The destruction of cannabis company valuations in 2019 made investors nervous. Many have lost thousands of dollars investing in public companies. Some shareholders were worse off: Those in iAnthus (ITHUF) , for example, may have even lost their entire investment as the company gets turned over to its creditors.
So, it is understandable if tried-and-true cannabis investors are choosing to be conservative.
But technology and software seem to hold the most promise at this time for cannabis investors, as seen by venture-backed names -- and some public ones. The private companies are pulling in the capital and the public companies seemed to have stopped the bleeding. E-commerce company Dutchie just raised an additional $35 million bringing its total capital raise to $53 million. Dutchie processes approximately 75,000 orders a day -- a marker that continues to increase -- and is facilitating over $2.4 billion in annualized sales. Software company Fyllo picked up an additional $10 million to expand beyond cannabis bringing its total fund raising to $26 million.
Spring Big had a funding round of $11.5 million, recently, too. Launched in June 2020, Brands by Spring Big is a first-of-its-kind brand marketing platform that allows brands to directly reach cannabis consumers through targeted text messages. The platform provides an avenue for brands to drive direct-to-consumer engagement while staying compliant with strict cannabis regulations.
Here are some tech-infused names to watch:
Akerna Has Street 'Cred'
One of the OG's of cannabis tech, Akerna (KERN) made news last week, but seemed to slip under the radar. But the announcement could potentially have a big impact on the industry. The company signed an agreement with Priority Technology Holdings, Inc. (PRTH) to provide CBD and hemp retailers that use Akerna's MJ Platform with a credit card payment processing service. Visa (V) and Mastercard (MA) have been adamant that their credit cards will not be used for cannabis transactions. This has caused a great deal of difficulty for dispensaries who are reliant on either cash-only transactions or awkward workarounds.
"With this solution, we are making it easier for our CBD and hemp clients to process payments. With this agreement, we are also well positioned to activate payment solutions through Priority for traditional cannabis sales pending legislative action at the federal level," Jessica Billingsley, chief executive officer of Akerna, said.
As part of the agreement, Akerna and Priority Technology Holdings will share in payment transaction revenue.
Akerna's stock was lately trading at $5.88, up considerably from its 52-week low of $3.16. The one analyst covering the company has a price target of $15.
Driven Deliveries Pulls Up
Driven Deliveries (DRVD) has had great timing. The company provides e-commerce services, online sales, and on-demand cannabis delivery, in select cities where allowed by law. Driven offers cannabis consumers same-day and next-day delivery. During the Covid-19 lockdowns, this has been a blessing in disguise. The company may also benefit from the challenges facing its competitor Eaze, who faced financial trouble before the pandemic.
Driven recently reported quarterly revenue of $5.7 million in the second quarter of 2020, a 158% sequential increase over the first quarter. But rather than just dispensary delivery, Driven can work with brands to deliver products directly to the customer from the brand's website. The company's Ganjarunner and Budee divisions now have more than 244,600 registered cannabis consumers. Customer acquisition costs are declining as orders are increasing. The company reported a net loss of $3.7 million as the company integrated acquisitions and killed some debt.
In July, Driven said that its average orders per day rose to 1,008 and the monthly revenue rose again by 4.4% to $2.1 million. The customer acquisition costs dropped once again and six new direct-to-consumer brands were added to the Brand Budee platform.
"Leveraging technology has enabled us to exceed our growth plans while reducing our operating expenses," said CEO Christian Schenk. "With these savings, we are able to provide consumers with better experience along with competitive pricing including daily deals, no minimum order requirements and free delivery. Our competitors have large minimums, delivery fees and very few meaningful promotions which means they either struggle with unit economics stemming from gaps in technology or they refuse to pass savings on to the consumer."
Driven's stock was lately selling at $0.43 and has no analyst coverage.
Investors seem willing to jump into private companies that are in these various e-commerce platforms, so these public companies should also begin to outperform. The market continues to deal with the fall out of the pandemic lock downs and if we see further spread in the months ahead, then these online and delivery companies should continue to benefit.
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