Oct. 31, 2018

#52 Fitbit … for Dogs

#52 Fitbit … for Dogs

Susan Sierota wants to help dog owners keep their furry friends healthy with her pet-tech startup, Waggit. Can she convince the four investors that her smart collar will win best in show?


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Susan: We have our passionate dogs, their dog is their baby,  We have our playful parents; their dog is their best friend.  Then you have your practical parents. And their dog is their pack and their motto is 'my dog's behavior is a reflection of me'. 


Susan Sierota has the scoop on dog owners everywhere. And that's a good thing, because she's raising $2 million for Waggit, a smart collar for dogs. 


Venture Capital investment in the pet space has been exploding… And Susan is hoping that amid the boom, Waggit is the startup that comes home with Best in Show … 


I’m Josh Muccio and from Gimlet Media, this is The Pitch.


Our investors today: 


Alexandra: Alexandra Stanton.


Alexandra is CEO of Empire Global Ventures and on the side, she likes to do a little angel investing. So far, she’s made bets on 15 startups.

Phil: Phil Nadel.


As a serial entrepreneur Phil built companies that sold for hundreds of millions of dollars. Now he manages one of the largest syndicates on AngelList.


Charles: Charles Hudson


Charles is with Precursor Ventures where he’s invested $20 million in over 100 startups to date. 


Jake: Jake Chapman


Jake has invested over 10 million in 30 startups, and now he’s a partner at Alpha Bridge Ventures.


Alright, take it away Susan. 


Susan: So imagine how you would feel if a member of your family were sick, silently suffering for months and you had no idea until after you lost them. And if you knew something was wrong sooner, you would have been able to help and potentially save their life. This is happening every day in over 60 million homes in the US alone who consider their dogs to be a member of their family. And a few years ago when I lost my dog Mulligan to cancer, I was devastated to learn that dogs intentionally hide pain. So I didn't know he needed my help. I let him down. And that's when I began to wonder; could technology have helped to discover Mulligan's cancer before it was too late?


Susan wanted an answer to that question, so she quit her cushy executive job launching consumer products and turned to a project she thought was far more important: helping save dogs’ lives. 


Susan: and after two and a half years of prototyping we have built it. And here it is. Waggit is a collar that collects an enormous amount of data about your pet's health. From changes in vitals, eating habits, sleeping habits, activity patterns and also location. And what it does is it allows those 60 million families to identify potentially life threatening illnesses before it's too late. Who wants to see it in action?


Alexandra: Yes.


Charles: Totally.


Susan: Awesome.


Susan walks over to the investors to show them the Waggit collar - it looks like a regular collar, but with little sensors along the inside that collect data about your dog. The collar syncs to an app on your phone via bluetooth, allowing all those concerned pet parents to monitor their dog’s health and habits.


Susan: So the key is it knows every dog’s baseline and it’s the changes to that that really matter. So we’ve got the health factors...


Phil: So the key is the changes in the dog's normal numbers compared to the baseline?


Susan: You got it. And so you track patterns of sleep, quality of sleep, body positions. So it doesn’t matter if a dog doesn’t lay on his left side, but if he used to and he’s not anymore, it could be bone cancer or arthritis.


Charles: Wow.


Susan: So it also does all the fun stuff, activity, where you can track time, distance, speed, intensity, you have leaderboards and badges. All to drive engagement and word of mouth. People love posting about their dog and bragging.


Jake: Fitbit for dogs?


Susan: You got it. And I also think about it as an Owlet baby monitor wrapped in an Apple watch. 


Jake: Yeah. I like the form factor, too. It’s slick. It’s nice. Thank you. 


Alexandra: Did any dogs try to take it off when they were wearing it?


Susan: We haven't had any problems with dogs who wear collars having any issues.


Phil: Are you getting complaints from dogs? Any written complaints?


Susan: Oh gosh, you've discovered it!


Phil: Okay, then you're good to go. No complaints. You're good.


Susan: I will tell you the testing though on the durability was really fun. Like, slather that with no electronics inside with peanut butter and have a dog chew on it every day to see how long it lasts. So my dog was the chief waterproof tester, by the way. And so poll testing a whole bunch of different things to ensure that it's fully waterproof, fully durable. And that when dogs wrestle and play, grab each other and pull them by the collars that it stays.


