How We Built $35M Plant Growing Empire GrowersHouse
Hello! Who are you and what business did you start?
My name is Nate Lipton and I’m one of the founders of a group of related companies in the cannabis and hemp industries.
GG Growth is the name of our parent company that includes: GrowersHouse.com, GrowersNetwork.org, Canna Cribs YouTube series, and TruPotency.com.
In an industry that’s fraught with grey areas, banking issues, and limited advertising possibilities (no Google or Facebook ads), I’ll give you an overview on creating and promoting marijuana-related online businesses. I’ll also explain why we had to create multiple companies where other industries would have made them all part of one entity (hint: it’s due to advertising, banking, credit card processing, and insurance--more detail on this further down below).
The main businesses we have are:
GrowersHouse.com @ $2.9M/mo
Ecommerce store with 6,000+ items that sell plant growing supplies to hobbyists and commercial growers, the majority of the growing cannabis and hemp. That said, we also sell to universities and governmental organizations such as the USDA and NASA.
We launched in 2011.
**GrowersNetwork.org @ $100k/mo
Forum for cannabis growers that includes video-based growing courses, editorial content on growing cannabis, Ask Me Anythings (AMAs) from well-known cannabis growers, and a huge directory to network within the industry. We launched in 2017.
Canna Cribs YouTube Series @ 100k/mo
Think MTV Cribs, but for the largest and most sophisticated growing operations in the US. We do in-depth walkthroughs of these massive growing operations showing how they do what they do. Launched in 2017.
TruPotency.com @ ?/mo
A curated online CBD multi-brand marketplace featuring blind lab-tested products vetted by an advisory board of PhDs and MDs. We created this company because a University of Pennsylvania study showed that more than 70% of CBD products are mislabeled in the market. We can confirm through our testing that this is indeed true. Soft launch October 2019, full launch January 2020.
We now have made it to the point where GrowersHouse.com is the largest e-commerce store in our niche, with one of the most popular YouTube series about cannabis cultivation. The cannabis and hemp industries are taking off, and I can’t think of a more interesting industry to be in on the ground floor.
What's your backstory and how did you come up with the idea?
I wanted to get into the cannabis industry following graduation from the University of Oregon in 2010. The industry was starting to take off. I had recently finished an internship at Morgan Stanley, which put the final nail in the coffin determining that I would not be joining the financial sector--I’m just slightly too alternative to join the mercedes driving, country club crowd.
The month following graduation I moved into my brother's apartment in San Francisco and parked on his couch, applying to probably 30-50 cannabis-related companies a week. After about three weeks of my brother and his girlfriend probably thinking “how long will this kid crash here?” I got a couple of calls back, and I ended up landing a position as a mid-level manager at a dispensary. I worked at the dispensary for about six months before taking a job at another company that focused on selling cultivation equipment online.
My goal in working for diverse cannabis-related companies was to understand the industry holistically and figure out my best long-term place within. In the beginning, I first thought I would open a dispensary. Around 2011, opening a dispensary was for cowboys i.e., people with a high appetite for risk, willing to take on the possibility of law enforcement raiding your establishment--depending on the current local political climate. I decided this was too risky for me.
I recognized that the equipment suppliers and service providers to the cannabis space were doing well and didn’t have these existential business-shutting-down issues looming over their heads. Some of these suppliers and providers included: track-and-trace software, growing equipment, packaging supplies, financing, consulting, etc… Selling these non-plant-touching items and services gives the arms-length distance needed to run a federally legal business. And who got wealthy during the California gold rush? It wasn’t the gold diggers--it was the equipment suppliers selling picks, shovels, and jeans e.g., Levi Strauss.
After working for an online store that sold growing equipment for a little less than a year, I decided this was a niche within the cannabis industry that had an attractive trajectory. I packed my bags and moved from the San Francisco area to Tucson, AZ to start this new company. The decision to pick Tucson was so I could be between the two largest states in terms of hydroponic equipment purchasing: California and Colorado. My shipping times would be 1-2 days to both locations via standard ground shipping, and at that time Arizona just enacted a freshly minted medical marijuana program.
