The legal marijuana market topped $10 billion in 2019. Along with the number of states and countries that have legalized marijuana, the number of marijuana users is growing. Behind them, tech startups are entering the market with digital solutions to make the process of buying, delivering and consuming cannabis as simple and convenient as possible. And at the same time, if you’re lucky, become the next “Uber for marijuana” in your niche.
These technologies have formed the basis of an industry called canntech (cannabis tech). In this article, I analyze the main segments of this market from the perspective of an investor and founder of a technology platform for investing in the cannabis industry.
Canntech for marijuana production, delivery and consumption
The term canntech generally refers to three main categories:
- Cannabis consumption devices, such as vaporizers and dispensers (PAX, Dosist);
- e-commerce platforms and delivery apps (Eaze);
- home cannabis cultivation systems (Leaf).
Industrial cannabis cultivation equipment is also sometimes referred to as canntech – but more often, the term is used specifically to refer to digital solutions or devices that make it easier for the end customer to purchase and consume marijuana.
Cannabis consumption devices
There are many ways to consume cannabis for medical and recreational purposes: pipes, vape devices, edibles (edible products containing THC), and oils. Not too long ago, electronic devices have also joined the list.
One of them – vaporizer, or vape – is rapidly gaining popularity in the U.S. and Canada due to the almost complete absence of odor and reduction of harmful effects of smoking. As with e-cigarettes, these devices heat marijuana to a temperature sufficient to release the active ingredient.
Dispensing devices occupy a separate niche in canntech. Dosing pens (Dosist) and dosed vaporizers (Syqe medical) are used primarily for medical purposes.
Medical cannabis is also actively developing breathalyzers, which detect the level of tetrahydrocannabinol (THC) and other active substances in the patient’s body based on the patient’s breath (Hound Labs).
Innovative methods of cannabis use are attracting the attention of venture capital and private equity funds: for example, in the last year alone, vaporizer manufacturer PAX Labs has raised $420 million from Tao Capital Partners, Tiger Global Management and other investors.
Convenient purchase and delivery
According to unofficial estimates, there are about 2,000 legal cannabis producers in the United States. Most of them – about 700 per state – are located in California and Colorado. They mostly sell their products through retail outlets, so-called marijuana dispensaries. There is still very little technology that effectively connects the grower to the end consumer.
Leading this segment in the U.S. is Eaze, an app for ordering cannabis with home delivery. The company raised $65 million in a C round in late 2019, making it one of the top contenders for that very “Uber for marijuana” status.
One of Eaze’s most promising competitors is Dutchie, a marijuana delivery startup that operates in 18 states. This September, the company raised $15 million from Gron Ventures and several other venture capital funds. Dutchie’s investor is also John Oringer, founder and CEO of Shutterstock.
At-home marijuana cultivation devices
The movement to legalize cannabis has made it possible to grow marijuana at home already in many countries around the world. For example, last week the capital of Australia voted to legalize the personal use of cannabis, which implies the right to grow 2 bushes of the plant at home. Thailand is also now considering a bill that would allow each household to plant 6 bushes on their property.
This trend is generating demand for home cannabis cultivation devices.
Both traditional hardware manufacturers – for example, Cloudponics introduced a specialized cannabis growing module in 2018 – and tech startups are interested in this market. In May of this year, Leaf raised $4.5 million to develop a plug-n-plant system that allows you to monitor the growth of cannabis bushes from your smartphone.