 as the second employee, 11 years later, she’s been promoted to the CEO position

🆒 Luxury pet fashion is about to go to a whole new level

🦃 Can your dog eat turkey?

🗽New York is banning the sales of dogs, cats, and rabbits in pet stores

🥇 This is the UK’s top dog-walking business

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Today we speak with Charles W. Tapp the founder and managing partner at Vetted Capital.

Could you begin by telling us a bit about yourself and the vision behind Vetted Capital?

My name is Charlie Tapp, Co-Founder and Managing Partner at Vetted Capital. We focus on early-to-growth rounds at the intersection of Consumer, Healthcare, and Tech for Pets. My background includes leadership roles at Koch and Mars, where I helped Mars move into Pet Healthcare, contributing to its evolution from $33B to $45B in sales and nearly doubling enterprise value during my tenure.

I co-founded Vetted Capital with Aaron Wallace DVM, whose successes include founding Lacuna Diagnostics, leading it to a 10x investor return, and helping grow Heska Diagnostics and Vetsource ahead of >$1B exits to Mars. Aside from being a great entrepreneur, Aaron is a trained veterinarian and toxicologist who still does rounds in clinics on the weekends and knows where the real unmet needs are. 

Mars-backed Digitalis Ventures remains the only other pure-play Petcare fund, and we wanted to create a similar opportunity for non-Mars investors. We chose to focus on Pets, where growth stage Consumer provides both alpha and beta. Healthcare and Tech offer alpha in an area where we have an edge, as well as an option to extend into human healthcare verticals given the shared biology of aging.

Could you walk us through the key steps in the fundraising process for your current $150 million fund?

Fundraising in any market is relationship-driven - and is especially so now. Without established LP connections, raising at this scale is challenging. Our Pet specialist focus has helped. We broadened our strategy and raised our AUM target through listening to LPs, incorporating their preference for a shorter fund life and larger / lower risk commitments, which has helped us navigate a tough environment.

What stages of companies will the fund focus on, and what range of check sizes are you anticipating for investments?

We are technically stage-agnostic, but are most focused on Series A-C rounds, usually leading and co-leading. While many generalists invest at the seed or buyout stages, we see a unique opportunity to bridge the gap for promising companies at these critical growth stages.

Why have you chosen to focus on the pet care sector over other high-growth areas?

Demographic trends like declining birth rates, growing pet ownership, and pet humanization are longstanding drivers of the sector. The pandemic accelerated these trends, but inflation and higher capital costs have created opportunities to back the best founders at more attractive valuations. The lack of competition doesn’t hurt.

Our strategy has been to aggregate successful veterinarian founders. With a team including four DVMs and four PhDs, we aim to build category-defining companies. This is our unfair competitive advantage.

What are three key qualities you look for in a founder?

Great founders demonstrate resilience, often spending 5-10 years building their businesses before reaching Series A-C. Exceptional leadership, a clear track record, and the ability to set, fund, and execute a vision are critical. We value grit, intellectual curiosity, and ambition over formal credentials—success is determined by results, not degrees.

In a recent interview, you mentioned that the pet sector is “underbanked.” Could you expand on this?

That was a misquote. Many sophisticated investors, from a16z to Blackstone, are active in the sector. However, most focus on pre-seed/seed or later growth stages, leaving a gap at Series A-C.

Many Petcare founders lead with their heart, leading to a long tail of enthusiast-driven lifestyle businesses with <$1M in sales and high failure rates. At the Series C stage and beyond, exuberant valuations from generalists can dilute returns. We aim to bridge this gap, providing disciplined, sector-focused capital at the most critical growth stages — where we can de-risk through hands-on value creation.

Your experience at Mars reshaped investment strategies. What lessons did you take from that?

Three key takeaways:

1. Portfolio Management Matters. Pivoting Mars’ focus from mature confectionery to high-growth Petcare has added over $100B in enterprise value. At VC, we’ve similarly been intentional about our focus on stage, ownership, and target markets.

2. Demographics are Destiny. Long-term trends, like pets becoming family, are predictable and enduring. Technology changes rapidly, but human always need companionship.

3. Stage Discipline is Essential. Mars’ growth ambition required a later-stage focus to drive meaningful growth. Similarly, we avoid deals that are too early to achieve the returns we need. 

Venture capital investment has halved this year. What’s driving this, and what are your projections for the pet industry?

VC investment is procyclical, sensitive to interest rates and capital availability. Low rates previously encouraged long-term risk-taking, but today’s environment demands higher returns, slowing investment.

In Petcare, strong demographic tailwinds make the sector resilient. While VC activity will rebound slower than buyout and growth, we expect recovery around 2026-2027, supported by demographic fundamentals and receding antitrust concerns. Near term, reduced competition and falling valuations create an excellent opportunity for disciplined investors to deliver outsized returns in a market Bloomberg predicts will grow from $320B last year to $500B globally by 2030.

The future of pet ownership may well be defined by how we navigate these complex issues today.

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Finally, why didn’t the dog want to play football?

It was a Boxer.

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