In less than a year, the recreational use of cannabis will become legal in California. But as a new crop of tech startups scrambles to put themselves in place to service the burgeoning industry, there are a lot of questions that simply don't have answers quite yet. We talked with four growing cannabis companies about what's next for the industry.
Cannabis industry veterans Nicolas Nezhat and Josh Glasgall originally conceived the idea for their startup Fynd, while climbing Mount Shasta together. Officially founded in 2016, the startup develops software that allows dispensaries to engage their customers.
What is Fynd?
Fynd creates innovative, intuitive software for cannabis dispensaries. Our initial product is an advanced cannabis menu software that increases customer engagement, informs consumers with educational content and empowers them to find their perfect cannabis product.
At what point did it become apparent that Prop 64 was most likely going to pass?
If you combine the upwelling of voter support driven by the success of legal markets in Washington, Colorado and Oregon, as well as significant financial backing that exponentially outweighed the opposition — the prospects for the passing of Prop. 64 looked very optimistic. The victories gained by supporters of legal cannabis in November across the entire country echo a larger trend of acceptance and the desire for regulation.
When did you start working on your startup?
Josh and I have been friends for years and always enjoyed bouncing ideas off one another. Last year, we climbed Mt. Shasta for Josh’s birthday and got to know one another in an entirely new way. At the time, Josh was working in Seattle in the cannabis industry and I had just launched another retail-tech startup in Santa Monica. Walking away from that trip, I think we both knew we needed to find a way to join forces and build something great together.
Fortunately, a few months later we had such an opportunity and began developing a much-needed solution for the cannabis industry. We couldn’t be more excited about the future of Fynd and the future of cannabis.
What are some hurdles businesses encounter while waiting for the Prop to take effect (on January 1, 2018)?
While the passing of Prop 64 is a huge victory, due to California’s size and economic impact, it’s important that we lay a stable and scalable foundation. The infrastructure required to create an adult-use market is still lacking across a wide range of services. It is an enormous task to consolidate and reign in the gray and black markets and requires clear and consistent rules for how businesses can legally participate.
Even though cannabis businesses will require the approval of their local authorities to secure a license, most of the municipalities are waiting for guidance at the state-level before they take any action. Add in the uncertainty of future federal policy under the newly appointed Attorney General, and you have a complex set of challenges that may take years to fully iron out before the market is widely implemented.
There will inevitably be growing pains — thankfully, the community is supported by strong, innovative and brilliant visionaries. Uncertainty oftentimes represents a half filled glass — while it may frighten some, we couldn’t be more excited for what the future holds.
How long do you think it will take before the stigma of cannabis fades, and do you think that will hurt business?
We strongly believe that the stigma is diminishing with every passing day. Not only is public perception of cannabis shifting, the cannabis industry is evolving at a speed that continues to reduce the entry barrier for new consumers. Increased regulation that contributes to consumer protection, such as new standards regarding production, labeling and education have made it easier and less scary for new consumers to dip their toes into the market.
Regarding medicinal use, more and more baby boomers and their parents are turning to cannabis to help with medical issues, shifting the conversation from abuse to responsible use.
It’s impossible to stereotype the cannabis consumer of today — the availability of infused lotions, tinctures, cooking condiments, patches, even personal lubricants, directly contradict the dated stoner stigma.
What's one prediction you have for the cannabis tech industry for 2017?
Data will be king in 2017. Standardizing and demystifying the purchasing process for retailers will lay a better foundation for reliable product offerings. Offering consumers transparency on the potency and chemical composition of cannabis products will empower people to find the perfect product that’s right for them. The opportunity for innovation in this industry through technology solutions is massive. The business that caters to the customer of tomorrow is one that will survive this tumultuous moment in history.
KIND Media co-founder Silas Dunham and his team have developed a data-driven website in KINDLAND that informs cannabis enthusiasts with interesting content about the cannabis space. According to Dunham, established tech entities are starting to take notice of the steps cannabis tech startups are taking.
What is KIND?
KIND Media was founded in May of 2015 and we launched our flagship website KINDLAND in November of 2015. KINDLAND is a content, data and technology-driven digital media company focused on the intersection between cannabis and culture.
At what point did it become apparent that Prop 64 was most likely going to pass?
To me, there wasn't really a point where I thought Prop 64 wouldn't pass. Legalization has had so much momentum behind it recently that Prop 64 kind of seemed like a sure thing. Prop 64 isn't perfect by any means but it was a well-written policy for all parties involved.
When did you start working on your startup?
We started working on the idea/conception back in March/April of 2015.
How long do you think it will take before the stigma of cannabis fades, and do you think that will hurt business?
A while. Even younger generations still have a weird perceived stigma to cannabis. I think since it's still looked at from a federal level has a Schedule 1 narcotic people have a predetermined notion towards the plant. Maybe when they stop including weed in the D.A.R.E program or something, that's when people will lose the stigma.
What's one prediction you have for the cannabis tech industry for 2017?
Cannabis tech is booming right now. From seed to sale tracking to delivery services apps to media, the cannabis tech space is keeping pace with mainstream tech verticals. Some of the grow-ops tech these days is insane. I can see Big Agro looking at the innovations in the cannabis space and start to take a page from their books. Also, I see way more mainstream venture money coming into the space. When Peter Thiel's Founders Fund invested in Privateer, that was the start of the shift in Silicon Valley.
