Linear #020: vSaaS For Dispensaries, The Worlds Top App Factory, Creating Urgency In Sales When There Isn't Any

One vSaaS breakdown. One Biz Story. One 'How To'. In your inbox once a week.

May 15, 2023

The Story Of Dutchie, Vertical SaaS for Cannabis Shops

Two brothers built a ~$3.8B software platform for Weed Shops.

Earlier this year, they were ousted in a hostile takeover.

The WILD story of Dutchie, the all-in-one software platform for Cannabis businesses:

Dutchie was founded in 2017 by two brothers, Ross and Zach Lipson. Prior to Dutchie, Ross founded a food ordering company that he sold to Just East for ~$30M. Zach credits Dutchie's success to learning at his prior startup “how to bring tech into a retail environment".

Like a lot of start-ups, Dutchie took advantage of new legislation. The "aha" moment for Dutchie came in 2015, when recreational cannabis was legalized in Oregon, where he had been living at the time. He believed other states would follow suit and saw a tremendous opportunity.

Ross's initial concept was pretty simple. He would build a software tool that would enable dispensaries to put their menus online so customers could easily place orders for pick-up. Almost all vertical SaaS companies start with a simple wedge product that gets them in the door. Dutchie was no different.

Dutchie scaled this tool to 50+ dispensaries across Oregon.

With a maniacal focus on the customer, he began hearing about a lot of other opportunities where they could expand their product line.

A classic vertical SaaS playbook.

1. Wedge Product

2. Expand across the value chain

Dutchie moved into a full blown point-of-sale solution that allowed for of all orders (online, in-person, delivery) into one centralized source of truth.

Not only was this helpful to business operations, but it also and streamlined the checkout process for customers.

VC's began noticing Dutchies traction.

But there is stigma in cannabis, a lot of funds were unable to invest in the space, so it was difficult to put a round together. Ross and team persevered, raising a $3M seed round in 2018 followed by $15M Series A in 2019.

The Dutchie team continued to expand the product rapidly, launching a payments module. Dutchie Pay that allows dispensaries to offer a compliant, secure, and cash-free option with its in-store PIN debit solution. Going cashless is now REQUIRED by regulators in many states.

This was a BIG unlock, as similar to their experience with investors, many dispensaries were unable to leverage modern horizontal payment solutions because they refused to service the cannabis space. Where there is tremendous risk there is also tremendous opportunity...

As they continued scaling to hundreds of weed shops, they realized something interesting...

Only 6 insurance carriers offered plans for the industry. This meant that getting insurance as a dispensary was difficult and costly. They launched Dutchie Insurance as a response.

Ross's early prediction of states legalizing cannabis was right on.

As of January 2023, 21 states have now legalized cannabis for recreational use, and 37 have legalized it for medical use.

With $14B+ worth of transactions now flowing through their platform, Dutchie has raised $600M+ in venture capital.But when you raise those types of $$$ things can get dicey.

Lipson and his brother were ousted earlier this year in a hostile takeover.

Here is a breakdown on what happened by Forbes:

We don't know how the lawsuit will shake out but I'm pulling for the founders.

It's clear they've built something special.

Dutchie is now the market leader with a one-stop-shop for cannabis businesses via point-of-sale, insurance, payments and more.

One Biz Story:

The App Factory That Controls The Worlds Attention

One ‘How To’:

How To Create Urgency In Sales When There Really Isn’t Any (SaaStr - Jason Lemkin)

Creating urgency is an art.

Most founders are great “middlers”. They are great at explaining not just what the product does, but what it can do to solve your problems. No one is better than a founder at this.

And then … the deal often never quite closes. The prospect got interested, took the call and the meeting, but … didn’t ask for a contract. Or sign up herself.

What a great sales pro will learn is how the heck to add thoughtful urgency to a sales process. When really, almost any SaaS purchase can be put off a month or two.

It’s not easy. But the tricks include:

Discounting. Easy to do wrong, but done just right, creates urgency. Done wrong, it just devalues the product and/or leaves you with less revenue than you’d otherwise have. Or even slows down the deal, if it looks like desperation or a used car salesperson’s attempt to create urgency.
Asking. If you don’t ask, you don’t get. But this only works if you’ve truly added value to the prospect during their discovery and trial process.
Asking — After Having Provided a Ton of Value. The prior point. If you have helped your prospect plan, upgrade, and even pilot an important and valuable change to their business process, they you have added value. Ask for a favor back after (“Can we get it signed this month? It would help me a lot.”). It often works.
Getting Used to No. Sales is hard. You get a lot of Nos.
Talking to More / Other Stakeholders. The person that inbounds is often not the only stakeholder in a buying decision. The more you talk to, the higher the chance the deal has to close, usually.
Constant Follow-Up — without crossing the line of being annoying. Great sales reps know to touch base as often as possible once a deal is in flight. But not so often to break the deal. This is an art. And founders aren’t very good at it. One key is to keep adding value during each touchpoint.
Knowing The Competition Cold. The better you know the competition’s products, the better you can clearly show a prospect where you win. And be honest about where you merely have parity, or even gaps.
Getting on a Jet. Showing up in person always increases the odds a deal closes.
Understanding the Customer’s Timeline for Roll Out / Deployment, and Backing The Purchase Into It. If they want to roll your product out in 3 months? Then help them understand they need to buy now, to be ready. Mapping against a roll-out schedule can often show a prospect they need to actually buy a little sooner than they’d realized.

Most founders sort of get a B- at demand gen. Somehow, they create interest and leads. Then they are an A/A+ at the middle of the sales process (demos, qualification). Then a C- at closing.

You need help. You need a dedicated professional. But — only someone better than you at this. For real.

And when you hire a great VP of Sales, they’ll spend a ton of time here. Getting good at it themselves, and helping the team. And you’ll watch close rates go up, and sales cycles shorten. At least a bit in both cases. Almost like magic.