Why I Invested in Dogster

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1. vulturevalley
   

   September 18th, 2006 at 8:04 am

   Hey people like to social network so why not get their pets on board too? I’ve been hearing more and more about this site, which is a good sign that it is growing and that you made a good investment.

   P.S. I like your dog.

2. Raj
   

   September 18th, 2006 at 8:10 am

   Kudos for addressing this head-on (apply directly to forehead :>). Being above board like this can’t possibly bring you any criticism.

3. Frank Gruber
   

   September 18th, 2006 at 8:21 am

   That is pretty cool Mike. I just wish there was a site for fish owners like me.

4. LifeAtHarvard
   

   September 18th, 2006 at 8:22 am

   Absolutely - congratulations on a smart investment and thanks for being transparent with your readers.

5. GUAGUAU
   

   September 18th, 2006 at 8:33 am

   QUE BUENO QUE TE INTERESES POR MI ESPECIE
   YO YA TENGO MI WEB HACE UN RATO…
   ABRAZO VIRTUAL

6. Chubbs
   

   September 18th, 2006 at 8:45 am

   Like the virtual pet craze, I don’t think even “niche” social networks have a chance long-term.

   Investing in these is still pretty risky; a lot of money could be lost. Although I guess a guy like Arrington doesn’t really worry too much, considering all the revenue he’s pulling in from TC

7. j
   

   September 18th, 2006 at 8:59 am

   They should put some work into the design and build of their site…yuck.

8. Drama 2.0
   

   September 18th, 2006 at 9:15 am

   It may not be a bad investment. I disagree with Chubbs. Niche social networks can be more effective monetizers of their users with the right business model. In fact, I think niche social networks will, on a per user basis, outperform over the long haul and will survive at a higher percentage than a lot of the “general” social networks, especially the latecomers.

   The question I have is why they went the private equity route and diluted their shareholders when they’re profitable. Obviously, I don’t know the extent of their profitability and all the details of their expansion plans (how they intend to use the money, etc.), but it seems that a company with real revenues and profits might have found other financing methods more appealing to shareholder value over the long-term, unless investors were so eager to get in that Dogster got a great valuation.

9. Nathan Kaiser
   

   September 18th, 2006 at 9:31 am

   I am a big fan of these sites, not only the business model, but the approach that is taken by the founders. I interviewed Ted Rheingold for my site nPost.com.

   http://www.npost.com/interview.jsp?intID=INT00144

10. Brooke
    

    September 18th, 2006 at 9:36 am

    I’m also curious about why all these sites are choosing to go the “investor” route. Why not go with a bank? At least then you don’t have anyone accountable for your business decisions other than yourself and the need to pay off that monthly interest/princpal.

    I visit TechCrunch every day and almost every day I read about a new startup that raised $x,xxx,xxx.xx (seven figures). I’m then puzzled to find that their actual business shouldn’t cost NEARLY that much in operating/advertising.

    Half the startups I read about on TechCrunch could be built by high school/college students in their basements. With a major grass-roots effort these companies could skyrocket to profitability (however short-lived) because they don’t owe investors anything.

    ————————

    I am by no means a business student, nor do I claim to be. I’ve recently been weighing the pros and cons of private/venture capitalist investment to help get my niche social networking site off the ground and I’m really leaning towards self-investment.

    Heck, I have a decent job, and while having millions in investments would help get the product to the shelf a bit quicker with a massive advertising budget, I can’t see a benefit beyond that. With the business model route I’m choosing to go with and the availability of tech sites such as Tech Crunch, Slashdot, Digg, etc. I think you can get free advertising if you look hard for it.

    The best part is that if I fail, no-one loses out except me. Sure I might have lost a few thousand bucks, but as I said before, at least I have a job to go back to.

    Can anyone tell me why I should look for private investors? Also, when should I approach them (before the site is up or after)?

    Thanks!

11. Brooke
    

    September 18th, 2006 at 9:39 am

    PS - I suppose Dogster and Catster aren’t technically “startups” per say, so I’ll ask the question in general. I think the thoughts on startup investment are still valid though, no?

