Dog-walking service Wag — with the heavy imprint of SoftBank — is replacing its CEO and accepting $300 million in cash
The dog-walking company Wag is replacing its CEO as it prepares to accept an investment from SoftBank that would offer the Japanese investor substantial control in the startup.
Wag said on Tuesday that Hilary Schneider, an experienced executive who most recently led LifeLock, would replace the company’s co-founder, Josh Viner, as its CEO. Viner’s departure comes as Wag accepts $300 million in an unusual deal that is expected to give SoftBank a 45 percent stake in the company.
The deal in some ways resembles a private equity move — and is a vivid reminder that SoftBank holds a ton of power in negotiations.
Recode first reported last December that Wag was preparing to accept only $100 million in funding. But the company’s fundraising budget tripled as it got to know SoftBank, which runs a $100 billion technology fund that needs to cut big checks to invest its mammoth war chest.
And then this month, we shared that the expected deal terms would give SoftBank enormous influence at Wag, given that the company was only valued at $650 million in the transaction. SoftBank is behind all of the $300 million investment — this is not a traditional venture “round” — and none of the money is going to buy out existing investors, according to a person close to the deal.
Commensurate with its massive ownership stake in the company, SoftBank is taking two board seats at Wag, one of which will go to SoftBank investor Jeff Housenbold, who will become chair of the board.
The ability to install a new CEO was a major draw for the investor. SoftBank wanted Wag to bring in an experienced CEO, and was unsure whether it would do the deal if the company did not, the person said. The company’s founder, Josh Viner, and his brother, Jon Viner, have modest early-stage startup experience, but have not grown a global business like what SoftBank wants Wag to become.
So enter Schneider, once the executive vice president of the Americas for Yahoo before becoming the head of LifeLock, which was sold to Symantec for $2.3 billion last year. Schneider is a well-known leader in digital media and once led Knight Ridder Digital.
Schneider, the owner of two black terriers, told Recode in an interview that she was not worried about the heavy imprint of SoftBank, as she has worked with the investor in the past.
“I think we have an aligned vision of how we want to grow the company,” Schneider said.
Schneider said the Viner brothers will remain at the company in to-be-determined senior roles focusing on product and engineering.
The Viner brothers told Recode in an interview that they had secured the SoftBank investment before securing Schneider, and insisted that the two developments had “nothing to do” with one another.
The Viners said they had actually signed a term sheet in October after a meeting with SoftBank chief Masayoshi Son in Japan. SoftBank knew at the time that the brothers had retained the executive search firm Spencer Stuart, and that the firm had narrowed the search to a few finalists, but interestingly, SoftBank did not know for certain who the new CEO would be when the term sheet was signed.
Once she had been recruited, Schneider met with the SoftBank team. It turned out that Schneider already knew Housenbold from their decades in Silicon Valley.
“This is a coincidence it’s happening at the same time,” said Josh Viner.
It is nevertheless a new phase for the Viners: The two brothers once had control of the board, but will now be just two of eight directors. They compared it to when Larry Page and Sergey Brin of Google handed over the CEO reins to the elder Eric Schmidt.
Wag is in more than 100 cities in the U.S., but has no international footprint. Expect SoftBank to push the company to grow overseas quickly.
The challenge for Wag will be to grow from primarily the dog-walking market into the much more substantial pet market, which Wag pegs at $70 billion in the U.S.
SoftBank is placing a series of bets on automation, and envisions a company that is well beyond merely connecting dog owners with available walkers in their neighborhood. The investor was impressed by the rate of adoption by millennial users and the low costs to acquire customers.
But the company nevertheless faces a persistent threat in the U.S. dog-walking industry from Rover, which has raised over $160 million. Both Schneider and SoftBank see the market to be big enough to host both a Wag and a Rover — and that there is not yet a preeminent global brand for the dog industry.
“We think about pet services broadly,” Schneider said.
Now Wag has a big cash advantage over its competitor. In addition to the $300 million in fresh cash, the person close to the deal said, more than half of the $60 million the company has previously raised is sitting in the bank.
Other backers include Sherpa Ventures, General Catalyst and Battery Ventures, which quietly led the company’s $40 million round last year.