Leafly arrived on the public markets Monday, setting a milestone for not only the Seattle company but the cannabis industry at large.
Leafly began trading on the Nasdaq under the ticker symbol LFLY following a SPAC merger with Merida Merger Corp., a special purpose acquisition company sponsored by Merida Capital Holdings. Shares were up about 7% as of Monday afternoon.
Founded in 2010, Leafly’s online marketplace lets customers shop and select cannabis products from licensed retailers. The startup also serves as an educational resource. Its platform has more than 125 million annual visitors and the business generated $36 million in revenue in 2020, with expected year-over-year growth of 19% in 2021 and reaching $151 million by 2024.
Leafly’s revenue primarily comes from a monthly subscription fee paid by cannabis retailers to be listed on the platform and to access e-commerce tools. More than 7,800 brands and 4,600 retailers use its services. Leafly also makes money from advertising.
The company’s growth is propelled in part by increasing legalization of cannabis across the U.S. and world. Other cannabis tech companies including Weedmaps (which went public last year via IPO) and Bend, Ore.-based Dutchie (which raised $350 million in October) are also riding similar tailwinds.
Leafly is among a group of Seattle-area companies going public via the SPAC route, joining a list that includes Rover, Nautilus Biotechnology, and Getty Images. The mergers have become a popular alternative to the traditional process for initial public offerings, paving a faster path to going public. But in the new year, some stocks are tumbling and deals are being abandoned.
We just chatted with Leafly CEO Yoko Miyashita, who joined in 2019 after a 13-year stint with Getty as a legal chief. She is just the second woman to guide a Washington state company to the public markets in more than two decades.
The interview was edited for brevity and clarity.
GeekWire: What does going public mean for Leafly?
Leafly CEO Yoko Miyashita: This is just huge for us. As a cannabis company, one of the biggest challenges for every business is access to capital. So for us, not only being able to access the public markets, but to be one of the few that’s out on NASDAQ, it just builds massive optionality and opportunity as we continue to grow this business. It’s super exciting taking a company public, but taking a cannabis company public and having that access is fundamental for us.”
GeekWire: Why go public, and why via SPAC? There is some volatility and riskiness with that route, especially over the past few months. And Leafly raised a $30 million convertible note just weeks before this merger closed, which seemed unusual.
Miyashita: It was really looking at our near and long-term objectives; finding the right partners who really understood cannabis and our strategy and our unique assets; and really looking ahead to this cusp of massive legalization momentum. Building the capital plan to prep us and put us on that right footing to capitalize on those moments was really one of the key drivers behind why we chose this funding path.
You also really have to understand the difficulty of accessing capital and how the door closes and opens and closes. It’s quite whimsical. For us, it was just that steady stream access to the U.S. public markets that opens up a whole new range of investors who can look at Leafly as an investment option. That is what was super critical and why we were so excited about taking this path.
GeekWire: Why did leafly raise the $30 million convertible note so late in the process?
Miyashita: We want to make sure we have all the pieces in place that we control to secure the necessary funding for our business. We didn’t want to find ourselves at the end of this SPAC transaction wondering if we could close and whether we had enough here. It really was about making sure we have all the pieces we need to be successful.
GeekWire: Talk about the “massive legalization momentum” in cannabis and what it means for Leafly.
Miyashita: Leafly is literally at the epicenter of this industry. We’re a three-sided marketplace connecting consumers, retailers, and licensed brands.
We have a content-first strategy. We are educating consumers about this highly complex plant. We have over 5,000 strains in our database, and they come in multiple form factors. We have the assets and the IP to demystify that for consumers.
And then in a challenging space where brands and retailers can’t access consumers through traditional advertising channels, we create this opportunity for them to engage with that audience. That’s massive in terms of shopping, ordering, and creating the ecosystem that’s driving massive engagement around cannabis we’re seeing today.
We can also get going on the demand side of our platform before legalization ever starts. And so we have a ton of data from early engagement with consumer side of our platform that we can then weave through into the product that connects retailers to customers.
GeekWire: It hasn’t been totally smooth sailing for Leafly over the past few years, most recently with sizable layoffs in 2020. Talk about some challenges that may lie ahead and how the company plans to maneuver around them.
Miyashita: For us, it’s really about focus. We’ve been on a path before where we were trying to do too many things. When that can coincide with the door of access to capital opening and closing, you can find yourself in difficult situations. We’ve really taken the learnings from the last several years and focused on a single strategy of our marketplace. Now the real piece is execution with the right plan and the right funding.
As I think about our journey, I look at this industry — we are a reflection of the ups and downs of the cannabis industry. You have these sways, and we are not immune to that. You really have to flow, right? You’ve got to move with where this industry is going. And if you can just be one half-step ahead — by doing this kind of transaction and ensuring that we secure that funding and not planning to be dependent on legalization, that’s a big thing for us.
We don’t sit out there and say we need legalization for this business to succeed. We know we can’t control the ups and downs of this industry. But what are the things that we can do set ourselves on that path?
GeekWire: What about your own personal journey? It must be a whole different ballgame going from being a top lawyer at a company like Getty Images to leading a startup in the cannabis sector.
Miyashita: I’ve had plenty of people ask what caused me to make a leap like this. It’s about the mission. Leafly has always been on a mission to help people discover cannabis. We believe that this is a magical plant with the potential to transform really almost every facet of what we’re facing, whether that’s economic development of communities that have been ravaged by the war on drugs, or people who have found untold relief through cannabis. And everyone else just looking for a new way to just relax.
That’s what this is all about — that focus and delivering against the mission through this business. And honestly, it couldn’t be a more fun time to lead a company like this with the talented people that we have here.