A growing number of Canadian tech entrepreneurs are betting big on the future of cannabis in the lead up to legalization later this year. These “weed tech,” or “canna tech,” companies, as they are sometimes called, are hoping to cash in on the new legal market by creating specialized software and hardware to serve the cannabis industry and consumers.
Investor interest, so far, has focused mostly on companies cultivating cannabis. But the ancillary market, which includes industry-specific technology as well as other offshoots, such as consumption devices and security, is predicted to be sizable. A Deloitte study predicts Canada’s upcoming legal recreational market could be worth as much as $8.7-billion a year, and with ancillary operations thrown in, the number jumps to $22.6-billion.
“We’re like the plumbing of the cannabis industry,” said John Prentice, founder and chief executive of Ample Organics Inc., a seed-to-sale software company that helps producers with compliance requirements and inventory tracking. “If you’re going into a licensed facility and [are] trying to figure out how many plants are in a grow room, what they’re being manufactured into and who’s buying the product, our software is the system that tracks that.”
For investors, the appeal of weed tech is simple: They can try to reap the rewards of the market without taking on all the legal and financial risks that can come with direct involvement in the production and sale of cannabis products, which are still illegal federally in the United States. Plus, some investors may feel more comfortable investing in ancillary businesses, given the lingering stigma that can still be associated with cannabis.
The increased interest is benefiting companies such as Toronto’s Ample Organics. Founded in 2014, the software firm closed a Series A round of financing in early July, raising $7-million from investors including Green Acre Capital and Osmington Inc. (which is controlled by David Thomson, whose family holding company owns The Globe and Mail).