One of the region's fastest-growing companies has been sold to an emerging Boston-based startup.
Cuddle Clones, founded by Jennifer Williams and Adam Greene in 2010, has been acquired by Dianthus, an artificial intelligence (AI) e-commerce company. The Louisville-based company, which makes plush replicas of pets, among other pet products, grew its revenue from $3.27 million in 2018 to $11.67 million in 2020, a 256% increase, according to Business First's 2021 Fast 50 list.
Williams said the acquisition will create a 10-times return for Cuddle Clones' original investors, which initially funded the company with a $300,000 investment in 2012. With performance-based incentives, it is expected to be an eight-figure exit for Cuddle Clones.
"Adam and I thought that 2021 would be a good year to look into selling the business, as we had achieved triple-digit growth for a couple years in a row and because 2020 was such a good year for the pet industry and e-commerce," Williams said. "I also have that entrepreneurial itch and would like to move on to new projects. My passion is building companies from the ground up and then handing them off to a team that can take them to the next level.
"We feel that Dianthus’ strong team and concentration in AI tools will help grow Cuddle Clones further."
Dianthus, founded by Louisville native Rob May in 2021, looks to help small to medium e-commerce brands grow faster on a common AI platform that includes new technologies and new AI-centric workflows, processes and ways of working. In an interview Tuesday, May, a venture capitalist and founder of Backupify, said he was looking into machine learning for e-commerce in late 2020 and initially thought it wouldn't be economically worth it to develop AI tools for consumer product-focused sectors.
He was going to pass on the whole space before coming across Boston-based Perch and similar companies, which have a roll-up acquisition strategy of buying smaller companies in similar verticals. "I was like: 'Hey, what if we incubated a company that did this roll-up model?'" May said.
That company became Dianthus.
"We build our own software, but instead of selling it, we use it to do this roll-up model — and so that was the genesis of the idea."
Cuddle Clones is Dianthus' second, but first major, brand acquisition in the pet space. May said he was attracted to the company's custom, handmade product, as well as its skilled team, which filled some gaps for his company.
"We're going to continue to expand our Louisville office for other Dianthus positions and other brands," he said, noting that Cuddle Clones headquarters at 445 Baxter Ave. will have a mix of Dianthus, Cuddle Clones and other employees. "We've hired some machine learning talent that's going to be starting in the Louisville office soon. So we are definitely going to build out our Louisville presence."
Dianthus will be trying to reach $100 million in annualized revenue by the end of the year, both through organic growth and additional acquisitions.
Williams said she knew of May and his startup Backupify, which got its start in Louisville, but had never met him in person. But through mutual connections — namely Vik Chadha, founder and CEO of Scalable Ventures — they were able to vet each other and the opportunity.
"There were people that we knew in common that were willing to vouch for Jen and for the company," May said. "I think that — plus some of the changes they had made like shift towards profitability and some of the revenue growth opportunities — it just felt like all that together made it really attractive acquisition for us."
Williams is now vice president of business development at Dianthus, where she will be assisting with the company's M&A strategies and fundraising, working with partners to help additional brands take advantage of Dianthus’ AI tools and models, thinking about the future and Web 3.0 and still a little work on Cuddle Clones partnerships.
She also plans to continue to be engaged in Louisville's startup ecosystem.
"I made some small investments into three companies in 2020 and would like to continue that trend into the future," Williams said. "I am also working on a couple startup ideas under my newly formed startup studio called Working Title Labs. I’ve received some investment funds and currently have two employees but the ideas are not quite ready to be shared with the world yet."
