Layoffs in the Marijuana Industry – What is the dramatic change Dutchie sees that caused her to lay off 67 employees?

On June 6, 2022, reports of Dutchie laying off 8% of its employees hit the news, and the company’s CEO and co-founder, Ross Lipson, immediately confirmed the reports. Among the reasons for the layoffs he cited a “drastic change in the market” and the need to “restructure” various areas of the company.

On closer inspection, not only has the number of employees in the company gone down recently. Current Dutchie fund managers and investors have also declined to invest in the company, based on Forbes interviews with current and former employees. Does this mean the days of stratospheric assessments are over?

(For the sake of anonymity, the names and identities of those interviewed by Forbes are being withheld.)

An investor who has been contacted several times by Dutchie shareholders claimed during the interview that last year’s Duchie valuation was nothing but madness. He affirmed that those who paid for the share lived in a different time and world.

There are currently no sales on the secondary market at a lower valuation. Although some sources claim that their multiple shareholders want to exit all categories. Some shareholders who bought in very early on are willing to sell their shares at $1 billion, while later investors are trying to sell just $1.7 billion. A sale at $1.7 billion indicates a 55% discount to the current valuation of $3.7 billion.

Investor initial investment

Given the company’s potential for excellence in the early stages of the cannabis industry, investors initially flocked to buy Ditchie’s shares. In 2020, cannabis sales in the United States totaled $17.5 billion, and that number is expected to reach $100 billion by 2030. Dutchie, a cannabis software company, has become a way for many to invest in the cannabis industry without actually investing in their own cannabis company.

Lipson has confirmed that despite the layoffs, the company’s position in the market remains unchanged and Dutchie will continue to deliver for its investors and customers. Addressing the rumors of a drop in Dutchie’s valuation, Lipson claimed that the current valuation has remained unchanged since the last funding round and any rumors to the contrary are false.

According to him, Dutchie still has a very strong position in the market and the company is more focused on continuous growth. He said the company will hire top talent and look for more growth opportunities that will lead to achieving business goals. This allows the Company to continue its mission of providing easy and safe access to cannabis while driving distinction in the cannabis sector.

Meanwhile, the head of a venture capital firm, who is an early investor and has invested in Dutchie’s three consecutive rounds of funding, believes Dutchie’s valuation has fallen. However, he’s still very optimistic about Dutchie, advising the company to cut headcount and fight down the hatches.

He claimed that while Dutchie is still fundamentally solid, you can’t just ignore the fact that the technology has craters. The investor claimed that he was not surprised that there were no available offers on the secondary market. Though he thinks a 50% discount is pure speculation as the tech is also down 40% or more.

As it stands, an unprofitable cannabis software company with a monthly burn rate of about $20 million and annual revenue of $45 million could be valued at $3.75 billion. The investor pointed out that big names like Durant and Schultz helped Dutchie reach such big numbers.

Not alone in the downturn.

The current issues Dutchie is facing are not specific to the software company. Eaze, a cannabis delivery company, and Akerna, also a software company, have recently laid off some employees.

On the other hand, MSOS, a publicly traded cannabis company, has also seen a decline. The company is down 70% year over year. Some of the largest cannabis companies like Green Thumb Industries, Trulieve, and Curaleaf have also seen their share prices plunge 60% since June 2021.

This downturn spread to other venture markets as well, as Forbes reported that many startups valued at $1B

So far, Dutchie’s sponsor Tiger Global has declined to comment, while Cass Verde and D1 Capital have not responded to emails and calls. Dutchie confirmed that one of its investors bought more shares in the secondary market at the current valuation, but did not mention the investor.

Gaurav Ahuja, a partner at Thrive Capital, said the company is still very optimistic about Dutchie and doesn’t think the economic headwinds will last long. He reiterated that as cannabis legalization continues to ramp up around the world, companies like Dutchie still have plenty of room to grow and experience rapid growth. And that’s true even when huge macroeconomic situations are at play.

However, both a former and current employee confirmed that the company is behind on several product launches. The notable Dutchie Pay, which Dutchie promoted as a mobile payment product that allows customers to order and pay for cannabis products online via ACH transfer. The app had an alpha launch in the first quarter of 2022, but a broader rollout is yet to come.

The former employee claims people at the company saw the writing on the wall. He claims Dutchie doesn’t have enough products to back up his rating and lacks proper strategies either.

An investor who refused to put his money into Dutchie after several offers from the company confirmed that Dutchie has a smoky software offering. However, he wonders if it’s better than its mainstream competitors. Investor claims Dutchie is selling themselves by saying they are the Shopify of cannabis, but the question is why can’t Shopify be the Shopify of cannabis?

Conclusion

Only time will tell if Dutchie will be able to pull itself out of this downturn. Just like Gaurav Ahuja said, as cannabis legalization continues to increase around the world, companies like Dutchie still have room to grow and see rapid growth. One can only be optimistic for the cannabis software company.

CANNABIS RELEASES, READ MORE…

LAYOFFS IN THE CANNABIS INDUSTRY ARE HERE, WHAT’S UP?