Founded in 2019, Alphagreen is an online CBD marketplace created by Alexej Pikovsky and Viktor Khliupko.
Cannabis Wealth spoke to Alexej about his journey so far, his plans for the future – and why he has no plans to float Alphagreen on the stock market.
What is your background and how did you get involved in the industry?
I was born in Russia, educated in Germany and came to UK for university; I studied at Loughborough, which is renowned for sport, and I was a keen waterpolo player.
After leaving uni, I spent 10 years working in finance, giving advice on mergers and acquisitions, working in tech company investments.
I really got into CBD through being very involved in sports, sports science and supplements; it was through this that I became aware that medical cannabis was a thing from fairly early on, although I never looked into it in too much detail.
But when I was working in private equity, the market in cannabis was going crazy thanks to what was happening in Canada and the US, which got me interested in the legal market, I wanted to know what I was missing.
Having spent time as an investor looking at different industries and different companies, I knew that being right in terms of timing is critical.
It was when I attended a party hosted by Chrystal Capital in May 2019, where there were lots of cannabis investors, that I realised there was no deal flow for cannabis-based businesses, the only company doing anything was Prohibition Partners.
I found that interesting, as there was clearly huge investor interest but no targets.
So I thought, if I go to the US and Canada and find these interesting cannabis companies, I can create my own deal-by-deal cannabis fund. And so that’s how I got into the CBD space, more as an investor in the first instance, leveraging my background and experience.
Of course, when I got to the US, everyone wanted to meet me, because everyone needed money and I soon realised that every single firm, whether medical cannabis or CBD businesses, wanted to expand into the UK market.
That’s when I decided to create a platform to allow customers in Europe to get educated and get access to the best quality products, and have US and Canada to bring their brands over.
I was lucky, having been in venture capital I had interesting ideas and a great support team, including Victor, my co-founder.
We launched in October 2019, and I contacted a lot of previous investors to see if they were interested in coming on board, which meant we had the team, the idea and the money, we went from zero to 100 quite quickly.
In fact, we became the largest marketplace in Europe in the first six months, with 150 brands and 2,500 products online.
However, we don’t hold stock ourselves – we’re more of a tech platform than an e-commerce one. Instead, we take orders on behalf of brands, then when the brand delivers the product to the customer, we give them 70 per cent of the retail price, taking 30 per cent in commission.
What challenges do you face, and how have you overcome them?
Payment issues can be a problem, with shady payment processes and weak technology, so that took a while to iron out. We use two platforms now, in case one goes down.
However, one of the biggest issues is spreading the word, especially online. The CBD industry isn’t allowed to advertise, which means no PPC – we can’t put £100k into Google ads and get £100k revenue.
Instead, we have to grow through the search engine, so we need a lot of content, a lot of backlinks, a lot of PR – we need to be much smarter than usual brands.
This is a challenge in itself, as traffic from Google is not always linear so we have to be very close to Google algorithms and constantly produce content.
We’re producing 400,000 words a month, both on unique content, product descriptions, link building and backlinks – it’s a huge operation.
Also, Google is getting smarter, so this all needs to be good content, referencing medical publications, on a quick, sophisticated website. We’re indexed for more than 7,000 keywords, so if you google CBD benefits, we’ll be on page one. That’s one way we’re directing people to us.
The second way is through influencers – we give them the product, they tag the products and they also tag Alphagreen – although sometimes it does just end up being the product. That’s why we’re launching our range of gummies, to find other growth channels.
What other developments do you have in the pipeline?
We’ve recently launched the Nuoptima platform to increase our offering and help brands grow their own digital footprint.
The idea behind it is to simplify the marketing process, with one agency able to handle all the PPC, SEO and influencer marketing.
This saves brands, especially the smaller ones, having to work with different agencies for different things, while also giving them a marketplace to sell their products.
Setting up with a new name allows us to be clearer, and also helps us to talk to the US market about everything else they need, because, as it stands, they’re not able to be on the marketplace yet.
What do you see as the wider impact of supporting smaller brands in this way?
Ideally, we are creating an ecosystem for the best brands, because the main problem in the industry at the moment is that, every few weeks, there’s another CBD brand popping up.
We’re very selective about who we allow on Alphagreen – we’ve almost stopped UK brand admission because there are just too many, and ultimately many may have great branding but they don’t have the means to generate sales by investing in the above marketing.
So Nuoptima is an instrument for them to improve as well, and it helps us make more money – all part of our 10-year game. We want to surround ourselves with the best brands, helping them by not only generating sales on Alphagreen but also by really helping them grow as a brand and bring traffic to their own domain.
What do you look for in a brand?
Initially, we were focused on getting brands from best marketplaces. Then we got them all.
However, we still look at rankings of brands and work on acquisitions – as a marketplace, we need to have the most popular brands on our site and that is always evolving. We’re constantly talking to people and investors are always introducing brands to me, so we have various channels we go through.
Are you considering floating on the stock exchange?
We’ve already been approached for both the London Stock Exchange and the Stockholm NASDAQ. My thinking has always been that there is a lot of retail happening, retail hype means stock price goes up, but it doesn’t necessarily mean the company has a lot of cash or can do anything with that value.
There are only about ten people trading the stock every day, which is nothing. If tomorrow, I started shorting the stock, it will crash because there’s no volume there, so any impact will be detrimental – just look what happened in Canada in 2019.
The market crashed by 90 per cent and the companies had a hard time raising more money and investors got a really bad experience. As long as you’re building a good story, you don’t need to go public.
What’s next for Alphagreen and the industry in general?
For Alphagreen, we’ve got a strong international market opening up; we’re now open in France, Germany, Spain, Italy and Sweden, and we’re launching in Poland next month, then also Japan.
We’re seeing that, although there’s still a lot of regulatory noise, we do see a stronger acceptance in those markets.
Medical cannabis will also be a big focus for us over the next year or so. We launched a subsidiary in 2020 but with the pandemic, we thought it would be very difficult to educate medical professionals and they had better things to do.
Plenty of the brands we already stock offer med cannabis too so it makes it easier if they can talk to us for that too.
We’re also excited about a data product we have coming up, because we know that the industry doesn’t have any reliable intel out there.
The beauty of Alphagreen is we have 2,500 products on the marketplace, so we can really extract the data about what products people are buying, and what they’re paying, so that’s another service we can offer brands.
This means they don’t launch, say 50 SKUs, 40 of which nobody needs; they can understand what are the best-performing SKUs and what are the gaps in the market – ready to be filled.
It’s all about helping brands perform at their best – which means Alphagreen will perform at its best too.