To get the business up and running, I ended up cobbling together $150k from a mixture of myself, my father, and some family friends. I had about $7k to my name at this point and invested $5k of the $150k. As you can see the other investors were heavily needed to get this off the ground. My father, recently divorced and out of a job, decided to move from New Jersey to Arizona to join me on a great adventure. The help and wisdom of someone who has 30 years of business experience selling electronics via mail-order came in handy as I was a 23-year-old high-energy, low-experience entrepreneur.
The $150k allowed us to hire three employees; purchase inventory; and rent a 2,000 sq. ft. space for office, retail, and warehouse. We opened our doors in November 2011 with the goal of being a multi-channel retailer, having both a walk-in store and an eCommerce store.
Take us through the process of designing, prototyping, and manufacturing your first product.
The decision to move to Tucson, AZ was driven by the large distributors we desired to purchase from rather than our first choice for a location. Ideally, we would have chosen Las Vegas or Phoenix as a shipping hub, but the large distributors in my industry with all of the most requested products had territories for their dealers. Las Vegas and Phoenix were completely saturated with competing stores. After searching for any open space to locate, Tucson, AZ came up on the radar.
It may add context for you to understand that I’ve had a difficult time with patience all my life. Everything should have been done yesterday, and always ‘strike while the iron is hot’, yada yada yada… Once Tucson, AZ was greenlit by the distributors, I packed everything I could in my car and left everything else in San Francisco. Mind you I have never been to Tucson, but I was now driving to this city to make it my residence and start a business. Needless to say, things happened very quickly.
I used the website couchsurfing.org to find a free place to stay for a few days while I could look for an apartment to rent. Not extremely relevant, but to add color to this story, I ended up couch surfing with a doctor who worked for the University for his day job, and his weekend job was a trip-sitter for first time DMT (the psychedelic compound) users so they could have a safe environment with medical assistance if needed. I swear this information was not in his profile. I only learned this after getting to know him. I fell in love with Tucson very quickly.
I spent March through October meeting with lawyers to incorporate the business, interviewing software providers for our backend system, and building our website. I did get help building a website from one of my father’s friends Jeff who was a programmer. He did most of the heavy lifting. I believe we paid him $2k + my father’s Movado watch that Jeff seemed to take a keen interest in. I just ended up learning everything I could about SEO, website design, and basic HTML/CSS from YouTube videos and online courses to fill in the gaps.
Describe the process of launching the business.
The first few months of business was tough, especially the e-commerce business. It was my first business. I had no idea what to expect, but for some reason, my mind was assuming the orders would just start pouring in. Not the case.
It takes a long time for Google to deem your website as ‘relevant’ so you can start to gain organic traffic. In the meantime, the retail store held us afloat due to my going into hustle-mode.
I went to every gardening-related Meetup and event to let people know about my new indoor gardening and hydroponics store. I would give quick talks on building hydroponic systems, which eventually turned into me teaching full hour-long classes on the ‘intro to all things hydroponics.’ To market these classes I would put up flyers at all the alternative book stores, coffee shops, and markets. I would also advertise locally on Facebook and post-event listings on Craigslist and other local online event boards.
We eventually got to the point where we had around 30 people in each class. I then called some popular plant nutrient manufacturers to sponsor the classes so we can give out free product with class attendance. This worked well and our classes shot up to closer to 50 people. We would do this monthly.
We were extremely scrappy in our beginning days. I would do deliveries to customers who had a hard time making it down to the Southside of Tucson. My father was grabbing used cardboard boxes from behind the Starbucks every morning so we could save on packaging supplies. We built our retail counter of stained plywood. We were taking the term bootstrapped to the Nth degree.
Luckily, I was a little better at local online promotion than my competition, mainly focusing on Yelp, Facebook, and Google advertising within Tucson, AZ. This helped get people through the door but still didn’t do much for our eCommerce store.
Since launch, what has worked to attract and retain customers?
Around six months after launching, I noticed that a prominent e-commerce competitor of mine was focusing on making YouTube videos to promote their products. At this point I was just focusing on on-site SEO like product descriptions, great pictures, meta keywords and descriptions, a blog post here and there, etc…. I watched some of their videos that had more than 10k views and immediately thought I could probably improve upon the format and content of their videos. I was throwing ideas at the wall at this point to see what would stick. YouTube videos were next.
