Cannabis is now a big, legal business in much of the United States.
Since California legalized its medical use in 1996, the industry that grows, packages, markets, distributes and sells marijuana has grown into a $10 billion-a-year business that employs more than 210,000 people, according to the web site Leafly. Industry executives say these pot-centric companies range in size from less than 10 employees to several hundred, with a handful counting their headcount in the thousands. Revenue ranges from the low millions to an estimated $100 million or more.
Despite all this momentum, cannabis as a business faces some unique challenges. For example, because the industry’s products are illegal in the eyes of the federal government, processes that are somewhat routine in other industries (such as estimating expenses for tax purposes or distributing product) can prove problematic.
For example, said Keegan Peterson, founder and CEO of Wurk, an HR management platform based in Denver, the IRS bans deductions of expenses related to retailing illegal substances. As a result, the costs related to operating and staffing dispensaries can’t be written off, but those related to growing the product can be. “There’s a lot of little nuances based on regulation both federally and state-by state-that requires a highly specialized solution to help solve them,” he said.
On top of that, many solutions providers, in technology and other sectors, shy away—if not outright refuse—to take on customers involved with cannabis. According to industry leaders, those vendors are nervous about pushback from other clients or their own legal exposure.
Cannabis Business in Need of Solutions
When you consider the various components of a cannabis business (the production process, record-keeping, distribution, customer service, payroll and benefits, to name just a few), the importance of technical solutions quickly becomes apparent. But since the ability to secure contracts with technology-solutions providers is often limited by the aforementioned legal quagmires, industry businesses put a premium on sourcing solid technology talent.
“Some of the biggest companies in the cannabis space are technology companies,” said Jacob Levin, co-founder and COO of Best in Grow, a Boulder, Colo., business that provides team-management solutions to the industry. Such companies didn’t exist three or four years ago, he said, because so many businesses operated on an all-cash basis. “They were using QuickBooks to manage their payroll because they were just stuffing envelopes with cash and accepting cash at the point of sale.”
However, it didn’t take long for the industry to begin building work-around solutions for things like debit-card sales and payroll, Levin said. Technology companies that moved into the industry became popular and filled real needs. “Cannabis,” he said “is a really fascinating playground for leapfrog technologies.”
“There’s a shortage of providers and products in the industry that are needed and required by the industry,” added Sabas Carrillo, CEO of Adnant, LLC, a Los Angeles financial and strategic consulting firm that works with businesses throughout the industry. “As an example, if I were in a restaurant, I’d probably have no problem calling up several types of technology and software providers to come help me with everything from security camera systems that are connected to my phone, or [products that] allow me, with the tap of a button, to pull up my inventory and see how much product I have on my shelf.”
Such products are just beginning to come online in the cannabis business. “We need Big Ag-type software and hardware,” Carrillo said. Most companies still don’t have the technology to accurately predict their inventory needs or plan production so that pipelines are properly filled.
“There’s a lot of technology needed,” Carrillo explained. “You can get into cultivation equipment, you can get into automated nutrient and water delivery or the type of sensors and data-gathering that most other industries have.” While multiple POS systems are available, “there isn’t anything robust enough to make you say, ‘This is the market leader in the space.’ None of that has happened yet so it’s still, to a certain extent, wide-open territory for major software and hardware providers to get in.”
That means there’s a promising market for tech professionals, as well. Legal and financial complexities has allowed many cannabis-focused startups to gain traction, Carrillo suggested, though bigger, more established competitors are beginning to wade in. “It’s only been in the last year or two that we see companies like Microsoft coming into the states and actively providing products specific to the industry,” he said. “For the most part, we don’t see large players coming in.”
Most everyone in the business believes that’s bound to change. Not that long ago “nobody wanted to touch the industry and everything was in the gray or black market,” Carrillo recalled. That’s not the case today: “It’s almost like every two years is a span of 10 years in terms of change—the rapid pace of development, capital coming into the industry and new players coming into the industry.”
Where the Jobs Are
So where are the jobs? In terms of technology, Levin believes many are in Seattle, where “some really wonderful companies are solving really big problems.” In Colorado, Denver and Boulder have become hubs for innovation. Relatively mature markets such as Washington State and California are “great opportunities from a tech perspective,” he said, because of the presence of more mature operations with the bandwidth to consider how technology can move to the next level.
Carrillo believes that any country and state that legalizes cannabis “is going to see an explosion.” While he expects a surge in job opportunities in large states such as California, he also predicts “a lot of job creation” in smaller states, as well. “If you go look at some of the data for sales in Colorado, Washington, Oregon, you’ll see that even in smaller states and smaller market sales aren’t robust.”
If the industry offers a promising job landscape for tech pros, does that opportunity come with risk? Will a software developer or UX designer who works in cannabis today find they difficulty landing a job with more traditional companies tomorrow?
Yes, but the level of risk is quickly going down, Carrillo suggested. From a cultural perspective, the idea of marijuana products being equivalent to alcohol and having legitimate medical uses is becoming more mainstream. “This is a booming industry that’s not going away,” he said.