Pet adoption rates have surged amid the pandemic, and pet spending accelerated last year. Those are a few of the tailwinds driving optimism at Rover as the Seattle startup prepares to go public via a SPAC deal by the end of next month.
Unlike many tech companies, Rover saw its business plummet at the outset of the pandemic as demand for pet care decreased with the lack of travel and people working from home. It cut 41% of its workforce in March 2020, with executives also taking pay cuts.
But now the outlook is much sunnier for Rover, which has more than 500,000 caretakers on its platform. The company’s bookings and gross booking volume for March nearly bounced back to 2019 levels, according to data shared by Rover last month.
“There are very positive trends in the business,” said Rover CEO Aaron Easterly.
Those trends include:
- Adding new users: The company is acquiring new customers at a higher rate compared to the equivalent 2019 period. “Part of that is a return to some level of normalcy, but the other part is the huge influx of new pet owners,” Easterly said. Rover cites data showing that U.S. pet adoption increased by 11 million or 35% in 2020.
- Digital acceleration: The shift from offline-to-online across various industries has surged amid the pandemic, and that’s good news for Rover. Other tech companies in the pet industry such as Chewy have seen strong growth.
- Record daycare use: Rover’s daytime services are setting new marks, which surprised Easterly as he didn’t expect workers to return to the office — and thus require dog walkers, etc. — until most of the population was vaccinated. One theory he proposed: owners and pets got used to being around each other all the time. “People’s relationship with leaving pets alone for six, eight hours has just changed, in terms of whether or not they feel comfortable with that or whether or not the dogs are even used to dealing with that,” Easterly said.
- Travel uptick: As people feel ready to travel again, that will drive demand for Rover’s overnight services, which make up 68-to-75% of its business. Easterly also said that as people work from home more, they will end up traveling more.
Rover, long rumored as an IPO candidate, in February announced a deal with Nebula Caravel Acquisition Corp, a publicly-traded SPAC sponsored by True Wind Capital. The deal valued Rover at $1.35 billion.
SPAC mergers last year became popular alternatives to the traditional process for initial public offerings, offering a faster path to going public. Also known as “blank check” companies, SPACs typically do not have an established business and are used to raise funds via public offering for a future merger or acquisition by a specific deadline.
But the craze around SPACs has cooled in recent months. Part of the reason is a delay in completing SPAC deals due to a revised approval process from the SEC, The Information reported this week. Some companies are also seeing less cash than expected because SPAC shareholders can take back their money before voting on a deal; this can also result in slashed valuations. And the aftermarket performance of SPACs has fallen more than 20% in the past three months, according to IPOX SPAC Index.
Easterly said Rover knew that market or investor sentiment could shift when the company agreed to the SPAC deal. He still expects the merger to be completed.
“We want to capture more dollars on the balance sheet to invest in growing our business and take advantage of this unique opportunity in the pet industry,” Easterly said. “But at the same time our capital requirements are far less than the size of the deal. So we feel confident, regardless of the outcome.”
When the deal was announced, Rover said it would add approximately $325 million to its cash balance as part of a merger.
The company reported $48 million in revenue last year, down 49%, but projects $97 million for 2021 revenue and $201 million in 2022. Rover expects to be profitable by 2022, with $35 million in adjusted EBITDA.
Rover has raised $281 million in equity funding, including a $155 million funding round in 2018 that valued the company at a reported $970 million.
Rover moved into a new 75,000 square-foot headquarters in Seattle just before the pandemic hit. Easterly said the company plans to keep the space, but employees will have more options to work from home.
“We do expect to get back to the office,” he added. “We miss each other, and we miss each other’s dogs.”