The demand for CBD products across the globe has been steadily increasing and in Europe, consumers are projected to spend approximately €13.6B on CBD products by 2025. The e-commerce CBD marketplace, Alphagreen, makes it easy for consumers to discover and purchase high-quality CBD products while providing emerging CBD brands the tools to scale and launch products in new markets. 90% of the UK’s top CBD and alternative healthcare brands are on Alphagreen’s platform, and its model is lean; Alphagreen doesn’t need to carry inventory but instead acts as an agent to help brands fulfill orders. Once a brand shows enough traction, Alphagreen will step up to manage the brand’s European presence, e-commerce operations, and build a standalone presence for the brand. Within the next six months, Alphagreen plans to onboard 30 US brands that are seeking to enter the European market.
London TechWatch caught up with CEO and Cofounder Alexej Pikovsky to learn more about how Aphagreen plans to become more than just a CBD marketplace by becoming the go-to intelligence platform for CBD products, the company’s impressive traction, and recent funding round, which brings the total capital raised to £1.6M.
Who were your investors and how much did you raise?
We just completed our seed funding round with £1.1M raised, which in Europe is unprecedented for a CBD marketplace. Some of our key investors are Enexis AB, based in Stockholm, and West Creek, a US cannabis fund. We’ve also had angel investors come in, including Igor and Oleg Tikhturov, the founders of Truesight Ventures.
Tell us about the product or service Alphagreen offers.
Alphagreen is an e-commerce platform providing tech-enabled services to CBD brands and is the owner of Europe’s largest CBD marketplace Alphagreen.io.
Six months after the launch of the domain in November 2019, we became a leading seller of CBD products and that gave us credibility to start helping other brands to scale. We provide business intelligence services via our dashboards and reports, SEO as a Service to boost the domain authority of brands, as well as Performance Marketing and Influencer Marketing. We are expanding our portfolio of services, similar to The Hut Group’s Ingenuity platform which has a related setup, but for the Beauty industry rather than the CBD industry, which is a higher risk industry and requires very different approaches and tools to generate growth rather than classic Google or Facebook Ads.
Having Alphagreen.io provides us with an end-to-end solution for brands, and that is also very interesting for US and Canadian brands who are looking to enter the European market. Instead of going to different agencies and building up an e-commerce team in Europe, we offer them a one-stop-shop solution to scale abroad, launching their brand first on Alphagreen.io and helping with fulfillment in Europe. Once there is enough traction, we manage their UK/ European domain and e-commerce operations and build up their standalone presence here.
What inspired the start of Alphagreen?
I have a background in finance. I ran venture capital for a family office where I was investing in early-stage technology companies in the UK and several VC funds. I spent two years at a private equity fund where I also sat on the board of the largest German specialty fertiliser business. Initially, as a stock market investing hobby, I started following Cannabis investments in the early stages of the US and Canadian markets back in 2017 and 2018. In early 2019 I started exploring opportunities of growing the industry in the UK and Europe and spent a month in Canada and California talking to more than 50 businesses. After realising there is huge potential to help brands scale and also make it easier for customers in the UK and Europe to access the best quality products, I reached out to a long-time friend of mine, Viktor Khliupko, who lives in Germany and was CTO of Etsy’s B2B2C marketplace copycat in Germany called Sugartrends. He has a wealth of experience building online marketplaces and was up for the challenge. We’re both very driven and passionate about our work but we also invest in living healthy, balanced lives, which is what we want Alphagreen to be about: working hard and living light.
How is Alphagreen different?
From day one we set up as a Remote First business, which means we never had an office and have systems in place to optimize remote working, from time tracking, performance tracking, smooth communication, and an agile process.
When it comes to the business model, we are also the only marketplace that does not have any inventory. Similar to Farfetch in the Fashion industry, we use API keys to allow brands to fulfill the orders and we act as an agent. This asset-light and digital model allows us to move very fast and aggregate a wide range of top-quality brands.
Our team is based all over the world, bringing together a range of professional backgrounds and various networks of experts and advisors. We nurture close relationships with all our stakeholders- the people behind the brands that make use of our platform and services as well as our customers. In this way, we can create a holistic experience for all parties and do our part to drive the growth of this industry.
What market is Alphagreen targeting and how big is it?
We’re predominantly targeting the UK market for the time being, though we are set for our US expansion and are also keeping an eye on Asia. On the CBD consumer side, our data shows us that approximately almost 15% of the population, or 6.8 million adults, with internet access in the UK are CBD consumers and have health-related reasons for their purchase.
These range from joint pain to anxiety and sleep issues, as well as skin concerns. Almost 43% of the population suffers from chronic pain and worry-related sleep loss has increased from 19.7% to 24.7%, which indicates that people are in need of more ways to improve their quality of life.
What’s your business model?
