The Inside Story of Petco’s Acquisition of Shark Tank-Featured PupBox
July 23, 2021 |
About this episode
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Like many young couples, Ben & Ariel Zvaifler got a puppy and found themselves trying to figure out how to train it. They wondered what toys were safe and what kind of food to give to their brand-new puppy.
The couple figured they weren’t alone and decided to launch PupBox, a subscription box for new puppy owners that offered owners training guides, treats, and toys for puppies appropriate for their age and stage of development. The company captured the imagination of the producers at Shark Tank, who invited them to appear. After a rigorous vetting, Shark Tank star Robert Herjavec offered to invest $250,000 for a 15% stake in PupBox, which was doing about half a million dollars in subscription revenue at the time.
The Zvaifler’s took the money and invested in marketing to grow the business which was thirsty for cash. As they burned through the Shark’s money, they decided to look for a strategic investor who could fund their growth. They approached Petco, who looked at their business and decided to make an acquisition offer instead.
In this episode, you’ll discover:
- The difference between growing through organic vs. paid search.
- How PupBox lowered churn.
- Why The Zvaifler’s turned down Herjavec’s request for a board seat.
- Why Ariel’s second child was the trigger she needed to start documenting her Standard Operating Procedures (grab The Definitive Guide to SOPs here).
- The surprising reason shorter subscription terms may yield lower churn rates.
- Why around half of Shark Tank offers made on the show never close.
- How to guarantee you get the budget to hit your earn-out.
- Why asking for a Vice President title at your acquirer’s company is important.
- A layman’s definition for “unit economics” and “convertible notes”.
- Why the Zvaifler’s were surprised their Petco stock became valuable.
Show Notes & Links
(03:36) Ben Zvaifler: “So, we start PupBox to kind of mitigate this disjointed puppy process. What it is, it’s a subscription box, and every month you get a box that contains five to seven products and a training guide, and everything is targeted to your puppy’s specific age and months and physical characteristics, and it really helps and walks the new puppy owner through all the steps of puppyhood.”
(04:55) Ben Zvaifler: “We looked at the BarkBox model obviously, they were the big player in the space, even when we started the company.”
(05:49) Ben Zvaifler: “Also knowing in the back of our mind that this is a very valuable customer, because it’s like the Disney model. If you can connect with them when they’re young, you can upsell them and cross-sell them into new products, new brands, and that becomes very powerful for a major brick-and-mortar retailer”
(10:49) Ariel Zvaifler: “we were in 500 Startups at the time, and we met somebody who said, “Hey, I know a producer, does anyone want to go on Shark Tank?” And we thought, “Well, yeah”.”
(22:09) Ben Zvaifler: “They got us some placements in Forbes, and Inc. and some major publications.”
(29:31) Ben Zvaifler: “we had some money and it drove our growth. When we kind of got to this impasse and we realized we needed to raise more money to continue to fund the growth, and that’s actually when we approached Petco.”
(32:55) Ben Zvaifler: “So, I think one, I, like you, am a huge fan of recurring revenue models. I think it’s kind of the only way to build a business, is to drive customer loyalty and get recurring revenue from the same customers.” (Read: 8 Key Drivers: Recurring Revenue)
(50:33) Ben Zvaifler: “we’re starting a new company called Cloud Water Filters, and essentially it’s a direct-to-consumer water filtration brand.”
(52:21) Ben Zvaifler: “It’s like we see the opportunity cost of not starting another business. I have a buddy, a business partner for Cloud. He always says, “I like to work for chunks, not checks.” You know? It’s if you can do this right and you can have an exit in some liquidity event, you’re always going to make more in the end.”
(54:30) Ben Zvaifler: “You can also email us obviously. You can do [email protected] or [email protected], and definitely have your listeners check out the site. It’s going to be launching early next year. We’re just in production now, manufacturing product. The site is live and I think it’s worth a look.”
About Our Guest
Ben and Ariel Zvaifler are entrepreneurs passionate about starting and scaling businesses. Ben and Ariel started PupBox together in 2014. PupBox was born out of personal experience. Ben and Ariel adopted their furbaby Maggie when she was just 8 weeks old, and like many first-time dog parents, they became totally obsessed. The problem was they had no idea what they were doing. They founded PupBox to try and facilitate the puppyhood process, for new puppy parents like themselves, by delivering all of the training information and products a new puppy owner needs, when they need it.
PupBox quickly found a product-market fit, Ben and Ariel graduated from the 500 Startups Accelerator program in 2015, and in 2016 PupBox was featured on ABC’s hit show Shark Tank. In 2017 PupBox was acquired by Petco Animal Supplies, one of the leading pet brands in the world. In 2020 PupBox was named by the International Advertising Bureau as one of the most disruptive direct-to-consumer brands in the US.
While at Petco Ben managed PupBox as well as Repeat Delivery, Petco’s pet food auto-ship business. Ariel leads the operational efforts at PupBox, overseeing supply-chain, merchandising, and distribution. Over the course of three years at Petco, Ben and Ariel participated in Petco’s digital transformation, and in early 2021 Petco went public on the Nasdaq.
Ben left Petco in early 2021 and is starting in on his next entrepreneurial journey, Cloud Water Filters. Cloud is a water filtration brand, building a network of lifelong customers around the single promise of toxin-free, nutrient-rich water. Cloud products are easy to use, technology-enabled, and deliver pure water peace of mind. Cloud will change the way consumers think about the water they drink.
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