Tweet, tweet, pass: Twitter unlocks a budding growth opportunity for cannabis startups

Cannabis startups have to navigate some rough waters: They can’t access federal funds or work with traditional banks, and they have to find customers across a fragmented market while adhering to local laws. But at least on the advertising front, a new Twitter update might signal smooth sailing ahead.

Twitter updated its advertising rules to allow cannabis companies — including those selling products containing THC and CBD, in addition to related accessories — to advertise on the platform under a strict set of guidelines in states where those products are legal. Twitter is the first major social media company to allow these companies to advertise.

Twitter’s advertising business has been hit hard since Elon Musk took over last year. It’s no surprise, then, that the company is trying to diversify its revenue funnels. Multiple cannabis companies told TechCrunch that this could be huge for the industry that has until now been locked out of the top advertising channels.

Tweet, tweet, pass: Twitter unlocks a budding growth opportunity for cannabis startups by Rebecca Szkutak originally published on TechCrunch

Weedmaps for Business debuts as a SaaS suite for cannabis retailers and brands

Veteran cannabis tech company WM Technology is rebranding and expanding its SaaS offering to move upstream beyond its existing Weedmaps marketplace. Previously known as WM Business, this B2B subscription-based suite will now be known as Weedmaps for Business, a service designed to offer an end-to-end solution for cannabis retailers and brands.

Due to regulatory restrictions and stigma, cannabis businesses can’t operate as freely as their peers in other sectors: From ads to payments and delivery, they require dedicated tools to comply with fragmented legislation, both in the U.S. and Canada. But the more tools they require, the more complex things become.

That’s where Weedmaps for Business hopes to step in.

The service is more integrated than its predecessor, CEO Chris Beals told TechCrunch. This evolution, he said, is based on the company identifying, “a need for a unified set of tools that would help retailers and brands with the lifecycle of how they reach, convert, retain consumers — but also how they get insights and analytics around that lifecycle.”

Christopher Fenske, chief strategy officer at California-based dispensary Jaderoom, confirmed that a lack of integration was a pain point for dispensaries, saying that, “the biggest hurdle in the cannabis industry right now is connecting all the software seamlessly between your CRM, orders fulfillment and delivery management system.”

Weedmaps for Business aims to be a full SaaS suite, in part thanks to integrating the offering of several companies WM Technology acquired since it went public on the Nasdaq via a SPAC under the MAPS ticker in July 2021.

“What we now have,” Beals told TechCrunch, “is the culmination of several years of acquisition and M&A work, integration work and shared feature work such that businesses can now go and buy once and log into this first full platform offering for consumer lifecycle management.”

Each of WM’s recent acquisitions have turned into elements of the suite: Sprout, into WM CRM; Enlighten, into advertising-centric WM Adsuite & WM Screens; logistics-focused Cannveya, into WM Dispatch; and CannCurrent, into WM Connectors, which Beals referred to as a “Zapier for cannabis.”

All in all, WM Technology’s ambition is to support retailers and brands at every stage in the consumer funnel. In a similar move, Oregon-based Dutchie recently launched Dutchie Pay to help dispensaries accept cashless payments.

Integrated suites are particularly relevant in the cannabis sector, Beals said. “Cannabis is an incredibly highly regulated space and so the laws and regulations vary widely from state to state and in some places from city to city. The ability for us to build compliance functions and then have them be seamlessly leveraged across the suite and handoff compliantly is a real advantage of having a centralized platform.”


Saving time and money matters more to dispensaries and cannabis brands than ever, as, “these businesses are suffering the effects of margin compression given that we’re in what appears to be a recessionary period,” the CEO added.

According to Beals, one of the main challenges for cannabis brands is that, “it’s incredibly difficult to reach actual high frequency cannabis consumers.”

Another issue that WM is hoping to help tackle is that “almost half of cannabis consumers don’t have a favorite brand.” As a result, “In cannabis, we haven’t seen the same level of the same ability of brands to generate increased premiums for brand affinity as we’ve seen in other consumer goods. But that’s going to change,” Beals hopes.