E-commerce is not what it used to be. E-commerce companies now need to be community builders, and basically digital marketing agencies.
I had zero experience with photography, film, or editing. Remember my character flaw of impatience. Sometimes it actually works in my favor. In this instance, I thought the fastest way for me to see if these works are to film a video ASAP and learn along the way.
I made a few videos on ‘how-to’s’ and product unboxing. They did okay but didn’t really move the needle. I kept getting questions from my customers like ‘What product is best in this category?’ and I didn’t have many objective data to go off. This inspired my video idea of starting to do product comparisons.
One of my first successful comparison videos was an LED grow light test. Buying an LED grow light often costs hundreds of dollars, so it was not an insignificant purchase. All of these lights purported to be the best, so how can consumers wade through the marketing speak? I took a light meter and measured how much light they emitted over the intended grow area and put that info on a grid. Customers loved having this information.
I’m going to share this video with everyone, but I cringe watching it now. It’s important for everyone to realize how a simple and poorly edited video can still provide value to the viewer. As some advice to those who err on the side of perfection to the point where you don’t want to perform a task because you don’t believe you’ll do well: just do it anyways. I really should take this thing down...link to video.
I started focusing on more of these comparison videos and I would then write blog articles on our site accompanying each video. This combo of creating video content on YouTube and written content on our site. This content helped people make a buying decision and are what ultimately helped grow our business. Customers became extremely loyal and hungry for our content. The videos I created were based on comparisons of the most popularly used products that I sold, with most recommendations coming from my customers.
Because we tested so many products, many customers gravitated to working with us since we had unique third party testing that other competitors do not. Doing comparison reviews of products with instrumentation that gives you relevant information is powerful. Think about selling coffee mugs. If I were to compare them I’d put 180 F degree water in each of them and check the temperature every 30 minutes for 4 hours to see which one had the best thermal properties. I’m sure this would help people choose what item to buy, and they’d probably spring for the more expensive option knowing it’s better at keeping their cup of Joe warm.
Growers House 2.0
Everything was going extremely well with video content and business was growing. Unfortunately, since marijuana is still federally illegal, national banks won’t do business with the industry. Over the course of time, even the term ‘hydroponics’ became synonymous with ‘growing weed.’ One day Chase Bank who we used for business banking delivered a letter saying their compliance department no longer wants to do business with us and they will be shutting down our account immediately.
Keep in mind we did not have any mention of marijuana or cannabis on our site because we knew it would cause us to lose banking, credit card processing, and the ability to advertise on Google and Facebook. Our site was just like any other garden site, except we also had hydroponics equipment, grow tents, etc… We had a strict policy of making sure those terms never made it on our site or in any of our content.
Yet, we still got closed down by our bank. Chase wouldn’t give us an answer why, but we assumed it’s probably because there were enough online links from cannabis-related forums to our website, which is 100% outside of our control. They also decided to hold onto $180k from our bank account for six months as some form of insurance from large withdrawals from our account. This really sucked, as you can imagine. Luckily, this didn’t put us out of business, but it was close. We almost got legal involved but decided it would probably take six months anyway, so we just angrily waited.
Keep in mind, this is probably 2013. Over the next 4 years, a bank closed us down every year including Chase, Bank of America, US Bank, Wells Fargo, and probably a couple more--I’ve lost track at this point. We ended up getting multiple banks to have redundancy, eventually now settling on local credit unions and community banks. I currently have three bank accounts for each business.
One thing about this industry that always bothered me is that I couldn’t directly or openly speak to my customers about the plant they were growing. I believe the majority of my customers are in some shape or form growing cannabis or hemp, but I can’t mention cannabis on my site or videos for the risk of losing all the extremely important tools mentioned above. That means I can’t make content focused on the main terms they’re searching for e.g., ‘how to grow cannabis’, ‘best equipment for growing marijuana’, etc… Not only that, I’m trying to stay as above board as possible, but I’m still getting shut down by banks.
