Cannabis tech: some people love it, some hate it, some make money out of it

As more and more U.S. states legalize marijuana for medical and recreational uses, the business is seemingly thriving. The global legal cannabis market is expected to amount to $70.6 billion in 2028, growing at a CAGR of 26.7% from 2021 to 2028.

However, despite appearances, this sector is facing numerous challenges related to cannabis itself and the regulations around it.

If you are interested in capitalizing on your state’s legalization and developing cannabis tech solutions for weed companies, this article will help you better understand the peculiarities of the cannabis business and identify lucrative opportunities in the booming market.

Cannabis tech market overview

Background

Cannabis was essentially legal until the Marijuana Tax Act of 1937, which outlawed the plant across the US. Despite its prohibition on the federal level, most US states legitimized the use of medical cannabis, with many authorizing it for recreational purposes. California was the first state to legalize medical marijuana in 1996, followed by Alaska, the District of Columbia, Oregon, and Washington in 1998. Colorado was the first state to authorize weed for recreational purposes in 2012, while Connecticut was the last, giving recreational cannabis the green light in June 2021.

At the moment of writing this article, 36 U.S. states and four territories authorized medical marijuana, and 19 states legalized its recreational use.

Products from cannabidiol (CBD) oil, a compound in hemp plants, are legal at the US federal level. Commercial hemp production was authorized back in 2018. But individual states' laws are dynamic, so it's best to check for updates regularly.

Technology companies targeting the legal cannabis industry

Cannabis technology plays a crucial role in the field as it helps automate the cultivation process and measure weed’s quality and intensity. Marijuana tech enables users to have a safer and better experience while consuming the final product. Moreover, it supplies users with a platform where they can socialize and search for products and dispensaries in their neighborhood.

There is a spectrum of companies producing devices and software for the cannabis industry. Some weed technology firms aim at helping people cultivate marijuana both at home and at the industrial level, some want to connect cannabis consumers and ease the delivery process, and some are building high-tech vaporizers and other devices that facilitate marijuana consumption.

Below you will find an overview of prominent cannabis technology companies based on the segments they’re targeting.

Cannabis cultivation

This segment includes cannabis technology companies that build and sell devices for weed cultivation and vendors that develop apps, which help users monitor and improve their plant growth.

Seedo

This cannabis tech startup offers a self-contained ecosystem with internal cameras and LED lighting in a device the size of a small refrigerator. After planting a seed in the device’s basin, users do not need to open it until harvest time. Seedo’s home growing kit includes an app that helps select the right cannabis strain to start with and controls the whole cultivation process.

Damatex

This Quebec-based company offers Damatex Control Systems, which is a highly sophisticated control system for greenhouse operations in industrial settings. It can monitor aspects such as heating, cooling, humidity, ventilation, etc. This system also has an alarm function that notifies growers by sending alert notifications to their mobile phones if anything goes wrong.

SimLeaf

Cannabis technology company SimLeaf built a 3D Medicinal Plant Growing Simulator app. This software enables users to grow virtual plants and experiment with growing conditions to examine how the crop will behave under different circumstances before committing to growing real cannabis.

This app is available on Google Play and the Apple Store.

Cannabis Consumption Devices

Such devices include vaporizers, product storage equipment, and product potency evaluators, among others. Here are a few examples:

Syqe Medical

This Tel Aviv-based marijuana technology company produces vaporizers that ensure a consistent 100 mg marijuana dosage with each inhale. This venture is backed by a $20 million investment from Philip Morris.

Lobo Genetics

Toronto-based hemp tech company Lobo manufactured a device that can measure a user’s ability to metabolize the THC and CBD compounds by using a mouth swab. This device makes sure consumers are safe and no one bites on more than they can chew.

Kassi Labs Inc.

Another company from Tel Aviv mixing cannabis and technology, Kassi, built a connected device to store marijuana and track its consumption. The equipment is controlled by a feature-packed app that allows for monitoring humidity levels inside and evaluating the effectiveness of marijuana treatment.

