Fire & Flower Purchases Cannabis Marketplace Wikileaf for $7.5 Million

Fire&Flower makes a BIG bet on owning their own cannabis marketplace....

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Fire & Flower is Acquiring The Assets Of Wikileaf

In a deal worth $7.5 million USD, the Canadian cannabis retail is making a big bet on winning in digital media.

In 2014 Dan Nelson identified a problem.

It was too difficult for cannabis consumers to locate the right cannabis products at the best prices.

To solve this problem, he built Wikileaf.

By aggregating pricing data to help consumers identify the best-priced cannabis products in their area, Wikileaf became a popular destination for cannabis consumers.

This bet paid off, and two years later with 7 employees — Wikileaf was acquired by Nesta Holdings, a private equity fund focused on cannabis.

Neta Holdings was founded by Chuck Rifici, who is the former Co-founder and CEO of Canopy Growth.

Fast forward two years later and Wikileaf was a publicly traded company, raising some $6.8 million USD in the process of going public.

The Problems…

Wikileaf may have some 1.09 million people coming to their website each month, however, the company has struggled to generate meaningful amounts of revenue since its inception.

As part of Wikileaf going public, it became clear that they were incurring very large losses — losing $3.7 million USD in 2020 alone.

In January of 2020, Wikileaf appointed a new CEO with Derek Firth taking on the task of turning the company around.

Firth was unable to turn the company around and they continued to bleed cash as they continued to invest in building their product — only these investments didn’t have the required impact.

With mounting losses and limited capital left — it was time for some big changes. Welcome Fire & Flower.

The opportunity…

One of the big problems cannabis companies face today is the inability to advertise online.

For cannabis retailers, this makes it very difficult to reach new consumers to bring them in-store, or to purchase cannabis from them online.

Cannabis companies need to think outside the box to drive new traffic to their websites.

Fire Flower — one of the largest cannabis retail chains in Canada likely sees Wikileaf as a solution to this problem.

At the time of writing Wikileaf is valued at just over $6.5 million USD, however, the real value in Wikileaf is their website, their social media accounts, and email list.

All of which Fire & Flower now own.

Fire & Flower would have the means to purchase the entire company, however, they have instead acquired Wikileaf’s most valuable assets.

The Challenge…

Fire & Flower is located in Canada and according to Similar Web, 57.3% of Wikileaf’s web traffic comes from the United States.

With Fire & Flower planning to move into the U.S, why would a cannabis retailer in the region allow them to plug into their point of sale platform?

They don’t need to advertise on the platform, and it seems likely that cannabis retailers will need to be convinced that they are not handing over their valuable data to a would-be competitor.

Success?

15% of Wikileaf’s visitors come from Canada each month which is substantial.

Fire & Flower has already developed best-in-class software in-house via their acquisition of Hyfire, and if they can improve the product and use the existing traffic to acquire new customers — then this deal has great potential.

It is a very bold move, and it highlights the need for cannabis companies to own media assets to build relationships with consumers as they cannot rely on Facebook or Google to reach consumers.

The Future 🔭

I don’t expect Instagram or TikTok to stop censoring cannabis content or allowing cannabis companies to advertise on their platforms anytime soon.

As such, if Fire & Flower can retain the traffic Wikileaf is receiving today, then I have no doubt this strategy will pay big dividends in the long run.

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