12. jonathan
    

    September 18th, 2006 at 9:45 am

    You invested in this piece of shit and have the balls to brag about it???

    Hey maybe you can buy the rights to the sock puppet now genius??

13. Brian
    

    September 18th, 2006 at 9:45 am

    hamsterster, snakester, potbellied pigster, birdster, iguanaster, the possibilities are endless, start buying domain names NOW!

14. dave
    

    September 18th, 2006 at 9:50 am

    uh, yeah, it was enjoyable to see you rationalize your investment i can completely see dogster as a publicly traded corporation, or if the capital markets turn their backs, then a merger or sale of assets with a cat site or or a mega portal like yahoo, or if they balk, then certainly some more financing to keep them alive from you and the other seeders…

    seriously, this smells just like 99, sorry. i’ve got zero faith.

15. Mr Poutine
    

    September 18th, 2006 at 9:51 am

    You really did invest in this? Insanity. Bubble 2.0 is surely upon us, perhaps someone is going to revive bbq.com as well…

16. Wal
    

    September 18th, 2006 at 9:52 am

    What exactly is web 2.0 ? –Just redo everything we already did in 90’s
    Calendar, Photo sharing, Home page, now we have 90’s pets.com

    Probably bubble 2.0 needs another “REDO”

17. Paul
    

    September 18th, 2006 at 10:22 am

    Woof!

18. Lisa
    

    September 18th, 2006 at 10:23 am

    LOL! I nearly fell off my chair after I read this one. And the follow-up comments are bang on! I will surely return for my great laughs. TC is now bookmarked under “Comedy”.

19. 
    

    September 18th, 2006 at 11:03 am

    Personally, I think this is a great investment.

    Dogster is a niche site and potential advertising dollars are HUGE!

    It may look crazy to some, but there is a reason why this site has thrived while other social networking sites have disappeared into thin air.

    Kuddos to you Mr. Arrington!

    Good Succes!

    Vondre’

20. Christian Baxter
    

    September 18th, 2006 at 11:03 am

    This is great! Surely the strategy will be to facilitate a mega-merger between Dogster and PetsCell [link: http://www.petsmobility.com/products/ ] This way the dogs can network and call eachother! There’s even the possibility of recording dog profile viewing patterns and using the data to roll-out targeted doggy-treat text advertisements (right to the PetsCell!).

    If it’s profitable, then ok, but this does all feel a little bubbly.

21. Shuki Haiminis
    

    September 18th, 2006 at 11:04 am

    Care to share what the $$$ amount was

22. Paul
    

    September 18th, 2006 at 11:10 am

    The doubters here know nothing. I find on TC there are a great deal of commenters who, through the TC comments and reviews, have learned to sound like they know what they’re talking about.

    No-one is going to invest in a company they have little, to no faith in. If Mike invested in this company, he did so for a reason, and I would think has enough experience to know a good investment when he sees one.

    I doubt you couch potatoes have any more experience than he does, so your ridicule is hilarious to me.

23. Peter
    

    September 18th, 2006 at 11:26 am

    this blog has a lot of haters. jealously, i’m guessing. i’m the most jealous - but i’m not hatin’ - i’m congratulatin’.

    on dogster’s UI, it does need a little help, but my feeling is that it’s much better to have what they have - much - than, say, Pawspot (http://www.pawspot.com/) (http://www.techcrunch.com/2006/07/11/dogster-has-competition/). I mean, who wants to go to a sterile site like PawSpot when we’re talking about _dogs_. I mean, dirty, mangy, smelly, funny, sweet, crappin everywhere, love-you-like-you’re-the-best-thing-since-sliced-bread, running around crowded dog parks raising heck dogs. If you _know_ dogs, and you _love_ dogs - you’re gonna go to Dogster, not pawstop or whatever it is. If you _don’t_ know and/or love dogs, you’ll be none the wiser. We’re talkin bout dogs, man - dogs. Dogs? (my AI routine). Dogster has character. If they’re not already secretly collaborating with that other Potrero Hill megabrand, the senior Cuteologist in all the land - CuteOverload.com, then they should be. She should be their marketing person.