Cannabis Marketing and Distribution

Marijuana technology companies under this segment offer platforms that help cannabis firms manage their business and connect with consumers.

Just recently, a unity of six founders approached ITRex with an ambitious project. They want to provide a comprehensive marketplace for B2B and B2C sectors that would serve the whole country. This platform would be built as a SaaS solution enabling cannabis business owners to have a legal web representation without putting in any development efforts and access clients without investing in marketing. Simultaneously, buyers will be able to browse stores in their area without the need to look up multiple websites.

Signum.ai

New York-based Signum.ai offers an AI-based platform for marketing and sales. Participating weed businesses can use AI to run ad campaigns and reach out to consumers. They can also benefit from the AI Content Generation tool to craft marketing texts, product descriptions, and even parts of their landing pages.

Baker

This cannabis tech company offers an innovative CRM platform tailored to cannabis businesses. Baker helps them create customer lists, improve consumer relationships, launch targeted SMS campaigns, and reward active users.

Headset

It offers a business intelligence platform that gives retailers, cultivators, and dispensaries real-time sales data and rich market insights to help them manage their inventory and keep up with the industry trends.

Cannabis Technology Trends

Lighting Technologies

Under traditional cultivation conditions, crops remained at the mercy of outdoor events and could be easily ruined. Innovative light technologies such as LEDs allow cultivators to grow cannabis indoors. This is also possible with high-pressure sodium bulbs, but they are relatively expensive, have a short life span, and generate a lot of warmth. LED light is a more affordable and practical substitute.

An increasing number of cannabis growers have adopted a data-driven lighting strategy to ensure their crops receive enough light at the right intensity and within the appropriate light spectrum. According to a survey published by Cannabis Business Times, 72% of the responding cultivators used at least one light meter in their practice in 2020. This number is up from 55% in 2016. This shift presents an opportunity for marijuana technology companies to include smart lighting options.

DNA Sequencing

Even though marijuana is classified as one plant, there are many variations in DNA sequencing, which can offer thousands of different options. Combining DNA sequencing with artificial intelligence, researchers can experiment with cannabis genetics to create unique experiences suited for patients’ needs. Such genetic modification can lead to products with different colors and flavors.

For example, a Colorado-based company claims to have developed a method to use CRISPR gene editing to grow cannabis with no CBD at all. This breed would taste differently and would be easier to cultivate.

Adding AI to the mix largely facilitates the task. Frelii, a medical technology company, uses AI in genome sequencing, and they are very happy with the results. Here is what the firm’s CEO, Ian Jenkins, said, “This is a fundamentally different approach to DNA sequencing and analysis. We produce 60 million data points, vs. the typical 400-700 thousand, as with typical consumer-level DNA kits.”

Ecommerce Apps

Ecommerce apps are driving the cannabis industry, especially in the COVID-19 era when limitations on movement have been imposed. This marijuana technology covers different aspects of the sector. For example, Eaze delivers marijuana-based products without breaching social distancing rules, Leafly helps new users learn more about cannabis, and WeedMaps helps discover the nearest weed dispensary.

IoT

Another valuable cannabis technology is the internet of things. Here’s how it contributes to the field:

• Environment control: marijuana is sensitive to its surroundings and requires effort from the cultivator’s side. With IoT solutions, growers can build connected cultivation systems while adding thermostats, humidity sensors, automated watering, etc. Contact an IoT development company to build a connected smart system
• Product tracking: with IoT solutions, one can create tracking IDs, enabling plant monitoring from the germination process until it's time to harvest and sell the final product. This adds transparency and allows governments to track any problems down to their origins
• Real-time data access: sensors allow cannabis owners to oversee the state of their growing crops and adjust their climate control systems remotely

Artificial Intelligence

Many industries are successfully adopting AI, such as healthcare, retail, and agriculture. The Cannabis sector is no exception.

