Getting high … tech
At SXSW, industry experts spoke on the importance of cannabis-specific tech solutions and the future of the industryAt SXSW, industry experts spoke on the importance of cannabis-specific tech solutions and the future of the industry
In a recent study by Leafly, more than 211,000 Americans are involved in cannabis, making it the fastest growing industry in the United States.
Cannabis, especially in California, has come a long way since the state first legalized medical marijuana in 1996, but there are still many hurdles with ever-changing regulations and the day-to-day challenges of operating a lucrative business.
This year, SXSW launched its first ever Cannabusiness track, a bold move considering cannabis isn’t yet legal in Texas where the festival is held. The sessions acted as a jumping-off point for larger conversations on the evolving trends in the industry, hemp and health and the importance of cannabis-focused tech solutions.
For Emily Paxhia, a co-founder and managing director of Poseidon Asset Management, a Bay Area cannabis hedge fund, it’s those custom tech solutions that are more important than ever to help the industry flourish.
“When we first started to examine the market back in 2012-2013, we were struck by the fact that people were running these operations that were cash-flowing, but were using paper and pencil to log the transactions. Things were fragmented. In order to grow, they needed the type of tech solutions that other traditional businesses enjoy.”
Enter entrepreneurs including Keegan Peterson, founder of Würk, a cannabis payroll and HR company, and Cy Scott, founder of Headset, which provides real-time analytics and customer demographics.
It’s key for the cannabis industry to have track-and-trace systems for ingredients that go into consumer, point-of-sale systems and tech that makes sure employees feel safe at work and get paid on time.
“All of these things are critical to not only run your business, but stay compliant,” says Tahira Rehmatullah of MTech Acquisition Corp.
Rehmatullah, the former general manager for cannabis brand Marley Natural, echoes Paxhia on the importance of continued innovation in the industry, recalling her frustration over what gathering data was like in 2014.
“I would call and text dispensaries to get information and send over a formatted spreadsheet in the hopes they would send me back the information,” she says. “But this would never happen. If Headset had existed just a year earlier, it would’ve made my life so much better.”
Peterson said that tech has also made it possible to keep on top of state-by-state policy changes.
“Every day things are changing,” he says. “You have to train your entire staff how to pivot, and because of this, dispensary owners are some of the grittiest business people I’ve come across in my entire career. It’s like every morning you have to figure out a Rubik’s Cube, and every morning the government comes and messes it up.”
Because of that quickly changing business environment, cannabis tech entrepreneurs have had to become very focused on execution.
“It’s not a move fast and break things industry,” Paxhia says. “If you do that, you are putting your clients at risk with the regulators.”
With many tech companies on the horizon, many of which are cloud-based, Scott and Peterson are looking forward to seeing how traditional tech companies will get involved and how tech developed for cannabis could be used in other industries.
“It’s also been great to also see how the tech used in Headset could work in other verticals such as alcohol, OTC and pharma,” Scott says.
Cannabis is even reaching traditionally conservative industries such as oil and gas.
“An oil and gas company in Denver reached out to us to manage their payroll because we work in a highly complex, highly regulated industry that changes constantly, just as the oil and gas industry does,” Peterson says. “They couldn’t find a company that could keep up with them.”
Locally, these cannabis innovations are hitting home as well. More than 100 dispensaries exist in Sacramento County, and without new tech solutions, they wouldn’t be able to keep up. Dispensaries such as RCP Sacramento, which opened as Magnolia Wellness in 2009 and partnered with River City Phoenix in 2010, rely on stringent testing operations.
While much has changed over the last decade, the cannabis industry is still young. What will happen if every state legalizes medical and recreational marijuana? Will cannabis tech companies fizzle once more Fortune 500 players begin to invest?
One thing is certain: Tech developments will always be important.