Brendan Kennedy had done his homework and knew it was a financially smart decision. That wasn’t the issue.

What caused him to reach out to family and friends, though, had to do with a question centering on his moral compass.

Was entering the controversial medical cannabis industry the right thing to do?

That was a little over a year ago. Listen to Kennedy now, and it’s clear he knows he made the right choice.

“It’s almost a sense of disbelief, like how could I have asked myself that question?” he said, reflecting back on the career-changing move. “Now, I feel like I have a moral imperative for this to succeed and a moral imperative to help those patients.”

Kennedy is the president and co-founder of Leafly, a unique review-site for medical marijuana patients to find the right strains and dispensaries to suit their medical and financial needs. Think Yelp with a little bit of Rotten Tomatoes, but all about marijuana. It’s a Seattle-based startup attempting to professionalize a booming yet controversial industry with laws on the November ballot in several states that could change things dramatically. More on that later.

It all started when Kennedy worked at Silicon Valley Bank and spent five years hearing thousands of venture capital pitches. One of those pitches was about medical marijuana and he became fascinated with the industry.

Leafly’s founders: Michael Blue, Brendan Kennedy and Christian Groh.

Kennedy recruited two of his buddies — Michael Blue and Christian Groh — raised capital and met with over 300 people in the business. Finally, the three came upon Leafly.

The company was actually started in June 2010 by three engineers that are still employees — Kennedy calls them “rock stars” — who were tired of the cliches and wanted to raise the level of conversation about medical marijuana. But they had no sales team, no advertising effort, no way to make money.

Kennedy and his team saw the opportunity and ran with it.

“We knew immediately that this was the perfect first acquisition,” he said.

However, the process of raising capital wasn’t simple because there are no venture capitalist investments within the medical marijuana industry. Given the nature of limited partnership agreements, it’s too complex for a venture capitalist make an investment, as it would take only one limited partner — like an endowment or retirement fund — to object.

So the founders created a private equity holding company called Privateer Holdings to make acquisitions in the legal segment of this industry. The company wholly owns Leafly and is funded by their personal investment, high net worth individuals and family offices.

“Our investors are spread across the country,” Kennedy said. “They tend to be very educated, wealthy professionals who happen to believe that cannabis should be legal, cannabis will be legal and that reputable companies need to be built to help patients and to accelerate the end of prohibition.”

Once the money was secured, it took six weeks to sign the first client and business has taken off ever since. Leafly makes money through advertising packages to dispensaries and other companies that run anywhere from $195 per month to over $3,000 per month.

In less than a year, the company of nine employees has grown tremendously from the site’s interface to the user engagement to the business model. Traffic is growing 10 percent each month and now sits at about 1.5 million visits per month split between three channels: the website, the iPhone app and the Android app.

Leafly allows you to filter out medical marijuana strains based on medical use and body effects on this page that mimics a periodic table.

And frankly, it’s not all that surprising considering the lack of superior competition and Leafly’s overall user experience. The site lets you easily explore over 500 strains that differ in their abilities to treat symptoms like anxiety and pain while providing effects like euphoria and creativity. People can filter out unwanted strains based on medical use and effect to the body on a neat interface that mimics a periodic table.

“It’s no diferent from Consumer Reports or Amazon when comparing the same product or similar products,” Kennedy said.

Each strain has an overall rating based on user reviews — there are over 50,000 of them — that people can read. Photos are also available with a clever “safe-for-work,” default option set up.

Essentially, Leafly is an information resource to help medical marijuana patients find the right strain. Kennedy said most people don’t realize that doctors will recommend medical marijuana treatment but don’t specify which strain.

“It’s like a doctor telling you that you have an infection and you should try taking an antibiotic without actually directing you to a specific one,” Kennedy explained. “Medical marijuana patients have a right to information about this medicine and that’s what we provide.”

You’re also able to find out which dispensaries are currently in stock with the specific strain, which is the other part of Leafly. There are 2,600 searchable dispensaries across the 17 states where it’s legal to buy medical marijuana. Users can enter in a city, state or zip and add filters like “credit card,” or “online menu.” There are over 10,000 dispensary reviews — in this aspect, it’s very similar to Yelp.

