Being Acquired By Petsmart

Issue #18

August 8th, 2023

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1. Tell us a bit about yourself and about AllPaws? how did you come up with the idea and where is AllPaws today?

I'm a serial entrepreneur from NY with two successful exits. I combined my passion for pets with my online dating expertise (having previously co-founded one of the first dating apps, which we grew to 100 million users and $100 million in revenue) to create AllPaws, an online-dating style pet adoption platform that makes it easier for people to find their next pet. PetSmart acquired us in 2016. I stayed on for a short time to help transition the business to them. Sometime after I left, PetSmart chose to discontinue the product as AllPaws.

2. You built AllPaws in 2013 and have been building other businesses more recently. Are you noticing any differences between building a business today vs. 2013?

Indeed, the landscape has evolved. Today, everything is mobile-first, and it's easier than ever to validate an idea before building it. Additionally, building a brand and cultivating a passionate community around your product has become more important and relevant compared to a decade ago.

3. What was AllPaws' business model since it was adoptions working with animal rescue groups and shelters?

Our revenue was primarily derived from partnerships and deep sponsorships with other large pet brands. Royal Canin and PetSmart were our 2 biggest partners. Advertising revenue alone wasn't enough to support the business so I had to get creative and leverage the depth of the platform to create high-performing custom placements (ie - new pet parent welcome kits) and multiple touchpoints within the product beyond the norm. The ability to leverage these placements and connect with new pet parents at the point of market entry was highly valuable to our partners.

4. What was the user acquisition model you used & how were you able to reach your first 500 organizations?

While the website was being built, I focused on growing our Facebook page. With the audience there and the email list we collected from our "coming soon" page, we had tens of thousands to market to when we launched. From there, we shifted towards optimizing our CPC campaigns on Google & Bing (we were paying as little as 5 cents per click and 75 cents per registered user), and deeply integrating sharing tools into the product.

All of our initial Orgs came via a partnership with RescueGroups.org which provided management tools for shelters and rescues including the ability to upload their pets to adoption websites such as ours. That allowed us to launch with the critical mass of pets needed to offer a robust search experience for our first users.

5. Petsmart acquired AllPaws - Why did you decide to sell the business to the largest pet retail chain in the US and how did you find the sale/exit process?

I reached an inflection point with the business. I didn't see an opportunity to 10x the business focusing solely on adoption without a significant capital raise. We were collecting targeted leads for numerous different pet product types (food, supplements, insurance, etc) but we were a small team and lacked the resources to maximize all of these. We felt the business could be better served in the hands of a larger organization better equipped to monetize all of these leads along with the wealth of user and pet data we were collecting. Ultimately, I had to pick a path between pursuing a sale, raising capital, or pivoting away from adoption. I hired a bank to explore our options and it turned out there was significant interest in an acquisition. We received multiple bids at a price well above what I felt was the minimum I would consider for a sale. PetSmart came in along with one other company at the top of the range and we also had experience working with them through their acquisition of Pet360, who managed our sponsorships - so it was a natural fit at the time.

The process itself is exhilarating and exhausting! I was very hands-on and enjoyed the intellectual aspects of it, but it's certainly nerve-wracking because once you commit to a sale, it's incredibly challenging to run the business day to day.

Nowadays, Darrell also advises businesses and startups on how to grow and optimize their growth strategy. You can find him on Twitter or check out his website if you want to reach out to him.

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PAWS right there!!! Don’t forget to subscribe 👇👇

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1. What was the key business challenge you faced when building the business vs. when scaling the business?

The major challenge while building the business was the 'chicken or egg' problem. However, given my background and experience, I didn't encounter many challenges once I was able to validate that demand would be there on the user side and I could obtain a critical mass of pets to launch with. The biggest challenges around scaling were managing the normal technological fires and bugs that come with a fast-growing product and trying to develop a monetization strategy for a product that lacked an obvious one. I'm very data-driven and use data to inform strategies, optimize, and drive growth.

2. Should you start a business with an exit strategy in mind? In your opinion, how do you know when it's time to "sell/exit"?

There are only a few potential outcomes for a business, with an exit being among the best. However, I believe that building a business with your eyes solely on an exit is a poor strategy. There's an old saying that businesses are bought, not sold, and I think that generally holds true. If you focus on building a high-quality business (as defined by any of rapid user growth, a best-in-class product, strong financials, great tech, a great brand with passionate supporters, etc), buyers will naturally emerge.

As to when it's time to exit, there's no "one size fits all" answer. Each business is different, the people running a business are human beings with their own objectives. It always comes down to timing and circumstances.

If there are offers on the table, then it's important to candidly assess what the future trajectory of the business looks like and make a risk/reward assessment.

3. Creating a marketplace is notoriously difficult. Any advice around pitfalls to avoid when creating a 2 sided marketplace?

2-sided marketplaces are indeed extremely challenging to build. One of the biggest pitfalls is trying to scale both sides simultaneously without having a strong foothold on either side. In the case of AllPaws, we ensured we had a robust inventory of pets available for adoption before pursuing user acquisition. This was achieved through a strategic partnership with RescueGroups.org, which was already serving rescue groups and shelters. So, don't start without validation on both sides and a clear plan to address each side and achieve critical mass on each side.

Another pitfall to avoid is neglecting the balance between your two sides. You have to ensure that both sides are receiving value. For us, this meant not only did we have to provide a variety of pets for potential adopters, but we also had to ensure the Orgs felt their pets were being adequately promoted and were reaching the right audiences.

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Finally, Why can’t a tortoise stand up?

Because they have a reptile dysfunction

See you next week!

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