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High technology: How IT is fueling the budding cannabis industry

Katherine Noyes | Aug. 23, 2016
From APIs to dispensary robots, new innovations are popping up like weeds

La Conte's weed marijuana pot

The cannabis industry is growing up, and it would be tough to imagine more convincing proof than Microsoft's recent announcement that it's getting involved.

Though the software giant will stay very much in the background -- its role will focus primarily on providing Azure cloud services for a compliance-focused software push -- the move is still widely viewed as a telling sign.

"Having them come out and say, 'we're willing to have our name in the same sentence as the word cannabis,' adds to the legitimacy of our industry," said Kyle Sherman, cofounder and CEO of software maker Flowhub.

Stigma is a longstanding problem for those trying to run a legitimate business in the cannabis industry, thanks largely to the fact that marijuana remains illegal in the U.S. federal government's eyes. Twenty-five states have already passed laws that allow for some degree of medical or legal use, but that can be cold comfort for entrepreneurs unable to get a bank account because of lingering concern.

Yet there's no doubt of the profit potential. Legal cannabis sales brought in US$5.4 billion in 2015, and $6.7 billion are expected this year, according to a February report. By 2020, the forecast is $21.8 billion.

Startups are now jumping in to help make that happen, and technology is playing a central role.

Historically, technology has been used minimally in the production and sale of cannabis, largely because of legal concerns.

"It has been not just minimal but actively avoided," said Mike Bologna, founder and CEO of Green Lion Partners, a business strategy firm focused on the regulated cannabis industry.

Bologna predicts that technology's growth in the industry will eventually outpace the growth of the industry itself, and over the past year he's started to see signs that things are picking up.

Today, there are not only a raft of agricultural and security technologies used on the growing end, but also tools ranging from dispensary robots to APIs to help sell cannabis in a way that's convenient, transparent, and compliant with regulations.

Flowhub, for instance, offers a seed-to-sale tracking platform for growers and retailers, with a particular focus on compliance. Founded in 2015, the Denver-based startup offers a mobile device for scanning RFID plant tags, a point-of-sale (POS) system for dispensaries, and a cloud-based software-as-a-service (SaaS) platform that's accessible via web or iOS. It currently serves customers in Colorado, Alaska, and Oregon.

Essentially, the goal is to track every plant, product and person associated with the production and sale of marijuana and maintain legal compliance.

Flowhub's POS system reports to states' compliance tracking systems automatically using application programming interfaces (APIs), replacing what used to be a laborious manual process. The company has also opened up its platform's APIs to other entrepreneurs, giving them a way to write apps that use Flowhub data, such as for loyalty programs.

 

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