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Founded in 2015 Leaflink is playing in the fast-growing, but legally unknown, cannabis space
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The company did $6m in 2019 revenue helping 3400 dispensaries purchase from 1600 brands. Brands pay $400/mo on average to use.
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The team is 90 people today, customers churn at a 12% annual rate, and the company has raised $50m
Did you know you can’t mail cannabis, can’t transport it across state lines, and can’t even advertise it on traditional channels? Fear of being associated with the nasty side of cannabis has led many a company to drop potential clients.
Not Leaflink, the nationwide cannabis marketplace leader.
Founder and CEO Ryan Smith joined Nathan Latka on the show in late 2019 to discuss SaaS entrepreneurship from a fascinatingly unique perspective.
“The Whole Space Is A Startup”
The long and short of it is, you can’t look at the cannabis industry in the United States like you can any other industry anywhere. Hundreds of thousands of jobs have been created through legalization state-by-state, and cannabis technology companies are putting the pedal to the metal to get ahead.
So when most of the clients in the space are startups, it’s hard to really measure industry trends. The market leader last year might be irrelevant tomorrow.
Leaflink, though, has remained constant, with their first revenue dollar earned in 2016. It’s a marketplace platform where dispensaries can connect to growers and other distributors. You need to have a retail license to buy from Leaflink, so don’t head on over to the site just yet!
$51M in Investments… Not a Cannabusiness
Smith reminds us that Leaflink has spent a great deal of time, effort, and money staying away from the label of a cannabis business. They’re a software company through and through.
That’s not personal preference – Google and Facebook don’t let cannabis-related businesses advertise on their platforms, and Stripe and PayPal won’t process payments for them.
The whole space really sounds like the Wild West, with a large percentage of transactions done in person in cash.
Instead they connect cannabis businesses, providing a space to track and fill orders between 1300 distributors and 3400 dispensaries. Keeping a distance from the actual cannabis product also warms Leaflink to investors, who so far have invested $51 million in the company.
So far, they have 90 employees in various offices around the US. They’re active in all 33 states where marijuana is legalized, and so they mainly work out of New York, Los Angeles, and some satellite offices.
How Leaflink Makes Money… $400 Monthly Retainers
The vast majority of revenue comes from retailers paying four hundred dollars a month to sell on the platform. If you imagine a small grower, that sounds like a steep price, but think of it like this:
Without a platform like this, growers are doing everything totally manually, because they can’t put their product on any e-commerce sites otherwise. People are getting orders by text and having to keep track of them in Excel sheets.
Leaflink saw that need and ran with a solution, and because of that, four times more retailers joined in 2019 than did in 2018.
The platform also kind of levels the playing field and brings sophistication to the market in general. In a new space like this, prices fluctuate regularly and different people are likely to charge very different rates for the same product. Having a marketplace ends up being good for everyone because it standardizes what’s on offer.
Main Revenue Sources: Ads, Retainer Fees and Leaflink Financial
So eighty percent of the revenue comes from the fees paid to be on the platform. Another fifteen percent comes from advertising.
Remember, there are virtually no platforms for advertising open to cannabis companies. The Leaflink marketplace is large enough that they can charge fees to growers to advertise their products on that marketplace, and they’ll end up seeing results – fully four out of five dispensaries in the United States have used Leaflink at least once.
And lastly, the remaining five percent of revenue comes from a payment system set up in certain areas to make paying for cannabis online legal, compliant, and convenient.
That’s why they launched Leaflink Financial in early 2019 and are looking to use the money from their Series B funding round to invest further in that space. It goes back to the basic value of providing a legitimate and official platform for marijuana brands that have been hampered by stringent regulations.
With Leaflink Financial, they can take an additional risk-calculated three to five percent from each transaction using that platform.
Expanding To Stay On Top
It’s important to understand that Leaflink is head and shoulders above the competition. There’s not a single other marketplace that comes close to the market penetration that Leaflink has. In fact, there’s not even a single competitor of theirs with presence in more than one state!
Smith is keenly aware of this, and is very cognizant of the fact that he will have to keep working hard to stay on top in a market that changes so fast.
He talked about using his lead strategically, and how as the East Coast becomes more open to cannabis products over the next few years, he’s willing to burn through capital fast in order to be the first one on the doorstep.
Right now almost a third of his employees are sales reps or client success managers, and more of those positions will be created as the demand continues to rise.
The example of Illinois came up: Illinois legalized recreational marijuana effective January 1, 2020. Smith fully expects at least seven hundred newly licensed dispensaries to start business on that first day, and he wants to be there.
In A Nutshell
Leaflink is a platform connecting cannabis distributors with cannabis retailers, charging 1300 brands four hundred dollars a month to sell on the platform as well as advertising and payment fees. Built by CEO Ryan Smith, the company now has total domination in the cannabis industry thanks to its streamlined and regulation-compliant processes.
About the CEO Ryan Smith
Favorite Business Book: Alan C. Greenberg, Memos from the Chairman
A CEO he follows: Isaac Oats at JustWorks
Online tool: Loved Inbox by Google before they discontinued it
Nightly hours of sleep: Seven
Family situation: 28 years old, long-term girlfriend
Advice to his 20-year-old self: talk to more people. You never know who knows who.
Data
Revenue
2017 – 720k annually (estimate)
2018 – 1.8m annually
2019 – 7.2m annually
Customers
Mid 2017 – 970 dispensaries, 150 brands (spendmatters)
2017 – 1700 dispensaries, 400 marijuana brands (inc)
2019 – 3400 dispensaries, 1600 marijuana brands
Funding
2017 – 10 Million Series A (Inc.com)
2019 – 35 million series B (builtinla.com)
Sources
https://www.inc.com/will-yakowicz/leaflink-wholesale-marijuana-raises-10-million.html
https://www.builtinla.com/2019/08/08/leaflink-raises-35m-series-b
https://spendmatters.com/2017/06/21/salesforce-com-bud-putting-saas-marijuana-supply-chain/
Author:
Yassir Sahnoun is the founder of YassirSahnoun.com. He helps SaaS companies like Castbox and FluentU attract sales using content strategy, copywriting, blogging, email marketing, & more. If you want to up your content marketing game, you can schedule a free discovery call with Yassir by clicking here.