Then the idea occurred to me that I had to create a separate company on the ‘dark side.’ In the cannabis industry, the ‘dark side’ is when a company openly acknowledges cannabis and marijuana. Alternatively, ‘light side’ companies sell to cannabis growers/users but do not acknowledge it. GrowersHouse.com sold equipment to growers but never acknowledged what it was being used for. Another example of this might be a smoke shop that sells bongs but says they’re for tobacco. As this country gets more liberal on marijuana, this is less relevant, but it definitely depends on what state you’re in. Overall, I needed a ‘dark side’ company to create content that directly targeted my consumer's interests, using the exact keywords they were searching: cannabis and marijuana.
Thus GrowersNetwork.org was born--a completely separate LLC. I always wanted to create a forum where my customers could talk to each other about using the equipment I sold along with methodologies for growing. I also wanted to create video content that fully acknowledged cannabis and marijuana.
Under GrowersNetwork.org we started creating the video content we always wanted to create--visiting the largest and most sophisticated growing operations in the world. That’s how the project Canna Cribs was conceived. Turns out this was video content that many people didn’t know they wanted. Canna Cribs blew up, and now we have an episode with more than 1M views. These videos help show that our staff at Growers House helps supply some of these incredibly mesmerizing and impressive growing operations. Canna Cribs highlights our level of skill and professionalism as a provider for the picks and shovels of the cannabis industry. We also just happen to sell everything you need to build a grow tent kit in your spare bedroom.
The video content became aspirational in away. I introduce every Canna Cribs episode by saying I’m the owner of Growers House, who helps build large growing operations. Consumers and viewers now understand that we’re more than just a store. We’ve developed customers who love our content and associate our expertise with our store. If we can help build multi-million dollar facilities, we can probably help people out with everything smaller than that too--and we do.
How are you doing today and what does the future look like?
Our business is on an upward trend in this industry. With the 2018 hemp bill being signed into effect, 11 states now having recreational cannabis, and 33 having medical cannabis, there is still a multitude of growth potential to be seen. Each state that increases the availability of cannabis increases our market size, not to mention the international market is becoming more accepting of cannabis and loosening its laws.
Having a strong community changes the conversations you have with vendors, strategic partners, and customers for the better. We have more manufacturers banging on our doors on ways to partner together because they want to be part of our community.
Both GrowersHouse.com and GrowersNetwork.org are profitable businesses on their own. Together they form something very unique in the cannabis industry; marrying community, content, and commerce in a self-reinforcing cycle. Much of our content helps increase awareness of new and interesting products within the market, and our customers also communicate with us on the forum and in comments on what products they’d like to see in our content and reviews.
Margins on the equipment side are relatively low. A lot of our customers are growing for a living, so buying products from us at an expense on their income statement instead of a casual purchase for their personal hobbies. For the GrowersHouse.com site, it’s normal to see our gross margin fluctuate around the 20-25% range.
Combined, we’ll probably do about $30M in 2019 and hope to grow at about 30% in 2020. The most unbelievable part of our business is that our customer acquisition cost is extremely low, if not negative. Yes, we do spend money advertising via Google Product Listing ads (about $20k a month), but that’s about all we spend advertising dollars on, other than the occasional trade show. GrowersNetwork.org is basically our marketing division. Not only that, it takes in advertising revenue for its business model, which covers all expenses and then some, making our marketing efforts a source of income!
At this point, our retail store is about 2% of our overall revenue, we do about 10% of our revenue through the combination of Amazon/eBay and the remainder is our website and sales staff. We’re still based out of Tucson, AZ with a 40,000 sq. ft. warehouse and a third-party warehouse in Pittsburgh, PA.
In October we launched another sister company that operates with the same staff called TruPotency.com. As the hemp and CBD industry is exploding we saw some bad actors making a product that was either much lower in CBD concentration than they were advertising or were downright dangerous, containing heavy metals and other non-desirables.
We brought together a team of PhDs and MDs who are pre-eminent scientists in their field with regard to studying cannabinoids. Our science advisory board helps us assess, test, and choose the products within the market that are safest and most effective. They even helped us build an algorithm using all the available scientific literature to best estimate what the product will be good for (e.g., sleep, stress, soreness, etc…) based on its cannabinoid and terpene profile.