Better analytics and benchmarks data would also help brands maximize their profits. Weedmaps for Business already includes analytics elements, but the company is hoping to further expand that side of the suite over time.

“We’re looking to start adding information on Share of Voice, suggestions of products that seemed to be drawing increased consumer affinity, on skewed distributions by geographies. A lot of that data sits with us currently, it’s just a matter of building it into as we iterate on these analytical solutions,” Beals said.

Cash is nice — as an option

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When I visited London recently, I found it hard to spend even one pound in cash: Cashless transactions were more than encouraged — they were often mandatory. However, cash payments are still very much a reality for American cannabis dispensaries and in emerging countries. But are we ready for the end of cash? Let’s explore. — Anna

Forced to pay by card, or forced to pay cash?

There is no doubt that the COVID-19 pandemic has made it less common for people to use cash to pay for their everyday purchases.

Because of hygiene and social distancing measures, merchants who used to frown upon letting customers pay small amounts by card are now encouraging contactless transactions. And with many outdoor activities simply out of the question, cash was more often hoarded than it was spent.

Dutchie Pay wants to help you stop paying in cash for your cannabis

Cannabis is now legal in a number of U.S. states, but because it isn’t federally legal, this “legal” status only does so much for cannabis businesses. While dispensaries can sell cannabis products legally in many states, they don’t have access to the same banking facilities that any other retail business would.

As a technology platform for cannabis commerce, Oregon-based startup Dutchie is cognizant of the complexity of the problem it is trying to tackle. “We are frankly a little bit and kind of in the stone age when it comes to payments and cannabis,” co-founder and chief product officer Zach Lipson told TechCrunch.

“It really forces the industry to rely on cash,” he said, pointing out that 90% of all dispensary transactions are handled in cash. This figure might be a tad high or slightly outdated, as it comes from a 2020 report by research firm Aite Group, prepared for Emerging Markets Coalition (EMC), an advocacy group for financial services in the cannabis space. But the point remains: Cashless transactions are often not an option for cannabis businesses.

Zach and his co-founder (who is also his brother and the company’s CEO), Ross Lipson, aim to solve that problem with Dutchie Pay, a payment solution that is designed for the legal cannabis market in the U.S.

How it works

If you’re buying legal cannabis for medical or recreational purposes, you might be able to place an order on your dispensary’s website, but you’ll still have to pay cash upon delivery or pickup. This is where Dutchie Pay comes in.

Dutchie Pay’s moniker is reminiscent of Apple Pay, and that’s not a coincidence — Dutchie also has ambitions to be a one-click payment system.

Retail investors or guinea pigs?

Welcome to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily TechCrunch+ column where it gets its name. Want it in your inbox every Saturday? Sign up here.

There is a paradox when it comes to retail investors: Many startup-related deals are out of their reach (in part for their own sake). Yet, laypeople have also become the target of novel schemes hoping to attract their bets and savings. Are nonprofessional investors assuming more risk than they should? Let’s explore. — Anna

Opium for the masses

I am by no means a stock exchange expert. But while writing on cannabis and psychedelics startups for TechCrunch lately, I discovered that some young companies in these verticals are listing on trading markets that I had never heard of. I mean, I had heard of “pink sheets” — in “The Wolf of Wall Street.” I just didn’t think that over-the-counter securities were something startups would ever use. It looks like needing money for drugs makes you creative!

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I have nothing against innovation, even when it comes to fundraising. But the fact that listed cannabis companies — many of which went public with nascent revenues more reminiscent of startup metrics than mature-company results — have seen their market caps crash is likely no coincidence. And when we consider the period of hype surrounding their public debuts, it’s difficult to not wonder how many retail traders got burned.

We’re not merely discussing the most obscure exchanges, either. Cannabis companies listed on the Nasdaq, such as Akanda and Tilray, have also seen their value plummet.

