Demand for pet care has cooled from the pandemic-induced puppy frenzy. At least one firm, though, sees a value-hunting opportunity in the downturn.
Vetted Capital aims to raise between $150 million and $300 million for its first fund, according to marketing materials obtained by PitchBook. The firm expects at least $50 million from LPs for the flagship’s first close later this year. That includes an undisclosed strategic investor that has pledged a contribution of $15 million.
General partners Charles Tapp and Aaron Wallace confirmed the pending fund launch in an interview. The co-founders of Vetted, based in Denver, declined to comment on the marketing materials, citing US private placement regulations.
“There is a long, secular tailwind behind this category, and there is a momentary opportunity to have a strong vintage year for early partners,” Tapp said of the timing, which comes as VCs retreat from the sector. “This is an underbanked area, and there is simply not a lot of serious money coming into it.”
Tapping into pet-care VC dealflow
In underscoring Vetted’s access to deals, Tapp touted his time as an executive at Mars, where he helped remake the private food company’s investment and incubation business by adding private pet-care names to the company’s portfolio.
Mars is among the most active corporate investors in pet startups, according to PitchBook data, and has backed cat food makers Smalls and Made By Nacho.
Wallace co-founded Lacuna Diagnostics, a vet diagnosis platform, which was acquired by longtime sector specialist Heska in 2021. He most recently served in a senior role for Vetsource, a vet clinic communications provider.
Vetted has four undisclosed investments lined up, set to be made in tandem with the fund’s first close.
The team is betting that their long-term returns will be bolstered by buying at value levels now, as well as a resurgence in consumer pet-care spending.
The firm’s flagship fund has three main investment buckets: 40% early stage, 40% growth and 20% opportunistic, which could include convertible debt-to-equity notes. It expects to earmark about half of its portfolio to North America, with the remainder including chunks dedicated to Asia and Europe.
Stuck-at-home families adopted puppies and other pets in droves during the pandemic. In 2021, VCs invested a record amount into pet-oriented startups. But last year, just $1.75 billion was funneled into pet startups, a 44.1% drop from the 2021 peak.
Pet health startups such as Loyal, which develops anti-aging medications and treatments for dogs, have raised sizable sums: Loyal hit a $291 million valuation on the heels of $76 million Series B in March, according to PitchBook data.
And vet platform FirstVet of Stockholm recorded a $134 million post-money valuation in a $27 million Series C in May, PitchBook data shows.
Vetted’s marketing materials emphasize an opportunity set born out of a fragmented market skewed disproportionately toward backing early-stage founders. There is, in other words, a clear need for follow-on growth capital.
Just 15% of overall pet-care funding in private markets is attributable to capital infusions beyond Series A rounds, according to the materials.
Mature startups that have raised large sums include dog food-maker The Farmer’s Dog, veterinary chain Bond Vet and pet insurance provider ManyPets.
“Founders want larger exits [and] strategics want larger assets with less risk,” the materials said.
Correction: An earlier version of this article incorrectly described Wallace’s background. This update also clarifies Vetted’s fundraising progress and planned investments. (Oct. 24, 2024)
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