There are currently 8.4 million people in America who use marijuana on a regular basis; more than half of that in 2002. The US cannabis industry is booming. The market currently valued at $7.2 billion; is growing 29 percent annually. This is in big part due to legalizations in Colorado, Alaska, Oregon and Washington.
Cannabis executives met in San Francisco’s New West Summit earlier this month in an event:according to investors, “that felt like an awakening for an industry that has hidden in the periphery of the US economy for decades” in statements to Red Herring. British entrepreneur Sir Richard Branson put in his two cents at the summit saying: “I certainly would be out there in this industry,” addressing attendees via a Skype linkup. “It has enormous potential with the ability to do a lot of good.”
Current cannabis innovation has aimed mainly toward strains, vaporizers and edibles, but the fact that this event was held in America’s home for technology was no coincidence. Tech startups are beginning to get involved and they have brought Silicon Valley-level funding along.
This week Eaze, a medical cannabis firm, secured $25m series B funding round, making it the largest funded marijuana tech company in the world. “This is a critical time for the marijuana industry. Adult use is on the precipice of becoming legal in California, the largest marijuana market in the United States. Eaze is setting a new standard for accessibility, safety, and professionalism, which makes it best positioned to educate and service the future market,” said Keith McCarty, CEO of Eaze, in a statement.
If Prop 64 passes in California on November 8th it will be an enormous boost to the cannabis industry. As per The World Bank, California has the equivalent of the world’s sixth largest economy. The impact of such a large and vital state into the cannabis industry will, most experts agree, pave a significant path for nationwide legalization.
Legalization will help a lot of tech startups who have appeared in recent years. Innovators include Grownetics, which uses machine learning to increase bud yields. Fleurish Farms alleges to have invented a product that captures more sunlight for home-growers, and reduces the process’ environmental impact. FlowHub is a cloud-based point-of-sale (POS) software that allows users to pick a strain of cannabis depending on their needs.
B2B acceleration has been comparatively slow for a number of reasons. “The biggest breakthrough in enterprise solutions will come from the customers of the solutions themselves,” says Bologna. “Currently, there are few, if any, companies that can be considered ‘enterprise’ level supply chains in cannabis.”
“Some major product manufacturers and distributors likely have mature supply chains and business tools, but cannabis processors are not at that scale,” he adds. “The increasing need to lower cost will drive the advanced companies towards efficiencies offered through standardization and software similar to other mature industries.”
Investment in the marijuana industry has grown rapidly. $360m was invested in the sector in 2015. Another $137m has been invested this year. In 2012 that figure was only $7m. Bologna, who founded Green Lion in January 2015 with business partner Jeffrey Zucker, says he sees
“technical advances in cannabis every day. It ranges from software to agricultural automation to medical research and testing capabilities. This industry has allowed brilliant people the freedom to implement some very impressive advancements over the past few years, as they increasingly leave industries that may stifle their creativity in a way the cannabis industry generally doesn’t due to it’s open-minded environment.”
Bologna adds that, in the long-term, he expects infused products, software and medical research to be the biggest drivers of revenue in the marijuana market.
Leslie Bocskor, president of Las Vegas-based Electrum Partners, agrees. “We’re seeing a substantial overlap between cannabis and technology, which is fueled partially by cultural similarities and previous overlap,” he says. “The anecdote that the reason Silicon Valley companies don’t drug test is because they’d lose all their most talented workers is something that we’ve heard more than once.”
Companies are having a hard time investing in cannabis tech startups on a larger scale due to skepticism surrounding banking regulations. Licensing, physician recommendations and other political issues all pose problems to those looking to expand beyond state borders. Nationwide deregulation will allow firms to analyze data and project for the future, which currently is hard to do. This along with out-of-state ownership, which has begun to be allowed, will also ease financial bottlenecks and should solve these issues.
Perhaps cannabis tech startups will be able to look to a future beyond the United States. Latin America and Europe are expected to present huge marijuana opportunities in coming years. Israel has also emerged as a home for cannabis innovation, with a bunch of private investors investing into the market. American cannabis entrepreneurs will be blowing the weed world up in smoke.
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