Ryan Cohen may no longer be Chewy's CEO, but he will always be the guy who made it into a multibillion-dollar brand.
The 33-year-old entrepreneur co-founded the online pet supply store with Michael Day in 2011 and then sold it to PetSmart six years later for $3.5 billion, a deal billed as the largest e-commerce acquisition to date. Cohen stayed on as CEO until March last year--when he says it became clear to him that his work there was "complete." He had grown Chewy from $0 to more than $2.1 billion in sales and turned the company into a well-known brand among pet lovers. In 2018, the year he left, Chewy booked $3.5 billion in revenue, according to regulatory filings.
On Friday, Cohen watched the company hit a new milestone: PetSmart--Chewy's new owner--took the company public at an $8.7 billion valuation. Shares soared 63 percent on opening price, increasing Chewy's market cap to more than $14 billion. Like many other unicorn IPOs this year, Chewy is still unprofitable. It also has a dual-class stock structure that ensures PetSmart will retain about 99 percent of the voting rights after its IPO.
Chewy's rite of passage has lured Cohen back to the spotlight after spending most of last year keeping a low profile and, he says, focusing on himself and his family. And, though he has no stake left in the company--and he did not ring the bell on the New York Stock Exchange--he was happy to see his "baby" make its public market debut. In an interview with Inc., he talked about what contributed to Chewy's success.
Strapped for Cash
"I couldn't fund the business for the first few years," Cohen says, noting that more than 100 investors passed on the opportunity. "And they were right. We were going head-to-head against Amazon, there was Pets.com--we know how that worked out--and selling 30-pound bags of pet food and shipping it across the country isn't the highest-margin business," he adds.
It also didn't help that Cohen was building out the company in Dania Beach, Florida--which is not the first place that comes to mind as a hub for tech startups. The initial lack of VC didn't stop him from growing the company, but it forced him to be disciplined. "It wasn't growth at any cost," he says. "Free cash flow was the governor of growth."
Cohen says he focused on putting cash back into the business to fuel its growth and keeping expenses in check. The goal was not to be forced to sell or go public just to keep the lights on. "It could've been profitable a long time ago, many years before, and ultimately it would've been a much smaller business," he adds.
The co-founder claims that what made Chewy excel had little to do with the product or category--it was the execution. "It was really just the team and the focus--the obsession--over delighting customers. It could've been any product."
Eventually, investors did bite. Chewy went on to raise venture capital--and quite a lot of it. In late 2013, Chewy raised a $15 million series A, according to Crunchbase. By the time of its acquisition, the company had raised roughly $451 million.
Building a Customer-Obsessed Business
Cohen credits his founding team as his most important hires--the ones that helped transform the idea into a full-fledged company. He says they made the "ultimate sacrifice" during the early, intense days of Chewy, and it helped that no one had big egos.
Early on, Cohen realized that the only way to compete against giants like Amazon was to make Chewy's customers the stars. So, the company adopted various customer service practices to show customers how much it valued their business. For instance, Chewy sends customers handwritten holiday cards, sketches of their pets, and flowers when their animals pass away. A 24-hour customer service line promises to answer any call within six seconds. And, yes, the customer is always right.
"I love making customers happy," Cohen says. "When people shop at Chewy, they really understand we care about them, we care about their pets, and they want to tell all their friends and family."
It's a simple model that can be replicated in every industry, he says: "I don't know too many businesses that ended up not being successful when they did a really good job at delighting their customers."