• Monitoring plant growth: cultivators use AI-powered software solutions to experiment with soil enhancement and come up with optimal conditions. They can also adjust the genetic makeup to produce best-selling cannabis strains.
• Controlling pests and diseases: through cameras, AI algorithms can spot illnesses or pest infestation without requiring farmers to oversee their crops constantly. In another instance, artificial intelligence can predict yields by analyzing the crops’ 3D images
• Discovering marketing and demand patterns: with its ability to analyze data, AI can develop valuable insights. Colorado-based Cannabase utilizes analytics to help marijuana firms forecast demand and price fluctuation and anticipate trends
• Improving operations: AI can perform cost-benefit analyses when purchasing equipment and estimate the risks of adopting new techniques
• Optimizing logistics: this weed tech can find the optimal shipment paths and storage options that suit marijuana-based products at hand (dried products, oils, etc.)

Cannabis Tech: Opportunities and Limitations

If you are planning to develop any digital products related to the cannabis industry in the US, there are several issues that you need to consider as those aspects might impose a very particular ecosystem structure. ITRex Business Adviser and Analyst, Anton Pitsukov, sheds light on the most prominent ones:

• This is evident but still worth mentioning; all cannabis producers should have a license for their activity. Verify that your business activity is legal in the state that you register your business and for which purposes (medical, recreational)
• Not only production should be licensed but also delivery services. If you are planning to launch a cannabis delivery platform for weed manufacturers across different states, you need to pay close attention to regulations in the states you are targeting
• If you plan to have a marijuana marketplace, you will likely have to verify your consumers’ IDs and medical cards. Also, for selling activities, you need to correlate customers’ purchase limits with governmental institutions. For integration, you can use Biotrack or Metrc
• Not all payment systems are open to covering marijuana-related transactions. For example, at this point, Stripe and PayPal do not accept or facilitate cannabis-related payments. One reliable payment system option for these types of products is Aeropay
• Not all mobile applications stores agree to host marijuana-related apps. Since June 2021, Apple permits apps from “licensed or otherwise legal cannabis dispensaries” in its App Store, while Google maintains its ban on such software. It might be safer to develop a web-based platform for your business

Marketing-Related Opportunities

• Tailoring for underserved audiences. Through market research, Melinda Rombouts, Founder and CEO of Ontario-based cannabis cultivator Eve & Co, discovered that more women are purchasing cannabis-based products than previously believed. Rombouts realigned her company to better advertise and market to her female audiences. You can do the same if you are interested in covering this segment
• Occasion-based marketing. Brightfield Group found that customers like to pair cannabis with video games, and it would drive sales to market the products that way. Companies can show how their products complement various activities, such as gaming, yoga, partying, etc.

Cannabis tech opportunities

When speaking of weed technology, mainly AI and IoT, there are several opportunities:

• Automating the growing process, on both individual and industrial levels
• Analyzing the market and predicting trends
• Evaluating product quality and intensity

Main barriers

• Rapidly changing legalization and political views. This is especially challenging when delivering marijuana across different states
• As cannabis is a federally controlled substance, online transactions and credit card purchases are problematic in the field, and businesses need to find ways to sell their product and enhance their customer experience
• Many banking institutions are not open to accepting marijuana-related companies as clients
• According to Forbes, one of the main challenges in the cannabis tech industry is the lack of talented people willing to work in this sector. Many strong IT professionals are already recruited by companies such as Google, Amazon, Facebook, and other formidable players. The remaining talent might not want to work in the cannabis business due to the social stigma around it or for other reasons. To overcome this, your company can hire remote developers to cover its current needs

Ending Note

As you can see, the weed industry is challenged by different aspects, such as legalization and limited payment/delivery options. Still, marijuana technology can offer substantial value to weed cultivators and product manufacturers.

If you have a cannabis tech product idea in mind, don’t hesitate to contact ITRex experts. They stay up to date with the regulations and will help you create a solution that is functional and compliant.