Cannabis-focused point of sale software company Treez closed an oversubscribed $11.5 million Series A funding last week. The round was led by Pennsylvania-based growth equity firm Intrinsic Capital Partners who invested $10 million in the round along with investments from AFI Capital Partners and healthcare, life science, and cannabis-focused technology investors WelCan Capital.
Launched in 2016, Treez offers an enterprise retail management software platform that serves cannabis dispensaries — where consumers purchase medical cannabis products — across many US states.
“The fundraising process was extremely arduous considering we started our raise over two years ago,” CEO John Yang wrote to AgFunderNews. “The grind is real and new entrepreneurs should multiply their target fund date by at least four. Intrinsic was very straightforward with their due diligence process and we were able to close before the estimated timeframe.”
The new round will be used to expand Treez’ team, explore and invest in beneficial partnerships, and to bring more creative retail management solutions to the burgeoning cannabis industry. The raise will provide the Oakland-based startup with ample roadway for growth, says Yang.
According to Yang, there wasn’t much capital out there for cannabis tech when they started raising in 2016. As the industry continues to gain momentum despite legal roadblocks, he is finding that mainstream investors are showing more interest in cannabis technologies especially when it comes to ancillary businesses that don’t involve dealing directly with the plant. He predicts that we will see an increase in VC investment in cannabis in the next two years.
Twenty-nine US states have legalized medical cannabis and eight, along with the District of Columbia, allow recreational use of cannabis, according to NORML, an advocacy organization supporting legalization. California’s recreational use laws took effect on January 1, 2018, opening a massive new market for cannabis products.
A wave of uncertainty rippled through the cannabis industry at the dawn of the Trump administration as newly-appointed regulatory officials made direct and indirect indications that the cannabis industry would no longer enjoy the same slackening reign it experienced under the Obama administration. The sudden uncertainty caused some investors to tiptoe away from cannabis in fear of stricter regulatory scrutiny. For the investors who are dedicated to the space however, the disappearance of less-experienced or knowledgeable VCs could be a welcome shift, leaving them with less competition when it comes to attracting cannabis startups.
Treez’s software solution is designed to ensure compliance, increase data-driven decision making and improve productivity for dispensaries in the rapidly growing legal cannabis industry.
Point of sale, online ordering, analytics and inventory management are the four core pillars of Treez’s current platform offering. It targets customers through direct sales as well as targeting channel sales partners to help the company achieve scale. The company reports serving over 100 large-scale dispensaries in the United States.
“When we created Treez, we understood the impact our technology could have within the cannabis industry—ushering in a new era of automated compliance, data-driven insights, and a more modern, integrated cannabis ecosystem,” Yang said in a recent press release about the raise.
Competition in the Cannabis Software Space
The cannabis sales software space is not without competition. Several companies have popped up that are focused on helping dispensaries manage multiple aspects of their operations, including regulatory compliance and inventory management.
MJ Freeway provides ERP software for the cannabis industry offers cannabis compliance assistance and reports handling $10 billion in sales as well as amassing 7 years of cannabis business data. It’s “seed to sale software” targets operations of all scales. The Denver-based company completed its $11 million Series B in April 2017.
Bay Area-based Green Bits offers similar services through its software, including regulatory compliance, customer verification, integration with other cannabis software products, and customer-focused product menus. It closed a $17 million Series A in April 2018 bringing its total funding to $20 million.
Florida-based BioTrackTHC brands itself as another seed-to-sale cannabis tracking software service for the medical and recreational sectors. The company boasts nearly 10 years of experience and over 2,000 customers. It offers tracking and reporting tools that are geared toward each jurisdiction’s regulations, as well as sales and marketing management tools. It has raised $5 million in venture capital so far.
Based in Denver, Flowhub offers compliance software and hardware for the regulated cannabis industry. The company’s CEO worked as a cannabis compliance officer and saw firsthand how technology issues plagued software in the industry. With a $3.8 million seed round under its belt, the company offers inventory management, point of sale series, cashless payments, ID scanners, and more.