Confident Cannabis
- Investors are pouring money into cannabis companies, and cannabis tech is becoming an increasingly large part of the pie.
- These startups are insulated from much of the risks of investing in cannabis because they don’t actually sell or distribute a federally controlled product. That frees up mainstream venture capital and private equity firms to invest.
- We asked some of the top cannabis investors to pick out the cannabis tech startups they think will blow up this year. Read on for their picks.
Investors are pouring money into the red-hot cannabis sector.
Venture firms invested $881 million into cannabis startups in 2018, over the double amount raised a year prior, according to the data provider PitchBook. And cannabis tech, or startups that provide hardware and software support to the industry, is becoming an increasingly large part of this pie.
It’s still too early to get specific growth numbers on cannabis tech, but the area is attractive to investors since the companies don’t actually sell or distribute THC, and therefore, aren’t breaking any US federal laws. Like the picks-and-shovels salesman who struck it rich during the Gold Rush, these startups provide data analytics, software support, cultivation technology, and consumer products like vaporizers.
And because they don’t touch the plant, bigger investors — think the Sand Hill Road set or mainstream private equity firms — are mostly free to invest. On top of that, software companies provide the rapid growth rates and higher margins that venture capital loves, without the risk of investing in an industry that’s federally illegal.
Read more: Top investors say these 11 buzzy, under-the-radar consumer cannabis startups are set to raise fresh rounds and blow up this year
These cannabis tech startups are sitting on fertile ground. Some Wall Street analysts say cannabis could be a $194 billion global industry by 2030 — and all those companies are going to need hardware and software to support their growth.
Some of these startups, like Pax, are geared towards consumers and have raised astronomical amounts of money at huge valuations. Others, like Cellibre, have laid a bit lower, by using cutting-edge tech from the agriculture sector to biosynthesize the active components of the cannabis plant.
And last, like any other established industry, access to quality data is an edge every company is looking for. Startups like Headset, a data analytics company, are looking to provide that for clients that range from cannabis cultivators and major consumer packaged goods companies, to investment banks and consulting firms figuring out ways to make money off the cannabis boom.
Business Insider surveyed a dozen of the top cannabis investors about which cannabis tech startups they think will blow up or raise fresh rounds this year.
Here are their picks:
LeafLink
LeafLink
Startup: LeafLink
Investors: Lerer Hippeau Ventures, Nosara Capital, Casa Verde Capital
Recommended by: Andrea Hippeau, principal at Lerer Hippeau Ventures
Relationship: Investor
What it does: LeafLink is an online commerce platform for wholesale cannabis. The startup’s software provides streamlined ordering, customer relations management, as well as reporting tools for cannabis dispensaries.
Why it’s hot: "Before LeafLink, dispensaries were running their businesses on Post-It notes with absolutely no software or technology," said Hippeau. "LeafLink has developed a platform that addresses the unique needs of cannabis companies and has become the system of record for the industry."
Treez
Screenshot/ Treez
Startup: Treez
Investors: Welcan Capital, AFI Capital Partners, Intrinsic Capital Partners
Recommended by: Vikas Desai, partner at Welcan Capital
Relationship: Investor
What it does: Treez is an enterprise software platform for cannabis retailers. The startup provides payment solutions and seed-to-sale tracking software for cannabis dispensaries and cultivators.
Why it’s hot: "With over 25% market share in California, their ability to solve key pain points will continue to drive adoption both in CA and with national cannabis operators," said Desai. "Brand Treez, their newest initiative to standardize information for brands and distributors across their sales channels is an example of how they enhance stickiness and will become a central repository for information and valuable customer data."
Headset
Courtesy of Headset
Startup: Headset
Investors: AFI Capital Partners, Canopy Rivers, Poseidon Asset Management
Recommended by: Narbe Alexandrian, president of Canopy Rivers
Relationship: Investor
What it does: Headset is a data analytics startup focused on the cannabis industry. The startup recently inked a partnership with Nielsen and Deloitte to provide insights on the cannabis industry to major consumer packaged goods companies.
Why it’s hot: "Relative to the traditional CPG industry, the cannabis sector is working backward," said Alexandrian. "Brands are being developed blindly, without looking at data around consumer trends and retail buying behavior. Headset is the first and only real-time retail business intelligence platform in the market today. Backed by a strategic relationship with Nielsen, the company provides brand managers with insights on price, volume, market share, and buying trends."
See the rest of the story at Business Insider
See Also:
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Source: Business Insider – jberke@businessinsider.com (Jeremy Berke)