How Leaflink CEO Ryan Smith grew to $46M revenue and 1.3K customers in 2024.

you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview hello everyone my guest today is ryan smith he's now working on a company called leaflink the wholesale cannabis marketplace before founding the company successfully founded and exited two companies one of which he sold to a new york stock exchange public firm ryan brings his experience creating and managing b2b firms and online marketplace investing in a highly regulated space to leaflink as its ceo ryan you ready to take us to the top yeah let's do it nathan now did you found the company as well yeah i'm one of the co-founders of zach silverman who's our cto okay when do when you guys launch uh we raised the first million bucks in an angel round in december 2015 so the software actually went live march 2016. okay and why do you why do you why do you uh tie the start of the business to your first raise so uh after i sold the last company which was this investor relationship management platform there was a full year i had to commit to the next company and quit the day after that year and then zach and i started working immediately on this and once the capital was in we were both zach was able to leave his job and we were both fully you know committed so so when i guess when was the first line of code written for the platform uh january so january 2016 yeah i mean all the things that we were doing researching like q4 2015 was really none of that kind of carried over just more like starting to pencil it out and whiteboard it together so 2016 and when was your first dollar of revenue uh probably end of that summer so like yeah end of q2 end of q2 q3 of uh 2016. and so i mean when you when you sum it up i mean if i asked you how much total cash did you guys invest right in the mvp before your first dollar revenue what would your answer be probably around uh 200k okay 550 to 200k and what made it i mean where'd you spend that really just all engineering so we had um you know we had one engineer at the time we had two first hires and that was really the core team through the middle of 2016 and so that's a lot of what the capital was spent on the thing we really celebrated i remember though in like in that march 2016 was when the first order organically was generated between buyer and seller um because obviously you know the first few clients you give it away just get some feedback and then a little bit after that's when we started making you know beginning to charge a few clients well i want to dive into how you built the early stage of the marketplace because that's obviously critical yeah the chicken and egg problem um but what's the team size today how many people we have just under 90 people today okay um around 50 in new york just under 20 in la and then we have uh three satellite offices with you know less than four people in them okay how many engineers are the 90 uh we're we're just nearly doubled our engineering team size so about 30 um right now yeah and any quota carrying reps sales reps yep we have uh about 24 sales reps and client success managers within that with the next so well of the 24 how many actually carry a quota did the customer success folks carry a quota too yup they have uh quotas around churn engagement upsell uh and then on the account executive side they have like brand sign-ons and that's pretty much it's their quota what i mean when you when you set you know hiring salespeople and doing it at scale as an art because you have to get kind of guess on pro formas you have to guess on bookings target you have to guess on ramp up time you're you know you're fully matured aes today what do you try i mean what is healthy for them to be closing annually in terms of new revenue for you guys is like a million dollar quota or something else so we just recently transitioned to revenue quotas for the last like three and a half years it was really just around because we're going for market penetration and growth of the community on the network was a number of brands so brands of the sell side companies to retailers who do the buy-in the marketplace and so um in early compost number three but in early 2018 we were bringing on about 30 brands per month as a company and there was probably five reps so somewhere between like five to seven brands per rep um and now we you know have a vp of sales we've done a lot of education really teams leveled up in a significant way and we're closing on that number of that i mentioned earlier around we just broke 100 brands signed for the first time in a month i think reps are closing closer to like 13 to 17 brands a month now so last month you signed a hundred new brands yeah we first time we broke 100 new brands yeah like total or new signups that month new signups that month so we have in total almost 1300 brands on leafling's platform today yep and then fill out the market by stormway so you define brands at the sell side there's 1300 what's the other side retailers so the use case would be if you're a purchasing manager at a dispensary you need to buy from each state is its own marketplace because you can't go across state lines let's say you're in california you can buy from over 400 brands in one cart on leaflink hit submit and then all of the orders go out by their license number to those brands and then we have some sas tools in the back end to help them manage the life cycle of the order but that's like the use case so this is sorry name a real retailer like in la or denver so like harbor side would you know as a big client of ours up in northern california um in in denver medicine man is one of our great clients out there and so like there's a josh best i was actually a retailer of the year last year but he can order from all these different brands in one cart whereas previously he was calling texting emailing 30 to 50 brands and