Blazing Your Way to Billions

Weed.

Good old grass.

It’s on the minds of many- from college stoners to politicians, to business tycoons all over the country.

First, this is going to get controversial. Click off if you can’t take the heat. Still here? Let’s proceed.

I’m going to dive into some of the positive and negative health consequences of cannabis, before diving into a business that is absolutely crushing it in the space.

First, some of the positives:

• Weed has been shown to lower blood pressure- a 2017 study by JCI found that CBD actually lowered blood pressure in participants. Go figure.

• Helps treat anxiety (real anxiety, not the CBD trick we all know about)

• Improves sleep- to my fellow insomnics, this is all you need to hear

• Improves GI issues- ever feel that gut-wrenching stomach pain that you just want to make disappear? Well, looks like one joint is all it takes :)

• Actually lowers your risk of cancer. Crazy enough, CBD has been shown to promote cell death in cancer cell lines, and has been shown to have properties to treat tumors,

This one surprised me greatly, and at this point, I’m thinking: why aren’t we all stoners?

But, as the old saying goes, there are two sides to every coin.

So, I’ll mention some of the drawbacks:

• It can negatively affect IQ if used at a young age

• It can take a toll on your athletic performance (think worsened coordination, agility, etc)

• May have depressive affects

• It may harm your ability to drive and weave (shuddering as I think of LA traffic….)

Alright, now that we got both sides in a frenzy, let’s dive into a company that’s absolutely killing it.

Dutchie -The Shopify of Weed

Ever been to a dispensary that’s in a sketchy neighborhood? But you got to anyway to get the trees in your system.

Well, Dutchie is an all-in-one tech platform that has point-of-sale infrastructure, payments, and insurance for cannabis dispensaries. And it also helps dispensaries put their menus online so consumers can have a “Doordash-like” experience with the product.

Think of Dutchie as Shopify meets Doordash, but for, like, weed. Oh, and it’s worth nearly $4 Billion.

Let’s back up a minute. The business was launched in 2017 by Zach and Ross Lipson in Bend Oregon. They did outreach work and secured partnerships with three local dispensaries, showing exceptional hustle in the process.

In fact, though the business has big-name people such as Howard Shultz, Kevin Durant, and Snoop Dogg as investors, the Lipson brothers used a 1-by-1 recruitment approach. Specifically, they approached cannabis shops individually to sell them on their commerce technology, integrating with their systems. 3 dispensaries turned into 50 within months.

Eventually, the flywheel started to take off. 50 turned to 100’s, and the traction was palpable. Dutchie secured the first bag, with a $3 million seed round led by Snoop Dogg’s firm. A couple years later, they had thousands of stores on the platform, and expanded nationwide. Obviously, this attracted “the big boys” of the investment world- Tiger Global injected $200 million into the business, giving them unicorn status. Even wilder, just a few months later, they raised another $350 million. Cool.

Recently, however, things took a bad turn for the company. The board allegedly overthrew the founders of the company, and they sued the board in return. Things are definitely getting messy (we’ll keep you posted on the story).

Anyway, What’s their business model exactly?

Well, they charge a dispensary a monthly subscription fee in the range of $500 to $1000 per month to use the Dutchie software.

And currently, they have partnered with north of 5,000 dispensaries. Some back of the napkin math, which is all you need in the early stages of a company, and you can see they are making around $40 Million in Yearly revenue. Cool beans.

What Can I take away from this?

We got you covered.

Here are a few key points from this story:

1. Ride the wave of the market- The cannabis industry is a $22 Billion dollar market, and is expected to reach $134.4 billion by 2030. An incredible 25% annual growth rate.

Some of the biggest companies of the next decade will be built in this space. And, as Buffet says, the boat you’re in is often more important than how hard you row

 And he’s totally right- ride them waves, lads.

2. Focus on user density- basically, instead of going for a bunch of dispensaries across America right off the bat, the founders started in just Bend, Oregon. Build up enough dispensaries in a city in Oregon, and boom. You got some action and network effects going.

Which means, the spray and pray strategy of reaching out to random dispensaries would not have worked as well. In the early days, Uber actually used this strategy as well, focusing only on San Francisco.

3. X for Y Startups work - Remember the “I’m Uber for dog-walking” schtick? Well, that’s Wag, and it’s doing pretty well.

So, if you’ve got a good analogy going, like Dutchie’s “Shopify for Weed” play, don’t discount it.

4. Try to raise a crap ton of money, but choose investors wisely - If you’re going big, this applies to you. Unless you plan on bootstrapping, you’ll need capital for hiring, growing, etc.

But, get the wrong people on board, and you’re totally screwed. Dutchie’s investors and board ousted the founders recently, and a court battle is brewing.

Well, lads, we’re a bit far from 4/20, but with recent developments with Dutchie, this industry’s getting very juicy. Get in on the action and start that weed company. Or don’t.

That’s totally cool too.