My perception that we’re seeing a new crop of companies, those focused on psychedelics, follow in the footsteps of cannabis companies is not mere speculation. “There is an unwarranted rush from founders to list their cannabis and psychedelics companies on stock exchanges,” VC Bek Muslimov told me.

Muslimov is a co-founding partner at specialized investment firm Leafy Tunnel, and he sees a danger in rushed listings. “In this pursuit, founders and management teams bypass private financing markets which consist of professional and diligent investors such as VCs or growth capital funds,” he told me in an email.

The problem here isn’t that private investors lose out on juicy opportunities. The problem is that they would have declined to invest in the first place. Not because they don’t invest in cannabis — few do. But Leafy Tunnel is one of them, meaning that its viewpoint here matters.

What Muslimov objects to is seeing cannabis and psychedelics companies going public when they would not have passed venture capitalists’ criteria to get funded. “Unfortunately, this can lead to a situation where companies with poor business fundamentals and insufficient level of maturity are listed, allowing them to tap into funds of retail investors.”

Despite regulatory hurdles, these 4 US cannabis investors are planting seeds for tomorrow

Bearish markets and high interest rates often cause private investors to turn away from anything resembling a risky investment. Yet, now is a very apt time to take another look at the cannabis opportunity in the U.S.

Quite a lot has changed since our previous U.S. cannabis survey from 2020. Recreational cannabis is now legal in a few more states, including New Jersey and New York, the latter of which has even launched a social equity program that aims to help communities affected by the War on Drugs. Despite the market downturn, the sector is growing — legal sales of marijuana and related products are slated to rise about 32% from 2021 to top $33 billion this year and reach $52 billion by 2026, according to MJBiz.

But cannabis startups still have a long way to go before they can begin to truly thrive in the country. The biggest roadblock is cannabis’ illegal status at the federal level, which makes things even more difficult and fragmented than in Europe.

As we learnt in our European cannabis survey, despite cannabis being illegal at a federal level in the EU, companies can produce cannabis in one country and sell to businesses across borders as long as they have the necessary licenses. It’s a stark contrast to the barriers to selling across states in the U.S., and the banking and tax headaches it creates.

The lack of access to traditional financing services — commercial banking, credit card merchant processors, etc. — is holding the industry back. “Banking reform is the key to unlocking access to the capital markets,” said Emily Paxhia, managing director at Poseidon. “Offering mainstream banking services to cannabis operators would break the market open and could change custody rules that prevent institutional capital from participating. It would also create better liquidity and efficiency for market dynamics around publicly traded companies.”

TechCrunch is widening our lens, looking for more, and more diverse investors to include in our surveys where we poll top professionals about problems and challenges in their industry.

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No one has a clue when banking reforms, let alone federal legalization, could happen, so should investors just wait for more momentum? That’s perhaps what generalist investors are doing but not the specialists. No, indeed, they are looking to preempt institutional capital.

To turn today’s early bets into tomorrow’s lucrative investments, specialized firms like Entourage Effect Capital and Poseidon are deploying capital into so-called “plant-touching” and ancillary businesses. The latter refers to companies that are working on the infrastructure the sector will rely on once in full bloom, and the consensus among specialized investors is that they make for very worthy bets. Funds need funders too, however, and the lack of traditional LPs willing to write checks for this industry can be problematic even though investments are trending upward.

But VCs have found allies in family offices — a category of investors who are less constrained than their institutional peers and have plenty of capital to deploy. “We are seeing more and more first-time family office investors enter the industry at a pace we haven’t seen to date,” said Matt Hawkins, managing partner at Entourage Effect Capital.

We polled four active investors in the space to better understand the cannabis market right now in the U.S. and the regulatory hurdles the sector will have to overcome in the future.

We spoke with:

Jacqueline Bennett, managing partner and co-founder, Highlands Venture Partners

As cannabis companies struggle to maintain their market cap in public markets and compete with the black market, what is keeping you excited about the space?

The backdrop for public cannabis companies remains bleak with no signs of a near-term recovery. That said, the fundamental business opportunity remains intact.