now all these brands are launching new products constantly it's highly competitive on the buy and sell side so this creates transparency how many buy side folks do you have retailers we have over 3 400 retailers so about four so four out of five retail licensed retail dispensaries in the united states have placed an order on leaflets and how do you define active so is at least a dollar through your platform over the past year yeah so at least an order one order through the marketplace every month one order marketplace every month and so 3400 did that over the past 30 days yes okay i mean that's that's great so i want to again i'm getting these so i can then dive into the early days but just to be clear give me also a real example on the brand side so uh a company like kiva or docest in california dixie or wanna in colorado um brands that we sell and what we really focus on though because it's one of the early bets we made is when you think about the cannabis industry think about like the physical flower like agricultural product we believe really in brands as the future that's where we know companies have real margin just growing plants isn't really the business it was three or four years ago even so we bet on cpg skus that are consistent to buy time and time again and that's where we see the future in the space so when you go on leafling's marketplace the vast majority of our 70 000 odd skus are products that are well branded and consistently packaged so those 70 000 skus those are published and uploaded the metadata everything from these 1300 brands exactly yeah okay so 1 300 brands sorry and then you just said the 70 000 skews you said yeah over 70 000 excuses from the platform interesting do you see power laws and others does one skew make up forty percent of total volume sorry you can cracked up yeah do you see any power laws ryan does one skew make up like 40 of your total volume we see pretty close like in and when you see like 80 20 split and some more traditional supply chains we see something closer to like 65 35 in terms of like how things are consolidated the one thing that's interesting about our space is the the space itself is an is a startup and a lot of our clients are startups too so the companies that we're talking about that had significant market share even a year ago it changes so quickly and so a lot of us is just like staying up to be with with those changes in space okay and what is the what is the total uh i guess how do i define this the total gmv of these kinds of skus right in in the world right now is how much over the past 12 months or how much annually for for the whole industry yeah so we the way we get to our like gmv market penetration is we think the 2019 um whole industry size was like right around 12.7 billion dollars in retail and those are all these numbers are reported like the retail to consumer retailer to patient numbers we know that a lot of our clients charge 40 to 60 margin so we basically cut that in half at this 6.35 billion dollar in wholesale transactions and a few more numbers last month we did 123 million dollars in gmv so those are buy and sell transactions in the marketplace which is roughly like a 1.4 billion dollar annual run rate which is like 23 ish of um all legal cannabis wholesale now on leafling's marketplace so 123 through the platform exactly last month breakdown the economics on the buy side on the brand side the dixies of the world and on the medicine man side right so if 123 goes through your platform where how does that money get split up so the back to like each of the different marketplaces being each of the different territories being their own marketplace so we're like a collection of 23 different marketplaces like colorado's its own california's its own our largest markets right now are california's our largest not surprisingly just under like 40 million dollars in gmv last month colorado is just just over 30 million and then michigan oregon nevada are like the three that trail those and what we're starting to do now is like we've opened up in some markets that are really new like florida it's just record it's just medical only a few shops we opened up in oklahoma interesting enough you know right by you um and oklahoma's pretty far from texas just because we're in the south doesn't mean we're all live like right next to each other well it's close you know yeah kind of close i guess kind of close uh but yeah so we're we're starting to open up in a lot of these new markets where they've never ordered on something that wasn't leaflink and that's a really cool opportunity for us to set this like standard defining how the supply chain works so how do you make money so we have uh four different revenue lines historically um you know when you when you think marketplace you think take grade right like you have to get participating the transaction uh for us over the last three years we've been charging a flat sas fee really more just the sell side companies more as a validation of the product being valuable to them we are not a cannabis company we are a technology company and that seems like a word game but it's actually very important because a lot of our investors are hippos and thrives of the world they can't make investments as institutionally backed funds in cannabis touching companies so we're not involved in the actual transaction so we for the first three years couldn't take transaction fees until we recently figured out a way to enable that process so up to sas ads and um we're beginning to monetize that gmv number that we shared uh just in the last six months okay and let's go down each of those real quick so the flat sas fee i'm sure you have all kinds of different you know amounts people are paying but the sweet spot for you what do they pay you per year to use the sas side on average between yeah between two between 399 and 14.99 a month 