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Volition

Acquired by PetSmart in 2017 (at the time the largest e-commerce acquisition in history), Chewy.com is a leading E-Retailer of premium pet food and supplies.

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About Chewy

Founded in 2011 by Ryan Cohen and Michael Day, Chewy.com offers a convenient way to shop for premium pet supplies within a highly personalized e-commerce experience that’s fueled by superior customer care. From the beginning, the Company was poised to take the pet industry head-on, providing a faster, friendlier and more focused experience than the competitor incumbents and other industry giants that dominated the market at the time.

Background

After the launch, Chewy saw massive growth in the first year, bringing in close to $25M in sales. Growth aside, coming off the heels of Pets.com, the dotcom bust, and the 2008 crash, investors, weren’t keen on Ryan’s pitch. In the first few years, the co-founders bootstrapped the business, building the Company close to home in Dania Beach, Florida, and adopting a highly disciplined approach to cash-efficiency.

Ryan realized that the only way to compete to win was to take a page out of the Zappos playbook and put Chewy customers at the center of the stage. “When people shop at Chewy, they really understand we care about them, we care about their pets, and they want to tell all their friends and family.” To do that, the Company adopted best-in-class customer service practices such as handwritten holiday cards, sketches of their pets, and flowers when their animals pass away.

In late 2012, Volition Capital and Ryan crossed paths.

Why we invested in Chewy

In 2013, Volition Managing Partner Larry Cheng met Ryan Cohen in the Chewy Florida-based HQ. Within the next six months, Volition Capital was the first institutional investor in Chewy.com.

Larry said, “What was truly special about Chewy was Ryan’s commitment to delighting customers. He wanted to build the most customer-centered Company on the planet. All of the decisions about the Company – from fulfillment, to pricing, to working capital management, to merchandising, to customer service – were made with one goal in mind – delight the customer.  And, it was that commitment to the customer which ultimately became the key reason they succeeded.”

“They created a no-brainer value proposition,” said Larry. “They had the best selection of products. They were always the lowest price. They built their own fulfillment center, so they could ship as fast or faster than Amazon. They had much better customer service than any other pet food retailer. You can talk to pet lovers 24 x 7 x 365. Everything about the Chewy experience was better for the pet owner because their commitment was higher to the customer.”

Importantly, the volume of Chewy’s repeat business supported the approach.

“The end result of Chewy’s excellence with customers was we would acquire customers, and they would stay with us for life. We were deeply loyal to our customers, and they were deeply loyal to us. That loyalty was what made the entire business.”

Chewy's Challenges
  • Building the team in South Florida
  • Capitalizing the plan to reach substantial scale with significant infrastructure investment
  • Driving unit economics and working capital dynamics simultaneously
  • Maintaining a competitive advantage against Amazon
How We Partnered with Chewy
  • Recruiting the Board of Directors including Mark Vadon, founder of BlueNile and Zulily
  • Raised the subsequent rounds for Chewy including introductions to Greenspring, Allen & Co, Mark Vadon, Verlinvest, and Blackrock
  • Provided strategic counsel around in-sourcing fulfillment, private label expansion, M&A discussion, brand marketing – including introducing key advisors in these areas
  • Assisted in substantial expansion of the senior management team to support the founders including CFO, SVP of Business Development
Path to Exit
  • In 2017, PetSmart acquired Chewy.com for $3.35 billion in largest e-commerce acquisition
  • In 2019, Chewy went public company worth ~$12B (NYSE: CHWY)
  • As of September 2019, Chewy is worth ~$11 billion, and PetSmart is shaping up to be one of the most successful private-equity turnarounds in history, according to the Wall Street Journal
Ryan’s perspective

“You have some investors who you know you can only ask them to do certain things because they aren’t really willing to do a lot of work and get their hands dirty. I could pick up the phone to call Larry – almost 24/7 – he was available on weekends – he became like a partner. He was like my co-founder or one of the employees. I could ask him for anything. He didn’t always know the answers, but he would figure out a way to get it done.”

“We could have easily partnered with someone who would have been the wrong investor for a multitude of reasons – we got lucky.

Volition
Fun Facts About Chewy & Volition
  1. Chewy’s first official board meeting included two slides, a lot of laughter and a trip to McDonalds for soft serve. 
  2. Ryan was so disciplined about using his time wisely that he never traveled to Volition’s offices once. Not even for the Annual Meeting.  
  3. Larry and Ryan are still fast friends to this day.