Central Oregon co-founders expand Dutchie with venture capital

Dutchie co-founders from left, Ross Lipson and brother Zach Lipson.

Ross Lipson combined what he loves in life with what he does in life.

For the 32-year-old Bend resident, that’s cannabis, business and snowboarding. Together with his brother, Zach Lipson, who is the company’s chief product officer, the pair created Dutchie, an online cannabis ordering platform. It’s been a wild ride for the Lipson brothers.

“If anyone knows me, they know I want to go fast,” said Ross Lipson, Dutchie’s CEO. “In business, especially, I want to go as fast as I can. That’s my competitive advantage. It’s going quickly. I start off first and go fast; then it’s harder for competitors to catch up.”

After two years in business, the Lipsons have garnered $18 million in venture capital, expanded their company from five employees to 50 and now have 550 cannabis companies in 24 states across the country using their online ordering platform. In 2019, the brothers helped facilitate $100 million in sales with its member retailers.

“We can’t afford to grow this fast without the venture capital,” Lipson said. “Growth is expensive. We have to keep building.”

Online ordering in any space, cannabis, grocery or pizza, contributed to 11% of the retail sales in the United States, according to the U.S. Census Bureau’s 2019 third-quarter report. Despite funding limitations because of banking restrictions in the cannabis industry, companies like Dutchie are the new darling of the tech world. Lipson hopes to take his company out on another round of funding to fuel future growth of employees, space and customer base.

Dutchie is one of several companies that specialize in online commerce for cannabis. For a flat fee, Dutchie — named after a 1981 song called “Pass the Dutchie” — provides an online platform for cannabis retailers to sell products linked to their point of sale system and at the same time keep track of inventory in real time, Lipson said. Customers can either pick up their items or have them delivered through another company.

“As a retailer, we have found the brick and mortar can compete with other companies using this online tool,” said Jeremy Kwit, owner of Substance in Bend. “It’s a tremendous convenience. If someone knows what they want we can quickly pick and pack their product up and easily confirm with the customer that the product is ready for pickup.”

Creating and growing a company

Snowboarding brought Lipson to Bend, but it was business that got him in the online commerce sector. In 2008, he started an online food ordering program in Canada that he sold in 2012 called GrubCanada. It was acquired by Just-Eat, a publicly traded online food ordering company based in Europe.

After selling his company, Lipson said he dedicated himself to snowboarding, traveling from mountain to mountain, first Mt. Baker, then Alpental to Crystal Mountain to Mt. Hood and finally to Mt. Bachelor.

“Life was good,” Lipson said. “That was eight years ago, and I never left. Snowboarding is still my passion.”

At the entrance of the NW Lolo Drive office space, skateboards are lined up in a rack. An orange-hued mural by Nick Sirotich graces the wall, and rows of computers are used by workers in a variety of departments. And at 4:20 p.m. every day, the Dutchie theme song blares from speakers at the Bend headquarters, reminding the workers that its business is making online ordering of cannabis an easy one.

“We exist because the dispensaries exist,” Lipson said. “We want retailers to love us. They’re our customers. Cannabis is a hot space and e-commerce sector, that vertical is very promising. We’ve experienced unprecedented growth. It’s a typical hockey stick growth with a team that’s done it before.”

Dutchie also exists with the help of two rounds of Series A funding from venture capital firms backed by Gron Ventures, rapper Snoop Dogg’s Casa Verde Capital, Brooklyn Nets basketball star Kevin Durant and tech companies like Shutterstock and DoorDash. Dutchie hopes to get additional funding to fuel the next round of growth.

“It’s my job as CEO to put together materials that highlight the opportunity and our team,” Lipson said. “It’s also about networking and getting my foot in the door and exciting investors so they can’t say no.”

Come next fall, Lipson plans to move the Dutchie headquarters into District 2, a 5-building development in NorthWest Crossing. He’s leased 13,000 square feet that he plans to grow into by doubling the staff. To fund this growth, Lipson hopes to attract $25 million in Series B venture capital funding.

With that kind of capital, the plan is to grow the market size and begin a marketing blitz that will call attention to the company, he said.

“We’ve been building a team, infrastructure and the product,” Lipson said. “We want to use the (investor) money for marketing to acquire more customers to help our dispensaries.”

Marketing to the tech savvy

Growing up with cellphones and computers suits the needs of Generation Z, those born in the mid- to late -1990s, said Hal Koenig, Oregon State University associate professor of marketing. This generation is completely comfortable in that online space.

From a retailer’s perspective, tapping into that comfort will fuel the growth of online shopping.

“I think retailers have to think about online shopping now,” Koenig said. “It expands who they can sell to. As a retailer, you’re not confined to selling to people 5 to 10 miles around the store. With an online presence you can sell to a wider group.”

But there are concerns that need to be addressed, particularly in cannabis, Koenig said. Companies need to keep in mind the laws in individual states, privacy restrictions outside of the U.S., if the company provides online sales outside of the country, and cultural limitations, he said.

At the moment, only about 10% of all of Oregrown’s cannabis sales come from the online ordering platform, said Aviv Hadar, co-founder and CEO. There is room to grow online, but customers still like to come in to stores to make purchases.

“If we can get more traction and growth with online, it could become a larger percentage of sales,” Hadar said.

“In this industry, retail very much matters. Stores aren’t just stores; they’re community centers. People like to come in and touch and learn about the product.”

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