The cannabis industry may still be young and bright in Missouri and New York, but Colorado is already past puberty. The majority of the state’s largest pharmacy chains and an increasing number of established edible brands are now under new ownership, and nearly all of the new owners are multi-state operators based outside of Colorado.
We do not just see all that maturation on the plant side. The technology around cannabis is also growing rapidly, and some of it is staying in Colorado. Denver’s own Flowhub, a sales provider for dispensaries and menu sites around the country, closed on a $ 19 million funding round earlier this month, bringing the total funding amount so far to nearly $ 50 million. But it wasn’t just the dollar amount that created news for Flowhub: According to the company Jay-Z made a personal investment during this recent round.
We caught up with Flowhub founder Kyle Sherman, who has been involved in the legal cannabis trade since the early 2000s, to learn more about the state of Colorado cannabis and how investors are currently reacting to the industry.
Westword: How much has changed in Colorado cannabis since your early days working for companies like Weedmaps and Dixie Elixirs?
Kyle Sherman: Things are changing a lot and Colorado is maturing in an incredible way. The largest retailers in the state are certainly not who they were then. We have seen many of these companies become more efficient in their manufacturing processes, the maturation of the products themselves and the price stability. Much has changed since 2014.
Is Colorado’s cannabis industry already reaching its ceiling?
I’m a big fan of things being fluid and always changing. The cannabis industry is likely to be different in Colorado in ten years from now than it was today. It will continue to mature. We are seeing consolidation and we are also seeing small and medium-sized enterprises grow. It will not just be big companies. There will be very small and medium growth. Colorado is a mature market compared to the rest. It was the first highly regulated market and you have seen many others try to copy the rules made here.
Colorado itself is a leading market and mature in so many ways. I would not define it as an up-and-comer, as a place like Maryland can be. But I really believe that we are still in the early days at the crossroads and that this industry will darken alcohol by leaps and bounds.
How does raising money for a marijuana software service work? Is it the same as any other technical financing, or are there more hangers?
It is certainly harder to raise money in cannabis than in any other tech company. There is still the stigma that is carried with cannabis, which can make it harder for traditional investors to get into the room. But we’ve raised about $ 50 million so far, and we’re one of the few companies in our space that can travel that much. It has been a journey, but it gets easier as the stigma pulls away and more investment funds become familiar with this.
Are investors still waiting for a venting process, and for the major players in the cannabis tech space to emerge?
I do not think. There are clear leaders like Flowhub and Weedmaps – in fact, Weedmaps has just built an integration on top of Flowhub, which is pretty cool. It becomes clear who some of these winners are today, and this is where investors point to their capital. I would not be a new founder right now or just start on what we are doing now in the field of cannabis. We’ve been doing this for almost seven years, and so have some other players.
We have raised nearly $ 50 million and our next closest competitors have raised about $ 8 million and $ 3 million. Resourcing means something and the players have definitely established themselves. Look at Weedmaps and LeafLink. There are very defined leaders in the market.
When we talk about investors, we saw the latest financing news. How did the Jay-Z investment happen?
It all starts with a great story and a great network. We had done an amazing job over the last many months with social equality and talked about his interest in social equality. We have provided over $ 1 million in free software through these grants to social equity applicants and licensees. I think for Jay and his team, they are particularly interested in influencing businesses, and he sits on the board of Square so he gets payments and financial services, and he understands point-of-sale. And that’s what we do.
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