Jake: How do you power it?


Susan: So it has a 7 day battery life. We're 7 minimum because of two things. One is because we're getting all the other information, we can put the modem in deep sleep when the dog is in deep sleep. So it saves significant battery time. and so we're hoping to get more than that seven days even. 


Susan’s starting to hit her stride now. And even without written feedback from the dogs themselves, it seems like the Waggit team has worked out a ton of the kinks.


In fact, they already have two hundred thousand dollars in pre-sales of the collar. 


Alexandra: Susan, what’s the price point?


Susan: So the collar will be $199 with a $5 a month subscription. And we did a lot of work on the pricing. So a lot of research and a lot of A/B testing in our presales. And what we found is most trackers right now charge $10 a month. 


Charles: What are the margins like on a product like this?


Susan: So out the door, fully landed, right now I’m at 110. Next run, I’ll be at 85. I for speed got components at a higher price. At scale, we’ll be down to 50.


Charles: Wow.


Alexandra: Great.


Susan: So our three year revenue is 40 million with a 55% margin. And that does not include our next product which is cat and small dogs under 20 pounds. And it does not include the integrated surfaces or data. That's all upside.


Alexandra: How are you predicting your second and third year revenues to get to 40 million?


Susan: So there are 80 million dogs in the US alone. We did a very detailed target segmentation and have taken that to 36 million dogs that we’re targeting. And if we get less than 1% of that, it gets us to our volumes at three years. 


Alexandra: what percent of the 80 million dogs are in households that you think can afford what comes to, so 200 out the door, plus another 60, so 260 in the first year just for a collar.


Susan: Yeah. So it's a great question. So in our target segmentation, the 36 million dogs is strongly attached pet parents who are comfortable with technology, want a happy, healthy, safer dog, and have spending habits on other wearables and other dog products. And then we did a sub segment of those. We have our passionate dogs, their dog is their baby, their motto is 'all you need is love'. We have our playful parents; their dog is their best friend. Their motto is 'a tired dog is a happy dog'. That's me. Then you have your practical parents. And their dog is their pack and their motto is 'my dog's behavior is a reflection of me'. And as we look at that, we've looked at the behaviors on how each of those subsegments purchase to get to that 36 million. 


It’s not often a founder comes in and lays out in this much detail who their customers are - not only does Susan know the overall market size, she knows exactly which breeds of pet parents she’s going after. But the investors still want to know: what are those 36 million people really paying for?


Phil: Do you have any sort of proof, any studies that will show that you can successfully diagnose that there's some kind of a physical problem?


Susan: So to be really clear, we are not diagnosing. 


Phil: Right. Well, I didn't mean diagnose what the problem is, but diagnose that there is a problem. Some sort of physical problem.


Susan: Absolutely. So there have been several studies that have been done. That number one is even though animals hide pain, they feel pain. And if something is wrong, they're going to be more restless, so they're not going to sleep the same way through the night. Their respiration and heart rate gets elevated. And the vets are frustrated, because when the animal goes to the vet, they're nervous so you can't get a decent baseline to really understand things are changing. Bone cancer is a huge one in dogs. It changes their positions in how they actually sleep. we work with several vets from Colorado State University, they have the number one cancer center in the world. And they've shared with us a lot of their studies on the importance of this data. 


Jake: what do I do with the data if it looks like my dog has bone cancer? Is there anything I can as an owner do? Or am I just now saddened and feel helpless?


Susan: So the idea is that they will show signs through their patterns before it gets to stage four. And so just like humans then, then we have a chance at actually treating them. On top of that, if you look at... We spend more on our dogs than our kids. Because there's a... We don't have to make them responsible adults. And so we question what we spend on ourselves. But then we spend $300 a week on a dog walker. The other thing is that if you look at, in some ways this is a cheaper kind of pet insurance. Because if you do early diagnose, you end up saving some money.


Charles: I was an investor in Fitbit and I am an investor in Fuzzy. So I’m really curious How do you envision the consumer taking that data and then taking sort of the next step?


Susan: Yeah, absolutely. we’ve identified seven key customers of the data, from food manufacturers to insurance to the pharma service providers who then will be able to leverage those data insights. So right now our focus is on how do we scale fast to get that data? So we have a pilot in place with an insurance company to subsidize the cost of collars to their insurance holders to get the data. 