Overall, the site is organized, has nice aesthetics and is easy to use, something that’s not common in this relatively new industry. Ean Seeb, co-owner of Denver Relief, has tried similar sites to help promote his dispensary. But they don’t compare to his 11 months using Leafly.

“They are not as developed and far along as Leafly,” said Seeb, who added that 25 percent of new traffic to his website is a direct result of Leafly. “They’re not as clean and professional.”

Clean and professional are exactly what Kennedy and his team are going for. They’re sick of the negative stigmas all over various medical marijuana websites out there today — the bikini-clad girls, the pot leaves, the headlines of “budding business,” and “high hopes.”

“Those are just insults to the true patients we talk to every day,” Kennedy said.

“They are not a stoner website,” added Seeb. “There are no pics of ladies, no videos of people taking mad hits of mad nuggets — that kind of stuff is not even mentioned. It’s all very professional.”

Leafly seems to be in good shape. It is entering a medical marijuana industry that could grow from around $1.7 billion today to $8.9 billion by 2016 and society’s acceptance of the drug, which was federally prohibited in 1937, is increasing. Three states — Washington, Oregon and Colorado — are voting next month to legalize marijuana for the public, while Montana, Massachusetts and Arkansas have medical marijuana-related initiatives on the November ballot.

“We’ve reached the tipping point,” Kennedy said. “People are demanding this and it’s highly likely that medical cannabis will be legal in a majority of the states in just a matter of time.”

But while Leafly has a profitable business model, its dabbling in a controversial industry. Though state laws may change, there are still federal laws and regulations in place that prohibit marijuana use.

So to ensure that the company is following local, state and federal laws, Leafly has a “top-notch” legal consulting including former U.S and D.E.A. attorney’s to help the company navigate the legal implications. Kennedy says he hasn’t seen a legal consulting team like this in the business.

But is Kennedy worried that his site can be used by people who don’t need the drug for medicinal purposes or are not using it legally?

“We know we have a lot of traffic from places like New York City, Texas and Illinois where there is no legal medical cannabis,” he said. “But we believe patients in those states have a right to this information and we beleive we’re helping them by providing this information.

“And we have a sense that non-patients are just looking for informaiton on what it is that they have or what a partiuclar strain is all about … and I know that they are better off by not flying blind.”

All in all, the Leafly team has certainly studied up on everything surrounding medical marijuana and the results thus far have been optimistic. Seeb, the Denver dispensary owner, sees a bright future.

“I think they have huge potential,” Seeb said of Leafly. “They have positioned themselves as the first provider in this fashion. There are a few minor competitors, but nothing like the development Leafly has put in.”

The business opportunities to grow are obvious, and Kennedy plans to continue building up Leafly and create other companies in the industry. But perhaps most importantly, he’s found a new passion and says this is the most fun he’s ever had. For him, it’s not just about the money.

“We believe we have put together a good investment opportunity, but also an investment that can do good,” Kennedy said. “Far beyond its offering of significant financial returns, Privateer Holdings is an investment in health, decency, liberty, and human rights.  Our investors will look back not only on the money they made, but on the difference they made as well.”

Check out the 60 Minutes feature below that details the business potential of the industry. Denver Relief is featured.

Comments

  • Pace

    I hope that the Christian Church will get its priorities straight and start making the Gospel of Jesus Christ a reality for the people who need it most. We need to focus on this group with the election tommorow. Remember, The Sermon Jesus Christ preached in Matthew Ch. 5, should become reality for the people in those states where cannibis in going to be legal. That is the real prophecy, not man getting frustrated and giving up on managing the resources of this earth. Awesome work here! Wish I could help. God Bless

  • http://frugalmechanic.com/ Eric Peters

    With the law just passing in WA state, where do I invest? :)

  • dan

    Looks like more sites are getting in on the action! Check out http://www.wikileaf.com. Its kind of the same as leafly but in my opinion they seemed to have snagged a better name. Now they’ll probably get traffic from google organics on ‘strain name’ + ‘wiki’ keywords too…

  • elmer

    I like your website. its very informative and funny.

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