Q&A: PetDesk CEO Taylor Cavanah on Building a ‘Slower-Growth’ Startup

Xconomy San Diego — 

Taylor Cavanah, whose background is in physics, once caused a fellow scientist to do a spit take after learning Cavanah runs a software startup focused on pet care.

Just as surprising is the tale of how Cavanah and co-founders Ken Tsui and Aaron Bannister built the San Diego, CA-based company, called PetDesk. It sells online tools for veterinarians looking to automate appointment requests and marketing messages, and offers a free mobile app allowing pet owners to schedule visits and complete other tasks.

This month, PetDesk raised $12 million from New York- and Silicon Valley-based PeakSpan Capital to expand its offerings beyond veterinarians, to pet groomers and boarders. PetDesk had previously brought in several rounds of outside financing, but for much smaller amounts; the largest was a $2.1 million investment, raised in 2017.

Cavanah said the company, which operates out of an office in Bankers Hill neighborhood near downtown San Diego, plans to increase its headcount from 56 employees to 80-plus this year.

Today’s tech industry venerates startups that tally big venture capital rounds and grow aggressively, but Cavanah said PetDesk is determined to expand at a more measured pace. In an interview with Xconomy, he shares why he nearly gave up on finding more outside funding, why he believes scalability is overrated in a startup’s early days, and how to spot business opportunities in heavily contested markets. The interview has been lightly edited and condensed for clarity.

Xconomy: PetDesk recently raised $12 million from PeakSpan Capital, which, unusually, put up the entire round. How did that come about?

Taylor Cavanah: I’ve think I’ve talked to more than 1,000 investors since we started the company in 2011. We spent a lot of time over the past 13 months talking to private equity, growth equity, venture capital investors, and basically came to the conclusion that we don’t fit in any of those buckets. We have a billion-dollar opportunity, but we’re not betting it all on the billion-dollar opportunity, so that kind of takes us out of the running for a lot of the Silicon Valley, New York-type firms that are looking for rocket ships. If we were a Silicon Valley startup, we’d raise $50 million, dump it into the consumer app side, try to get as many users as possible and figure out a monetization strategy after the fact. Every time we raise money, we get back to cash-flow positive or break-even. We’re building a somewhat slower growing SaaS (software-as-a-service) company, even though we have had incredible growth over the last three years, so we make decisions sometimes to take the less risky road, which is not as interesting for the VCs. The vet space is a $150 million market: No VC would ever fund that. They’d say, you need to be playing in this $5 billion consumer market as soon as possible. We’re going to get there, but we’re going to get there on a slower, more meandering path.

On the private equity and growth equity side, we’re a platform, so they all wanted us to acquire companies and sell those things to the veterinarians too. We still want to keep the door open for this billion-dollar consumer vision that we have, so we found ourselves right in between. I had actually decided last year, let’s just go our own route, I’m done talking with investors. Then, San Diego Venture Group had an event at a Padres baseball game, and I decided to go. I ran into Matt Melymuka from PeakSpan, talked to him for about 20 minutes, and thought: “Oh, I think I’ve found the one firm that is philosophically aligned with our ‘tweener’-type company.”

X: You and your cofounders launched a company in 2011, but it wasn’t until 2013 that PetDesk got started. What did you pursue first?

TC: Ken, our CTO, and I had turned 30 and we were at a nanotechnology company. I had read this William Gibson novel, “Spook Country,” and was like, augmented reality, we have to get into this: Let’s start a company. The idea morphed into a better Foursquare. …We launched at South by Southwest in 2011 with a 10×10 booth and no funding. … Foursquare had an entire block, $40 million in funding and their offices were next to Mashable. We failed extremely fast.

X: How did trying to build a better version of Foursquare, which encouraged people to “check in” at local businesses, turn into PetDesk?

TC: We knew that we wanted to build a big platform and change the world with software. The entire time, my girlfriend’s [now wife’s] uncle, who’s a veterinarian, kept saying, “hey, you knuckleheads need to go into the pet space, they really need your technology.” I had been Googling “how do you shut down a company;” we had like $3,000 in the business bank account. One day I looked down and saw Molly, my little shih tzu, and one of her eyebrows was missing and her paws were all chewed up, and I just realized that while she had been keeping me sane—I would talk to her, bounce product ideas off of her—I had been being a terrible pet parent. I called up Ken and said, “maybe we should look at this vet space thing.” … In 2013, we did, and it was super obvious: Half a day at a trade show and I called Ken and said, “start building.”

X: What’s PetDesk’s “billion-dollar” opportunity, and how do you plan to use the funding from PeakSpan to move the company toward it?

TC: We started in vet grooming and boarding, but realized that veterinary clinics were the better place to start. The last four or five years have been focused on winning the veterinary offices over with our SaaS products and getting the app into the hands of their clients. As a consumer you want your vet on the app, your boarding or daycare facility there, you want to buy your drugs there through your vet’s pharmacy, and on and on. This raise is to move into grooming, then boarding and daycare, then training.

Our grand vision is to … have all of the pet care providers and their users on the app, and all of this contextual data about pet health. Right now, we have about 20 million to 25 million pets on the platform. We’ll be able to see how often they go to the groomer, how often they get daycare, how often they go to the vet, what food they eat and what drugs they take, and we want to be able to build regionalized, personalized breed-specific wellness protocols for the consumer. …By doing that, we’re hoping to extend the lives of those pets. We’ll have all this data that says, for example, hey, these 5,000 shih tzus lived two years longer than the breed average because they did all these things. It will probably take us about three to five years to build the ecosystem, then another 10 years to generate that 10 million years of additional pet life, which is our big goal.

X: Online tools for veterinarians weren’t a new concept five years ago. How did you convince clinics to try your software?

TC: There were like 22 players in the space, for 25,000 total locations—a lot of lifestyle companies, a lot of technology. But most of the major players had been acquired by the big sales distributors, and innovation had stopped. And the smaller players couldn’t make enough money to reinvest and really think about the next thing, and the industry didn’t know that it needed it.

What’s interesting is that they tell you to look for blue ocean or green field, and that having no competition is awesome—but what got us so excited was the competition. All of the vet offices either had no technology solution, or had a solution that was just sitting there not working well, but they had a budget that they were already spending on it. After the first 10 vets we talked to, we knew that if we could get them to look at it, they could see it wasn’t working. They had web portals that were getting less than 1 percent engagement annually. We get 30 percent active users monthly. I tell other entrepreneurs, if you can find a heavily fragmented, competitive market where they all are really bad at doing what they’re doing, that can be a really good place to win.

X: What other tips do you share with entrepreneurs based on the lessons you’ve learned at PetDesk?

TC: There are two big things. One, your customer will answer all your questions. Just go talk to 100 customers and get their feedback. Even if you don’t think the customer would understand your business well enough, figure out a way to get that customer’s feedback to guide your decision. The other thing is, don’t worry about scalability early on; worry about the viability of your idea. We did a lot of things that were not scalable in the beginning, because we had built this whole platform before for restaurants, so when we got into the veterinary market, before we built this whole appointment requester and app, we just did it manually. We let people request appointments and I would call vets and close the loop, and because we did that, we figured out the best way to build software for that interaction. It also meant we could quickly validate whether this made sense or not. Doing those sort of “fake-it-‘til-you-make-it” things earlier on is key.