Pet Partnerships Are Key

Issue #33

November 21st, 2023

Quick Hits:

🥾 Loyal dog found alive beside hiker owner’s body two months after he went missing

🐱 Cats are big business too

🐶 Rover just released the most popular dog & cat names for 2023, any guesses?

🦷 Moldovan president’s dog bites Austrian president

📱Google is giving away its Pixel 8 to help dogs get adopted

• Chewy layoffs - Chewy has laid off 200 employees across multiple locations.

• Saudi Arabia - Pet Products Trading Company has secured growth capital from Aliph Capital.

• 250 Locations - Dogtopia has achieved a very impressive milestone.

• Big moves - Europe's market leader just acquired the second-largest pet retailer in the Netherlands.

• Bonus Baby - Stella & Chewy promises to give employees a $15,000 bonus, but only if…

• Friends with benefits - The hottest new type of benefit in the tech space is pet insurance.

• Fly Grub - Grubbly Farms has announced that it just closed its Series A funding round.

• Registration open - The American Pet Products Association has opened registration for Global Pet Expo 2024.

• KatKin - After raising $22M last year, the cat startup is keen on scaling their fresh food subscription service.

Dan Nagler is the founder of Pack Partners, a partnership consultancy for pet brands, and brings 20+ years of cross-functional business development, partnership marketing, and strategy expertise. This week we brought Dan on as a guest author for our Main Story because of his wealth of knowledge and experience in this field - read on!

LET’S SHAKE (PAWS) ON IT

Whether it’s a handshake deal or a result of an expertly crafted contract, when two companies come together to craft a partnership, sometimes magic happens. However, for many, partnerships are an untapped and perhaps even a relatively misunderstood channel. And for those that do it right, they can be a path to growing awareness, capturing new customers,  advancing innovation and so much more. 

Sadly across the pet industry, we’re not seeing the same level of activity as you see in other industries. The quick take is that compared to other industries (e-commerce, we’re looking at you) it’s a vastly under-utilized marketing tactic. This seems puzzling given that so many companies are all vying (and spending valuable marketing dollars) to try and reach the precious, millennial, dog mom or dad.

So perhaps we can help demystify things - having built partnerships for everything from startups, to growth stage companies, to mature publicly traded companies led us to identify these key elements that should exist to better construct and leverage partnerships amongst pet brands: 

Commitment - it likely starts at the top. Companies that do partnerships well, often have leadership experienced in marketing, sales, or business development and this permeates through into the company DNA.  

Patience - definitely a mindset you need to embrace. Know that getting two complex puzzle pieces to fit together takes time. This is a longer lead channel. For good partnerships, plan for 3-6 months lead time. 

Alignment - partnerships are a two-way street. When looking at other companies, you want to find those who are as excited, curious, and open-minded as you are and where KPIs are aligned. Everyone should move closer to achieving their business objectives by working together. 

Value - you better bring it. Cookie-cutter discounts are too often the norm, seem like they are available everywhere, and certainly don’t make consumers feel special. Think creatively - whether that’s early access, a unique collaboration, an ongoing member benefit/perk, or more. 

Execution - details over speed. Even simple partnerships can be highly collaborative and highly cross-functional. From planning to legal, creative, social, and analytics/tracking, make sure efforts (and expectations) are clearly outlined and reviewed internally and externally before launching.

We spoke to 4 well-known brands across the pet space to get their differing perspectives and insights. Here’s what they had to share with others thinking about partnerships:

Why or when did partnerships become important to you?

What’s the most innovative, impactful, or interesting partnership you’ve executed and how did it influence your business?

What if anything did you have to do to get your company ready for working with partners? 

What have you found to be the biggest challenge with partnerships?

• More pet food recalls! Check out the entire list to see if your pet’s food is listed.

• Dogs > Kids - A traditional coming-of-age festival for children in Japan has shifted to dogs.

• Historic moment - South Korea announces plan to ban the dog meat industry by 2027 (finally).

• Mystery illness - Dogs in several states have contracted a mystery pneumonia-like illness.

• African Grey - A parrot that speaks 3 languages has gone missing.

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

So you got a term sheet from potential investors, but you think the valuation does not reflect the real “value” of your business. You are not the first, and most likely not the last, either.

How to value a business - your business is a key item of discussion between entrepreneurs and investors.

What does valuation mean? In rough terms, the valuation of your business is the present value of your future cash-flows. Lots of assumptions to unpack here -from the discount rate to forecasted cash flows and value in perpetuity. In the interest of not getting lost in the details, we won’t go into the calculations. Instead, let’s talk about methodologies you can use to triangulate on a value:

1. Comparable companies - You could look on stock exchanges to see how comparable companies to yours trade. What do we mean by trade? We use that term to calculate the valuation as a multiple of some metric, normally financial but it can be operational as well. So, for example, a lot of companies that are still loss-making will say that their valuation is a multiple of their sales, i.e. “5 times sales”. The key here is to find the company that is most comparable to yours and build a robust case as to why you think you should trade at a similar valuation or even at some premium.

2. Comparable transactions – Similar to comparable companies, you can also find intelligence (press reports, chats/gossip in the community, etc) about other companies that went through a fund-raise achieved in terms of valuation. Again, that should be anchored to some metric so you can talk about the valuation in terms of a multiple. Just because a company you think is like yours got a $10m series A valuation, doesn’t mean your business deserves a similar valuation. Build robust arguments here to justify the value you are asking backed by a comparable transaction data point.

3. Discounted cash flows - If you have the time, energy, and financial knowledge you could produce a model to calculate an implied valuation. Our advice would be to shy away from this methodology at the earlier stages given how sensitive the model is to assumptions. It may be an interesting thought experiment, but we think you would get more value, operationally and financially, from spending any time you have on building your business instead of building complex models!!

In reality, a valuation may be a mix of a few approaches, or, perhaps as simple as the amount you need to raise divided by the percent equity you are okay to give up. Remember, this is only the first step in your journey with your potential new investors. Use this as an opportunity to see how your investors negotiate with you, how they look at the long term, how supportive they are, and any other intangibles that may be important to you. Getting the right partners onboard is priceless.

• More recalls! - Check out the entire list and see if your pet food is on it. We know we mentioned this above but we are posting this twice to make sure our readers see this. 

• Ethical food - Meatly to sell first ever cultivated pet food on the market.

• Ziwi - Has been accredited by the Pet Sustainability Coalition (PSC) for its environmental efforts.

• What’s better than poultry? - Hydrolyzed chicken liver?

You reached the end, you deserve a treat 🍖

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Finally, I have a few jokes about unemployment dogs

But none of them work.

See you next week!

The Woof is a weekly newsletter dedicated to covering the pet industry.