Growing like weed: Pot tech startups bloom as Pacific NW becomes hub for cannabis innovation

Growing like weed: Pot tech startups bloom as Pacific NW becomes hub for cannabis innovation

11:58am, 20th April, 2019
An example of iUNU’s computer vision technology for monitoring cannabis and other indoor agriculture operations. iUNU’s cameras and AI monitors minute movements in plants to increase greenhouse efficiency. The company is based in Seattle. (iUNU Photo) If you happen to be searching for pot sales analytics today, on the annual celebrated by marijuana aficionados, look no further than the Pacific Northwest. Seattle startup , a marijuana retail business data intelligence provider, knows that sales grew by 111 percent on this day last year. , a Kirkland, Wash.-based cryptocurrency company serving the cannabis business, found that dispensaries in Washington, Colorado, and California saw a 91 percent increase in customers during last year’s festivities and a 22 percent increase in average transaction value. Headset and POSaBIT are just two of countless cannabis-related startups based in cities such as Seattle, Portland, and Vancouver B.C. Not only has this region been “the epicenter of cannabis culture in North America,” but it is also a “hub for innovative tech companies,” said , who recently an executive role at Amazon to become CEO at Seattle-based marijuana discovery platform . As a result, Leslie said Seattle is “well positioned” to be a cannabis tech hub. That’s helped along by the Northwest’s granola-crunchy, free-spirited culture, which is also somehow home to a Type-A, finish-it-yesterday tech culture. “People in this area get it,” said , POSaBIT’s co-founder and CEO. “They understand [cannabis] is a true business opportunity. As I travel around the United States … it blows me away on how the social stigmas and everything around cannabis are so much stricter.” Hamlin said he loves being in Washington, an epicenter of technical talent thanks to homegrown companies such as Amazon and Microsoft, for giants including Google, Facebook, Oracle, Uber, and others, and hundreds of smaller startups. Sure, the Bay Area is seeing a similar cannabis tech renaissance thanks to its own blend of expertise and culture. But Washington legalized recreational pot six years before California. That gave Northwest cannabis tech companies a head start in learning the industry’s needs and developing their products and business models. One of POSaBIT’s cryptocurrency point-of-sale units for cannabis retailers. (POSaBIT photo) The cannabis business is growing up — the legal marijuana industry grew to in the U.S. last year — and the tech companies serving pot enterprises are growing right along with it. And where cannabis-tech companies have typically sought to connect a fragmented, cash-only business emerging (more or less) from the black market, many are now talking about even more sophisticated systems — AI, computer vision, cryptocurrency and big data. Cannabis tech is entering a new era, and the Northwest is a key hub. Call it “Northwest Cannabis Tech 2.0.” “You’re seeing a second wave of noise,“ said , the co-founder and CEO of , a Seattle-based company that uses artificial intelligence and computer vision to increase the efficiency of greenhouse operations, including indoor cannabis farms. ”What you’re seeing is a market that’s become much more mature than the other markets around the country, around the world.” In Seattle alone, there’s Leafly, the online cannabis directory, which was bought by Seattle cannabis investing firm in 2011. Just across downtown in Capitol Hill is , another online cannabis directory, acquired in 2016 by Nesta.co, a Canadian pot private equity firm. In March, , a Redmond, Wash., provider of cannabis point-of-sale and tracking software, Seattle pot sales software company Soro, which came out of beta only last year. Together, the companies have set out to build what Soro founder and current Dauntless chief product officer calls “an entire ecosystem around what it means to be a cannabis business.