Baker CEO Joel Milton on how the company came to fixate on building a SaaS enterprise platform so universally useful that it becomes the central hub of the cannabis industry wheel.
During a recent trade event seminar, a speaker opined the cannabis industry is on track to become the world’s most technologically sophisticated industry. It’s a bold claim for an agriculture-based business, but as we look around we see it coming to pass. From cultivation and manufacturing to packaging, research and retail, cannabis businesses use cutting-edge technology to improve quality and efficiency. Likewise, products and services provided by talented technology companies working in the cannabis space are helping the industry achieve the sort of scale that will enable it to reap the billions of dollars it is forecast to make. Baker, maker of an increasingly popular software-as-a-service (SaaS) solution for cannabis retailers, is one such company.
We spoke with Baker co-founder and Chief Executive Officer Joel Milton about the discovery process that led the team to reverse course midway through the original product’s launch to focus on customer retention. The result of that decision is the Baker platform now experiencing record growth. The Baker story reveals a lot about the cannabis retail space and even more about how the team does business.
Milton, Chief Product Officer David Champion, and Chief Technology Officer Roger Obando founded Baker in 2014. The men knew one another before making the leap into cannabis. “David and I had been working together since 2010 on early-stage tech startups in New York City,” recalled Milton. “We also had our own agency helping companies build their own apps and websites. Someone came to me in 2014 with an idea for an app for the cannabis industry. Rec[reational] sales had just started in Colorado, and there wasn’t a lot of news about the industry in New York at that time, but I was interested. I’d always been a fan of cannabis and of legislative reform. I don’t like seeing harmless people rotting in jail and costing taxpayers millions of dollars.
“I flew out to Denver, met some dispensary owners, got the lay of the land, and came back hooked,” he continued. “At the same time, Roger, our third co-founder, who was working in the same co-working space, pulled me aside one day to ask what David and I were up to. It turned out he was thinking about building a cannabis app, too. It occurred to us that between the three, David could design the product, Roger could code and build it, and I could go sell it.”
And thus Baker was born, but it still needed to grow up. “Our first thesis for Baker was to build an online ordering tool so that customers who know what they want could order ahead. No one at the time was doing it, and we went to market with the product in late 2014. Customers would come to the Baker website, pick the dispensary, choose what product they wanted to buy, and place the order. When they got to the dispensary, the products would be waiting for them and they could skip the line.”
But it was still a part-time project. “In January 2015, we decided we really liked the cannabis industry,” said Milton. “Baker was getting some traction, we were working with three or four dispensaries in Denver, and we decided to jump in full-time.
“That summer, we were accepted into 500 Startups, a notable accelerator program in San Francisco that focuses on tech companies and is notoriously difficult to get into, harder than Harvard,” he added. “They have about 3,000 applicants vying for thirty spaces. In fact, we were the first cannabis company to be accepted into the program. It comes with about $100,000, but more importantly, they mentor you for three months and help you accelerate quickly.”
During that time, the team focused on growth more than product improvement. “We spent our time ramping up metrics that would help us grow,” said Milton. “Things like how do we get more dispensaries onboard and how do we get more customers spending more money on the platform.”
From the outset, the partners intended Baker to grow as a company. “We were six people at the time,” said Milton. “We raised another round of financing coming out of 500 Startups that allowed us to grow our team. It was then, at the end of 2015, that I took my first vacation in over a year.”
“I had just gotten engaged and went to Florida for Christmas with my fiancée and her parents,” said Milton, recalling a pivotal moment in Baker’s destiny. “So, I was sitting on the beach and thinking about everything that had been going on, how we’d raised the round of funding and were so focused on growth. And it dawned on me—not for the first time, but more intensely now that I was able to step back and observe—that the cannabis market did not need another [business-to-consumer] website. We already had Weedmaps and Leafly with their millions and millions of viewers, plus Pot Guide, Leaf Buyer, Sticky Buyer, Pot Buyer, High There, and MassRoots.
“There were literally thousands of sites trying to attract customers, a crazy amount of competition for customers,” he continued. “But we also had what I call the ‘Groupon effect,’ where dispensaries, in order to get customers in their doors, were offering really big discounts. A dispensary would spend $5,000 on a Weedmaps ad and offer $20 eighths as a crazy deal to get people in the door. A hundred people would show up for the deal, but a month later those same customers wouldn’t come back. Instead, they would go to the next dispensary for their deal.
“At the end of the day,” he added, “they were giving away too many eighths to get too few new customers. That’s why it’s the Groupon Eeffect. The retention isn’t there,” he added.
Retention, Retention, Retention
“We realized there was no one on the dispensary’s team,” said Milton. “Everyone was trying to sell the dispensary something, but they were really promoting their own brands. At the end of the day, Leafly wants people to go to the Leafly website, and we were doing the same thing.
