Cannabis Industry Becoming Competitive as Canopy Selects Latest Cohort

Canopy, a cannabis industry accelerator and venture fund, was the most active investor in the cannabis space according to AgFunder data. Today Canopy has announced its fall cohort – a class of eight startups that will service the rapidly maturing cannabis industry. This class will participate in a 16-week accelerator program, and receive a $30,000 investment from Canopy with the opportunity to score an additional $50,000 at the program’s conclusion. The new cohort includes startups addressing the cannabis supply chain, growing, marketing data, and retail experience among others. They are:

• Virtugro is a Colorado-based team developing automated grow tech solutions for medium to large-scale cultivators.

• My THC Guide is developing chatbot solutions for the cannabis industry.

• Cannabis Quality Group is a cloud-based integrated quality management system designed for licensed businesses to have transparency in their supply chains.

• Serene is a social network encouraging an active outdoor lifestyle, paired with cannabis use, by leveraging technology.

• Redfield Proctor is a startup in stealth mode focused on efficiency in the cannabis industry. 

• Dispenserly manages, monitors, and mines cannabis industry reviews to identify new opportunities and trends.

• DeepGreen is an optical recognition technology that identifies plant characteristics using AI and machine vision technology.

• GreenScreens manages a network of digital flat screens in dispensaries across the country that rotate menu information and advertising to inform and target customers in the store.

Throughout the program, the companies will have access to mentors and a cannabis investor network maintained through The Arcview Group, Canopy’s partner in the program.

We caught up with co-founder and managing director Patrick Rea to discuss the current political climate for cannabis and what Canopy’s new cohort say about where the cannabis industry is today.

How much do you think politics has affected innovation and deal flow in the cannabis space?

From an innovation standpoint, I’m not seeing any impact there. What we are seeing is there is an impact on the flow of talent coming into the industry at some levels. Where we’re seeing somewhat of a slow down is with people who need to have a paycheck and don’t have the means to extend themselves. We’re still seeing big-time investors who have a long-term vision view of the industry and where it’s going and what it’s going to look like, with California coming on line; they’re still entering the business with great fervor.

When there is a lack of certainty in markets, people just back off. That happens everywhere because they can’t quantify and thus manage the risk. At least when you have some policy statement or historical pattern that you can model off of, you can attempt to manage risk. But if your data points are all over the map you just say ‘I gotta wait.’ That being said, in the cannabis industry, which has growth prospects that are greater than most other industries right now, the larger investors and operators say that we can manage this because our margins and growth prospects are so great.

If the federal government starts cracking down on illegal operations, that’s a boon for those that are operating legally. The more they can shut down the illegal market, the more business that will flow into the legal market. Or, if they decide to crack down on the “adult-use” operators, which I don’t think is going to happen, all these states already have a framework set up to transfer adult use businesses back into medical businesses. What you’re going to see is the state governments flexing their rights with the federal government.

And we’ve already seen this in Massachusetts, Nevada, Colorado, California – they’re looking at the federal government and saying ‘We understand what you want to do. Come work with us on how to make it better.’ And if that can happen, it’s going to be very good for the cannabis industry.

Arkansas just started accepting applications for marijuana operators licenses since it legalized medical marijuana in November. How does the industry respond to a state that is starting from zero?

It’s not a blank canvas. They’re not starting without access to a lot of experience elsewhere and best practices. What we’re seeing is that every state develops slightly differently and the ones that are more business-friendly and open are more successful in developing safe, active, positive, sustainable industries that can be regulated.

It’s very interesting to see how the states approach this differently, and that’s by design. This is a state-by-state experiment, and my hope is that with time, every new state that comes on line does a little better than the last one.

Are there any parties that move in to ensure that legalization goes well?

There are different advocacy and legalization groups. There’s a new group, VS Strategies, which is a consulting offshoot from Vicente Sederberg, the leading legalization law firm in the country based in Denver. VS consults for not only businesses but also governments and regulatory agencies to help them make better decisions about their state framework. They’re the world’s leading authorities on this stuff.

Does you next cohort have any obvious trends running through it?

Our selections are more refined and nuanced to develop traction in the most mature market, Colorado. So in Colorado, the market is shifting from the licensed producers and sellers and manufacturers just keeping up with demand, to them competing and stealing market-share. That’s a very important gear shift in an industry’s development. The licensed producers are getting to a point where they need slightly different services and data from the ancillary businesses, and that’s great for us because we got ’em. We’ve built up a portfolio of companies that are ready to serve the need that they have now.

Your last cohort had a company that was visualizing zoning laws. Do you think that there’s a future in companies using data to navigate the complexity of the cannabis space and is it a long-term need?

Yes. Cannazoning is solving that problem of selecting not only a complaint parcel of land but, especially for dispensaries, a parcel of land that will have the best retail experience. Retail in the cannabis industry is just like retail in any other industry: it’s about location, location, location. When you’re trying to place a dispensary, and there are exclusion zones because of schools or daycares centers or parks or whatever, that can be an expensive process and a time-consuming process to go and find a location that is compliant.

We’ve been investing since day one in data businesses in the cannabis industry. One of our first investments was BDS Analytics. They collect checkout data from dispensaries, aggregate it, normalize it, mill it together and then it becomes an incredibly valuable database of what is selling and what is not for people in the industry.

How’s the quality of that data right now?

It’s excellent. The team came from natural retail and outdoor retail and bike retail. So they have done it before.

So the point of sale is standardized enough to gather data in a way that is useful and complete?

Well if you think about it, it never is standardized in these sort of niche markets. Remember in the cannabis industry there’s actually mandatory seed-to-sale tracking, so there’s more, better systems and data in the cannabis industry than outside it, thanks to the regulators.

Image credit: Vaping360