14.99 is definitely a more minority group those are for very large distribution companies that have multiple brands within them um and then we charge by brand got it so so they pay about 400 per month uh minimum across the 1 300 uh sell side folks the dixies of the world that's about right yeah and they uh that's really like we think of as the entrance fee to the community to the marketplace validation of value on the product okay can i multiply can i take 1300 times 400 that i mean that puts that revenue stream at 500. i know yeah yeah go for it yeah yeah so that that gets to where the sas revenue is okay good so that but that is fairly accurate that's around what you're doing there what what was that stream a year ago do you remember did you double it you triple it uh so yeah we've cut we've quadrupled that uh the sas revenue line from this time last year okay so you're doing like 125 grand a year ago on the sas side then yeah four yeah it was uh yeah annually or on the monthly side yeah that's right yeah um so yeah so that's that's about right on sas and then once you're a member of the platform you get access to a number of other different tools so we have there's a lot of restrictions in the space around advertising and so we allow brands at the point of purchase to retailers in this closed community to advertise new products deals all these different things and that's that's historically been our our second largest up until last month actually our second largest revenue line um and then i imagine though i imagine that ryan that's pretty i mean i imagine that's fairly small right i mean sas probably makes up what 80 percent of your total revenue yeah it's right around right around historically right around there yeah okay so ads are like what ads are like 15 and transaction fees are like five percent or something uh i'd say ads are yeah around around 15 to 20 percent yeah your your breakdown is not far off okay um so what so first off i love this uh one one thing i love about the show is that since i do so many of these like pattern retention tends to kick in there are so many sas companies killing it right now because they are jumping into the transaction game so you now have a gmv model because there's basically 300 bits up for grabs on every dollar through your platform 200 bips goes to visa and the other 100 right or the credit card company the other 100 essentially are up for grabs so how are you thinking about launching and getting into this transaction model so we very much believe in this like managed marketplace sas enabled marketplace con so that's very much how we see ourselves and we think on the b2b side simply taking a transaction fee in these closed or comm closed knit communities is more difficult because they know each other like if i'm a b2c marketplace let's go around to you today yeah i'll pay 15 to find the next nathan because i may never see you again in this and these b2b marketplaces what we think is you really need to bring additional value to charge so there's things around financial products that we can create for companies and streamlining cash flow issues that they have which are pretty significant in our space because people are literally moving cash um and so the points you're talking about two percent to like mastercard visa we actually can't work with if we were a shoe marketplace we could use stripe paypal whatever we can't use any of those merchants so we had to create something called leafling financial on our own that allows capital to move over the ach rails and also removes the need for people to be moving cash in these transactions and on those deals we're taking uh three to five percent depending on their risk profile we're building out credit risk profiles on companies as well to judge their you know what their what the risk is on lending some of this capital to them yeah but three percent on 123 million in gmv monthly that's a three million dollar a month revenue stream if you get that cranking across your entire base correct yeah really significant um and we've been doing this for the last six months uh we launched we launched in january we originated like right around twenty six thousand dollars in transactions through it um last month we did well over uh two and a quarter million and so and that's all totally manual like we're literally calling banks and settings sorry sorry i don't understand what you mean by that so when you say last month you two and a quarter million two and a quarter million of what other of of transactions within our larger gmv that have moved through this leafling financial oh i see i see okay got it so so basically you have a hundred three million part yeah 123 million total 2.25 went through this system of which you're able to capture on a minimum bottom end 0.03 you know three percent of that yes exactly yeah i mean that's like 60 70 grand that's pretty good and so what we've done since closing the b round with thrive is all that's been really manual with we partnered with the side fund that handles all the transactions and so we're beginning to automate a lot of that we've made some of our first hires on leafling financial and we're going to be bringing it into back to your point on like visa mastercard make it native to the checkout process so for our clients they feel empowered in the same way they would if they were in a more traditional industry on using these payment solutions yeah um is it easy for you to go from 2.25 of your total 123 million through your platform monthly is it easy for you to go and get 100 penetration out of the three percent or is it difficult to convince people to basically give you three percent of gmb um we what we found is like it's similar in how it's grown to the network effect around like liquidity in the marketplace so in the very beginning people are the problem in the space is that there isn't a clear