LeafLink Was Running at $1.4B in GMV, Aiming at $1.8B
LeafLink's headline GMV number is a target, not an achievement. What it had actually built was 23 state marketplaces and a payments rail it had to construct itself.
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This URL says LeafLink scaled to $1.8 billion in GMV. On the tape it names, that number is a goal Ryan Smith had not hit yet — and he says so in the same breath he gives it.
The goal for 2018 was to move half a billion dollars in GMV. We closed out just under 700 million. And this year the goal is 1.8 billion.
Ryan Smith, co-founder and CEO, LeafLink
The run rate at the time was $1.4 billion — $123 million of wholesale cannabis orders in the previous month, times twelve. Hitting $1.8 billion by December meant averaging around $150 million a month for the rest of the year, which Smith called being on track and which is a materially different claim from having arrived.
A marketplace that spent three years unable to take a cut
Every marketplace story starts with the take rate. LeafLink’s started with not having one, for a reason that has nothing to do with strategy.
“We are not a cannabis company, we are a technology company,” Smith said. “That seems like a word game, but it’s actually very important, because a lot of our investors” — he names Lerer Hippeau and Thrive Capital — “can’t make investments as institutionally backed funds in cannabis-touching companies. So we’re not involved in the actual transaction.”
That constraint forced the business into an unusual shape: a flat SaaS fee charged to the sell side, positioned as “the entrance fee to the community… validation of value on the product” rather than as a toll on trade.
$399 to $1,499 a month per brand, the top tier reserved for large distributors carrying multiple brands. About 80 per cent of revenue, and quadrupled year on year.
Brands advertising new products and deals to retailers at the point of purchase — valuable because cannabis advertising is restricted almost everywhere else. Roughly 15 to 20 per cent of revenue.
LeafLink Financial, launched that January. Three to five per cent depending on the counterparty’s risk profile, moving money over ACH rails the company had to build itself.
The payments problem is worth stating plainly, because it explains why building it was worth the trouble: Visa, Mastercard, Stripe and PayPal were all unavailable. “If we were a shoe marketplace we could use Stripe, PayPal, whatever. We can’t use any of those merchants.” The alternative in the industry was people physically moving cash.
The financial product that was still being run by hand
LeafLink Financial’s first month originated about $26,000. By the month before this conversation it was “well over $2.25 million” — against $123 million of total GMV, so under two per cent of the flow, earning perhaps $60,000 to $70,000.
Smith was candid that it was held together with people: “that’s all totally manual — we’re literally calling banks.” What he was optimistic about is that the objection he meets is never refusal.
There’s definitely always a lot of questions and pushback. What we found is it’s not a no, we don’t want the service — it immediately goes into negotiation around the price.
The stated ambition was 30 to 50 per cent of GMV running through it within two years, which he called the north star. At three per cent of $123 million a month, full penetration would be a $3 million monthly revenue line on its own.
The SaaS line is simple arithmetic, and everyone knew it
With about 1,300 brands paying around $400 a month, Latka multiplied on air and Smith let him. “Yeah, go for it… that’s about right on SaaS.” That is roughly $520,000 a month, or a $6.2 million run rate — and it is why LeafLink’s GetLatka profile carries the 2019 revenue figure as an estimate rather than a disclosure.
A year earlier the same line was around a quarter of that.
On the other side sit more than 3,400 retailers — which Smith frames as four out of five licensed dispensaries in the United States having placed an order, with active defined strictly as at least one order a month. Between them the platform carried over 70,000 SKUs.
Concentration is milder than in comparable supply chains. Where a traditional market might show an 80/20 split, LeafLink sees something closer to 65/35, for a reason specific to its moment: “the space itself is a startup, and a lot of our clients are startups too. The companies that had significant market share even a year ago — it changes so quickly.”
Twenty-three marketplaces, not one
Because product cannot cross state lines, LeafLink is not a marketplace. It is a collection of them, one per state, each with its own liquidity problem to solve from scratch.
California was the largest at just under $40 million of monthly GMV, Colorado just over $30 million, with Michigan, Oregon and Nevada behind. The interesting expansion was into markets with no incumbent habit at all — Florida, medical-only at the time, and Oklahoma. “We’re starting to open up in a lot of these new markets where they’ve never ordered on something that wasn’t LeafLink,” Smith said, “and that’s a really cool opportunity for us to set this standard.”
New states are also why churn does not bite. The brand-side target was 12 to 15 per cent annually, held under one per cent a month, and expansion outruns it structurally: when Illinois opened, several hundred new licences would arrive at once, most held by companies already trading on LeafLink somewhere else.
Raising more than you need, on purpose
LeafLink had raised $49 million for the US entity plus a $2 million joint venture with Canopy Rivers — $51 million in total — and Smith is unusually direct about why, given the company had barely spent its Series A twenty months in.
The reasoning is positional, not operational. “Second place is the first loser for marketplaces, particularly industry-specific marketplaces,” Smith said. So the company raised “even maybe a little bit more than we need, but to pedal to the metal as aggressively as we possibly can” — with the East Coast expected to follow the West on legalisation.
What that bought was a burn of about $500,000 a month — a company covering roughly half its own costs, which he described as more aggressive spending than LeafLink had ever done. “We’ve always kind of covered half of our expenses.”
Asked who could take the position from him, Smith dismissed the direct field — “no competitor that we have is in more than one state right now” — and named a longer-term threat from outside the industry entirely: a Shopify, or an Ariba-style B2B marketplace arriving from a more traditional space.
A note on this interview’s date
GetLatka’s record dates this recording 22 May 2019, and the tape does not support that. Smith discusses the $35 million Series B led by Thrive as already announced — that was 7 August 2019 — and refers to Illinois opening for adult use “in January”, which was January 2020. The video itself went up on 14 October 2019. An interview cannot have been recorded after its own upload or before the round it describes, so this conversation happened between August and October 2019. The stored date is wrong by roughly five months, and is flagged for correction rather than quietly replaced with a guess.
Asked what he wished he had known at twenty, the founder who built a marketplace by convincing two sides of an industry to trust each other answered in the only way that story allows: “Talk to even more people. Even if you don’t know what you necessarily want to talk about with them — there’s so much to learn, and you never know who knows who.”
Sources — Ryan Smith interviewed by Nathan Latka; the recording is dated 22 May 2019 on GetLatka, though its content and its 14 October 2019 upload place it between August and October 2019 (see the note above). GMV, revenue, customer, headcount and funding figures are as stated on the tape or from the LeafLink profile on GetLatka, with dates as recorded; the 2019 revenue figure is carried as an estimate.
