Bold decisions, great timing, and a little bit of luck: Lessons from Mad Paws founder, Justus Hammer

Co-founder of Australia’s largest online pet platform, Mad Paws, Justus Hammer has reached the pinnacle of business success – but it hasn’t been without its ups and downs and a lot of innovative thinking. He joined editors Cec Busby and Adam Bub on the First Act podcast to share some of the secrets to his success.

Known as ‘Airbnb for pets’, Mad Paws connects pet owners across Australia with trusted pet sitters. Since launching in 2014, the business has grown to have more than 30,000 pet sitters at the ready, even expanding during COVID to launch their pet food subscription service, Dinner Bowl. Before Mad Paws, Justus was also the founder of the successful group buying platform, Spreets, which he sold to Yahoo7 for $40 million after just ten months in operation.

Justus credits a few simple yet crucial things to his successes – lessons he’s learned from years of trial and error.

Execution is everything

Firstly, the German ex-pat says that while a big part of a business’ success is about the right timing (and a little luck), it’s also essential to nail your execution to secure your reputation as the best in the space.

“Spreets was one of those opportunities we saw working elsewhere, and it was very much an executional play on making it work in Australia,” says Justus. “A lot of times, that’s also driven by luck, right? You can pat yourself on the back and say you’ve looked at everything and made the right call, but I’ve also been wrong. Sometimes it just doesn’t play out the way you think it will. This was about spotting an opportunity overseas, then looking at the market and executing it better than anybody else.

“From the beginning, Spreets was built with an intent to sell,” he reveals. “We knew it was a model that we had to drive very quickly and hard from a marketing perspective, so we were not shy about spending money, and we also had the right investors to push us that way. More conservative investors might have been concerned about our runway and how long we could survive at that spend. Still, our investors pushed us to spend harder and grow the company faster because it was a very competitive space. So being very aggressive in that execution and putting all our chips on the table to grow quickly was key. As a result, we became number one in the group buying space very, very quickly.

“We were also ahead of the curve regarding how we ran our performance marketing. Even back then, we could tell you on a single customer basis when they joined, how much we spent on them, and how long it took us to make them profitable. Of course, that’s standard procedure now, but back then it was quite ahead of the times. It allowed us to also be more aggressive in how we spent on our marketing than some of our competitors.”

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Nailing a niche

After selling Spreets, Justus was in discussions with three other entrepreneurs, all keen to do something in the pet space. However, with significant retail giants like Pet Barn already increasing in Australia, a decision to conduct some market research proved a valuable move in finding the perfect niche.

“A big ‘a-ha’ moment was when we did our first consumer research,” Justus says. “We knew we wanted to do something in the pet space, so we invited some dog lovers to share their concerns. We saw the amount of love that they had for their pets and their passion for the idea of not having to go to a kennel. Some of them told us they’re not going on holiday because they don’t have somebody to look after their pets. That was when we realised there’s a big opportunity here to solve a key customer issue, rather than just trying to build something else that nobody needs. Nobody else was looking at it from an experience or services space.

“It is always like that,” Justus muses. “I think the second you go out and talk to more people, you’ve got a chance to find out whether you’re on the right track or not. The biggest mistake I think you can make is trying to perfect your idea without talking to anyone. It doesn’t mean that you get it right all the time, but it helped us verify there’s something there.

“We discovered a huge opportunity to build a bigger brand from the services side and then potentially add additional revenue streams to it later. Once we achieved that, then it was the right time for us to look at using the incredible customer base we’d built up to put other premium offerings in front of our customers and expand our service and product offerings.”

COVID – a blessing in disguise

While the pandemic outbreak initially impacted Mad Paws’ operations, along with countless other businesses worldwide, Justus says the challenging circumstances were the catalyst to expand the company to survive.

“In two weeks, we lost 85 per cent of our revenue because everyone was locked up at home and nobody could travel. It was a huge impact on us as a business. We had to decide between shutting down or putting the company into hibernation and letting go of all the great staff that we’d built. Instead, we decided to do the opposite, using the team to help us build the new revenue streams we’d always discussed.

“We started Dinner Bowl – from the first idea to shipping the first box was just over two months – and that saved us because it meant that we could keep our staff. All of them took pay cuts to get through that time, and then we ramped it up once the business slowly came back. Our team were extremely supportive and wanted to stay with the business, and we used that energy to build that new part of the business.

“Because of that, we had the opportunity then to take the upside out of COVID, which was the realisation that after a few months of lockdowns, everyone was buying pets. There are 25 per cent more pets out there now in the 18 months since COVID – that’s a huge opportunity for us. Because we made a bet on staying alive and doubling down on the business, the business is over ten times bigger now than when we went into COVID.”

Not about the money

No doubt about it, business can be tough. For those wondering why you wouldn’t just retire in luxury after selling a business for $40 million, Justus has some wise words.

“The first reason is that I didn’t quite get the whole $40m,” he laughs. “And by today’s standard, I probably couldn’t buy a house for that in Sydney anymore.

“The other thing I’ve had to learn over the years is that life is not about making a huge amount of money, because I think if you think about the pleasure you get from working or the enjoyment you get from something – it is not about the money. It is kind of an endpoint, and that’s great, but if you don’t find ways to enjoy the journey, it’s a pretty sad existence.”

Justus shared more insights into his business journey, including the lessons learned from failure and the benefits of partnering with the right big brands on First Act. Listen to the full ep now.

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