In this post Debra Borchardt highlights a new technology niche created by the emerging cannabis industry
The emerging cannabis industry has not only created thousands of new jobs, it has also given birth to a new technology niche. Existing software companies are adapting and news ones are being born to address the specific needs of this new sector. Government agencies and business owners find that they are at ground zero for the creation of these new products.
The low hanging fruit was the copy cat web design for internet cannabis sites based on already popular traditional internet sites. Leafly is called the “Yelp” of pot because of its product reviews and Weedmaps is the “Groupon” of cannabis with its daily deals. Weedhire is the equivalent of Monster.com for its marijuana jobs. However, it isn’t just marijuana businesses, government agencies have also been challenged with meeting the specific requirements of complicated cannabis legislation. Since each state is unique in its regulations, there isn’t a one size fits all software program on the market. Plus, the most unique challenge that faced many software designers was the seed to sale tracking that several states require.
DENVER, CO – MARCH 11: A sample of marijuana is in a jar, for customer to look at and smell, at Euflora Dispensary in Denver, March 11, 2015. Colorado pot sales soar to record in January, bringing $2.3 million for schools. Around $36.4 million of recreational marijuana was sold this January compared to about $14.69 million sold the same month last year. (Photo by RJ Sangosti/The Denver Post via Getty Images)
Franwell didn’t start out as a marijuana software company. It had 20 years of fresh fruit and berry tracking experience. Another customer told them that Colorado was taking bids on supply chain tracking for marijuana and they won the bid. Cathy Jolley said one of the biggest challenges is the continuous change in regulations. She said the state made 14 software changes in the first six months. As they look to working with more states, adjusting the software to each state’s particular regulations becomes a challenge. “It would be great to have standardized tracking,” she said. Franwell has reached out to more states including Illinois and New York. The bonus for Franwell is that Oracle and Microsoft have not decided to jump in as of yet.
MJ Freeway was created out of necessity. Co-founder Jessica Billingsley said she had invested in the first licensed business in Colorado and was tasked with choosing the software. That’s when she and co-founder Amy Poinsett decided they needed to create a platform that tracked every gram of marijuana and every dollar. They both came from the computer space. Now they have 1,000 licenses in 19 states. MJ Freeway is one of the few businesses that has translated its product to Spanish and is looking at foreign markets. It was one of only a handful of American companies at the World Cannabis Conference in Spain. Business is so good that MJ Freeway has doubled is revenue every year since inception.
NIC targets the government as its client in the cannabis space. It specializes in helping the government agencies tasked with creating a marijuana department. It’s one thing for lawmakers to decide that applicants for licenses and dispensaries need to follow certain procedures and pay specific fees, but its another thing to create that process online. “The policies being set up by the state, we’re putting them into play,” said Robert Knapp COO of NIC. Paul VandenBussche, NIC General Manager in Maine said, “ We moved from paper driven because there were too many issues , such as whether the paper was valid or real. We strengthened it by making it fraud proof.” NIC is currently providing services for Hawaii and Maine. the marijuana program in Hawaii began in the Department of Public Safety, but in January it moved to the Department of Health where NIC implemented a new system that doctors and patients have found to be simpler and faster.
Product testing is another cannabis hot button issue. In the early months of retail marijuana in Colorado, customers became confused as to how much THC was in the product they bought. The problem was very pronounced in the edible market, but dispensaries increasingly realized they had to deliver as much information about their product as they could. Sage Analytics was founded when they saw that growers, labs and producers were forced to ship their product off to third party labs losing time and money. Necessity is the mother of invention, so they built a small desk top measuring device to deliver instant and accurate THC, CBD and CBN measurements.
On the financial side, Amercanex is creating a cannabis commodity exchange with the plan for a futures market. Not unlike the other commodities exchange, this platform will allow cannabis farmers to lock in prices for their crops and for buyers to secure their inventory. Steve Janjic, CEO of Amercanex said his company is looking ahead to when the Federal government declassifies marijuana, which would allow him to sell derivative financial instruments. He anticipates option and futures. “You have to give them the ability to manage infrastructure,” said Janjic. “We allow growers in Denver to sell all over the state.” The company is currently in Colorado, but they expect to be in California, Oregon, Washington and Nevada. They’ve even been approached by other producers of wine, hops and bio-fuel to join. Take that Chicago Board of Trade. Janjic said, “We want to be first to market and we want the bigger players to partner with us. Run it like a true exchange.”
One person though that isn’t impressed with the marijuana technology is Adam Bierman, Managing Partner of MedMen, a licensing and consulting company for marijuana businesses. “We didn’t like what was out there, so we built our own software for seed to sale tracking,” said Bierman. He said the problem with the cannabis tech companies is a lack of access to institutional money. He suggests that if the best minds of silicon valley started an incubator lab, that far superior products would emerge. “Because of the nature of the business, we can’t attract top talent,” Bierman said. He believes that when established companies gain comfort with the space, the current companies will either get bought out for their databases or fail. “I’m not being negative, just realistic. When Yelp decides to get in, it’s over for Weedmaps.”
The only space that Bierman is impressed with is the payment kiosk space and in particular Integrated Compliance Solutions. Banking is another problem for the cannabis industry causing businesses to become very creative in order to process transactions. It’s becoming a crowded space with other kiosk companies like Medbox and C4EverSystems. Some of the kiosks actually dispense medical marijuana, while others are strictly banking related. The banking transaction works in coordination with the seed to sale software so that the product and purchase match up.
With 23 states legalizing medical marijuana and more to follow, these businesses hope that by getting in on the ground floor, they will be successful. First to market advantages have usually paid off. However, Bierman could be right about the bigger players. Can MJ Freeway survive if Microsoft wants to play and will kiosks be needed if Bank of America decides cannabis won’t get them in trouble with the Feds. In the meantime, these new companies aren’t letting any grass grow beneath their feet