CannaTech: The Lasting and Up-and-Coming Hot Picks

Tech entrepreneurs are into marijuana and our cannabis business lawyers regularly get calls from coders, tech investors, and other startup-types concerning new ideas for market entry. Product traceability, consumer support, market tracking, commodities exchanges, data support for cultivators and processors — both software and hardware companies are actively looking for ways to attack the market.

CannaTech. Like a cannabis business, but different.
CannaTech. Like a cannabis business, but different.

As an ancillary service, technology is a less scary for financiers than investing directly into a business that violates the Controlled Substances Act. Similarly, market entry is easier because though states have robust regulations to deter investment into businesses that deal directly with marijuana, those same regulations don’t affect outside software providers. Banking, taxation, and fundraising are all a little easier. The IRS treats technology companies in the marijuana space much better than cannabis companies, and the U.S. PTO is more than willing to allow tech companies to register their trademarks.

This is not to say though that marijuana tech companies don’t have their issues — often cannabis related — because they do. Facebook, Google, Apple, and Twitter (just to name a few) seem committed to shut out any cannabis related business. Just like those directly involved with the plant, software companies are often constrained by having to deal with the laws of multiple states and with the fact that cannabis is not legal nationwide. It’s not often that you meet a coder who loves digging into the minutiae of different state regulatory regimes, but tech companies that offer services in multiple states generally need to have a pretty good understanding of the regulatory scheme in each of the states where they work.

The primary void today seems to be in software companies offering primarily business-to-business solutions and those that businesses run internally to increase efficiency. Most of the most successful tech companies in the cannabis space are consumer facing, but have found a way to monetize that via advertising or payments from the business end. Here is a sampling of some of the companies currently populating the market:

  1. Weedmaps. Weedmaps has been a staple in the cannabis ancillary economy for a number of years now. Often called the Yelp of marijuana, Weedmaps is “[a] free . . . service that maps out local marijuana dispensaries in states across the country. Registered users of the site can leave reviews and ratings for different dispensaries with the ultimate goal of helping others find the best weed in town.” As of May 2014, the company’s website “. . . has more than half a million registered users and accommodates four million unique visitors per month.”
  2. Canary. It’s finally here — the phone app that tells you if you’re THC-impaired. Through a series of memory, balance, reaction, and time perception tests, the app can allegedly determine if you’re impaired. The science behind “My Canary” can be found here. With new state marijuana laws that maintain strict DUI standards for relatively low thresholds of active THC, “My Canary,” if truly effective, could prove to be a useful tool for consumers (though Canary currently disclaims relying on its app to determine whether you should drive or not if you’re stoned).
  3. PayQwick. Looking at payment platforms to avoid paying cash at a dispensary? PayQwick is one of several companies that offer this service, but they may be the first company to actually register those services under its state’s (Washington’s) money transmitter licensing schemes. In addition, according to its website, PayQwick is working on the technology to allow consumers to pay for their pot with their smart phones and there should be an app coming soon.
  4. Leafly. If Weedmaps is the Yelp of marijuana, Leafly is the WebMD. Leafly describes itself as “The World’s Cannabis Information Resource” made up of marijuana dispensary and strain reviews. By clicking on the site’s “Strain” tab, you can search volumes of information about “Flavors, Effects, Symptoms, and Conditions”; you can also locate on Leafly your neighborhood dispensary (in multiple states) that carries your favorite strains and products.
  5. Massroots. Billing itself as the Instagram of marijuana, Denver-based Massroots maintains an app that “. . . allows its 275,000 semi-anonymous users to post pictures of themselves smoking marijuana without the potential repercussions of doing so on conventional social sites.” Essentially, Massroots is a social media platform for its users (and marijuana businesses) to unite over their common love and interest in cannabis, regardless of state lines. And Massroots is serious about its staying power. Through the power of lobbying and persuasion, Massroots pioneered a big victory against Apple in February 2015 where the tech giant originally refused to allow Massroots (as well as other marijuana-geared apps) to offer its free app in its App Store.

What are you seeing out there in the world of CannaTech?

4 responses to “CannaTech: The Lasting and Up-and-Coming Hot Picks”

  1. To answer the article’s concluding question…we’re seeing a lot of the same issues in CannaTech as in the non-cannabis tech space: business model scalability advantages (compared to offline) that are also accompanied by potentially low barriers to entry and low/no revenue models with uncertain paths to monetization.

    Ironically, Massroots’ success in lobbying Apple to open up the App Store to cannabis apps such as theirs lowered an important barrier to entry (user network effects) in an arena where Massroots arguably had a head start.

    We think the prospect of more state (not to mention national) legalization is simultaneously a blessing and a curse for many companies (tech or not) in the space, and investors should think carefully about that. To what extent, for example, are social sites such as Massroots driven by cannabis’ “forbidden fruit”/counterculture image? Will the cache of being a member of such sites remain as the industry becomes more corporate and the fruit is no longer forbidden? Time, as always, will tell.

  2. Having just completed reading Oregon’s temporary rules for recreational cannabis, there will be a need for a B2B software that is compatible with the OLCC vendor’s seed to sale tracking system if rec businesses need to use a secondary tracking or point of sale system. The secondary software will not only have to migrate data seamlessly from the mandated seed to sale tracking software, but will have to be approved by OLCC’s vendor before it can be used by the business.

  3. There is still confusion among readers if it is “possible” to have a for profit CA medical marijuana business starting as early as 1 Jan 2016, or not under any circumstance until 1 Jan 2018, or somewhere in between.

    And what happens with the license scheme if CA moves forward on recreational marijuana?

    Can you clear it up with facts, or even best guess informed opinion?

    Appreciate any guidance at all, this is a topic being discussed on many forums on the internet.

  4. Eaze, named the “Uber for Pot” by WSJ, is missing from the up-and-coming list. Eaze is one of the fastest growing and most funded cannabis companies having raised $12.5 million in VC funding in its first year. Eaze’s technology streamlines the delivery experience helping dispensaries fulfill patient deliveries in 15 minutes on average across California.

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