News & Analysis

Cannabis tech company Dutchie secures $1.7 billion valuation! Will it IPO?

26 Mar 2021 | by: Kirsteen Mackay

Cannabis tech company Dutchie secures $1.7 billion valuation! Will it IPO?

Cannabis tech company Dutchie, just secured an incredible $200 million in a Series C funding round that lands it a whopping $1.7 billion valuation! The company digitalizes cannabis dispensaries from website setup through order processing and product tracking. This gives the company a value eight times higher than it was just seven months ago when it closed its Series B funding round for $35 million.

Cannabis company Dutchie seals record funding round.
Dutchie’s valuation soars to $1.7bn – Photographer: Esteban Lopez | Source: Unsplash

This $200 million will go towards expanding internationally and building a suite of discovery and educational tools for consumers.

Why did investor interest soar?

The reason for the massive hike in investor interest is that Dutchie now owns two additional companies. These are point-of-sale software producer Leaflogix and enterprise resource planner Greenbits, and this is giving Dutchie a competitive edge. The acquisitions add 150 employees to its payroll, effectively doubling its employee base.

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Leaflogix and Greenbits acquisition by Dutchie

Cannabis dispensaries are a safe and easy place for consumers to access cannabis locally. But being able to order online provides added convenience. And this is why Dutchie is aiming to be the equivalent of Grubhub or Uber Eats for marijuana delivery. Dutchie CEO Ross Lipson comes from the online food ordering industry with a wealth of transferable experience under his belt.

But that’s not all. Dutchie is helping the dispensaries streamline their operations by bringing in omnichannel solutions that meet consumer desires.

A fully-integrated shopping experience

What an omnichannel strategy ultimately means, is that Dutchie is creating a fully integrated shopping experience, for customers of the dispensaries it serves. This means from the physical store to the virtual store and every step in between.

It includes mobile applications, educational literature, physical pick-up, delivery, and a full spectrum of offerings made possible by these offline and online worlds colliding.

Like grocery stores, cannabis dispensaries are the sort of business that will always benefit from both a physical and online presence. So Dutchie is providing the infrastructure to power the industry and help normalise the cannabis space efficiently.

Growth in the sector

Cannabis retail is an explosive industry that’s rapidly grown in the pandemic. A combination of factors have boosted sales. These include being stuck at home, striving to pass the time, self-medicating and improving general health. With many people reluctant to leave the safety of their own four walls, delivery demand has soared too.

Marijuana is still illegal at the federal level, but states are gradually reducing restrictions and there’s widespread optimism that the Biden administration will legalise it from the top.

As an illegal Schedule I drug, cannabis companies are barred from utilising the services of commercial banking and insurance. And as it currently stands, the complex legal situation makes it difficult for cannabis companies to navigate the interstate regulatory intricacies.

With regulations easing in the future this should improve the landscape for businesses operating within it. For instance, the safe banking act should pass, which will allow payment processing within the pot industry to normalise.

Dutchie congratulates states for legalizing cannabis

Top quality investors backing Dutchie

Investment firm Tiger Global Management led Dutchie’s record $200 million funding round. This is a prominent hedge fund with two decades worth of experience. San Francisco-based Dragoneer and venture capital firm DFJ Growth also joined it, while several existing investors stumped up cash too.

The company has already attracted some big-name celebrities to back it in previous rounds. These include Snoop Dogg, Kevin Durant and ex-Starbucks CEO Howard Schultz.

Snoop Dogg’s Casa Verde Capital is one of the long-time investors back for more in the latest funding round. As are Thrive Capital, Gron Ventures and Howard Schultz.

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Dutchie was founded in 2017. It’s based in Bend, Oregon and has now raised $253 million since the start.

Previous investor Thirty Five Ventures is co-founded by two-time NBA Champion and Finals MVP Kevin Durant and his manager Rich Kleiman. When Thirty Five Ventures invested $1 million in Dutchie last summer, they’d no idea how right on the money they’d be. It’s now worth a staggering $25 million.

Ross Lipson, Dutchie co-founder and CEO commented:

“This round is one of the largest in cannabis and a landmark round that brings top-tier people to the space…The industry is bringing change, and it’s a beautiful opportunity to be a part of it.”

What do Dutchie dispensaries sell?

Some dispensaries are Medical-only, which means you must have a valid medical card to place an order. Others offer recreational products too.

Products include cannabis flowers with exotic names such as ‘First Class Funk’, ‘Marshmallow OG’, ‘Sundae Driver’, and ‘Garlic Grove’.

As an example, a half ounce of ‘One Night Stand’ costs $140 and contains 24.8% THC (the ingredient that gets you high) and 0.07% of CBD, this is a hybrid cannabis flower product. Meanwhile, ‘Sunset Sherbet’, a cannabis vaporizer, heats the product by a battery and is vaporized for inhalation. This has a very high THC content of 82.9% and 0.24% CBD. It costs $50 for 0.5g.

An example of a recreational product is the ‘Gorilla Glue Gelato’. This is a rolled up and ready to smoke pre-roll.

The Dutchie website is easy to navigate and after choosing your location, it displays the dispensaries available near you. From here you can browse what’s available and read about the different potencies and products and what they’re good for.

Dutchie wants to focus on educating consumers and helping them discover what’s available in the wild world of cannabis retail. As more and more states start to legalize, the site has plenty of opportunity for further growth.

If the cannabis sector evolves to become more widely acceptable, it begs the question, would Dutchie potentially move away from servicing dispensaries and simply go direct to consumer? The CEO says No. He firmly believes that consumers will always prefer a local dispensary model to be able to ensure access to freshly cultivated plants.

Highly competitive space

Cannabis is a highly competitive space with a ruthless winner takes all attitude. Nevertheless, Dutchie has an edge because it can be independent of the brand manufacturers. That’s because it’s there to serve the industry in general rather than any individual brand.

Apparently consumers shopping at dispensaries spend 30% more online than they do in the physical store. So by providing a seamless shopping experience to customers via the dispensaries, Dutchie can help boost revenues for its client base.

Will Dutchie be the next cannabis company to IPO? Lipson denied any plans to IPO via SPAC but didn’t rule out entertaining business opportunities as they arise. It doesn’t appear to have any plans at the moment, but we should definitely watch this space.

Other interesting and innovative companies operating in the cannabis space include Creso Pharma and Red White and Bloom, both of which we’ve covered at Value the Markets.

Valuethemarkets.com, Digitonic Ltd (and our owners, directors, officers, managers, employees, affiliates, agents and assigns) are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above.

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

  • Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.
  • Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

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