October 10, 2019

Lessons from the Dot-Com Era: Cautionary Tales for the Cannabis Industry

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Green Growth Brands is building the future of cannabis without losing sight of past fortunes and failures of online pioneers.

Two decades ago, the seemingly unstoppable expansion of online brands came to an abrupt and unexpected halt. In hindsight, it’s easy to blame the dot-com bubble’s vulnerability on rampant speculation, unrealistic revenue models and the pervasiveness of promises instead of actual innovation. But the convergence of events before, during, and after the crash was more fundamental, offering both cautionary tales and crucial lessons for another fast-emerging industry: Cannabis. While the prospect of repeating history is cliché, that doesn’t make it uncommon—startups continue to make the same mistakes, despite the warning signs. Green Growth Brands is working hard to learn from these lessons of the past.

A Look Back: The Dot-Com Rise and Fall

As 1999 was winding down, anticipated technology spending was unprecedented amid concerns about the potentially crippling consequences of Y2K. Advertising to lure new individual and enterprise customers after those fears fizzled was unparalleled. Profitability took a backseat to brand recognition, with 16 tech companies dropping a whopping $2.2M for 30-second Super Bowl spots in 2000. Time Warner and AOL had just merged, an arranged marriage of old and new media dynasties destined to own the future. Telecoms were connecting the world as quickly as they could lay fiber-optic cable while scrappy little startups fought for top talent with lavish incentives and absurd hiring perks.

But then the wind quickly blew the other way. The Federal Reserve raised interest rates with the millennium bug now in the rearview. The NASDAQ hit its pre-crash peak, Japan declared a return to recession, and Yahoo and eBay called off their engagement—all in the span of a single week. Investor confidence had been waning for more than a year before the attacks of 9/11, with former dot-com darlings still spending millions, despite no foreseeable return. When consumers pulled back, ad budgets dried up, the ripple effect kicked in, and suddenly statistical abstractions and worst-case scenarios became inevitable.

Did the tech industry and the global economy bounce back? Eventually, yes. And there are surely young garage pioneers in Silicon Valley aspiring to build the next big thing. But for those who remember the flameout dot-com brands and piles of Aeron chairs you could buy for pennies on the dollar, there are five parallels today that smart modern brands should pay attention to.

Lessons Learned

So what can the cannabis boom take away from the dot-com bust? More than most may think. Here’s why Green Growth Brands will beat a potential “weed bubble” and remain well ahead of the curve.

1. Balance Your Build Out With Your Burn Rate
When Pets.com went public, backed by Amazon and an advertising campaign that left rival retailers fearing for their very survival, the media frenzy over the prospect of one-stop, online shopping for your furry family friends ignored the numbers. In less than a year, Pets.com went from an $82.5M IPO to 19 cents a share and eventual liquidation.

Their synonymous sock puppet seemed like a thrifty marketing maneuver over a celebrity pitch person; in fact, Pets.com spent nearly $12M in advertising, yet generated only $600k in sales in its first fiscal year, without any independent market research prior to launch. There were no loss leaders. They lost money on everything they sold.

Green Growth Brands leadership understands retail development and scalable deployment better than anyone else in the cannabis industry. Contemporary market research informed by decades of understanding consumer behavior drives every decision. Sustainable success is more than just the right products. It’s about having the right people and processes in place to build brands and cover costs simultaneously.

2. It’s More Important to be Better Than First
Apple has been early to adopt almost every technology trend since its inception. But even Cupertino’s enviable engineering team hasn’t always seen over the horizon.

There were already dozens of competing digital jukebox applications and MP3 players on market when Apple finally introduced iTunes and the iPod. Instead of rushing to market with two incomplete, or worse, incompatible products, Apple took the time to create a best-of-class customer experience. The fabled “iPod Halo Effect” drove sales for other Apple products, epitomizing a signature strategy that persists to this day—creating a seamless integration only possible when one company makes the whole widget.