Weak markets and a challenging macro environment will test operators, expose misplaced strategies and tighten the wedge between cannabis capital (public or private) and liquidity.

While exhaustion is setting in and industry constituents long for a break, now is the best time for investors to discover talent and promising ideas. We saw record levels of M&A activity in cannabis over the past 12-18 months. Most of these acquisitions were paid for with large amounts of stock, and given where stock prices are trading today relative to 52-week-highs, seller’s remorse is the theme.

While economic loss is never fun, what this dynamic does promise is the re-entry of experienced talent in the market.

Have you seen a flight of generalist investors from this sector?

“Given regulatory hurdles surrounding plant-touching companies, investing in ancillary businesses has also provided us an opportunity to bring in more traditional investors into the space.” Yoni Meyer, partner, Casa Verde Capital

Any pullback from investors, I believe, is temporary and driven by current market conditions as opposed to loss of confidence in the sector. It feels impossible to not see opportunity after being submerged in the industry and exposed to the endless potential of both the plant and resulting innovation across verticals.

In the near term, what are you more interested in: Ancillary businesses or plant-touching companies?

I’ve never bifurcated the industry in this way for investing purposes. We have a good balance of ancillary and plant-touching companies in our portfolio, and this is reflective of the diversity in my partnership with Tahira [Rehmatullah] and our category-agnostic investment thesis.

What we won’t compromise on is: strength and experience of management, purpose-driven products or services and a TAM that expands at the intersection of industries.

Do you see any opportunities in this space that are being overlooked by investors and entrepreneurs?

Companies led by women, people of color and minorities. While not unique to cannabis, subconscious bias amongst investors and operators guarantees missed opportunities. Cannabis also happens to be an industry best understood by these overlooked demographics.

Health equity and innovation in women’s wellness is slowly unlocking in parallel with the cannabis industry, and we see significant synergies in R&D and product innovation. The challenge I pose to myself and my peers is to pause, look up and break habits.

There is significant trapped value in cannabis, and until we acknowledge and remove bias from business, we will continue to miss opportunities for justice and innovation.

Cannabis production is still illegal under federal law, which means companies in this industry can’t use traditional financial services. How much of a roadblock is this to the industry’s growth, and how do you advise your portfolio companies to deal with these restrictions?

Restricted [access to] financial services is a massive impediment for the industry and affects every industry participant in a material way. The silver lining is that we get creative, collaborative and deepen a sense of community. These are the same traits we look for in our portfolio teams and so it becomes a self-fulfilling prophecy!

Cannabis is not for someone needing a well-trodden path void of obstacles. People join and stay in cannabis because of a connection that extends beyond business. It’s the mission. At least that’s true of myself and many of the wonderful folks I’ve been fortunate to meet.

With New Jersey legalizing recreational use, several U.S. states could legalize medical or adult use this year. Do you expect these milestones to impact valuations? Are you watching for any changes in regulation that would break this market open even wider?

Following the 2020 U.S. election results, the markets showed us what could happen with regulatory change at the federal level with an immediate uptick in valuations. Since then, Congress has made little to no progress toward federal legalization and cannabis stock prices barely flinch at news of regulatory advances at the state or federal level.

All this is to say that I believe the markets are now waiting for the actual implementation of legislation that has potential for sustained value creation in the industry, like SAFE Banking.

Has the type of LPs willing to invest in cannabis-related funds changed at the pace you hoped?

There has absolutely been an evolution in LP community interest in cannabis. Cannabis remains one of the very few industries with guaranteed growth for many years to come. The challenge is understanding where to find this growth and be comfortable with locking up cash for longer-than-expected periods.

We still meet LPs with strict policies that do not allow investment in the industry, mostly on the plant-touching side. LPs who previously held back because of sentiment or lack of knowledge have been gradually crossing the floor.

My strong advice to new capital in the industry is to partner with experienced cannabis investors. You cannot prepare for the degree of surprise in the space. Never a dull moment!