price point for a lot of very basic services so like distribution companies are charging a very wide range for their services payment processors some are you know kind of legal others are international so those will range as well in pricing so what we've seen is we came in at these numbers we mentioned there's definitely always a lot of questions and pushback what we found is it's not it's not a no we don't want the service it immediately goes into negotiation around the price and so that's part of the manual process that we're looking to to automate between three and five percent yeah um and but we feel really confident about you know as we begin to automate more of this moving that from the small penetration that we're at now to i think breaking like 30 and 50 of the gmv in the next two years is that's like our north star yeah what's your gm what's your gmv growing by month over month uh so right around um 11 uh month on month with the the gmv growth we closed out last year so the goal for 2018 was to move half a billion dollars in gmv we closed out just under 700 million um and this year the goal is 1.8 billion um so yeah a little more than a tripling year on year you're on track to do it yeah we are we're uh we were like you said it was like 122.8 last month 125 is 1.5 um and so we're two million short of we're definitely on track for the one eight which is we're looking to hit the end of the year yeah that's great so so let me let's fast forward a couple years you're now doing 100 million years in revenue not gm but you as a company in revenue of the transaction of the of the revenue lines you just told me sas ads and transaction fees what's your prediction what's going to make up the majority of that hundred million certainly the the leafling financial revenue line will be the largest um sas will continue to grow i think it's powerful we've actually only raised prices twice in the history of the company in certain markets and so i think there is potential for us to have you know we just hired our first professional professional services and integrations team there's upsell opportunities around a lot of those things and those will continue to grow um in a great way but for us like empowering companies around payments and movement of product is key to the liquidity of the marketplace yep okay so walk me through you've obviously raised capital you just announced i think like uh in august uh 35 from thrive how much total have you raised now to date we've raised uh 49 million dollars for the the u.s entity and we did a 2 million jv with canopy rivers which is the venture arm of canopy growth up in up in canada okay um so 51 total as a company okay got it so so 51 total and then um why you know obviously dilution is a real thing right so so why did you need to go raise that capital why couldn't you get creative and and just keep using the money already had so we've always been really capital efficient i mean we were barely through we're barely through half the money that we raised the series a almost 20 months before the b closed um for us i think there's it's really sorry say that again 20 months before the b closed so 20 months before the b closed we still had a significant chunk of the a capital oh and the reason and the reason to your point we've gotten more aggressive is we think really two things first is we clearly have a lead in market penetration and where we're we have to use that lead toward advantage um also the uniqueness of the industry we think that right now particularly this year and into next year as the east coast falls in line with the west coast on legalization it's really like second place is the first loser for marketplaces particularly industry-specific marketplaces so for us to raise even maybe a little bit more than we need but to pedal the metal as aggressively as we possibly can that was like really the theme behind it and knowing that second place is the first loser concerns around dilution and potentially raising a little more than maybe was even needed were you know one way to rest easier on those yeah so i mean help me understand what you're comfortable with and right obviously you're putting pedal to metal to drive growth i mean are you comfortable burning a million bucks a month [Music] um if we are we comfortable i mean it's it's i feel like i see us potentially getting there yeah um it's definitely more aggressive spending than we've ever done historically as a company we've always kind of covered half of our expenses um but like it's part of that commitment and so that's what it takes to hit the goals that we're doing increase those penetration numbers on leafling financial and just be this industry standard platform in the next 18 months um you know that's that's that's what we raised capital for and that's the bet that we all make together with our with our investor partners yep so what burn today is what like 100 grand 200 a month no the burn today is like so it's still like that that half mark so 500 grand yeah okay good good i mean that's look uh based off basically what you're saying is your total expenses are your total expenses are 3x your monthly revenue so net net you're burning about half of your total revenue we're burning half yeah so if we're spending like you know one one one a month and we're bringing in half of that is revenue the burn is like you said five around 500. yep yep no exactly right that's good um okay cool and then last question here churn's critical right in sas companies in general right when you look at on the just your sas product line revenue trend over the past maybe month what is that coming in at so last month was a particularly good month we tried to keep it to between this like 12 and 15 annual churn on the brand side so last month was half a percent but we've historically kept it below the one percent per month to meet that yearly goal and what