Fast-Growing Salesforce of Cannabis Raises $1.6M
Baker, a customer engagement software platform for dispensaries, announced a $1.6 million investment last week, bringing its total fundraising to $3.5 million.
The lead investor was Poseidon Asset Management, a cannabis-focused investment firm. Most of the rest of the raise came from existing investors including Michael Lazerow, Base Ventures, XG Ventures and Phyto Partners.
“Baker has proven to be one of the fastest growing, most scalable businesses we have seen,” Poseidon managing director Morgan Paxhia said in a statement.
In an interview, CEO and co-founder Joel Milton, 30, said the company was originally conceived as a way for customers to order online and skip the wait at dispensaries. The Denver-based company built a minimum viable product that enabled online ordering. But they soon recognized another problem: that dispensaries struggled to retain customers. Baker decided to ally itself with the shops.
Dispensary customers, as Milton tells it, feel little loyalty to stores and the various companies that could keep customers engaged with special offers weren’t doing a great job targeting clients. They might, for example, text a flower consumer, an edibles coupon.
“Dispensaries were spending a ton of money on customer acquisition but not customer retention,” he said. He compared this with the “Groupon phenomenon” which lost its momentum because the restaurants, salons and other businesses that accepted Groupons weren’t retaining customers and so had little incentive to continue using the platform.
In addition to letting customers order online, Baker allows them to easily enroll in loyalty programs. Perhaps most importantly, Milton boasts of Baker’s ability to help dispensaries reach out to the customers they want to reach, whenever a dispensary wants to reach them.
So, if edibles sales are slow, Baker can tailor a text-message offer to customers who buy edibles. Milton claims the company’s messages are well enough targeted to deliver 20% conversion rates. “No such thing as spam if you’re sending the right message to the right person at the right time,” Milton said.
It seems to be working. In 2016, the company expanded from 30 to 250 dispensaries in 10 states and grew from six to 27 employees. The average dispensary, he said, sees a $15,000 boost in monthly sales after it starts using the platform, for which they pay a substantial fee of $600 a month or more. “The ROI is clear,” he said. “Expensive is relative.”
The company says it drove $3.1 million in revenue to its clients last month.
Earlier this month Los Angeles voters approved Proposition M which will enable full regulation of the city’s cannabis market, said to be the world’s largest. Milton believes it’s an opportunity for Baker which is only in a handful of L.A. stores so far. Baker, he says, works best in a regulated market.