In a “people-to-pet” pivot, PillPack alum Gavin Cotter has raised $20 million in Series A funding for his latest venture, an online pet pharmacy called Koala Health, the CEO tells Axios exclusively.
Why it matters: Veterinary care is expensive and getting more expensive, and pet company MARS Veterinary estimates it will peak at 33% in the next 10 years. And, like human medical care, the field is anticipating a significant labor shortage.
🐨 Quick update: PillPack, a startup that targeted people with chronic conditions by delivering drugs in conveniently labeled packages, rose to fame when Amazon acquired it in 2018 for $753 million.
- Koala – named for the animals’ characteristic front pockets – aims to provide pet owners with a similar service.
Offer Details: Menlo Ventures led the round, and First Round Capital, Box Group and Operator Partners joined in, bringing Koala’s total funding to $23 million.
How it works: Koala’s pharmacy team works with veterinarians to provide and refill medications to pet owners, who can purchase prizes on the company’s website.
What’s next: The company is currently available in 36 states and plans to expand to all 50 states by the end of the year.
- It also plans to raise a Series B sometime next year, Cotter says.
- “Venture financing is critical, while there is still a gap in the market,” he adds.
Situation: Veterinary practice roll-ups (and increasingly virtual pet care start-ups) have mostly dominated investor attention. That’s partly because fewer startups have focused on closing the supply chain gap between veterinarians and pet owners. Some exceptions:
- Vetsource, backed by Mars Petcare and Bain Capital Ventures, helps veterinarians get medicines, OTC products and foods from manufacturers to pet parents’ doors.
- Covetrus, recently acquired by CD&R and TPG in a $4 billion deal, has a product and distribution business; home pharmacies and drug compounding companies and a technical branch that aims to improve the efficiency of veterinary practices.
- And further down the supply chain, Wedgewood Pharmacy dominates the pet pharmacy compounding arena. (Partners Group bought Wedgewood in 2021 for a value of approximately $700 million.)
In the meantime, Virtual pet care continues to be an emerging corner of the health tech industry, with venture dollars spinning into startups selling everything from home care and diagnostics to telehealth and more consumer-friendly versions of classic personal care. For example:
- Petfolk, a veterinarian startup with simplified access to medical records and care teams, raised $40 million in Series A funding in August.
- The Vets, a home care pet startup, raised $40 million in a massive seed round in January.
- Hybrid pet care company Modern Animal raised $75.5 million in a combined Series A and B round last summer.
Yes but: Despite a flash of recent venture deals, the animal care industry is still dominated by private equity players that maintain control of the industry, such as JAB Investors’ NVA and TSG Consumer Partners’ Pathway Vet Alliance.
💭 Our Thought Bubble: Like human healthcare providers, vets are ravaged by demand, so we foresee the industry continuing to bubble with mergers and acquisitions and investor interest from both private equity and venture players.
Sarah Pringle contributed reporting.