does this expansion more than make up the 12 percent churn will expansion make up for it in other words for the court you have signed up exactly a year ago you'll churn 12 percent of that over a year but will you expand that same base by more than 12 so net revenue retention is greater than 100 yeah absolutely there's like this interesting dynamic right now where new as new states come online like illinois goes legal doors open in january there's gonna be a flood of several hundred licenses there that we'll bring onto the platform they're likely clients already in another state and those are you know several states seem to be coming online every three to six months now so that far outpaces any churn that we've experienced and who are your closest competitors name two um so i'd say there's no competitor that we have that's in more than one state right now um i'd say like there's there's some e-commerce hubs that sit on top of uh distribution companies but like we we have logins to those platforms and we've used them we know you know people that are have left them to come to leaflink and none of them have really raised any capital to speak of um i think the more the longer term concern for us would be like uh this is like the uniqueness of the space so i'd say a shopify honestly or like uh an ariba version of like a b2b marketplace for sas but in more traditional spaces is like the long term okay well let me let me run through something so what about flower obviously they're they they're the darlings of yc right is flower a real threat or no so that's like a b2c subscription service right kind of depends on how you look at it yeah yeah i would i wouldn't i'd say no no for that one anything they'd probably be a client again a client of yours what about toker um no i think they were like a payment solution right everyone has a different mouse trap yeah yeah yeah i would say i so i would say that like there's a few companies that are trying to launch like e-commerce solutions that sit above um you know like brands and and be used in that way but there no one has this like centralized marketplace that we like aggressively are thinking about you know putting out a business very good all right uh let's wrap up here with the famous five number one favorite business book uh recently i've really liked um i read uh international bank of bob it was about um oh actually you know what that was a good one on kiva where he goes and visits everyone he's lent money to actually memos from the chairman i recently read that one i don't know if you know like the it's a it's all it's a collection of all the memos by um i think maybe it's bear stearns but over the history of the ceo at this company and it was just like a fascinating like 20-year yeah you're talking about you're talking about alan greenberg yes alan greenberg that was it yeah yeah yeah all right uh number uh number of and he's obviously former chairman of bear stearns uh number two is there a ceo you're following or studying we've been getting closer with some um so i want to say isaac outside uh just works right now number three which is some cool stuff on board management number three what's your favorite online tool for building your company so i was in love with inbox by google not google inbox uh and they shut it down and it was just crushing but really like even still now that some of the tools on like snoozing emails reminders that pop up in the inbox is this like hub of the day-to-day love it gmail good number four how many hours i sleep to get every night um i guess seven seven okay and what's your situation married single kids single oh sorry i'm not married but i'm not single i've had a girlfriend for like just over yeah nice catch don't hurt to listen to this you'd be in trouble you know i know i was thinking like is this a tax question single but we have a serious girlfriend yeah why do you think i'm a do i look like a government official to you you know some of these questions are so like boom boom boom i'm like all right that's just my style uh and how are you uh 28 28 last question what do you wish your 20 year old self knew um talk to even more people like even if you don't know what you necessarily want to talk about with them just like there's so much to learn from and you never know who knows who so talk to even more people than you're already talking to because that's the best way to learn that guys there you have it leaflink they've raised 51 million dollars to grow their brand with a recent round they've got 1300 brands like dixie on the sell side of their marketplace paying 400 per month for their sas products so 520-ish grand a month right there in revenue or 6 million run right on the sas side of their business again going through it to the sell side uh connecting to their buy-side retailers about 3 400 on that side of the marketplace those are folks like harborside and medicine man in denver total gmv uh through the platform uh last year broke call at 700 million bucks hoping to break about 1.8 billion in gmb this year three revenue lines that sas model i just mentioned two they're getting a transaction fees via leafling financial where they'll take between three and five percent of that gmv through their platform and lastly an ads marketplace so we'll see as each one scales where they end up ryan thanks for taking us to the top thanks a lot nathan you guys know i fight like heck to get these data points for you from these ceos that rarely do these kinds of shows if you want more shows like this make sure you subscribe right now we're trying to get 10 000 youtube subscribers by the end of september here 2019 and it would mean the world to me if you clicked now to subscribe additionally i've got two more great interviews for you if you want more data points from the world's leading sas ceos click 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