Mass High Tech - January 12, 2007

PawSpot funding fuels U.S. growth
Mass High Tech

Angel investors ponied up $600,000 in a second round of financing this week for PawSpot Inc., a Woburn-based operator of a website dedicated exclusively to pet owners.

The Series A round closed this week and raises total investment in the company to more than $1 million -- an amount that may be all that's needed to reach profits this year as viral marketing spreads the word about PawSpot.com, said CEO Mark Roberge.

The investors who led this week's round include members of Launchpad Venture Group LLC and Boston Harbor Angels, both based in Boston. The new investment follows up a seed investment of $500,000 from angel investors nearly one year ago, according to Roberge, though he declined to identify the first-round investors.

Mic Williams, founder of Boston Harbor Angels, and Launchpad member Lance Kawesch say PawSpot.com has attracted more than 3,000 registered users. The number is triple what it was before the New York launch and 25 percent more than initially expected, Roberge said.

Williams said the cost to develop such websites is so low imitators are likely to follow if PawSpot proves to be a major success, which is what his angel group is expecting.

"The appeal is that it's not a complicated business," he said, "and being the first mover is very important."

PawSpot launched its website in June 2006 and its first marketing campaign in New York in October. The site has attracted 50,000 visitors to date, many more than initially forecast, Roberge said.

The company now plans to market itself in Los Angeles, followed by nine other major U.S. cities this year to attract additional advertisers and hopefully generate enough revenue to post a profit for the fourth quarter 2007. Roberge is counting on word-of-mouth viral marketing to drive the expansion, not traditional media outlets.

"For the business model to work, you can't go out and pay for users," he said.

Such websites can grow virally because users are motivated naturally to promote such common-interest sites. A larger network of members generates more information and advice, said Rebecca Wettemann, vice president of Nucleus Research Inc., a Wellesley-based technology research firm.

PawSpot would be a natural acquisition for a pet supply retailer such as California-based Petco Animal Supplies Inc., she said.

In 2006, U.S. consumers spent an estimated $38.4 billion on pet products and services, according to the American Pet Products Manufacturers Association Inc.

Pawspot.com's homepage this week features advertisements from companies including Wellness brand natural dog food made by Chelmsford-based Old Mother Hubbard and through Google.

Pawspot.com users have been viewing an average 14 pages per visit, a number that Roberge said is much higher than initially expected.