How MassRoots went from massive debt to eyeing the NASDAQ in 2 years

September 1, 2015

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MassRoots is a social network for cannabis consumers. Away from the prying, judging eyes of censors and relatives lurking on Facebook, the network gives potheads an open platform for sharing photos of their smoking sessions, braging about their new bongs, and a forum to discuss all things pot. It is Facebook’s red eyed, grinning cousin, and it plans to have its fingers in every aspect of the cannabis industry.

MassRoots’ users are hardcore potheads. Their demographic smokes marijuana every day and, to some extent, that habit is part of their cultural identity. They feel comfortable publically posting photos of themselves holding joints. Potheads are their tribe, and they’re a valuable audience for the cannabis industry.

“The initial core thesis of Massroots was to get a whole bunch of people using one central platform,” MassRoots CEO Isaac Dietrich said. “Now that we have those people, we’re expanding in a multitude of directions.”

This is not as small of a demographic as you might think, and MassRoots boasts over 500,000 loyal users. So loyal, in fact, that when Apple pulled the MassRoots app from the App Store there was such an outcry that the world’s largest company reversed their decision.

“Over 10,000 of our users sent personal emails to Apple,” Dietrich said. “The National Cannabis Industry Association and a couple dozen business leaders in the cannabis industry sent Tim Cook a letter saying how Apple’s decision was stifling innovation and social progress. Within two weeks we got a call from Apple saying they’d reversed their policy.”

But the road to MassRoots’ success is an unlikely one. Before founding the company, Dietrich was running Republican political campaigns in Virginia — more or less the opposite of the stereotype of your average cannabis entrepreneur.

“During the 2012 election cycle I saw Colorado and Washington pass cannabis legalization and I wanted to get involved,” Dietrich said. “I thought this would quickly spread to the rest of the country.”

By 2013, he began laying the groundwork for MassRoots. Unable to find outside funding, and grappling with $17,000 in debt, the company looked doomed.

“We flew from Virginia to Denver for the ArcView meeting, and MassRoots had the lowest rated pitch out of all the pitches at that meeting,” Dietrich said. “But, you know, we convinced one person in the audience to invest and two days later we got a phone call from Doug Leighton, our lead investor, and got our seed round started.”

That round ended up raising over $150,000, allowing the company to rapidly grow. But even with strong growth the company struggled to raise venture capital.

“We went to all of the Silicon Valley’s VC firms and pitched MassRoots,” Deitrich said. “They all said the same thing: we love your growth, we love your model, but we can’t invest in marijuana.”

The problem, it turns out, is that venture capitalists manage other people’s money and some of those people are absolutely against funding marijuana companies. University endowments, wealthy conservatives, and foreign families all invest in venture capital funds and can’t have their money funding marijuana businesses. So, locked out of the venture capital club, the company went to the people.

“The only people willing to give us money in 2014 did so on the condition that we went public,” Dietrich said. “But unlike the other cannabis companies, we did it the right way, going through the full SEC vetting process and we became one of the first cannabis companies to go public through an S1.”

The company has come a long way since then. They recently launched premium profiles for business, allowing them to list their hours and locations. In the near future they will also be able to list live pricing and inventory. But perhaps most impressive, and most importantly for the industry, MassRoots has become an investor in other cannabis companies.

Earlier this year they took an equity stake in FlowHub, and are busy integrating information from their platform into MassRoots. When complete, MassRoots will have information from grow operations, dispensary point-of-sale systems and a highly connected network of marijuana users. It’s not hard to see the company’s future as a central hub in the cannabis industry.

Earlier today, after the writing of this article, MassRoots applied to be listed in the NASDAQ. While far from a sure thing, the company is no stranger to overcoming long odds. Should it get listed, it may not trade at the same level as Facebook — but the company has come a long way from maxed out credit cards and fights with Apple.

 

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