With regards to Alphagreen.io, we want to give our customers a 360° service experience. We curate the best products for them, and we are easy to find when you look for CBD benefits or top CBD products on Google.
All pricing and inventory levels are synced with brands so we always have the best price and offer free shipping to all countries where CBD is legal.
We will also apply this model to other innovative wellness products such as ashwagandha and legal mushrooms.
With regards to the services, we are tackling the outsourced direct-to-consumer market which is huge, and where brands need help scaling their presence. We have built a streamlined tech stack that allows brands to use us to grow quickly without looking for growth and marketing agencies who usually have no experience with CBD. We are working with ten brands on growth initiatives which is our recurring revenue side, and we are seeing a lot more demand from the US and Canada so exciting times ahead.
How has COVID-19 impacted the business?
COVID-19 is a tragedy, however being an e-commerce business, we did not suffer. We saw an increase in online shopping rates triggered by a strong growth in older customers. The public’s interest in health and alternative wellness was amplified, accompanied by more time than ever being spent online. This has led to unfortunate closures in brick and mortar but underlines the importance of a strong online presence. In a time of great duress, we are doing our best to provide both people and businesses with solutions for their needs so that we can all come out of this stronger.
For the Cannabis industry, COVID-19 has been beneficial, because people are increasingly turning to natural health supplements and remedies, and the conversation around mental health is as important as ever. On the regulatory side, there has been a slow-down in approvals, which is unfortunate but current political developments point towards a promising outlook. Given our own successful seed round and market trends pointing upwards, investors are also still putting their money into the industry and supporting our growth.
For the Cannabis industry, COVID-19 has been beneficial, because people are increasingly turning to natural health supplements and remedies, and the conversation around mental health is as important as ever. On the regulatory side, there has been a slow-down in approvals, which is unfortunate but current political developments point towards a promising outlook.
What was the funding process like?
Having been an investor for 6 years myself, I have built up a large network of family offices, angels, and VCs. Our strategy was to get funding for well-known tech angels and value-add family offices, as well as cannabis-focused funds. While there are many VCs who are very good, there are Cannabis-focused investors who can connect us to their portfolio brands and amplify our network. We had several term sheets from Venture Capital funds, but we decided to not overfund at this stage and keep the ownership and control with the founders. I am very fortunate that the funding process went very smoothly and did not distract the team from building the business. We are growing very fast and for the next growth chapter, we will consider VC and Growth Equity funding down the line, no doubt.
What are the biggest challenges that you faced while raising capital?
Many people were not familiar with the CBD and Cannabis space, so we had to explain a lot of the regulatory framework and legalities of this industry. While the process with some investors took a bit longer because of the educational angle, it is always good to make this industry more well-known and build up more transparency and investor appetite overall.
What factors about your business led your investors to write the check?
We have a very well-rounded team of investment, strategy, technology and e-commerce experience. Our growth and execution track record made investors comfortable that we can grow very fast in this competitive industry. We have also been very disciplined on the cost front and bootstrapped a lot of the growth which is always a positive sign for investors. Finally, being a technology business with a recurring revenue stream and a transactional revenue stream, is fairly unique and combining it with the rapid growth in Cannabis overall, the interest from investors was very high.
What are the milestones you plan to achieve in the next six months?
We have 90% of the top brands in the UK while we only have 5% of the top brands in the US. We are looking to onboard 30 US brands in the US in the next 6 months. Given we have a lot of traffic in the US and are indexed for 10K keywords, we are seeing the huge potential to make the US the second biggest market after the UK for us and in the future potentially outgrow our first market. We are also looking to launch in other European countries in local languages enabling customers to get access to top US and UK brands.
What advice can you offer companies in London that do not have a fresh injection of capital in the bank?
Keep raising and stay patient. There is a lot of capital out there. Try to pivot and challenge your product-market fit. Fundraising is easy if you have a USP and a strong team. If you struggling to fundraise, challenge your business model as quite likely the problem is in the business rather than in the funding market.
Where do you see the company going now over the near term?
We are working hard to become the Go-To Intelligence platform for CBD insights. We are the only player globally with point-of-sale data aggregated and visualized and we are aggregating more than ten other data sources providing a very sophisticated and accurate view of the CBD market.
We are working hard to become the Go-To Intelligence platform for CBD insights. We are the only player globally with point-of-sale data aggregated and visualized and we are aggregating more than ten other data sources providing a very sophisticated and accurate view of the CBD market.
We are tracking the size of the market, demographics, psychographics, pricing, formats, new product developments and discontinuation of products, purchase frequency, and many other factors which are very interesting not only for CBD brands but also for FMCG players, consultants, and financial institutions who are looking to enter the CBD industry.
What is your favorite London pub to grab a pint with the team?
We have no favorite London pub. We did an offsite with the team in Corfu (Greece). From time to time, we grab dinner as a team and have lots of educational workshops remotely where all of the global team comes together.
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