We’re sort of like consumer reports for CBD products, and believe me, it’s needed in this industry. We’ve brought in more than 300 products for blind lab testing and so far only about 60 of them have passed all of our tests for accuracy, purity, and safety. Be careful where you buy your CBD products because you could be getting ripped off, or worse, taking something that’s unsafe.
Due to my team's long history in the cannabis cultivation space, we know many of the organic and ethical commercial cultivators for hemp-derived CBD and focus on getting products derived from their hemp.
Through starting the business, have you learned anything particularly helpful or advantageous?
E-commerce is not what it used to be. E-commerce companies now need to be community builders, and basically digital marketing agencies. Consumers are taking in more digital content and all retailers need to figure out how they can differentiate themselves from more traditional retailers, whether they be online or traditional retail.
Everyone can launch an e-commerce store. It’s not hard. If you want to be a relevant e-commerce store, figure out what you’re going to offer that’s different from your competition, and it can’t just be price.
Having a strong community changes the conversations you have with vendors, strategic partners, and customers for the better. We have more manufacturers banging on our doors on ways to partner together because they want to be part of our community. This allows us to be in a position of choice to choose who we want to work with.
Do you know what the second largest search engine is? It’s YouTube! I truly believe that the way we digest things online will become more and more video-based. Whether they be short gifs or longer videos, I believe it will be the desired way to absorb content. You’re already seeing it now with eCommerce stores having gifs of the products in addition to product shots. I heard a statistic that I can’t source, but it seems true, that around 80% of consumers can claim to be convinced to buy a product after watching a YouTube video.
What platform/tools do you use for your business?
- GrowersHouse.com site: Magento.
- Backend CRM for order processing, inventory management, accounting, etc…: BrightPearl
- Email capture on site: WooHoo
- Email management software + flows: Klaviyo
- Business Tools / Email / Docs / Sheets: Google Apps for Business
- Sales Tax: Avalara
- Customer Communication: Freshdesk
- GrowersNetwork.org site: Wordpress
- GrowersNetwork.org forum: Discourse
- Sales Team: SalesForce
What have been the most influential books, podcasts, or other resources?
I’m pretty voracious when it comes to taking in information related to my business. One of the best moves I made was stumbling across this site called ecommercefuel.com.
It’s a private forum just for eCommerce store owners above $250k in yearly revenue. Being able to talk to other eCommerce store owners going through the same troubles and solving the same problems is enlightening.
Most other eCommerce forums are people trying to launch their first store. Nothing against them at all, but the conversations are very different once you’ve hit scale. Actually, I modeled GrowersNetwork.org forum after the ecommercefuel.com forum in many ways.
As for podcasts, I mainly listen to Mixergy, My Wife Quit Her Job, and the EcommerceFuel Podcast. They all revolve around business but mainly focus on eCommerce.
Advice for other entrepreneurs who want to get started or are just starting out?
Everyone can launch an e-commerce store. It’s not hard. If you want to be a relevant e-commerce store, figure out what you’re going to offer that’s different from your competition, and it can’t just be price. Sure a low priced item can work in the short term, but more often than not, it fails as a long term strategy.
If anyone sat down with me for a beer to chat about how to succeed in e-commerce or the cannabis industry, I’d say start quickly and create a form of content that answers someone’s question that hasn’t yet been answered, or answered well. Also, invest just as much time in learning content marketing (including video) as you do in learning e-commerce.
Too many people get wrapped up in the tasks that are necessary to running a business, but not sales related. You need to focus on sales and building your customer base as the #1 priority, the rest of the tasks will naturally follow. If you don’t have customers, it doesn’t matter how pretty your site is or how automated your order processing is.
Are you looking to hire for certain positions right now?
I’m always looking for good e-commerce professionals to join our team. I’m a fan of the saying ‘always be hiring.’ In particular, looking for people to help us with nontraditional growth and content strategies.
Also, if anyone has a good social media following and wants to do some collaboration, feel free to drop us a line! Currently looking for some great affiliates for TruPotency. :)
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Hey! 👋 I'm Pat Walls, the founder of Starter Story.
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