When it comes to on-demand pet-care services, Rover.com wants to be your best--and only--option.

The Seattle-based pet-sitter site Rover.com has agreed to acquire DogVacay in an all-stock deal, the companies announced on Thursday. As part of the agreement, DogVacay will eliminate 22 positions--primarily engineers and marketers. Those workers will receive severance packages and generous stock treatment, the founders confirm. For now, DogVacay will continue to run independently; it's unclear whether both companies with eventually operate solely under the Rover name.

"We always knew that this might be a possibility," says Aaron Easterly, co-founder and CEO of Rover. "This is very different from an Uber, where there's a large amount of dissatisfaction with existing commercial solutions. We're fundamentally changing consumer behavior, and in that type of business, it's more about category development," he adds.

The move marks an end to competition between the two firms, which together did more than $150 million in bookings last year. Both companies charge a 20 percent fee to connect pet owners to vetted sitters online, and offer related services like dog walking.

Aaron Hirschhorn, founder of DogVacay, recently suggested a synergy between the two companies in a February interview with Inc., citing the "real" competition as traditional pet boarding services--local kennels, neighbors and relatives. "We've been talking on and off for more than five years, so this [the merger] is something that has always been on the table," Hirschhorn added on Thursday.

Hirschhorn will be stepping down from his day-to-day role. He plans to take a board seat on the Seattle-based business, which will be headed up by Easterly. Meanwhile, DogVacay's investors--which include Andreessen Horowitz and First Round Capital--will become shareholders in Rover.

So why did it take so long?

The integration reflects the promise of the pet-care industry, which accounted for more than $66 billion in spending in 2016, according to the trade group the American Pet Products Association. New entrants such as Rover are upending the space through the use of technology, reducing costs by tapping into the so-called sharing economy. Between 2012 and 2016, as much as $486 million was invested in the pet tech space across 172 deals. Meanwhile, the pet wearables market (i.e., connected treat dispensers and fitness trackers) is expected to reach $2.6 billion in spending by 2019, according to IDTEchEx, a market research firm.

"There's a macro trend that Americans are having children later in life, and related to that is that there are more dogs than there are children in the U.S.," notes Ben Ling, a partner with Khosla Ventures who invested in DogVacay, and is now a Rover shareholder. "Unless this macro trend reverses, it is a fact that this [pet care tech] is not a fad."

Still, Ling suggests that the companies would have benefited from merging sooner rather than later. "Since very early on, some investors encouraged them to merge because they were fighting for the same hosts and the same customers and the same capital. It's really more of a natural monopoly," he adds. "They could have merged much earlier on and raised capital together."

Published on: Mar 30, 2017