Dutchie, a nearly three-year-old, Bend, Ore.-based software company focused on connecting consumers with cannabis dispensaries that pay it a monthly subscription fee to create and maintain their websites, process their orders, and track what needs to be ready for pickup, has raised $35 million in Series B funding. The capital came both new investors Thrive Capital and Starbucks founder Howard Schultz, along with earlier backers, including Kevin Durant’s Thirty Five Ventures and the cannabis-focused fund Casa Verde Capital.
The money comes hot on the heels of Dutchie’s first major round of funding — $15 million that it closed last September — and suggests that the cannabis industry has fared better during the COVID-19 pandemic than people outside the industry might imagine.
We had a fast chat yesterday with the company’s cofounder and CEO, Ross Lipson, about the year that Dutchie is having.
I’d seen recently that Dutchie has added contactless payments.
RL: Yes, when the pandemic hit, virtually all of our dispensaries shifted to a curbside pickup model. We built a solution that allows customers to select curbside at checkout, and also includes a way to notify the dispensary when they arrive and provides them information on how to locate their vehicle.
A year ago, there were more than 30 states where cannabis was either medically legal or that had legalized the recreational use of marijuana. How has that changed?
RL: We now work with over 1,300 dispensaries in 32 markets. By comparison, a year ago we were only operating in 9 markets. Nationwide, 47 out of 50 states now allow some form of legal cannabis, and 2020 could bring full legalization in major markets such as New Jersey and Arizona.
Can you put that into context? How many dispensaries are there in the U.S.?
RL: Dutchie processes 10% of all legal cannabis sales worldwide and powers over 25% of dispensaries. That’s more than 75,000 orders a day.
You had 36 employees the last time we talked. What’s that number now?
RL: We currently have 102 employees and we aim to double our team by the end of 2021.
Aside from helping dispensaries shift to a curbside model, how has the pandemic impacted your business?
RL: Virtually all states deemed cannabis dispensaries as essential businesses [once COVID took hold]. Many still had to comply with state laws and close their physical stores, though, leaving only one option for sales – online ordering. We saw dispensaries shift from about 30% of overall sales coming from Dutchie to upwards of 100%, and our business grew 600% in roughly one month.
Overall, we’ve seen a 700% surge in sales volume during the pandemic. We had to scale quickly to deal with six times the load on our technology.
Think those numbers will shift around as some parts of the country open up?
RL: Dispensaries are poised to keep online ordering and e-commerce options available because it is part of what their customers now expect.