    on an unrelated note - with the ref to Dogster’s job posting needs - i’ve been in the job hunt on and off for the past few months. and there are all these new sites, and niche sites like TC, and whatever. i thought, “man - i’ve been _searching_ a lot”. Who owns search? With companies like SimplyHired (who appear to be Simply Hiring like crazy at the moment) - whose specialty seems to be aggregation of job listings/search - where is Google in the jobs market? Yahoo’s got HotJobs. Some of the smaller Web2.0-type startups are consolidating. eMurse’s are still popping up every once in a while, but the big player is nowhere to be found. Maybe they’re not quite ready to take on Monster? Maybe they’re not into smaller markets like job hunting. Maybe it’s too resource-intensive? I’m a believer in Google. I think they continue to do things that are just really unbelievable - given their size - in such a short time period. Can they keep it up? How long did it take Microsoft to start crushing competitors? One thing I know - job hunting sucks. People have mentioned they’re working on this or that for job hunting. I saw, ‘go fer it, dawg!’ What’s out there right now is not gettin it done.

24. Robert Dewey
    

    September 18th, 2006 at 11:30 am

    Paul,

    Most here might have done their own (most likely limited) research and came to the conclusion that they don’t think an investment was wise. I’m sure Mike had access to more information such as business plans, market analysis, etcetera, so his decision could be a little bit more informed, but still entirely his own opinion.

    I guess what I’m trying to say is that everyone is entitled to (and has) their own opinion. Some think the investment was a good idea, others disagree. So, if it’s a matter of opinion, how can the “doubters know nothing”? Unfortunately, you can’t “know” something that hasn’t happened yet…

    Don’t think I’m being one-sided, because there are just as many posters who are trolling Mike’s decision, and the same concept applies to them.

    Anyway, congrats and good luck to Mike.

25. Jeremy Pepper
    

    September 18th, 2006 at 11:42 am

    I was talking to Ted the other night, and got the pet story. Comes down to building rules suck.

    Here’s a testament to the site, though. I joined because a friend in Truckee joined for her Viszla. Here’s a person in Truckee - not part of the Web 2.0 thing, but a dog owner - pinging another dog owner (in Scottsdale, AZ) to join her dog’s network. This is about two years ago, and shows why the site has legs: unlike most Web 2.0, it’s not a Valley only phenomenon.

    That’s the genius of Dogster (and Catster). People are involved in their pet’s lives, and love their pets. And, want to do goofy, loving things with them - the reason Dogster works. And, um, look at the amount of money people spend on their pets for Christmas alone.

26. garth
    

    September 18th, 2006 at 11:45 am

    When sites that start as a joke get funding, you know the bubble is near.

    This group of angels must have their sights set a little lower than most VC’s, as I see no way for this to recover 10 times the initial 1 million investment.

27. SutroStyle
    

    September 18th, 2006 at 11:54 am

    I guess selling dog food on the net 7 years ago did not turn out to be profitable, so they turned to “pure play” this time. That’s web 2.0 or pets.com

28. Ted
    

    September 18th, 2006 at 12:32 pm

    I think this has real potential because it’s not another “me too” social network, it’s something that has a real-world application, and is a niche which is unexplored. The key is that a much larger % of people on dogster or catster will NOT have myspace profiles or friendster, etc.

    This is key because mining people who don’t use social networks currently is important unless you want to battle MySpace.

29. Marc
    

    September 18th, 2006 at 12:39 pm

    Brooke, I’m in the same boat with my site and have the same issue and questions regarding VC dollars. I guess VC’s come with great contacts, expert advice, and really help with strategy and direction. You could argue that these things alone can truly MAKE your business and without quality amounts of these your business may never see its true potential. The bank loan may allow you to hire consultants in those areas, but they don’t have a stake in your business, they get paid for their time, and you might not appreciate their “dispassionate or disconnected” interest in your business’s success. They often only feel like a cost to you. So with the bank loan, you pay the debt AND the consultants giving you bad cash flow at a point in time where your project is relatively new and unproven. With a VC, you don’t make debt payments, you just sell part of the dream. You also don’t get the benefit of a proper valuation of your business (which would come with a VC investment) if you self fund or go with a loan making your own stake’s worth ambiguous.

