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Dutchie: A 3-Billion-Dollar Cannabis E-Comm Giant

Dutchie certainly has made headlines with its rapid growth over the last few years. An e-commerce platform focused on facilitating dispensary operations and transactions, Dutchie enables more than $14 billion in sales annually across 5,500 dispensaries in the U.S. and Canada en route to an October 2021 valuation of $3.75 billion.

Ross Lipson, CEO, Dutchie

The company launched in 2017 after Ross Lipson, a co-founder and the company’s CEO, saw the opportunity for the convergence of a mission- and values-driven company in a rapidly growing market. The failed war on drugs is a product of systemic racism, Lipson tells Cannabis Business Executive, and being aware of that injustice can make cannabis “a really uncomfortable setting to be in …. And it gives us the responsibility and the opportunity to change that.”

That’s why five months after it completed its Series D fundraise of $350 million in October 2021, Dutchie announced a $100,000 donation to Last Prisoner Project and pledged to match $1 million in donations to the non-profit from their dispensary partners and cannabis consumers.

Despite the industry goodwill the Bend, Oregon, company is building, the pressure might be on for the company to execute well on its strategy, as several–if not most–of its hedge fund investors are taking big losses in the current difficult financial environment. Bloomberg reported that D1 Capital Partners, which led Dutchie’s Series D funding, is down 28% year to date (YTD). Tiger Global Management, another hedge fund that participated in Dutchie’s Series D and its $200 million Series C fundraising, saw its flagship public fund take a 54.7% YTD loss, and a crossover fund (one that mixes publicly traded tech companies with private equity investments) hit 44% YTD losses in October, according to the Financial Times.

After raising more than $600 million since its inception, building a team of more than 650 employees (including 300 staff focused on research and development), and acquiring POS platforms Greenbits and LeafLogix in 2021, Lipson says Dutchie is going to be “heads down, laser-focused on the customer” and be “very open to the partnership ecosystem” moving forward, adding that Dutchie has “a very, very healthy balance sheet that gives us plenty of runway.”

North Star

At its roots, Dutchie is an e-commerce platform enabling retailers to rapidly set up an online storefront with just one line of code and take orders for in-store and curbside pickup, delivery, kiosk, and drive-thrus.

Fairly plug-and-play, Dutchie can integrate with the dispensary’s website and can create subdomain menus on the retailer’s domain to increase its search engine optimization ranking. The platform is pre-filled with a product library, allowing inventory managers to quickly add products with images and descriptions to their menus. It also comes with free analytics features as well as the Dutchie Order Terminal, a touchscreen device that allows retailers to receive and manage orders and print fulfillment tickets.

Dutchie also offers what it calls “Ecommerce Plus+,” a service that allows retailers to design a completely customized front-end for their digital menus by leveraging Dutchie’s APIs and data–although that package might require a bit more back-end coding knowledge than might be available to most retailers, making it a more enterprise-grade offering.

As he built an e-commerce platform, Lipson saw the cannabis market was being built on what he considered a fragmented technology base, and ”that was the impetus for us to move into the point-of-sale space,” he says. Merchants may have different software providers focused on each e-commerce, POS, payments, ERP, and loyalty, “and the only way to succeed is that all these systems have to be communicating together in a seamless fashion through API integrations, which, after being in the space for a quick three years, we realized that this is a broken model.” 

After acquiring both LeafLogix and Greenbits, the company launched Dutchie POS in August 2022. Combined with its e-comm solutions and Dutchie Pay, its fully integrated, closed-loop automatic clearing house (ACH) solution, Lipson is positioning the company to “attack the most important pieces to the retailer,” he says. “Our North Star goal is to provide as much value to the industry. And how we do that [is] … by creating an all-in-one technology platform that streamlines the dispensary’s operations, focused on point of sale, e-commerce and payment.”

Retailers can still leverage whatever POS or payments provider they prefer, but Dutchie does offer bundling discounts and promises smoother operations and integrations when integrating all of its solutions. “There are tons of savings on the support side,” Lipson says, “they have one account, one customer success manager, and one platform that powers a majority of their core products.”

Covering an Insurance Gap

Having discussions with retailers helped Lipson identify synergistic parts of the retail process that Dutchie could integrate with. But those conversations also revealed other problems that normally would be outside of an e-commerce platform’s core competency. Namely: insurance access. 

“A dispensary, like all retail, needs insurance policies and coverage in order to operate and open,” Lipson explains. “However, the typical brokers and insurance agencies do not understand cannabis that well, and therefore do not have products that fully cover the needs of the dispensary. And then further they’ve deemed it a high-risk category and are charging, in some times, astronomical prices.” 

“So we saw an opportunity to better suit our merchants’ needs with better coverage, better insurance policies and products, and then further save them a ton of money.” the CEO says, adding that he views insurance as a value-add to Dutchie’s core offerings, not necessarily something that will be a flagship feature any time soon. 

With its insurance solutions, Dutchie is a broker working with a network of carriers to find the best solutions for clients. Dutchie’s internal team of insurance experts can review a cannabis operator’s current insurance policy documents to identify coverage gaps and savings opportunities. The insurance program is “open to anybody in the cannabis space, from cultivators to manufacturers, distributors, retailers, and anybody in between,” Lipson notes.

Relying on In-House Expertise

To continue improving company offerings and executing his vision for it, Lipson plans to rely on Dutchie’s deep in-house knowledge pool. Lipson has on-boarded experts from Toast (leading POS provider in the restaurant space), Square, Shopify, DoorDash, Uber, and PayPal, to name a few. “We’ve brought on folks that have deep experience in our subject matter,” he says.

In the near term, growth for Dutchie mainly will be defined by feature development, performance upgrades, and reliability improvements. In addition to 300 team members focused on R&D, Dutchie also has 200 customer-facing employees to respond to service and feature requests, and help identify client needs.

Beyond maintaining customer relationships, “the partnership ecosystem is very important” to Dutchie, Lipson says, noting that the company integrates with over a hundred other software providers in the cannabis space and is always open to expanding its partner roster. “Ultimately, we look through the lens of what makes most sense for our customer, the dispensary. If it makes sense for us to integrate and partner with a provider because they’re providing value, we’re gonna do that.”

Brian MacIver

Brian MacIver

Brian MacIver is a freelance writer and editor based in Vancouver, British Columbia. He also is Partner and Director of Strategic Communications for Guerrera: The Agency, a boutique communications and marketing agency serving small businesses, nonprofits and progressive groups. He can be reached at [email protected]

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