Susan does not mess around.. She hasn’t even launched the product yet. and she’s already looking at seven types of customers who might want this data. And one of them, is pet insurance.


Phil: So tell us about that pilot that you have with the insurance company.


Susan: So what we're doing is we are having them send out a survey, understand who wants to use a Waggit. And we're testing a couple of different price points. Because we're going to increase the monthly, because the last thing the insurance company wants is for them to send out the collars and them not to use it. Because then they don't get that actuary data back. And what the insurance companies really want they want retention. So if someone stays on pet insurance for over a year, they're a customer for life. And so they're wanting to really add value to their pet holder to get them there. And they're super excited about getting the data because then they can price packages more affordably. 


Jake: Do you envision any other use case outside of tracking your dog’s health?


Susan: Great question. There are so many features that we’ve built in and so many more future ones. We’re trying to stay focused right now on the health. we have a safety thing, which is ambient temperature alerts. So we want to match that with an API to a weather service, humidity, get the data that we get from the collar and see if we can learn enough to be able to then send those alerts. But heatstroke is the number one cause of death for dogs in Texas. So as we start looking at what falls under happy, healthy, safe, and that’s our filter for being able to add new features. 


Jake: So I think I'm out. I think the collar looks great. I'd love it for my dog. I'm just concerned that the number of pet parents who are forward thinking enough about their pet's health is too small. I'm thinking about the other, the human wearables market, and a lot of that is driven by ego and performance and the quantitative self movement. And obviously that doesn't translate. My dog might want to know if he's running faster this week than last week, but he can't tell me that. And so I've been sitting here thinking, what are the other use cases besides just the healthy pet that would drive someone to buy it. But I hope you prove me wrong. 


Jake bow-wows out early.


When we come back, we’ll see if Susan can get any of the other three to bite.




Welcome back. Before Jake passed on Waggit. The investors were going deep on the data implications of the business, now it's time to dive into the numbers. Here's Phil.. 


Phil: So you did $200,000 in pre-sales, right? And was that done just from your website?


Susan: So we spent all the time that we were developing gathering emails. And we had 25,000 emails to start. We then spent around $15,000 throughout the campaign, because our goal was to A/B test a lot of messaging and different price points. So it was less around leveraging the dollars to drive sales. It was more about getting the learnings that we need to actually lower our customer acquisition cost. 


Phil: So you spent $15,000 and you acquired how many customers?


Susan: Um... So… We acquired from the actual ad spend, we acquired 100 customers.  Because we were spending to test messaging in some other areas,we were not as efficient as we could have been. But those are the numbers when we got down to the right messaging.

Phil: So you said you have 50 collars in the market today. How long have they been in the market?


Susan: So the first 25 were in June of last year. And then we’ve spun the board and we got the next 25 out there six months ago. The ones that are in the hands of consumers, we’re seeing people on average open the app six times a day six days a week. We will not hold that in market. We handpicked the people who are using Waggit right now. And so we’re getting a lot of good feedback on, that allowed us to go through some bug fixes and some feature fixes on the app, and got really high engagement. The ten vets that are using the Waggit have been doing a lot of validation of the data for us. So really good feedback from them as well.


Phil: You know, I think this is an interesting product, but a) it’s too early for me and b) I have a potential conflict in my portfolio. So I’m going to pass.


Susan: Thank you.


Phil: I wish you the best.


Susan: I appreciate that. 


Phil joins Jake in camp “I’m out”. They must both be cat people… Here’s Alexandra 


Alexandra: What other segments of the market do you see upselling to?


Susan: So... Right now, we’re focused on our dogs. And then we will have the upsell of accessories as well as the upsell of a pro version with different data insights. And some of the integrated services that I mentioned that we will put in there. So lots of opportunity there. And then from an overall market reach, going after cats next. And cats also intentionally hide pain. The market is smaller. There’s the same number of cats, but some of the cats don’t wear collars.


Phil: And people don’t care as much about them.


Susan: They’re not as obsessive about their cat.


Alexandra: Oh, I don't know. 


Susan: So if you look at...


Alexandra: I don’t have cats, but...


