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Why Pot Is The New Frontier For Tech Entrepreneurs

This article is more than 7 years old.

The cannabis industry is growing like, well, a weed. And the fact that recreational marijuana is on the California ballot in November means that we are about to see an extraordinary number of tech entrepreneurs enter this arena. According to cannabis research firm The Arcview Group, if the measure passes, the California cannabis market will grow from $2.7 billion to $6.6 billion by 2020.

Currently, Alaska, Colorado, Oregon and Washington are the only states where recreational marijuana use is legal. It’s a $5.7 billion industry (“the fastest growing industry in America,” according to Cashinbis) that is poised to take off once California hits the market.

There are plenty of hot areas for fledgling cannabis entrepreneurs. Edibles, vapors, extraction processes and growing systems, to name just a few. “If you are looking at product development, there is no standard—no one will tell you how to do it,” says Michael Devlin, co-founder and president of Db3, which makes Zoots edibles. “As the industry grows, they will ask for innovation. The winners will be those who respond to that.”

I checked in with activist Brian Caldwell, owner of Triple-C: The Original Cannabis Club, to see what areas might be ripe for budding tech entrepreneurs interested in the cannabis industry:

Mature consumer-facing software: Right now, Weedmaps and Leafly are the top two sites where cannabis consumers can look up dispensaries, find cannabis strains and read reviews. But neither is perfect and both need to mature a lot in order to be truly user friendly.

Weedmaps suffered from a lot of growing pains and has had a number of software issues. Leafly, while packed with information on specific strains and great technologically, seems to be struggling to gain traction.

If a strong company with a good platform came in to be the Yelp of cannabis with the resources and developers to back it up, Caldwell says that company would be welcomed by dispensaries and consumers alike.

Retail experience technology: “I want software that meets my business needs,” Caldwell says. From state to state, the experience of shopping in a cannabis store varies. “In Colorado, they can still have a jar of cannabis where you can hand pick an order. In Washington, everything is prepackaged,” he says. “The consumer experience is different.”

For his own dispensary, Caldwell says he has unsuccessfully gone to a number of tech companies looking for software that will help him design his floor to allow customers to use tablets to explore merchandise while someone in the back pulls and completes the order. Right now, this technology doesn’t exist. But Caldwell says it would be a huge perk to the industry.

The top stores in Washington are serving 2,000 people a day and they are desperate for a better experience. “How do we move from consumer to connoisseur?” he says. “The only way is to use technology to make a better experience.” Caldwell would like to see seasoned professionals from places like Starbucks or Apple enter the cannabis business.

Better consumer friendly seed to sale tracking: Every state that allows cannabis sales regulates seed to sale tracking. In other words, the cannabis proprietors need to keep records of their product from the moment it is placed in their hands as a seed all the way to the point of sale. There are a number of cloud-based platforms that help growers keep track of inventory and share that data with the state, but there’s a lot of room for growth.

He would like to see a top-notch software system that is easy to use and reliable. “Right now there’s too much old software tweaked for this application.” A desperately needed digital technology that would tie seed to sale tracking to the retail experience, he says, would be a way for customers to pre-order products at digital kiosks within the stores to expedite sales.

Cash management software and hardware: The cannabis industry deals almost exclusively in cash because the federal government still classifies cannabis as an illegal substance. Therefore, federally regulated banks shy away from working with cannabis companies, even if they are legal in their own states.

Most dispensaries, some of which bring in revenues between $2 to $3 million a year, cannot accept credit cards, checks or debit cards. They have to pay their vendors and taxes in cash—and right now, there are very few good cash management technologies. Andrew Faulkner, president of Advanced POS Solutions and Business Machines Systems, Inc., has tweaked his company’s WebSafe software, originally created for fast food restaurants, to work for the cannabis industry because most point of sales software do not track cash. “Owners might feel confident through POS inventory that they have a good track on their cannabis, but there is so much cash flowing through dispensaries that it’s hard for them to keep track of employee theft,” he says. “It’s the wild, wild west.”

For entrepreneurs not bothered by the grey edges around this new industry, there’s plenty of opportunity.

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