Backed by Howard Schultz, Kevin Durant, and Snoop Dogg, e-commerce platform Ross Lipson claims more than 40% of the market and doubled its value last year to $3.8 billion. But as legalization spreads, so could his business increase.
aOctober 1, 2015 – the first day of recreational cannabis legalization in Bend, Oregon – Ross Lipson has been waiting in line for an hour to buy a little cannabis. A few years ago, he had sold the online food ordering company he co-founded after dropping out of college for about $30 million. Since then, the businessman in his twenties has spent his days snowboarding, during what he describes as a “off” from working for a living. But before he hit that cash register, a new business idea popped up on Lipson like a rip bong: he should start a company that helps dispensaries take online orders.
“I really feel like I was the right person, in the right place, at the right time,” said Lipson (top, left), now 34. “It was the first day of Oregon legalization, in the first hour, I’m standing in line and the lamp goes out The electrician in my head who orders online cannabis. And you know I’m the right person to do this because I have a lot of experience over the course of nearly a decade in the restaurant space.”
He immediately called his older brother, Zach (above, right), who was in the process of being sold for him Startup RepPro, an online tool for financial advisors, to see if their idea was a good idea – or a cannabis-inspired entrepreneur. “It’s a no-brainer, you have to do,” Ross Lipson recalls. “By July 2017, the brothers had launched Bend-based Dutchie as an e-commerce software company that helps dispensaries put their menus online So customers can order flowers, food, or e-cigarettes with a few taps on their smartphone for pickup – delivery isn’t an option.It’s a model that’s basically a mix of Shopify and Seamless, but for the bowl.
The first dispensary to use the Dutchie was the same dispensary where Lipson had his eureka moment, and within months, 50 Oregon dispensaries signed up for the service.
“We’re determined to stay in that tech piece of the puzzle, rather than move on to touching the plant,” Lipson says of Duchy.
Somehow excited about investing in the cannabis industry — without investing directly in a property that is still illegal federally — investors jumped on it. Snoop Dogg’s venture firm, Casa Verde Capital, led a $3 million seed round in 2018. Two years later, Josh Kushner bought Flourish Capital Fund and NBA star Kevin Durant and billionaire and former Starbucks CEO Howard Schultz. In March 2021, Duchy raised $200 million in Series C led by Tiger Global, which has backed companies such as Peloton, Roblox, Spotify and Juul. The investment made Deutsche Cannabis a rhinoceros, worth $1.7 billion.
Seven months later, in mid-October, Datchie announced a new funding round of $350 million, led by billionaire Daniel Sondheim, D1 Capital Partners, with a valuation of $3.8 billion. It all depends on the capabilities. all said, Forbes Datchie is estimated to have generated around $5 million in revenue in 2020 and about $45 million in 2021. Lipson has not commented on his company’s revenue.
Dutchie sells e-commerce and point of sale software to dispensaries that help them take online orders, manage inventory, comply with state law, and operate their own cash registers. Dutchie sells its software products on a monthly subscription basis, ranging from $500 to $1,000 per dispensary. There are currently an estimated 9,000 dispensaries across the United States and Canada, and the Dutchie claims that about 5,000 dispensaries have at least one Dutchie product.
But more than anything, what Dutch investors are counting on is the potential of the cannabis industry while it’s still in its infancy. In 2020, cannabis sales hit the US $17.5 billion, but this number is expected to grow to $100 billion by 2030. So Dutchie has become a way to invest in the industry without investing in a cannabis company. Lipson says that Datchie will never grow, sell, or distribute marijuana.
“It will always be, always will be, software,” he says. “We are determined to stay in that technical piece of the puzzle, rather than move on to touching the plant.”
It’s an important distinction because many mutual funds are governed by rules that forbid support for companies that break the law or violate the Limited Partners Ethics requirement.
The upside is still years away, says Gaurav Ahuja, partner at Josh Kushner’s investment firm Thrive Capital, which has invested in Dutchie. “We see a lot of similarities with beer, wine and spirits, which is $235 billion.” [annual sales] But these days it’s still relatively early for the cannabis industry, says Ahuja. Deutsches’ opportunity will grow as consumers’ access to cannabis grows and the banking resources of cannabis-related businesses expand.”
“People are realizing how huge this opportunity is and how much the Dutchman can do,” says Karan Wadhera, managing partner at Casa Verde Capital at Snoop Dogg, who has been involved in every funding round for the Dutchie. “I would say, in essence, becoming one of the major players in the point of sale space, and e-commerce alone is incredibly exciting. Duchy will have a presence in every new market and then there are opportunities outside the country and outside the continent.”
Others question how high the company is. For example, Duchy says its platform will process $12 billion in cannabis transactions across the United States and Canada this year. But the word “process” is somewhat of a misnomer. Dutchie and its point of sale products, GreenBits and LeafLogix, are not payment processors and many of the transactions that flow through its e-commerce platform are recorded by other point of sale systems. Additionally, most transactions in the industry are still made with cash — Visa, Mastercard, Square, and other payment processors won’t accept cannabis transactions until they are legal at the federal level. This means that clinics can only accept cash or cash equivalents such as ACH or . transfers Cashless ATM Transactions.
To put a $12 billion claim into perspective, the United States and Canada generated an estimated $29 billion in annual sales in 2021, according to analysts at Cowen. In other words, the Dutchie claims to have captured 41% of the North American market last year. But interviews with cannabis investors, operators and industry analysts indicate that Dutchess’ market share is as generous and positive as possible. “I see these numbers and I catch my eyes,” says a longtime cannabis investor who requested anonymity.
Cannabis laws by state
Most of Deutsches’ investors, including billionaires Howard Schultz and Dan Sondheim, along with Josh Kushner and the directors of Tiger Global, declined to be interviewed and would not answer questions via email. Lipson defends his numbers, saying his company’s forecasts are correct. “We stand behind the accuracy of our numbers at 100%,” says Lipson.
Right now, it doesn’t really matter if Deutche’s numbers are bulletproof. The company has been able to arm its huge capital and sell its software to dispensaries cheaper than its competitors because Lipson says he’s more concerned about growth right now, rather than profitability. (Duchi is not profitable and does not have a timeline for when it will be in the black.)