Susan: You look at the people who’ve lost their dogs and feel that, that market size I think is large enough to then be able to get to our data which is the big strategy.


Charles: Remind me how much you’re raising?


Susan: So We have 500,000 left in our round. So I don’t have a lead. And so I was super excited to come here today just with the caliber of you guys. Because we’ve done this by pure tenacity 


Alexandra: I love the pet space. I really like how you've thought about the tech. I also think that there are people who go into the pet space who have not been as broad thinking as you, whether it's about insurance or piloting in those markets. And you clearly have a love of pets.  I'm happy to put in 25,000 dollars 


Susan: Awesome!


Alexandra: So I’m... I think what you’re doing is smart. And broad thinking. And I think I’d like to be a part of it.


Susan: Thank you.


Alexandra: You're welcome.


Susan: Excited to have you on the journey.


Alexandra is in for 25 thousand! What about Charles? 


Charles: So I’m really active in pet. I’ve learned a ton about the pet space through Fuzzy. And I’ve looked at a bunch of the companies that are doing human grade or... Pretty much everything on the high end of pet is doing well. And I think for the trends that you mention that people are spending incredible amounts of money on pet. We’ve also bought, 10% of our investments have a hardware component in them. And so I’m going to pass. But for a really specific reason. Which is I think you’re going to need more money than you’re asking for right now. Because post launch hardware, it never goes the way that you think it will. And so I’m passing, because I’d actually like to talk to you about raising more money. 


Susan: I’m super excited. Thank you guys. Have a great day.


Alexandra: Congrats. 


Susan leaves the room and the investors keep digging into the pet space. 


Charles: We've done a ton in pet. And the company Fuzzy she mentioned, it's an in-home veterinary care business, and it's like, it's crazy. Because no one wants to take their pet to the vet. You know, you've got to put him in the car, you've got to take time off work.


Jake: He hates it.


Charles: He hates it.


Phil: We invested in VetPronto and they went out of business.


Charles: On demand. On demand is the part that doesn't work. 


Phil: Why do you think one of the pet tracking companies can't include some of these sensors in their devices that would be a natural...If this took off that they could naturally add that.


Charles: It's not trivial though. I mean, we learned this from our investment in Fitbit. Going from steps or activity to vitals is like, it's real R&D and engineering. But not impossible, to your point. Not impossible. 


Alexandra: This is like kids. People will spend and spend on pets the way they do on children.


Jake: I'm not concerned about the amount people will spend. Like I said, I spend a ton on my dog. I was just concerned that.. . People don't like to take care of their own health. They think they're sick and they still don't go to the doctor because they hate it. I think people want to ignore their, any problems with their pets too. Not ignore. But there's an inclination to not think about what's not right in front of your face 


Alexandra: My working assumption, people will take care of those they love better than themselves. And I think especially when people form an emotional attachment, you will do a lot not to suffer emotional pain because of that person you love. Because, you know, you want to know, my mum had a dog that died of a tumor. All day long, all day long, what she would have done to avoid the pain of that dog dying. Right. 


Phil: All right. Lunch time?


Coming up, things start moving REALLY fast. 




Welcome back! A few months later, I called Susan. And the first thing I asked, was about this moment in her pitch. 


Josh:  Alexandra told you she was going to invest, and you'd gotten two passes from the investors and it didn't sound like things were going particularly well. What did you think then when suddenly Alexandra said she was going to invest in you?


Susan: She was ... she's amazing. It was so exciting, first off. I was just, like, totally excited. And then just from conversations with her as the follow-up, and just her positivity and her support and ... and I think the value that she's going to be able to add to Waggit when we are shipping is amazing.


Josh: What happened with that investment? Did it pan out after the fact?


Susan: Yeah, absolutely. So Alexandra got back to me right away, went through diligence, and had a check in the bank a couple weeks after the show. 


Josh: That's really fast.


Susan: Yes. Very fast. She was on it and very respectful of ... of my time, and very clear on the things she wanted to see, and ... and she saw them and she wired the money. It was wonderful.


Josh: Well, let me tell you, that is rare.


Susan: Yes.


Josh: I don't think that normally happens. Why do you think that was  that she invested so quickly?


Susan: I do believe she just is -- really believes in the idea. She sees how consumers interact with their dogs and believes we're going to be extremely successful. She also totally got the data side of the business. 


