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The Surprising Story Behind PetSmart’s Acquisition of AllPaws

Built To Sell Radio Episode # 280

Back in 2013, on the heels of building a successful online dating application, Darrell Lerner decided to apply his experience in the dating industry to pet adoption. He built a website and mobile app called AllPaws which allows users to find a pet based on a variety of criteria important to people considering adopting an animal.

In just over 2 years, AllPaws accumulated more than 1.5 million registered users and was receiving nearly 1 million visits per month while ranking in the top 100 of all lifestyle apps on Apple’s App Store.

Despite AllPaws’ success with consumers, it wasn’t translating into the next unicorn business. Lerner had chosen advertising as a way to monetize his traffic and was hovering at around $1 million in annual revenue. Lerner decided his business was worth more in the hands of a larger organization that could better leverage the vast amounts of pet and owner data he was collecting. Lerner decided he would sell AllPaws if he could get at least $3 million for his company. That’s when PetSmart turned around and offered him a whole lot more.

In this episode, you’ll discover:

  • How Lerner quickly solved the “chicken or egg” problem of anyone building a two-sided market

  • An innovative way to align your M&A advisor with your goals

  • A sneaky (yet brilliant) way Lerner created competitive tension for his company by drawing Petco into his negotiations with PetSmart

  • How to know when you’ve pushed an acquirer as far as they’ll go on price

  • The biggest challenges for an entrepreneur as an employee/contractor after you sell

To quickly build his supply of pets that needed to be adopted, Lerner partnered with giving him instant access to more than 100,000 pets that needed a new home.

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