From lowering energy usage to developing point-of-sale systems to connecting grow facilities with dispensaries, software is shaping the quickly evolving cannabis industry — and making headlines every day.
On Oct. 15, Forbes declared, “Investors are pouring money into marijuana software,” and highlighted Denver-based Flowhub, which just raised $23 million to expand sales of compliance and point-of-sale software to marijuana dispensaries nationwide.
Of course there are already point-of-sale systems out there — anyone who’s worked in the restaurant industry can rattle off a list of POS systems with quirky names like Toast, CAKE, Aloha and, my personal favorite, Squirrel — but federal prohibition makes it tough for established companies like these to serve the cannabis industry, which still isn’t allowed access to federal banking.
Enter cannabis-centric tech companies like Flowhub, which, according to Forbes, “is also adapting its software to help dispensaries manage their inventory (including the shelf-life of edible pot products) and staffing needs.”
With pot sales soaring just over $10 billion in 2018 and projected to quadruple in the next four years, Flowhub isn’t the only company cashing in on cannabis-specific software.
Pitchbook, a venture capital database, found 39 venture capital deals involving cannabis software in 2018 worth more than $178 million.
“Legalization has opened doors for many businesses, especially startups dabbling in the data and technology aspects of legal marijuana,” Investopedia reported this summer in an article profiling a handful of top marijuana private equity and venture capital funds. “While it is still difficult to invest directly in legal pot through public equities, venture capital firms and private equity funds have raised hundreds of millions of investment dollars.” (One of the VC funds Investopedia highlights is Phyto Partners, the lead investor in Flowhub.)
CanPay is another Colorado-based IT company (it created a debit payment app) with nearly 300 customers across 17 states.
Business management isn’t the only area of the cannabis industry that software companies are looking to improve. On Oct. 13, The Denver Post profiled Boulder-based Surna, which designs, engineers and manufactures app-based environmental control and air sanitation systems for indoor grow facilities.
“The more precise control means less energy consumption and that affects the bottom line,” Surna CEO Tony McDonald told the Post.
Software is even helping cannabis companies find advertising space. Adistry, a Longmont-based company, developed software “that helps connect cannabis companies seeking to buy advertising space with media outlets and other businesses willing to sell advertising space to marijuana operators,” according to Marijuana Business Magazine.
“Adistry, which also serves other regulated industries such as alcohol and gambling, isn’t just about introductions,” MJ Biz Mag wrote. “The software automates much of the ad-buying and -selling processes for clients, which is particularly useful for small businesses that may not have the time or expertise to manage ad buys.”
But some marijuana tech companies are having a hard time getting their sea legs, as the Massachusetts-based Worcester Business Journal reported on Oct. 14.
“[W]ith the slow rollout of recreational marijuana in Massachusetts … would-be cannabis tech entrepreneurs are facing obstacles on two fronts: a limited number of licensed cannabis companies to do business with, and competition from established tech companies who already have cut their teeth in early-adopting marijuana markets like Colorado and California.”
West Coast (and Colorado) cannabis IT and marketing service companies have had more time to develop their products and find clients, meaning tech companies in newly emerging markets, like Massachusetts, are struggling to compete with well-established, multi-state operators.
Here’s hoping the cannabis industry can create a fertile ground for local businesses to flourish.