Green Growth Brands is more than just stores and websites operating in parallel orbits. It’s an entire supply chain, from cultivation to consumer. Each product is part of that journey, just like the places they are sold. It’s the same seamless business model that creates customer loyalty and makes the company more than just a commodity. Green Growth Brands has studied existing dispensaries, acquired leading retailers such as The Source in Nevada, and further improved on them to provide an even better customer experience.

3. Evolve with Changing Expectations
Unlike eventually obsolete forerunnersAOL and CompuServe, 23-year-old Sky Dayton, founder of Earthlink, wasn’t interested in proprietary chat rooms or curated content. He wanted to get to the broader “internet,” and founded a company that would eventually help millions of Americans escape the walled gardens of those early market innovators.

But phone lines weren’t the future of web access, nor were the faster dedicated circuits Earthlink started supplying to small businesses. So Dayton founded Boingo, a supplier and aggregator of wireless hotspots serving the hospitality sector. No longer household names, both brands still exist, but scarcely resemble their earlier incarnations. That’s because they’ve continued to adapt to changing expectations instead of selling out or withering away.

Green Growth Brands serves a wide range of prospective customers, all while keeping a watchful eye on what’s next. By offering CBD and THC in various products, selection and convenience become the deciding factors that distinguish the brand, not availability or price point. It’s a premium experience that remains accessible for familiar consumers, yet approachable for those new to the cannabis culture.

4. Don’t Let Passion Limit Progress
Offering the ideal client a perfect product sounds like a solid marketing strategy, unless the cost to create enough initial capacity is prohibitively expensive before the first sale. Though the govWorks website promised easy access to local government services and more reliable revenues for municipalities, its appeal to investors exceeded market demand on both ends of their business model. Citizens were no more eager to pay outstanding parking tickets online than cities were willing to spend millions on citations they’d eventually collect anyway.

As painfully detailed in the award-winning documentary Startup.com, govWorks spent three years and $60M in venture capital trying to create a service portal platform that rivals who followed were eventually able to offer for free through alternate financing. Infighting and expenses aside, a key failure that led to their downfall was “chasing the whale,” slang for that one enormous and elusive contract—and the blind obsession that would doom a sinking ship.

Green Growth Brands is more than a single product or static retail experience. Initial expectations often hide additional opportunities. The ever-adapting integration of traditional retail, online orders, ship-to-store sales and delivery services connect with each customer as an individual. There’s not one class of client upon which the entire enterprise relies.

5. You Can’t Innovate by Imitating Everyone Else
Twenty-somethings barely even remember the days before Google when competing search engine companies were engaged in mortal combat for the attention of early internet audiences. Lycos, Excite, AltaVista and others offered news, sports and maps. Yahoo and Hotmail let users take their email accounts anywhere, even if they switched ISPs.

Google now does all of this and much more. But they didn’t set out to own the internet or beat everyone at everything. They focused solely on search, and clearly separated advertising from content users found most useful through an innovate algorithm unlike anyone else. It was actually Ask Jeeves that was the first natural language search engine, eliminating the need for a cleverly crafted series of keywords and Boolean operators. But Google did it better by factoring in relevancy as more than another arbitrary metric. It charted a unique and better course.

Green Growth Brands has that same focus, offering customers easy-to-buy products relevant to them for recreation and relief. They’re not worried about shady head shops or head starts. It’s about identifying consumer needs and serving them better than anyone else.

Bloomberg Business

"Cannabis Company Backed by Retail Fortune Eyes East Coast Expansion"

The Province

"Opinion: The future of cannabis retail is simple, integrated, and welcoming"

CBC Business

“Unlike big names in production at centre of cannabis frenzy, company plans to focus on retail side of things”

Tech Startups

"Former Victoria Secret executive raises $85 million for cannabis startup…"

The Growthop

"Green Growth Brands completes upsized raise of $85 million to satisfy investor demand."

Benzinga

"Green Growth Brands announced it has completed a raise of C$85 million ($65.7 million) in a private placement…"

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