Cannabis Likely A High Growth Software Vertical For Years To Come

In 2018, U.S. consumers spent more than $10.5 billion on cannabis for both recreational and medical uses. Keeping in mind that only a fraction of our 50 U.S. states have legalized recreational use, recreational pot spending more than doubled from $2.7 billion in 2017 to $6 billion in 2018. Industry analysts estimate that by 2022, the market is likely to reach an estimated $14.3 billion in size. As the ecosystem of pot businesses continues to expand it’s inevitable that software companies focused on the sector capitalize on the business process needs of various players in the market.

Earlier this year, two cannabis software companies based in Seattle decided to combine forces. Dauntless is a software provider that offers point-of-sale and tracking software while Soro focuses on offering sales solutions. Through the combination, the two will be able to address a bigger portion of the supply and retail chain from growers and packagers to mom and pop retailers across the U.S.

“The vision is to build an entire ecosystem around what it means to be a cannabis business,” said Soro CEO Jerry Tindall. “By putting our softwares together we now have a full stack, a fully integrated offering, and that doesn’t really exist yet — not from the grower all the way to the retail plant sale … there isn’t anyone who is doing the end-to-end product suite at this point.”

While both companies would be considered in the emerging growth phase, Dauntless alone is estimated to account for between 30 to 40 percent of Washington state’s retail pot transaction. The state has also made moves to better track the industry. In 2017, it installed a traceability system called Leaf Data Systems. To its dismay, there have been many problems from businesses being unable to login, scrambled orders and missing shipping manifests.

Industry infrastructure is also developing on the east coast. Take for example Sprout, which is a CRM and marketing platform designed to help cannabis companies better manage, service and market to its customers. The company is located in Boston and has cannabis clients in 17 states and Canada.

Sprout’s CEO Jarret Christopher recently commented, "Sprout has developed an industry-specific, best-in-class CRM that resonates well with cannabis brands, CBD brands and retail dispensaries." He continues, "A key part of our overall success is our team's customer-centric approach and laser focus in building the most robust CRM and marketing platform for the cannabis and CBD industry. We wake up every day grateful for this opportunity and it's exciting to play a role in this fast growing cannabis industry."

Dauntless, Soro and Sprout are just a few of the software and tech company examples that are focused on the cannabis industry. While all three are riding the wave of expanding state acceptance and customer adoption, they still face the same challenges any business encounters – an effective customer acquisition strategy, efficient business operations and growing capital needs, among others. Overall industry growth, however, is not letting up so that wave may continue to swell for quite some time.