Thinkbox founder Mike Williams recently entered the cannabis tech scene with his startup's new app, Yobuddy. Williams brings a background in tech and an understanding of the product to the consumer side of weed tech.
At what point did it become apparent that Prop 64 was most likely going to pass?
I think having Prop 64 on the ballot was long overdue, and I was not surprised that it passed. I'm excited that it did and only hope that the interpretation of the bill does not put unnecessary barriers in place for online operators, like it has for online-based delivery services in some areas.
When did you start working on your startup?
We started working on Yobuddy earlier in 2015, but were not successful in having our initial product approved by Apple. We were constantly rejected, so we took a step back and launched a more lightweight version of the app, which is what you see today.
What are some hurdles businesses encounter while waiting for the Prop to take effect?
I think there are going to be hurdles for other apps and online-based companies in the cannabis space that are trying to leverage technology. I know that we already ran into this ourselves and have seen other companies have workarounds that are simply in place until they can provide the best experience to consumers when the legality has caught up. There are so many ways that technology can be leveraged in the cannabis industry that has been proven in other industries, but it's simply not possible yet.
How long do you think it will take before the stigma of cannabis fades, and do you think that will hurt business?
Regardless of the laws, I think that there is going to be a public stigma that is pervasive for much longer because naysayers will always exist. You have to also realize that the way information travels is also painting it in a taboo way, so this will also have to change for the public's opinion to change. I'm all for health professionals, users and others helping shed light on the potential health benefits. What really leaves me dumbfounded though is people who actively speak out against the recreational use of cannabis, but consume alcohol on a regular basis.
What's one prediction you have for the cannabis tech industry for 2017?
I think more people with solid technical backgrounds will begin to see the opportunity the industry offers and really begin to explore ways to innovate. I'm seeing more innovators than before, which is amazing and should result in awesome products and services. Cannabis tech space is really a nascent space and I couldn't be more excited to be involved in it!
Founded by a group of USC students, Reefer is developing a referral rewards network for cannabis dispensaries. According to CEO Brian Zatulove, the early adoption rates seen by neighboring states who have recently legalized recreational marijuana use are very encouraging for the industry.
What is Reefer?
Reefer is a viral referral rewards network for cannabis dispensaries. We grow the dispensary's patient count by increasing group loyalty. Reefer launched in beta in November of 2016. We have raised $100,000 in pre-seed from an executive at Google and from Sidebench Studios. Reefer consists of a team of seven USC students, and we were recently able to recruit developers and designers with experience at Salesforce, Amazon and Evernote. Additionally, we are the first cannabis team in the USC Incubator and the youngest tech team in the cannabis industry at the moment.
At what point did it become apparent that Prop 64 was most likely going to pass?
We were confident Prop 64 was going to pass when we originally founded Reefer based on how close Prop 19 was to passing in 2010 and the significant sentiment change in that six-year period.
What are some hurdles businesses encounter while waiting for the Prop to take effect?
We remain largely unaffected since California has such a large medical market to capitalize on for the next 10 months. Reefer doesn't touch the plant at any point so we avoid a lot of regulatory changes.
How long do you think it will take before the stigma of cannabis fades, and do you think that will hurt business?
There will continue to be some stigma regardless of legalization, but the stigma will gradually improve with time. The combination of high early adoption rates we've seen in other recreational markets (Colorado, Oregon and Washington) and the pure population size of California shows that it will cement itself as the cannabis capital of the world.
ArcView Group is a San Francisco-based investment company that funds cannabis-related businesses. CEO Troy Dayton has been actively lobbying for marijuana legalization since the 1990's.
At what point did it become apparent that Prop 64 was most likely going to pass?
I've been working on the politics for this issue since 1995 and am the leading publisher of insights on this market and currently serve on the board of the Marijuana Policy Project. I knew that legalization in California was ours to lose in 2016 since 2010. The polling was strong and steady. Even when it lost in 2010, it was clear what was needed to win in 2016 and all those things came to pass.
What are some hurdles businesses encounter while waiting for the Prop to take effect?
There are tens of millions of people who want to buy legal cannabis without a doctor's note that can't. I'd call that a pretty big hurdle.
Also, there are still many battles to be fought over the uncertainty of how the state will actually regulate, which could have huge impacts on business and investment.
As an investor, what stands out to you when you hear a business make its pitch?
I want to see teams that have both business experts and cannabis experts on them. I think there are a lot of lopsided teams, one way or another, and I think they are likely to fail if they don't have the benefit of people with a lot of traditional business experience and people with years of cannabis experience.
How long do you think it will take before the stigma of cannabis fades, and do you think that will hurt business?
The stigma is a mirage. It doesn't actually exist. Everyone thinks other people are judgmental about it, but very few actually are. It's clear that this is a legitimate and fast-growing industry and that those who hold on to their antiquated beliefs will miss out.
What's one prediction you have for the cannabis tech industry for 2017?
Cannabis will be seen as the top focal point for anyone developing a business in the agricultural technology world. There is no other agriculture product in the world that people fuss over as much as cannabis that has such high demand and high margins and a willingness among a fast-growing industry to try new things.
Images via participating companies. Some responses were edited for length and clarity.
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