Alexandra: I deal with rising companies all day long and you know it when you see it. 


This is Alexandra - I called her up to find out why she moved so quickly on Waggit. 


Alexandra: She is a star.  She's extraordinary. She had thought, really, of everything. She had really done her homework in terms of audiences, stickiness, price point, competition. She had answers for everything, and yet she didn't have that awful thing that you sometimes find with founders, which is that they're overly, overly confident. Like, "This is extraordinary, and I'll never have any competition!" Come on. That's not gonna happen. 



Josh: And that's very interesting, because she has a lot of experience here. She's been building products like this, so I could very easily see her being very matter-of-fact, this is the way it is, this is how I'm gonna do things.


Alexandra: She was sure in her approach, but thought about other approaches. I mean, you don't know what you don't know, right? So look, good analysis isn't black and white, it largely is often grey, right? On the one hand or on the other hand, and you know, we could fill landfills with, you know, pretty decks of founders who were completely sure they kind of had the winning formula, only to find fill-in-the-blank, right? So, I ... I think that she's got the right combination of mastery and experience and curiosity to be an excellent founder. 


Josh: You knew, like, during her pitch that it was gonna go fast.


Alexandra: I ... I knew I wanted to invest. I was interested in the pet space. I was very impressed with how she prepared for our call, really impressed with the documents she sent over. You know, once you see that, why wait? Why hold them up? If I ever wait, it's because I have questions. Otherwise, I move fast.


Things are still moving really fast for Susan. She’s finished the $2 million round — and is now working on raising ANOTHER million. Plus, the Waggit collars are shipping any day now. So we’ll see if Susan and Waggit can stay ahead of the pack. 


This is the last episode of the season. So we’ll be taking November off. Wait what am I saying… we’re not taking the month off. Actually we’re recording a whole new season of the show! And we’re doing a LIVE show in Philly. 


Which means... you’ll have to wait a few weeks for a new episode but I’ll see you right back here on December 5th. Thanks so much for listening.


Our show is produced by me, Josh Muccio, Molly Donahue, and Kareem Maddox. We are edited by Blythe Terrell. We are mixed by Enoch Kim. Original music composed by The Muse Maker. Our Theme Music is by Breakmaster Cylinder.
Lisa Muccio planned the recording of this pitch.


And we found Waggit because...Susan applied to be on our show. If you’re a startup founder you can apply to pitch by going to this web address: thepitch.show/apply


Here’s our disclaimer, no offer to invest is being made to or solicited from the listening audience on today’s show. 


All right -- you’ve been listening to The Pitch from Gimlet Media. We’ll be back in a few weeks. So stay tuned.

Phil NadelProfile Photo

Phil Nadel

Investor on The Pitch

Phil Nadel is the Founder and Managing Director of Forefront Venture Fund and of Forefront Venture Partners, one of the largest syndicates on AngelList. He has started and sold several companies and has invested in more than 200 startups with several exits.

Jake Chapman

Investor on The Pitch

Jake Chapman is a Managing Director at Army Venture Capital Corporation and focuses on companies working on technology that enhances the national security of the United States of America. The sectors I focus on are AI, Robotics, Aerospace, Autonomy, Quantum Computing, Semiconductors, Manufacturing, Security, Biotech, Defense, Energy and related industries.

Charles Hudson // Precursor VenturesProfile Photo

Charles Hudson // Precursor Ventures

Investor on The Pitch Seasons 2–10

Charles Hudson is the Managing Partner and Founder of Precursor Ventures, an early-stage venture capital firm focused on investing in the first institutional round of investment for the most promising software and hardware companies. Prior to founding Precursor Ventures, Charles was a Partner at SoftTech VC. In this role, he focused on identifying investment opportunities in mobile infrastructure.

Alexandra StantonProfile Photo

Alexandra Stanton

Investor on The Pitch

Alexandra Stanton is the CEO of Empire Global Ventures LLC, which advises Fortune 500 companies, national central banks, senior elected officials, and nongovernmental organizations across three continents. In 2013, Alexandra was appointed by President Barack Obama to the Board of Trustees of The Kennedy Center in Washington, D.C. She currently serves as Vice President of the Board of the Parrish Art Museum and is Vice President of Doctors of the World – USA.