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Flower Co. has raised $16 million in Series A financing led by an unnamed venture capital firm firm, along with other private investors, the founder of the company told MarketWatch.
The JAM fund, which is the venture capital firm backed by Tinder co-founder Justin Mateen, took part in the financing for Flower Co, along with Ben Curren, founder and CEO of Greenbits and Rob Stavis, a former partner at Bessemer Ventures.
Other investors in the round include well-known musicians and billionaire founders, but Flower Co. did not provide additional details on these parties.
Arcata, Calif.-based Flower Co. plans to scale up its business to compete on price with the legacy, or illicit market, which has been supported by consumers in California despite the availability of legal cannabis.
Lichtenberger built Flower Co. from the ground up to cut out as many steps in the supply chain in order to provide the sale and delivery of cannabis products directly to consumers at a reduced cost.
“We cut middlemen out by contracting directly with manufacturers or doing the work ourselves,” said Lichtenberger. “We have cultivation and extraction labs and our own customer fulfillment operation.”
As a direct-to-consumer company with no major retailing storefront expenses, Flower Co. is able to offer fresh products priced at or below the legacy market, even when state and local taxes are included.
The basic rule of thumb in the illicit market is the wholesale price doubles every time it changes hands between growers, distributors and sellers by the time it reaches the hands of the retail buyer.
This makes it possible for Flower Co.’s supply and delivery chain to compete with the legacy business on quality and price, even with the additional cost of state and local taxes and testing requirements for products, he said.
See Also: Investors in cannabis companies burned by stock-market losses in 2021 even as the pot business grows
Flower Co.’s least expensive cannabis currently sells for $49 an ounce and it has premium flower for $99 an ounce. Its prices average about 30% to 50% less than retail cannabis store prices.
The company offers standard delivery on 1,500 products 140 brands, including an express menu with about 150 in-house and third-party products offering same day delivery in the vein of Instacart.
Flower Co.’s sales model mostly avoids the challenge of winning space on store shelves operated by outside retailers.
“We’ve always been an open platform and let the best products rise to the top instead of a boys club where you have to be a friend of the owner to get placement [on the store shelf],” Lichtenberger said.
Flower Co. already serves about half the residents of California with a presence in heavily populated areas in the state including San Francisco, Los Angeles, Sacramento, and Marin County. It plans to grow its wholesale cannabis club offering savings on brands and products with door-to-door delivery.
See Also: Cannabis companies tap green dollars for debt from Bespoke Financial
An entrepreneur and former McKinsey & Co. analyst, Lichtenberger co-founded Flower Co. in 2018. He’s also been CEO of Humboldt Legends, a distribution and manufacturing company marketing a collection of legacy cannabis farmers.
He’s also co-founder and former COO of cannabis brand Old Pal, which he helped grow to about $30 million in annual revenue in less than a year.
Lichtenberger also graduated from Y Combinator, the startup fund and program that has invested in about 3,000 companies including Coinbase
COIN,
and Airbnb
ABNB,
With its latest round of funding, Flower Co. will focus on being the source of the freshest flower available, speeding up its delivery services, and creating more personalization for users by recommending products that they’d like.
The company also plans to “double down on verticalization” by ramping up its growing operations and other in-house production capabilities, he said.
Flower Co. operates out of its headquarters in the heart of the so-called Emerald Triangle of cannabis of Humboldt County, Mendocino County in Northern California and Trinity County.
This proximity gives it ample access to the largest outdoor cannabis production area in the U.S. and possibly the world. It also has operations on the central coast. These two locations provide the company with a pool of cannabis expertise for its cannabis growing operations.
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