Summary List Placement
Cannabis tech has become one of the hottest areas of the nascent industry, because it gives major venture capital firms an opportunity to bet on the spread of legalization in the US and around the globe.
The latest example of the sector’s appeal comes from Dutchie, a cannabis e-commerce startup. On Tuesday, Dutchie closed a $200 million Series C funding round led by Tiger Global. The round includes top Silicon Valley funds like DFJ Growth and Dragoneer, as well as Josh Kushner’s Thrive Capital, rapper Snoop Dogg’s Casa Verde Capital, and former Starbucks CEO Howard Schultz.
The round gives the Bend, Oregon-based software company a $1.7 billion valuation. Dutchie last closed a $35 million round in August.
This past summer, venture investors poured $57 million into cannabis tech companies, including Dutchie’s aforementioned Series B round, Fyllo, and SpringBig. New York City-based cannabis e-commerce startup LeafLink closed a $40 million round led by Founders Fund in December.
Big investors have their ‘eyes wide open’ to cannabis
Dutchie uses software to connect cannabis consumers to local dispensaries in their area. Dispensaries are then able to use insights to figure out how to better attract, target, and retain customers.
Dutchie cofounder and CEO Ross Lipson told Insider that Dutchie attracted mainstream investors by setting lofty goals, and then “exceeding those expectations.”
“We’ve stayed very, very focused in providing a leading technology platform in our sector,” he said. Lipson, one half of the pair of brothers that runs Dutchie, has experience in the e-commerce space: He previously founded a food delivery startup he sold to Just Eat in 2012.
For his part, Lipson said most venture firms have their “eyes wide open” to the cannabis industry.
“Cannabis is one of the fastest-growing segments of the economy right now,” Lipson said. “They’re looking for somebody to emerge as a leader.”
Dutchie on Tuesday also completed the acquisition of Greenbits, a cannabis software company that helps dispensaries manage point-of-sale services — also a Tiger Global-backed startup — and Leaflogix, another cannabis software firm.
Lipson said the acquisitions were born out of ongoing partnerships and from listening to dispensary clients who wanted a one-stop-shop for their software needs, rather than working with multiple companies.
Cannabis tech is one of the few areas mainstream investors can bet on
Cannabis remains illegal on the federal level in the US, though many states allow it to be sold for medical or recreational use. The substance’s illegality has constrained the pool of firms who are able to invest due to fears over reputational risk or even federal prosecution.
Cannabis tech, however, is a promising area in that the companies don’t sell or cultivate marijuana directly. For institutional investors who are bound by vice clauses with their own investors — who may be foreign sovereign wealth funds, pensions, or other groups that have restrictions about where their money is going — cannabis tech is the only available pathway to bet on the spread of legalization.
“We work with companies that have the potential to reshape major parts of the global economy,” Tiger Global partner John Curtius said in a statement.
Lipson said Dutchie will use the new capital to fuel growth into new state markets as they open up. Five states voted to legalize cannabis for medical or recreational purposes in November’s election. New York lawmakers are also weighing whether to legalize the substance for all adults.
Lipson said he expects Dutchie to double its headcount, which currently stands at just over 300 people, in the next twelve months.
As for his best advice to other cannabis tech entrepreneurs, Lipson said it’s all about telling your story in a simple, but effective, way.
“I think business is simple and you have to really boil it down to the value you’re providing,” he said.