30. mmenchu
    

    September 18th, 2006 at 1:08 pm

    Check out http://sniflabs.com/ It was started by fellow students at the MediaLab.

31. francine hardaway
    

    September 18th, 2006 at 1:20 pm

    I am a dog lover who signed her dogs up on Dogster when it first launched, and loved the idea. Unfortunately, after the first few emails for play dates for the dogs, I got tired of responding to people with too much time on their hands, and the site didn’t seem to be offering any real value. I feel much the same way about the social networking sites I am on. That being said, I’m not the market, because I’m a trained investor (cynic). I think with all the excitement about pets as part of the family, a good pet portal could still make a fortune.

32. Peter
    

    September 18th, 2006 at 1:21 pm

    On the viability of Dogster, let’s look at the industry metrics. The dog/pet industry is sitting like a good boy at, oh, five or so b-b-Billion dolares. That’s what I thought I remember reading, anyways. It sound reasonable to me. And it’s growing rapidly, from what I remember.

    How much is $5 Billion? About half the entire sports industry in the U.S. (MLB, NBA, NFL, etc. - which is the 10th largest industry in the U.S.). This ain’t kibbles and bits we’re talking about, here. If Dogster provides a gateway to consumers in the pets space, then $1 million will end up making these investors look like geniuses.

    An important point that others have mentioned is that people are passionate about their pets. People _like_ wine. Some people _love_ wine. But people _adore_ their pets. It’s a whole ‘nother level of passion. I don’t know why, but it seems like advertisers like that kind of stuff.

    I wouldn’t be surprised if Dogster gets bought in two and half years by Yahoo for $35 million - even though Yahoo has their own Pets-related site. $35 million to get traction in that market is chump change. Pet food / toys / training / grooming / vacations / daycare / burial / healthcare / walking / health insurance - the list goes on and on.

    I think the investment speaks for itself. Dogster didn’t _need_ this cash - they, and the investors, simply see the writing on the wall. Why do this ‘controlled growth’ nonsense when someone with some guts is going to march in here and eat our lunch? There’s that, and I’m sure not having enough developers/etc. to get new features up must be excruciating when you’re actually making money. Everyone you talk to is losing money hand over fist - and they have 20 developers. Where’s the fairness in that?

33. Brooke
    

    September 18th, 2006 at 1:28 pm

    I agree with Francine, I think a good social networking site is one that the user becomes invested in and comes to rely on. Sites like MySpace, Friendster, Dogster, etc., are all excellent time-wasters, but time is something in finite supply. People’s lives shift and so do their allottments of time.

    Hey, its easier said than done, but the lasting SN sites will be the ones that can achieve this goal.

    As for Marc:

    Thanks for the feedback. I suppose VC’s do offer a lot of value in terms of experience when compared to a non-invested consultant. What sort of decision have you come to in regards to private investors?

    Would it be smarter to do as Dogster did and establish a customer base first or go with invesment right off the bat?

    Cheers,

34. Peter
    

    September 18th, 2006 at 1:32 pm

    Scrap my figures. I can’t verify any of it. Well, almost any of it. The relative sports number looks good, but the pet spending numbers look woefully low. The actual numbers look astronomical.

    I’m hereby retiring from TC comment posting until Dogster is sold for $35 million to Yahoo in two and a half years time.

35. WormInBuffet
    

    September 18th, 2006 at 1:39 pm

    It’s a very sticky site. Pet owners are fanatics and they love to talk, compare, and show off their pets. They treat their pets as their children.

    Not sure about investing in it, but I can see this site being profitable. I am surprised that the founders wanted investors if they are already profitable. It is not as if you can expand this niched rapidly. There are only a certain number of pet owners and only a portion of them are websavy enough to become a member. Dogster will never be a 20 million member site….so why get the extra cash to burn? Word of mouth is the way to go with niche sites.