NY is creating a social and economic equity program as part of its retail license attribution. Are you seeing investors adopting an equity-minded approach to open up the space to communities harmed by legacy drug enforcement policies?

We are gradually seeing more investors and operators acknowledge social equity and the importance of creating and prioritizing opportunities for communities harmed by the War on Drugs and other social injustices.

How do you prefer to be approached, a cold email, or a warm pitch?

I do love a warm pitch.

8 cannabis investors share their outlook on the European market in H1 2022

Germany’s government created quite a buzz when it announced that recreational cannabis would be legalized during the current term. Does this mean that we’ll see recreational use of cannabis for adults becoming a common policy in Europe? It’s too soon to say.

After interviewing several active investors in cannabis-related startups, we learned that the regulatory and functional landscape in Europe is just as fragmented as it is in North America. Another important data point that connects both regions: the black market is a competitive factor. According to Europol, illicit spending on cannabis in the EU amounts to €9 billion each year.

However, things are moving on the legal side of the market — it appears medical cannabis still carries most of the momentum, and it is only accelerating. Around €354 million worth of unlicensed medical cannabis will be sold in Europe in 2022, according to market intelligence firm Prohibition Partners, and this number is expected to rise to around €2.3 billion by 2026.

Investments and M&A in the sector are also being spurred by Germany’s promised legislation.

“Our belief is that M&A will be front of mind for all legal cannabis operators. The difference in Europe is that there is opportunity for non-cannabis players to potentially get strategic and attempt to enter the market through an integration of cannabis as a CPG [consumer packaged good] or pharmaceutical-grade option,” said Todd Harrison, founding partner at CB1 Capital Management.

Also encouraging for producers and operators is the fact that medical cannabis isn’t verboten at a federal level across the EU, which lets companies legally sell their products across borders.

“This means that you can produce cannabis, for example, in Portugal, and sell to any EU country as long as you have export/import licenses. Hence, cross-border commerce in Europe is relatively fluid, meaning companies can scale relatively quickly if they know what they’re doing,” said David Bonnier, founding partner at Enexis AB.

We spoke with:

David Bonnier, founding partner, Enexis AB

What are some of the biggest challenges facing Europe’s cannabis industry right now?

Europe is largely a medical-only market right now. Unlike the U.S., medical cannabis in Europe is regulated as a medicine and falls under EU and national pharmaceutical regulatory systems.

As such, standards for production and distribution of medical cannabis are exceptionally high. Moreover, European doctors are generally more conservative and evidence-based. Therefore, it takes time to build the necessary infrastructure in order to get stakeholder buy-in.

Key challenges include (1) lack of education and buy-in from industry stakeholders such as physicians, research institutes, insurance companies, politicians, etc.; and (2) lack of downstream infrastructure such as research centers, specialized clinics, licensed wholesale distributors and manufacturers.

The good news is that since cannabis companies have to operate under pharmaceutical regulatory systems in Europe, we are seeing material accumulation of high-quality patient data.

While valuations are trending up, Germany’s exciting market developments still require business leaders to perform and scale. Viken Douzdjian, managing partner, Argonautic Ventures

Note that doctors in Europe can only prescribe a finished product to patients, unlike the U.S., where you only need a medical card. Patients must often follow up with doctors several times, which yields several valuable patient data points that can be used in real-world evidence studies.

As such, we believe Europe will most likely become a key leader on the research front for medical cannabis, which will further help lift the evidence base and general acceptance.

How are these issues informing your advice to your cannabis-related portfolio companies?

We are focused on companies that know how to navigate the European regulatory landscape and are filling key gaps in the market.

For example, we currently like the downstream part of the value chain, which has been underserved so far, including distribution companies, specialized clinics platforms, research and development centers, and companies that are accumulating patient data, which we believe will become very valuable over time. We also like ancillary businesses.

As in the U.S., legislation across Europe is fragmented but evolving. Are these situations comparable to you?