“ There are plenty of British Columbia tech companies as well, and they’re theoretically on steadier ground because Canada legalized recreational pot at the federal level last year. One of the most prominent is , the medical marijuana manufacturer also owned by Privateer Holdings and helmed by Privateer co-founder , who upwards of $31 million in compensation last year — more than Satya Nadella or Jeff Bezos. And to the south, there is, of course, Portland, which has its own celebrating the city’s Bohemian sensibility and is perhaps an even pot-friendlier town than Seattle. There, you’ll find , a point of sale product for dispensary owners, as well as the pot genetic testing company , among others. Phylos Bioscience sells a kit that identifies cannabis plant seedlings seven days after germination. The company is based in Portland. (Phylos Bioscience Photo) Anyone who got a front-row seat for the dot-com boom of the 1990s will surely recall all the hype — big words and jargon that, as it turned out, weren’t backed by actual revenue. By the end of the decade, tech stocks imploded, wiping out a wave of tech 1.0 companies whose shares had once soared. While there hasn’t been a pot-tech implosion (at least not yet) and there is certainly still plenty of hype, Greenberg said cannabis customers are demanding better tech, which is placing more demand on vendors to move beyond talk and develop fast, powerful software. “You have to really perform in Washington,” said the IUNU CEO, adding that pot tech companies in this new phase increasingly face “pressure to put up or get out.” That pressure, and the expertise of startup founders and workers jumping ship from Microsoft and Amazon to work in the cannabis business, means Northwest tech companies typically build very solid pot software, Greenberg said. POSaBIT CEO Ryan Hamlin. (POSaBIT Photo) “I’d definitely put the companies in the Northwest in a favorable position,” said Greenberg, whose company $7.5 million in February in a round led by Bootstrap Labs and NCT Ventures. Total funding in IUNU is more than $13 million. “You’re going to have a lot of winners and successful companies in the Northwest around that tech,” he added. POSaBIT began trading April 8 on the Canadian Securities Exchange under the ticker symbol PBIT. It opened at $0.28 per share and closed Friday at $0.37 cents per share. U.S. pot companies such as POSaBIT have been flocking to the CSE because it’s far more liberal than other exchanges when it comes to cannabis stocks. POSaBIT makes it possible for customers to walk into a cannabis store and convert their cash to Bitcoin, which they can then use to buy pot. Because of federal prohibition, legal cannabis is still a cash-only industry, which has produced any number of headaches, from difficulty banking cannabis revenues to the security concerns that come with any cash enterprise. Hamlin, POSaBIT’s CEO, said a lot of those problems can be solved with cryptocurrency. POSaBIT was born during a campfire chat with friends about about the technology needs of the emerging marijuana business. “It was the combination of, OK — cash-only problem, massive industry, cryptocurrency. How could they all come together?” said Hamlin, a former Microsoft general manager. “And that’s when the ‘aha!’ moment was. Well, you can use a debit and credit card to purchase cryptocurrency. And you can use cryptocurrency to buy cannabis.” Leafly co-founder Cy Scott and his colleagues celebrate the App of the Year award at the 2014 GeekWire Awards. (GeekWire File Photo) POSaBIT launched in 22 Washington cannabis stores in 2017. In 2018, it had expanded into Colorado, California, Oklahoma and Nevada. By the end of the year, POSaBIT had processed nearly $22 million in sales through its payment system. Like Greenberg, Hamlin said his cannabis industry customers are demanding a new level of sophistication from his software. One of the ways he’s trying to meet that need is to leverage bitcoin transactions to gather anonymous customer spending data and provide his clients with market research, a much-coveted service in an industry that has been cash-only since, well, at least the Monterey Pop Festival. “I can tell you precisely who a manufacturer is,” Hamlin said. “I can tell you (the ages and genders of those) buying. Males from 45 to 55 tend to buy edibles and they tend to buy them on Thursday night and they also live in these zip codes … that’s a gold mine.” Headset, the Seattle pot analytics and market data company started by Leafly co-founder , is providing similar metrics. Last month, Nielsen, best known for its TV ratings, and Deloitte forged a with Headset to provide U.S. and Canadian pot manufacturers with one of their first looks into how their customers think about cannabis, how often they use it and which brands they buy, among other data. Headset is an example of a Pacific Northwest pot tech ecosystem that’s already maturing. Scott originally founded Leafly in Irvine, Calif., but the company relocated its headquarters to Seattle after Privateer Holdings — the Seattle-based marijuana investment firm — acquired Leafly. Scott has stuck around town and is building another fast-growing cannabis tech company. Hamlin, POSaBIT’s CEO, noted that “you come to Washington and you don’t think twice.” “It’s part of doing business, so to speak,” he said.