Last fall, Aaron Hirschhorn was telling investors that his Santa Monica start-up DogVacay had quarterly sales that tripled compared with a year earlier, had profits well in sight and had grand ideas for new features.
But one big challenge lingered: DogVacay's main rival in pet-setting and dog-walking services, Rover.com, days earlier had received $40 million from venture capitalists. The haul brought Rover.com's total financing to more than $90 million, double that of DogVacay.
It appears to have been enough to unleash a marketing blitz from Rover. Though investors and users might have preferred aspects of DogVacay's business, it simply didn't have the cash to catch up in getting pet-owners' attention as fast as Rover.
On Wednesday, the companies announced that Rover had acquired DogVacay in a deal that converts its shareholders' equity into stakes in Rover. The price and further terms were not disclosed. Rover hasn't decided what will happen to the DogVacay brand.
The companies combined could end up with stronger profits than either one of them on their own, which could increase the appeal of the new Rover as it eyes an initial public offering. That means there's still a chance of huge returns for DogVacay backers, including Benchmark, its largest venture capital investor.
But the news could be dissatisfying for the Los Angeles tech community, which had held up DogVacay as a potential breakout.
Rover, based in Seattle, is expected to retain DogVacay's Santa Monica office. But a spokesperson said 22 of DogVacay's more than 100 employees will be laid off.
Both of the companies serve as an Internet shop where pet owners sign up independent contractors, such as college students and stay-at-home adults, to care for their pets for a few hours or several nights. The owners can keep track of how their pets are doing through an app.
Rover and DogVacay keep 20% of the fee charged by contractors. Pet owners also pay a service fee of up to 7% on the booking.
Aaron Hirschhorn and Karine Nissim got the idea for DogVacay after the married couple returned from a 10-day trip. They had a big $1,400 bill from a kennel, and their dog Rocky hid under Hirschhorn's desk for days, apparently horrified by the experience.
A small dog-boarding business evolved into a full-fledged operation in 2012 with the help of Santa Monica business incubator Science Inc. More services followed over the years, including pet insurance.
Last year, Hirschhorn, the chief executive, talked about the potential of getting into veterinary care, selling treats and developing pet-focused electronics. Such offerings could have brought DogVacay into competition with New York City dog-products start-up Bark & Co., which received $60 million from investors last year.
DogVacay's investors included Baroda Ventures, First Round and GSV Capital. Rover's existing investors include Menlo Ventures, Madrona Venture Group and Petco.
Hirschhorn will join Rover's board of directors, with counterpart Aaron Easterly continuing to run Rover as CEO. Rover now will have more than 100,000 pet caregivers across 10,000 North American cities.
"Together, we can accomplish our goals quicker and make an even bigger impact," Easterly said in a statement.
A spokeswoman said Hirschhorn was unavailable to comment.