36. Marc
    

    September 18th, 2006 at 1:41 pm

    Brooke,

    I decided (and have been advised by experienced advisors) to establish some sort of user base in order to have some demographic and usage data (I haven’t launched the site yet). In essence, I want to add value to the business so that I can give less of it away. But I don’t expect to wait too long before going to VCs if I see growth potential. I want to go global and I’m sure they can help with that.

37. Gloria White
    

    September 18th, 2006 at 1:57 pm

    it ain’t a bubble if everyone is saying it’s a bubble. contrarian indicator…
    It would have been a bubble if dogster had got 30 million in this round and they were looking at 500 million as the final number. At this valuation it looks like a smart investment….
    Can I invest my 50k?

38. JesseCiccone
    

    September 18th, 2006 at 2:26 pm

    There’s no doubt that a niche offering focused on pet owners has huge legs (I’m a boxer owner and embarrassed to admit the magnitude of my obsession!). Whether or not dogster/catster is THE one that makes it big remains to be seen. But chipping in to a $1M round seems like a reasonable bet to place.

    Jeremy, I think your comments are right on. And I especially appreciate the acknowledgement that Web 2.0 is still largely a Silicon Valley phenomenon. I’m a native East Coaster who spent ‘98-02 in San Francisco. So, I’m attune to - and, yes, excited by - the hype, but when I pull away from my computer screen, it’s weird to not have it physically manifested around me!

39. Bassam
    

    September 18th, 2006 at 2:34 pm

    Nytimes has an article about this today -

    http://www.nytimes.com/2006/09.....technology

40. Nik Cubrilovic
    

    September 18th, 2006 at 2:45 pm

    Dogster is a great company, there is a lot to be made in these niche markets and pet owners are a great market. Dogster is very very different to what pets.com was (people saying that just show their ignorance), and the good thing about 2006 is that if Dogster wanted to start dispensing goods all that it would take is a link to Amazon and they would have a nice, clean margin.

    On the issue of ‘this is just what we were doing back in the 90s’ - Timing matters so much in business that all it takes at times is to attempt a model that was tried before and that could bring you success (not that Dogster is in this camp). Some of the biggest companies today are a success because of timing (MSFT, Oracle, IBM, etc.)

    If I were to invest in 5 startups today (in addition to my own) Dogster would be one of them.

41. Again
    

    September 18th, 2006 at 3:11 pm

    “On the Internet, Nobody Knows You’re a Dog”– So true

42. dave
    

    September 18th, 2006 at 4:10 pm

    “web 2.0 is lipstick on a broadband pig” - me

43. Victor Hanna
    

    September 18th, 2006 at 5:20 pm

    At the end of the day, it’s not about the dogs or cats, but about the people who are leading the company, and their will to build a successful enterprise and adapt to the market.

    There are a thousand pet sites on the web. I happen to know because I also have one which I also started as a hobby a few years back.

    So, does $35MM sound high or low? It could be worth -0- in a few years, or it could be 10x that amount. Smart people create value. Idiots squander opportunity.

    Many of the best businesses in history were built ‘by accident’ or as a hobby (see ebay). That doesn’t make it any better or worse off as an investment.

    Hopefully the investors have done their homework and the deal will pay off handsomely.

44. Alexander Muse
    

    September 18th, 2006 at 5:26 pm

    I have really liked this one for a while. I am jealous that you were able to invest, I would have been all over this one!

45. Alex
    

    September 18th, 2006 at 6:06 pm

    I’m a little confused as to why you didn’t allow them to list for free on your jobs site?

46. Adam
    

    September 18th, 2006 at 6:34 pm

    This entire entry makes me sad. Where’s the PASSION, Mike? I’m serious. The best businesses in the world are started by people who have a love for something… a true passion. One of the head folks of Dogster doesn’t even have a pet?! And — in all your verbiage above — you say not one whit about anything other than cold-and-calculating stuff. Page views. Frugal spending. Smart people. Oh, and smart people. Blah blah blah blah blah.

