Read on Twitter
I was fascinated by this deck. Given how much time I spend in the space (ALL of the time, lol), I have a ton of thoughts. First off, deck is here for those who didn't see it: https://www.sec.gov/Archives/edgar/data/1826018/000119312521037557/d63727dex992.htm https://twitter.com/Biohazard3737/status/1359958897637945348
First off, just want to say, don't know Adam Clammer but have heard good things, and really respect the Rover folks a lot. I am pretty bullish on this deal (despite mostly bearish points below). A few major qns this deck raised for me:
First off, given the fact that 68% of their bookings are overnights, the fact that bookings/revenue only fell 50% in 2020 is a huge accomplishment. We have the opposite mix vs. them, but boarding is down ~90-95% (vs. daycare which is comping positive now YoY).
Mid-2020 was tough for both day and night though, and so -50% net decline implies some serious momentum in business coming into the year.
Their math on 10x RMS (relative to Wag I assume) is much larger than I thought and feels like a potentially insurmountable advantage (esp given public status/access to capital). Huge positive here.
That said, they don't address their (real) large competitors or the achilles heel to their business model. And the TAM math here is perplexing to me...
First, NVA has 1K pet resorts. Daycare/boarding at a physical location is directly competitive with Rover. No matter how you do the math on rev/unit, the idea that Rover is 10x larger than that is not correct. https://www.nva.com/pet-resorts
Destination Pet raised a $450M war chest before COVID. $450M (incl vet care, but most of their facilities are daycare/boarding) - https://www.prnewswire.com/news-releases/destination-pet-backed-by-letterone-completes-acquisition-of-vitalpet-301031798.html
Not a huge deal, but it is local market RMS that matters (obviously), and some seriously scale players out there, so not sure it is quite as good as they say. I think in most markets they are one of many options and might not always be top of mind.
Bigger issue is that unlike Uber/Doordash/etc, in this case, it actually REALLY matters who specifically cares for you pet and whether they know the animal already. This is a pretty different dynamic and makes a contractor marketplace much harder
Like in all gig work, my understanding in Boston is that many Rover walkers make <min wage once you account for transport time. The way to solve this is to optimize people's routes and take advantages of economies of scale
Unfortunately, you can't Uber Pool dogs you don't know extremely well. Professional providers (daycares/kennels/dog walkers, etc) DO know the dogs. They evaluate them, and can safely care for more than one dog at once
Solving for the scale advantage issue is tough... It means prices stay high for consumers, but pay stays too low for workers. We need a solution that pays the best workers well for what they do (because obviously better workers = better petcare. Talking my own book now 100% lol)
To take this to the extreme, let's take a peek at the TAM math...
Before I say anything, let's just add the Petco TAM graph for reference https://ir.petco.com/node/6941/html#rom62974_14
First, I think some small things that are weird (exclusion of dog daycare, fact grooming is bigger than walking, etc)...
That said, I have long been a believer that services are much bigger than the traditional market studies (i.e. petco) state, and so I was happy to see some bigger numbers floating around.
The boarding math is another level though. I'm sorry, but there is not a $70B addressable boarding opportunity in the US. The reality is that the vast majority of people have family watch their pets when they travel.
They cut (imho) the dog walking market very short by asserting only ~4% of HH are potential customers, but boarding they go the other way, trying to say 100% of dogs and cats are addressable market for boarding (not even close)
If you think there are 964M addressable dog nights in the US, you should be buying boarding facilities hand over fist, because you simply could not serve that kind of demand on a 1x1 basis.
Not to dwell on the TAM too long, I think there are some real challenges for them re: pay equity and quality of care that stem from being unable to aggregate demand in the same way that true pet professionals can.
Because you (typically) need the SAME person/company to care for your pet each day (or week/trip/etc), it is a pretty different market than other types of gig marketplaces.
That said, there is 100% a pretty large spot in the market for a good marketplace and if they have successfully won that space, that is a very powerful spot for them to be in / would guess they see some tremendous growth coming out of COVID (much better than their estimates)
Very open to thoughts/qns if anyone has read this far (DMs open). I have a pretty solid sense of volumes/data/etc, esp in US cities, so while I was surprised by some of what they shared, mostly not shocked by the numbers here.
Okay, actually two more thoughts. a) I've seen a lot of estimates, but this is amongst the most bullish full-yr figures I've seen. If true, insanely bullish for basically every pet business...
b) I think they benefit from the digital/search advantage today, but industry is changing very fast.
Over time they need a business model that can compete with ppl who can care for dogs more efficiently to win. The scale facilities will see their tech stack improve drastically over next ~5 yrs. Business model will determine who "wins" (although let's be real, prob both will win)