To an extent, albeit there are some key differences. Given that North America has already paved a pathway (starting in 1996 with medical cannabis in California, and again in 2012 with adult use in Colorado and Washington), legislation in Europe is accelerating at a faster pace.

While the Netherlands was first to legalize medical cannabis in Europe in 2003, the legalization wave really didn’t happen until much later, when Italy legalized, followed by Germany, Poland, the United Kingdom and many more. Currently, nearly 400 million Europeans now have legal access to medical cannabis in some form, which is more than in the U.S.

Also, Europe does not suffer from federal prohibition of medical cannabis like in the U.S. There is an EU-wide directive for production and distribution standards for medical cannabis products, which is interpreted by each country.

This means that you can produce cannabis, for example, in Portugal and sell to any EU country as long as you have export/import licenses. Hence, cross-border commerce in Europe is relatively fluid, meaning companies can scale relatively quickly if they know what they’re doing.

Which sector shows the most promise for growth in Europe this year: medical or recreational? Has the popularity of CBD products made investors more comfortable about recreational use?

While there is a lot of buzz around the use of cannabis by adults, it is still largely a non-existent market from a commercial standpoint. Malta has legalized (albeit it has a small population); the Netherlands is running a pilot program for legal production, which was previously illegal; Switzerland is running a commercial pilot program; and a few other countries have legalized home-grown cannabis for personal use.

Is that weed you’re smoking green enough?

For most of the world’s industries, sustainability is an exercise in correcting the mistakes of the past — from changing mindsets to the very machinery used.

But for the fledgling cannabis industry, there is still hope. A slew of startups and industry bodies are trying to make sure that for once, an industry starts off on the right path.

“What I have seen across Fortune 500 companies is, they’re trying to improve efficiency to reduce the environmental impact of operations that already exist,” said Annie Davis, vice president of marketing for Flow Cannabis Co, an outdoor cannabis cultivator. “But what if, from the start, we could build a different model?”

That would be ideal. However, even though cannabis as a legal business is only about a decade old, it still has a long history of illegal cultivation that set a precedent of avoiding the cops rather than saving the planet. Moreover, that has meant that cannabis cultivation has missed out on the massive advancements in traditional agriculture.

“The agricultural research that’s related to cannabis is anecdotal and driven from its history as an illegal product. It hasn’t benefited from the level of research that traditional agricultural products have,” said Shawn Cooney, co-founder of the Sustainable Cannabis Coalition (SCC), a coalition of 20 cannabis or cannabis-adjacent companies, including cannabis producer Trulieve and Flow Cannabis. “So there’s a history of using less efficient technologies.”

Hotboxing is bad for the planet

As of 2020, 40% of legal cannabis growers cultivate solely indoors, which leaves a huge energy footprint. According to Travis Higginbotham, vice president of production at cannabis retailer and producer Harborside, consumers prefer cannabis that’s grown indoors, and so it has a higher retail value.

In Colorado, the cannabis industry alone accounts for 1.3% of the state’s total annual emissions, equal to that of coal mining and trash collection.

Cannabis farmers moved inside because they had to hide from law enforcement, Davis said, and those that grew outside planted under the shade of large trees to avoid being spotted by helicopters — not optimal for producing cannabis with high levels of THC. Such early decisions, made when cannabis was illegal, are still influencing consumer preferences and business operations.

The high energy costs associated with growing indoors are the cannabis sector’s biggest environmental problem — one that is both operational and reputational. Indoor systems use a combination of lights and heating, ventilation, and air conditioning (HVAC) systems to control the climate and simulate ideal conditions.

Cannabis sustainability

Growing cannabis indoors can get very energy-intensive, very quickly. Image Credits: Harborside

Together, HVAC, CO2 pumps and lighting account for 11% to 25% of a facility’s greenhouse gas emissions. What’s more, HVAC systems in cannabis grow houses work harder than those even in operating rooms because of the heat generated by the grow lights.

What does the overall picture look like? Depending on location, greenhouse gas emissions can range from 2,283 kg to 5,184 kg CO2-equivalent for each kilogram of dry flower produced.