CFN Media Exclusive Q&A with Wikileaf Founder and CEO
August 15th, 2019
Have you ever visited a dispensary hoping to find your favorite cultivar only to be disappointed by a lackluster menu – or widely varying product costs? Wikileaf is the first price comparison model for the legal cannabis dispensary market. With just shy of one million consumers using the site on the front-end to compare prices and dispensary offerings, the company operates in 19 states and Canada (with more coming soon) and features around 3,800 unique retail locations on the platform. Featuring a slick interface and up-to-the-second data updates, Wikileaf is the go-to place for cannabis consumers of all types.
CFN Media spoke with Wikileaf Founder and CEO Dan Nelson about the company’s recent raise, their plans to go public, and how they plan to change the way people shop for weed worldwide.
What is the history of the company?
Dan Nelson: Going back to 2008, I was actually running an interest rate comparison website for FDIC and NCUA insured banks and credit unions here in the United States. And if you don’t recall the interest rate landscape at that time was record-high. They were like 7% and 8% for a CD or a savings account, which was quite an anomaly. Banks were pretty desperate for cash, and they were offering sign-up bonuses along with these great interest rates to get money into the bank. And at the same time you had the financial meltdown taking place.
There was a lot of money moving from equities into safe havens, CDs, money markets and online savings accounts that were federally insured. These things were extremely popular products. I mean, the search volume for these products on Google was through the roof.
I decided to basically create an interest rate comparison site that focused on smaller banks and credit unions that could really offer the top deals and highlight where those were. I grew its traffic pretty quickly and I ended up getting a deal with Bankrate, which was a publicly traded company at the time, that also was into industry comparisons. I essentially just embedded their interest rate tables into our site and we had a cost-per-click (CPC) arrangement, where they were charging the bank $8 per click, and then I would get four and they would get four. We had this sort of partnership moving for about three years, and the site was just getting so much traffic, I was able to send leads to banks and basically just make enough money to travel, to pick up and manage the site remotely and travel the world.
I left the United States in 2009 and traveled for three years. I went all around Europe, Asia and Africa, just running the site while interest rates were sky high. When they started to come down a little bit I decided to head back to Seattle in 2012. That’s when I noticed, oh my God, there’s now dispensaries on every block seemingly. And there were zero dispensaries when I left the state. I don’t know why my friends didn’t let me know that this phenomenon existed or anything like that. But it was just a total shock to me when I got back, and also very exciting to see.
This was also the medical days still. The only states that had legal cannabis were Washington and Colorado, and they were both medical. There was no recreational cannabis at the time. So I got a medical card and just started shopping around at these dispensaries to see what they were all about, what they offered. I didn’t know anything about different strains and all that stuff. I was getting a lay of the land. And what I quickly noticed is that there was a massive price disparity between dispensaries.
I was taking a peak at all of these and quickly noticed that in one shop you could get a gram of OG Kush for $10, and then you could go two shops down and find that same gram of OG Kush for $20. So it was like, what’s the rhyme and reason here? How are people charging their product? How are these prices coming to be what they are?
That was the initial ‘aha’ moment that made me think, “Why don’t I put this all in a consumer facing website to basically highlight places and show people where the best deals are at?” Similar to what I had done with interest rates, but moving that framework over to the cannabis market.
That was where the idea was born. The way that we initially set up the minimum viable product, or the first product that we went live with for Wikileaf, the model that we had gone with was what was called a reverse auction. We’ve pivoted away from this model today, but back then the way the site was set up is you would specify how much you wanted to spend at a dispensary, how far you were willing to go, and then all the dispensaries within that radius would put up the most grams that they were willing to offer for the money you were willing to spend.
If you went on the site and said, “Okay, I want to spend $40, and I will go three miles from my house,” then all of the dispensaries within three miles would say, “Well I’ll give you five grams for your $40,” “I’ll give you six grams for your $40,” “I’ll give you seven grams.”
We forced this hyperlocal competition between dispensaries for the consumer’s business. And this was a pretty novel concept at the time, so we were able to get a lot of media attention around it. The site went live January 22nd, 2014 for the first time, and we started getting national media attention within weeks of launching it. We got on TechCrunch, USA Today, Buzzfeed, Huffington Post. I mean, you name it, we were there. At the same time, the results were a lot of exuberance for cannabis and on the stock market. I got some offers right away to RTO the company and take it public just after a few months of launching the site, which was both exciting but also a little scary because I knew that we hadn’t really built on any of the fundamentals, grown the traffic, grown the number of dispensaries on the platform, that sort of thing.
