For the tamed ones: Why Petcube enters the domestic market only now – 11 years after its launch

In 2012, three guys from Kyiv invented a product that made them known as the "most promising startup" within a year. The founders of Petcube – Yaroslav Azhniuk, Andriy Klen, and Oleksandr Neskin – created a smart camera designed to connect pets to the internet. The device allows users to observe, feed, and play with their pets remotely. The first sales began in 2014, after the startup raised over $250,000 on Kickstarter.

However, rapid success didn't guarantee an easy start. According to the founders, 2018-2019 were the most challenging years: several reorganisations, lay-offs, sales channel reviews, and funding setbacks. After a thorough optimisation in the second quarter of 2020, the company became profitable.

Today, Petcube can hardly be called a young startup. Over its existence, the company expanded to more than 20 countries and finally announced its entry into the domestic market in May. What prevented Petcube from conquering Ukraine earlier? Why did the founders choose a very 'fortunate time' for the launch? And is there a demand for such devices? Mind explored these and many other issues.

Why didn't Petcube start in their home market? Since its inception, Petcube aimed at the American market and actively expanded overseas. Over 11 years of existence, the company managed to open operations in 22 countries. "The largest market is in the States. The UK and Australia are sizable markets as well. Asia is also very promising – interesting products constantly emerge there," explain the representatives from Petcube.

Andriy Kolodiuk, Founder and Managing Partner of venture fund AVentures Capital, clarifies that if a product is a world-class innovation, companies should launch it first in global markets, conquer them, grow a larger business, and invest in further development. For a long time, the Petcube team focused on developing the American market. "Petcube faced significant challenges in penetrating the US market, which was their main market. Therefore, the team had to concentrate all their efforts on working with customers, channels, and improving product-market fit," says Semen Dukach, Managing Partner of venture fund One Way Ventures and an investor of Petcube.

Why did the company enter Ukraine only now and at such a 'good' time? "Limited operational resources, a lack of reliable distribution partners, and the unpreparedness of the domestic market for expensive technological devices for pet care delayed the launch in Ukraine," explains Dukach.

Petcube had planned to enter Ukraine last year. During this time, the company was searching for a reliable partner and the price democratisation of newer products in the line-up. "Petcube could have entered the Ukrainian market earlier, but COVID and the war hindered it. It is a profitable project, which is crucial because it involves hardware. Due to having the Petcube Care service in the company, they were able to cover operational expenses," says Kolodiuk.

Currently, the company employs over 50 people. The team is international, but the majority of employees are Ukrainians. Petcube has offices in Kyiv, San Francisco, and Shenzhen, where manufacturing is set up. "We have been working with China for many years and have a team of engineers and managers there. At the beginning of the pandemic, there were significant logistics problems for several months. But now all processes have been restored and streamlined, making work quite comfortable," says the company.

How much money was needed to enter the domestic market? The team does not comment on this question. However, they note that the company is currently investing resources in the development of the Ukrainian market, and in the long term, it will yield financial gains. "I know that money was not the key motivation for the Ukrainian launch. The market will grow, and profits will come along, but it was crucial for Petcube to launch in Ukraine, where the brand and products were originally created," says Dukach.

Which products exactly were introduced? The company launched Petcube Cam and Petcube Bites 2 Lite with a built-in feeder. These are smart cameras equipped with HD 1080p video, two-way audio, and night vision mode. They operate via a mobile application, where users can switch between different devices and share camera access with friends and family.

Both products are supported by the Petcube Care service, which stores short clips with the history of events in the cloud. Using computer vision, Care notifies about the movements of animals and people, as well as barking and meowing.

How did the company start gaining traction? In the beginning, the company announced the start of sales in the Comfy, ALLO, Eldorado, Foxtrot, Stylus, ROZETKA, and E-ZOO networks. They also promised that the list of retailers would be expanded later on.

What is the sales trend? This figure remains a commercial secret, according to the company. According to the press service of ALLO, most Petcube customers reside in Kyiv and Lviv, with Petcube Cam being twice as popular as Petcube Bites 2 Lite.

Kolodiuk predicts that sales could be quite high due to brand recognition, and the initial weeks of the launch showed that Ukraine could contend for a top-3 position in Europe in terms of sales, even despite the ongoing war.

What are the chances of success? Kolodiuk points out that Ukraine is not a significant market for Petcube, so the sales level cannot negatively impact the overall business. The risks are mostly borne by the partner who sells the products. "The company works with a distributor and sets a certain margin for itself from the beginning. It is small, but it should be noted that a part of Petcube's profits comes from software services," notes Semen Dukach.

However, Petcube is confident that there won't be critical losses since they are progressing with small steps. "The local market is several times smaller than the American or Western European ones. There is a certain caution and an attempt to better understand the demand. Pet products, even if they are technological, are practically recession-proof and not affected by negative economic macro-trends. People will always take care of their families. Pets are part of the family," explains Petcube.

However, the Ukrainian consumer is only getting acquainted with the culture of caring for pets. This culture, as it exists in the West, is still in its early stages of development in Ukraine. "Low competition or its absence may indicate that the market doesn't exist yet, and budgets will need to be allocated primarily for its formation. By the way, competitors may benefit from it in the future," explains Andriy Chumachenko, co-founder, and managing partner of the Netpeak internet marketing agency.

"Without a doubt, there will be demand," Dukach hopes. "The culture of pet care in Ukraine is undergoing positive changes, and there is a growing demand for technological products. Petcube has significantly made prices more accessible with the introduction of new generations of interactive cameras, creating better conditions for our market. Moreover, to be frank, many people are aware of the company's Ukrainian origin and are delighted to have the opportunity to purchase devices in Ukraine."

What are the plans? The team is currently working on several new products and plans to release them by the end of this year. Recently, Petcube launched a new service called Emergency Fund by Petcube. This emergency fund serves as an alternative to pet insurance, covering up to $3000 for unforeseen veterinary expenses and providing 24/7 access to online chat with certified veterinarians. As of now, the service is only available in the United States, but the company intends to expand its geographical reach in the future.