Going Green: Scaling Existing Tech into the Cannabis Sector

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“Cannabias,” the practice in the business world of denying service to cannabis-related companies, represents a major opportunity for software startups, panelists at a Denver Startup Week presentation told an audience Tuesday afternoon at Galvanize Golden Triangle.

“We’re still in the second inning of tech evolution as it applies to cannabis,” said Zach Marburger, founder of Denver-based Whaxy and CannaBuild, developers of apps that serve the medical marijuana market, and CIO of Cresco Labs, a cultivator in Illinois.

If you’ve ever shopped at a dispensary, you know that marijuana businesses do business in cash, because banks won’t handle the proceeds of a federally illegal product.

Perhaps less well-known: many tech vendors, cloud-based service providers, marketing channels, and capital conferences won’t work with cannabis companies either, even though marijuana is legal in 25 states.

“We are being denied access to basic business services,” said Sohum Shah, co-founder and CEO of Cannabis Commodities Exchange, an online wholesale trading platform.

The good news, Shah said: “It makes us an entrepreneur’s playground.”

Cannabis businesses can’t run paid acquisition campaigns on popular social media sites and search engines. CRM providers won’t send their email. Tech and capital conferences shut out cannabis startups, and Apple has taken weed-related apps out of its App Store – although it relented under user protest.

“Opportunities are being created by obstacles,” said Stewart Fortier, co-founder of MassRoots, a social network for cannabis consumers. Nearly two years ago, MassRoots fans sent 11,000 emails to Apple, persuading the company to let its app back on the iOS platform.

So what does this mean for startups and developers eyeing this space?

“Being a first mover gives you an opportunity,” said Kelly Walborn, a web developer with MEV.com who moved from New York to Colorado because legalization of recreational cannabis allowed her to use her skills and business education to advance a product she believes in.

Marijuana-specific marketing, CRM and SEO seem like an obvious niche, offering the services that large players shy away from. “Cannabias is most evident in marketing,” Marburger said. “Our growth is really hampered by that.”

B2B products and services are another promising area for startups. “Think about what sort of problems need to be solved that a little guy could do,” Shah advised. They include processes such as regulatory compliance and reporting, data standardization and integration, inventory management and sales tracking.

Study the political, regulatory and financial trends, and watch what advocates like the National Cannabis Industry Association are lobbying for, panelists said. Join local meetups like the Cannabis Technology Association to meet people and find out what’s happening where. The ancient real estate adage of “Location, location, location” still applies.

“Do what you’re actually good at,” Marburger said. “Use your existing skillset and think strategically.”

The industry is ripe for consolidation, he added, so if you’re seeking employment or a market for software products in distribution, retail or edibles, look for a medium-sized or large player that’s more likely to survive the inevitable rounds of acquisition as the cannabis industry matures.

Check out the full Denver Startup Week schedule and register for events here!