LeafLink, a wholesale marketplace for the cannabis industry, said today it’s closed a $35 million Series B round of funding led by Joshua Kushner’s Thrive Capital. The company claims the round marks “the largest tech B round in the cannabis industry.” It also represents Thrive’s first marijuana investment, according to LeafLink.
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Current investors London-based Nosara Capital as well as U.S.-based firms Lerer Hippeau, Wisdom VC, and Thought Into Action Ventures also participated in the funding alongside L2 Ventures. LeafLink has now raised a total of $51 million since it was founded three years ago, according to the company.
Its first raise was a $3 million seed funding in early 2017, led by Lerer Hippeau. Today, LeafLink’s e-commerce marketplace connects more than 1,200 licensed cannabis brands to over 3,500 cannabis retailers and it has facilitated more than $1 billion in annualized orders.
Dispensaries use LeafLink to order inventory from multiple brands and the company also offers vendors services such as order management, customer relationship management (CRM), inventory tracking, and customized reporting.
The company charges a $299 minimum monthly subscription fee for that software. That makes LeafLink an SaaS startup, or looking at its cannabis focus, more precisely a vertical-SaaS startup
The New York company said it plans to use the new capital toward speeding up its expansion roadmap and toward improving its technology. It also says it’s begun “a massive recruiting effort” to hire in both its New York and Los Angeles offices. Currently, it has more than 65 employees.
LeafLink in particular is also eager to scale its LeafLink Financial unit, a payment and credit management solution it created for cannabis retailers and brands. So far, the service is live in four states in the US.
For context, many companies focused on cannabis marketing cannot access traditional banking resources. This forces many companies, operating legally in the space, to use cash more than they otherwise might. If LeakLink can provide better banking tooling to cannabis companies currently locked out from regular services, it could improve their operational efficiency.
The company launched in Colorado in 2016 with Zoots as its first brand and ended the year with $40 million in annualized orders. By August 2017, LeafLink had reached $100 million in annualized orders via its platform.
Others In The Market
LeafLink is not alone in raising capital as a cannabis-focused startup. The Crunchbase graph below has nearly 700 investments into cannabis companies recorded.
A few, for context. FLOWER CO raised just under $3 million last month after going through Y Combinator earlier in the year. The company deals with delivering “wholesale cannabis” to individuals at a discount to market pricing. And, sticking to recent investments, tökr raised $1 million, also in July, helps folks find the correct cannabis products for their needs.
But the most interesting among the recent cannabis-focused venture rounds that we came across was another software-focused investment. Flourish Software raised a Seed round earlier this week, a $2.1 million investment from 7thirty Capital. The capital was invested into a company that “gives cannabis business owners the power to manage and optimize their operations while complying with regulation standards.”
Investments in the space are going up. In April, we reported that funding for cannabis companies more than doubled from 2017 to 2018 with more than $1.3 billion directed toward startups and other private companies in the industry last year, according to Crunchbase data.
M&A activity also seems to be taking place. In March, Holden Page covered how Arizona-based Harvest Health & Recreation, a publicly traded company with dispensaries in many legalized states, acquired Verano Holdings, a Chicago-based operator and grower of Cannabis, for $850 million.
Clearly, there are several cannabis startups raising cash that are moving beyond the flower and into software. The fact that these startups are actually getting funding tells us that innovation, within a highly regulated industry like cannabis, is welcome.