When Nate Raabe co-founded RX3 Growth Partners with NFL QB Aaron Rodgers and Roth Capital CEO Byron Roth, he didn’t foresee the firm investing in dog food.
Launched in 2018, RX3 positioned itself as a growth equity firm backed by athletes and celebrities (which make up roughly half the investor base) as well as professional investors. Its first few announced positions—an eyewear brand, a sports equipment provider, an at-home fitness venture—fit the mold of companies often associated with athletes.
But in 2020, amidst a pandemic that saw more than 23 million American households adopt a pet, RX3 participated in a $34M Series B round for dog food maker Nom Nom. And the firm’s high-profile investors ate it up (so to speak).
“That’s exactly when we realized that there is a real interest in the category from our investor base, and that pet is a category that we’re going to be able to provide that value beyond capital,” Raabe said in an interview. “When we did make that announcement … we got a lot of interest from our investor base that they wanted to get behind it, they wanted to support it, they wanted to try the product.”
Within a year, RX3 added another position with dog food company Victor. As it begins to invest out of a soon-to-close second fund, Raabe sees similar investments around the corner.
“The pet category as a whole, even beyond food, whether it’s in the veterinary space, accessories, different types of animals—that’s definitely a category we really like and are going to continue to get behind,” Raabe said.
In 2021, Morgan Stanley equity analyst Simeon Gutman wrote that “the U.S. pet industry has reached an inflection point.” Investors have taken notice, including the athletes among them—many of whom have become devoted pet parents themselves.
Athletes—they’re just like us!—brought home pets at a rapid clip during the pandemic and spent more time with the animals they already had. Why not? They had free time for once, with schedules that were suddenly devoid of both athletic commitments and social events.
But unlike most pet-lovers, players also had a platform, and many of their dogs have developed followings of their own.
Two then-Blue Jackets defenders joined the trend of pandemic adoptions (one goldendoodle, one French bulldog) and got immediate attention. In April 2020, the Capitals started selling a dual bobblehead of Tom Wilson and his dog, Halle, to benefit a local animal rescue. Patriots wideout JuJu Smith-Schuster’s frenchie, Boujee, is now nearing 200,000 Instagram followers.
“NFL players love their pets to death,” Bills QB and RX3 investor Kyle Allen said via email. “They are huge stress and anxiety relievers.” As the owner of a doodle himself, he said investing in dog-related brands made complete sense.
Serena Williams may have been one of the first athletes to recognize the investment potential attached to pets (her Yorkshire terrier is named Christopher “Chip” Rafael Nadal). Serena Ventures has been an investor in pet wellness brand Ollie since before COVID caused the canine boom.
“It went from basically nothing to something,” Nom Nom co-founder Nate Phillips said of celebrities getting involved in pet food generally. “It’s definitely taken off.”
Phillips added that bringing on notable investors proved more sensible than trying to stick to influencer endorsers, in part because getting a celebrity to change their go-to dog food is trickier than committing to other product placements.
Nom Nom’s growth strategy worked. Last year, Mars Pet Care acquired the startup, and RX3 saw an annualized return over 100%. That was one of five exits RX3 has already achieved as it also continues investing in businesses more typically aligned with athletes, such as Therabody, Manscaped, and Corepower Yoga.
Going forward, Raabe sees interest in the pet category growing, especially if other sectors don’t heat back up.
“We’re seeing pet [spending] as more consumer essential and a little bit more recession resistant than a lot of other categories,” he said. “The macro environment has affected a lot of brands and sectors. It’s going to affect some more than others.”