“We wanted people to come to the Baker website and order” he continued. What if we were to shift gears and focus on being a [business-to-business] company? Sell software as a service to dispensaries but say to them, ‘Why are you paying websites for their customers and then those customers are going right back to their site—the listing site? Drive traffic to your own website. Let us give you the tools to build your own brand, to make customers go to NativeRoots.com instead of [name your destination].”
Shift gears they did. Actually, the change was more like a course-reversal. “In January of 2016, we launched our loyalty tablet and started selling Baker as a monthly software tool focused on customer retention,” Milton said. “Instead of having customers order from our website, we embedded a shoppable menu on our customers’ websites. Now, if you go to Native Roots, Medicine Man, or Harborside and click Order Online, you’re still on their website but you’re using our technology. It’s how Shopify works, which is now a $7 billion publicly traded company.”
The Baker platform offered today incorporates three core concepts. “First, there’s ecommerce, the shoppable menu we embed on our customers’ website,” said Milton. “Then there is the loyalty and rewards tool, which the iPad customers sign in on in the store to see how many loyalty points they have accumulated and choose which rewards they want. The third component is messaging, where dispensaries can send targeted and filtered messages based on the customer’s interests. We can also do alerts to let a customer know a product they love is in stock or will be in stock on a certain date.”
Prior to Baker’s relaunch as a B2B company, the platform served fifteen dispensaries and employed six people. “Fast-forward a little over eighteen months, and we now have 500 dispensaries on the platform across fifteen states, and I think we have thirty-seven full-time employees,” said Milton. “We do all our own development in-house and have a large development team based in Colorado. We now have a [vice president] of engineering, front- and back-end developers, data and product people, web developers, [user interface] and [user experience] designers, a sales team inside, and outside sales reps. We also have a large customer success team, including onboarding specialists who help customers get ramped up and account managers who check in with our clients every month to make sure they’re using our tools effectively and help them figure out how to look at their data to make more money from their customers. We have a marketing team and a chief operations officer now. We just hired a director of finance and accounting. So, it’s a lot; we’re a real company.”
Baker has been successful as a retention tool for one simple reason, according to Milton. “We help our customers make more money, and we can prove it,” he said. “And we’re one of the only tools out there that can. We can literally show them that we can deliver people into the store. Over the course of the month, we can show them how many people shopped online, how much money they spent, how many checked into the loyalty tablet, how many came back multiple times, and how much money came directly in response to a messaging campaign sent using Baker. We show them they are generating tens if not hundreds of thousands of dollars in revenue a month that is directly attributable to the Baker platform. The best part is that we’re helping the dispensary be the star of the show.”
Unlike some other programs, the date Baker generates is the dispensary’s to keep. “We put in our contracts that your data is yours, and we will never hold it hostage,” insisted Milton. “We’re building a venture-capital-backed, Silicon Valley tech company focused on growth and are only charging what we think is fair, and we’re not holding data hostage. We’re doing things with best practices. Dispensaries are now contacting us to find out how they can get Baker, because they are hearing that we are good people. That is what puts us in a position to succeed long-term.”
An ability to integrate with any number of complementary platforms also will help Baker to succeed. “We integrate with many [point-of-sale] systems,” said Milton. “We don’t do government reporting, seed-to-sale tracking, or compliance, but we do integrate with POS menu data. So, for instance, when you go to the Harborside website and see what’s in stock, that’s pulling in real-time [information] from MJ Freeway, the POS [Harborside uses]. We also integrate with Treez, Green Bits, Flowhub, and with most of the [other] leading POS systems.”
Pricing is based on the tools a retailer wants to use. “We have tiered pricing, but the goal of our pricing is that at the end of the month, it’s a no-brainer to pay that bill,” said Milton. “If, say, we help you generate $15,000 and it costs you $700 to do that, you’re happy paying that bill.
“For our average client, [the service] costs less than $10,000 for the year,” he added. “A large percentage of them do pay the annual cost up front, because they’re locked in at a better rate and they know the product will improve every month. Charging up front also allows us to keep our costs down and not pass them on.”
“The Salesforce of Cannabis”
There is a reason why cannabis retailers are keen to work with Baker and why Baker is keen on the cannabis industry. “In the same way we are POS-agnostic, we are focused on building an SaaS enterprise platform,” said Milton. “We’ve been called the Salesforce of cannabis, and we love that analogy because Salesforce is a platform that, for instance, integrates with HubSpot even though Salesforce doesn’t own HubSpot. Ultimately, it’s a single platform that allows you to run your business. The partnership has done a great job of buying and building pieces of technology it wants to incorporate, but also partnering with others.
“For us,” he added. “it’s about building that ecosystem. We’re big believers in opening our APIs [application programming interfaces] and integrating with lots of people in this industry to provide the best experience. We think we’re well positioned with our financial resources, our team, and our technology to be the center hub of that wheel that everything plugs into, and we’re going to be doing a lot of things soon that work toward that.”