    Maybe I’m overly idealistic, but if I were to write about an investment I just made, I’d indicate why I believe that the company will make a difference in people’s lives. I’d explain why I felt the site was unique (and not just in terms of perceived economic opportunity), why it was fun, why it was MEANINGFUL in the overall scheme of things. I’d mention an anecdote.

    No, I’m not talking about a vapid press release. I’m talking about showing some friggin’ soul. Fine, it may make for a great investment (and, as others have suggested, it may make for the dumbest investment of the decade), I don’t care. But from the way you described it, it hardly seemed doglike or lifelike or anything I’d even care-to-check-out-like.

    If I want just-the-numbers, I’ll go read an econ book, okay? Color me naive, but I like to think that people that invest in companies believe in more than just the expected bottom line.

47. CollegeKid
    

    September 18th, 2006 at 7:00 pm

    I guess he didn’t let them post for free because of conflict of interests…

    I like dogster - the design is shit, but last time I checked, dogs like shit.

    And plus, how much time do pet owners spend on the web looking at the standard “beautiful” web 2.0 app? They are still stuck in the old days of poor CSS and navigation, and if dogster can grab the attention of pet owners one trip to the net each day, thats some good cash.

48. Einstein
    

    September 18th, 2006 at 7:52 pm

    Dogster is a dog. I see one glaringly huge fundamental flaw in creating a social networking website for dogs. 1. Doggs can’t type. DUHH. That, my friend, is a platform killer. 2. Doggs can’t photograph themselves 3. Doggs aren’t tech literate. For christs sake, they can’t even talk, let alone read. 4. Of the millions and billions of dogs on the planet, no dog has ever or will ever surf the web. Therefore, this is crap. This guy is just doing a Pump and Dump of a fashionable stock with no fundamentals behind it. Show us a P/E for starters. The guy needs to read a Warren Buffet book about value investing…

49. Victor Hanna
    

    September 18th, 2006 at 8:09 pm

    Einstein - You are obviously not up on the latest 2.0 trend- Dog Generated Content, or DGC for short.

50. Ron Sheridan
    

    September 18th, 2006 at 8:21 pm

    Woould it be wrong for me to join this site with the expressed intent of hittin on some hotties who have a dog?

    Hey I love dogs but I don’t have one. I fear being responsible for anything that I could unintentionally kill simply through neglect. That’s too much pressure.

    I realize I am talking about becomming the preverbial “snake in the grass” (dog park humor), but I would never go so low as to say grab a collection of dog pics off the net and pose as a dog lover who recently lost his pooch, and needs to reconnect to keep the memories alive. That would be beyond the pale. No I would never do that..

51. eas
    

    September 18th, 2006 at 11:10 pm

    Ron, I wouldn’t try it. First time you actually meet, they’ll sniff you out as a fraud.

52. Moshe Katzmann
    

    September 19th, 2006 at 2:26 am

    I’m starting Ratster, who wants to spend some money? VCs are welcomed.

53. ventureblogalist
    

    September 20th, 2006 at 5:40 pm

    Brooke and Mark - I would be happy to give you more dynamics involved in this decision! contact me rob @ my domain

54. Billybong
    

    September 21st, 2006 at 3:53 pm

    Must be hard for all those Dogster and Catster users to type with their paws.

55. Matt from Urban Pug
    

    September 23rd, 2006 at 3:33 pm

    Lots of people have dogs, and LOTS of people are totally in love with their dogs. Monetizing this on the net isn’t the easiest thing in the world (people will only buy so many dog costumes and rhinestone collars), but it can be done.

    I’m also finding that there are a lot of obsessed people in the world, and there’s a market for every segment of them. People obsessed with: weddings, dogs, babies, and of course, tech everything. What’s happening now is that more people are getting into these communities. They’re speading mainstream.

    Think middle america, think suburbs, etc. I’ll bet there’s a soccer mom online community, too. (And they’ll be using it with their MS Origamis?)

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