Cannabis was, and still is, on shaky ground in terms of legalization and what you could do on the entrepreneurial side of it. I turned down the RTO offer that we had right off the bat in 2014, and instead took some investment funds from friends and family, and we just scaled the company.
In the middle of 2015, I met a guy by the name of Chuck Rifici, who founded Tweed, which is now Canopy Growth, the largest publicly traded cannabis company in the world. He started his own private equity firm that was going to invest in companies in the cannabis space. We talked with Chuck and I knew that this was the guy I wanted to work with. This was the guy that was going to help get Wikileaf to the next level. We started working together in January of 2016.
Nesta Holding Co. now has three portfolio companies. We were the first acquisition there. We’ve had two mandates to continue to onboard dispensaries onto the back-end and continue to grow the number of users on the front-end – the traffic, essentially shopping around for these dispensaries.
I think when we first went into business with Chuck and Nesta, we were at around 80,000 or 90,000 people using the site every month. And we had maybe a little over one thousand dispensaries on the platform. And now, as I said, we’re over 10 times that. I mean, we’re closing in on a million users a month, and we’ve got a little over 3,800 dispensaries and brands on the platform.
CFN: What sets you apart from potential competitors?
DN: What we’re seeing in the cannabis market now is that, like any industry as it matures, people are starting to have favorite brands and products. Whereas in the early days, you’d hop into a dispensary and it was like, “I want to buy some pot,” and you’d leave it up to the budtender to basically tell you what to get.
Now you have people that have favorite brands. They know they like their
“Phat Panda OG Kush” vape cartridge, and they’re going out to seek the dispensaries that have this in their inventory. We can see this through Google trends tools, where the search volume for cannabis products and brands is going up and to the right. So we know that more people are honing in on this.
Where Wikileaf is headed as a product to address this, first of all, is we’re connecting with all of our dispensary partner’s point-of-sale software so that we can get their live inventory into the site. And then what we’re doing with this data for consumers is we’re allowing them to specify at an individual SKU and product level, “Hey, I want this product. Who has it in their inventory, and what are the prices?”
We can still see that the price disparity between different dispensaries is quite high. For instance, a vape cartridge here in Washington can retail anywhere between $45 and $80, and it’s pretty much up to the dispensary’s discretion on how to price things. We want to stick with price comparison as we’ve always done, but bring it down to the individual SKU level so that people can run price comparisons at a granular level, and not just as a whole.
A lot of our competitors, they kind of go the Yelp model where they’ve got dispensaries on a map and you can review them, and we can do that too, but we also like to focus on finding the individual products and running price comparisons at that level.
CFN: Tell us about your recent raise?
DN: In our most recent round of funding we raised CAD $6.8 million, and are using that to build out the product suite. Because we’re trying to limit any sort of barriers to growth, we’ve let dispensaries on the platform for free. That way we can get them up, we can get their live data, their inventory coming in, and we can share that information with our consumers.
Up until now we’ve been very focused on low friction, but because we’re going public soon, the big thing is us building out the product suite and start bringing in revenue in a big way for the company.
We’re going for a subscription model where there’ll be three different tiers that dispensaries, and eventually brands, can buy into. In a nutshell, those tiers come with different levels of exposure on the site. If you’re in the highest tier you might get homepage or premium map placement, and your live inventory would get funneled into our strain pages so that consumers can get a first look at what the dispensary has to offer.
CFN: What should potential investors know about you?
DN: The market size is what they’d be most keen on. We’ve kept monetization off the table so we can ramp up our usage, both consumers and dispensaries, so that when we do flip on the revenue model they’re already participating in the platform and gaining value from it.
We feel like we can ramp up sales in a major way because we’ve already built this goodwill with dispensaries and brands by giving them such large consumer exposure at a relatively low cost.
Expanding into international markets is easy for us compared to other companies that need physical infrastructure. I mean, if Germany legalizes tomorrow, we can be there with our platform. That’s the nice thing about being a technology company and being able to scale in a very quick way.
CFN: Where do you see the industry going as a whole?
DN: I can speak on the technology side of things, specifically. I imagine there’s going to be a ton of innovation. I mean we’re already seeing that now as some solid tech companies that have only been around for a year or two are already getting big, healthy Series B financing.
I think a lot more VCs and a lot more investment banks are going to pile into the market. We already see that even legislation wise; the GOP has just signaled that they’re open to letting cannabis get in on banking, so that’s going to help propel things forward in a major way too. From there, just like other mainstream industries, there will be consolidation. In about three years, smaller companies are going to roll up into larger entities just like any other market as it matures.
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