It’s well known that there’s a pervasive gender gap in venture capital. Not only are women underrepresented in venture capital in terms of the number of women-founded companies, but they are also underrepresented when it comes to leadership positions in the industry. While there’s been some progress in recent years—female CEOs secured about 14% of all VC investment in the US in 2019, compared to … ... read more
Why VC and PE Investors are Doubling Down on the Pet Industry
Esteemed poet, Mary Ann Evans, known by her pen name George Eliot, once said, “Animals are such agreeable friends – they ask no questions, they pass no criticisms”.
We’ve always loved our pets. But, increasingly, people are treating their pets like people—and members of their family. An estimated 90% of pet owners believe their dogs and cats are members of their family. And perhaps they deserve to be—40% of married female dog owners say they receive more emotional support from their pet than from their husband or their kids.
Spending is Up
Part and parcel with the rise of investment interest in pets, spending on pet products has increased steadily over the years. According to The American Pet Products Association (APPA), Americans’ annual spending on pet products recently reached a record-breaking high at just shy of a staggering $100 billion ($95.7 billion).
The economic uncertainty may also be contributing to this increased interest. As the pandemic hit and more people spent time at home, investors have recognized a new opportunity with pets. As Kenneth Giuriceo, a Partner at Clayton, Dubilier & Rice has explained, “The market for pet care is large and growing with attractive long-term secular tailwinds and demonstrated recession-resilience,”
Attracting Investors' Interest
It’s not all that surprising that the increasing “humanization of pets” has attracted the interest of investors. As Peter Haabestad, Managing Partner, Guardian Capital Partners, recently said, “In recent years, everyone puts their pet in their holiday card…What that says to me is, pets are part of the family. They truly are.”
ACG’s Middle Market Growth reported that private equity firm Guardian Capital Partners has been watching the humanization of pets for several years. In 2016, they invested in HyperPet and expanded its toy and accessory business to include an eCommerce play. CosmicPets, their platform business, has made four major add-on acquisitions, plus several product acquisitions.
Perhaps one of the most pronounced manifestations of the humanization of pets is the domain of pet analytic startups, which include DNA testing and nutritional recommendation companies. A slew of companies are developing the next 23andMe for pets.
One startup that has attracted a lot of interest is Embark, which has developed a test that analyzes more than 200,000 genetic markers. The test can reveal a range of insights, including dogs’ disease risk, breed ancestry, inheritable traits, and more.
Another fast-growing company is Petabolix, a TechStars company that has developed an intelligent nutrition program that provides advanced nutritional assessments and personalized diet recommendations for pets.
A Flurry of Merger and Acquisitions activity
There’s also been a flurry of M&A activity surrounding pet companies of late. As noted by Fortune, In 2018, General Mills purchased Blue Buffalo Pet Products—a leader in dog and cat food—for $8 billion. Amid General Mills’ plummeting sales of processed food, the acquisition catapulted its status as a new major player in the pet industry.
Companies have also turned to acquisition and mergers to branch out into different realms of pet care. Mars—famously known for its chocolate products—purchased VCA, which operates more than 1,000 animal hospitals in North America, for just shy of $8 billion in 2017. Overnight, Mars became the number one U.S. employer of veterinarians.
And incumbents and startups have also forged new ties. PetSmart, the nation’s biggest pet retail chain, bought online pet supply store Chewy for more than $3.35 billion in 2017, cementing a key position in the pet e-commerce market.
Whetting corporate venture capital appetite
Pet products and services have also attracted the interest and attention of corporate venture capital. One such manifestation is Nestlé Purina’s Pet Care Innovation Prize, which recruited startups in the pet industry to partake in a competition to develop new innovative products and services. The prize is lucrative—$20,000 in funding, strategic support, and publicity.
Mars Petcare—along with Michelson Found Animals, a pet rescue foundation—has also established Leap Venture Studio. Leap Venture Studio is also supported by R/GA, a Los Angeles-based consulting company. It aims to find high-potential pet care startups with innovative ideas that leverage science and technology. For its part, Leap Venture Studio connects these startups with renowned strategists, technologists, and designers.
We’ve always recognized the value of pets. As American author Dean Koontz once said, “Once you have had a wonderful dog, a life without one is a life diminished.” But increasingly investors of all types are recognizing the value of pet investments—and that once you have a promising pet investment in your portfolio, a portfolio without one is a portfolio diminished.
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