By Tony C. Dreibus
Cy Scott, Scott Vickers and Brian Wansolich started Leafly about five years ago, when cannabis was not a topic discussed at cocktail parties, getting money from investors was an exercise in futility and recreational marijuana was something you bought from the dealer down the street.
The founders in 2011 sold the company to Privateer Holdings but stayed on to help establish it as a household name in the cannabis space. Now, however, they’re looking in other directions.
The trio left the company in June to launch a venture called Headset, which will provide market research and analysis as well as track inventory, sales, manufacturing and other data points of interest to cannabis business owners, similar to what Nielsen does for other industries.
“We’re entrepreneurs,” Scott said. “We’re startup guys. It’s in our DNA to tackle new problems.”
Their story isn’t unlike hundreds in other industries: start a business, run it until you feel you’ve taken it as far as you can, then sell it or move on to start another. It’s a trend that will become more commonplace in the cannabis industry as small companies that were started by individuals or groups with entrepreneurial spirits increase in value.
Diane Czarkowski, a principal at the consulting firm Canna Advisors who worked in the tech space for a dozen years, said she saw this scenario play out time and again during the dot-com boom. It’s natural that it’s already starting to happen in cannabis, which is often compared to tech with regard to its growth.
“It doesn’t surprise me at all that some of these founders are saying, ‘We’ve started this and taken it to the point when it might be better for someone else to step in and take it to the next level so we can pursue other options,’” she said. “This is a brand new industry and we’ve seen it evolve over the past four or five years, so now there are going to be opportunities people will want to take advantage of.”
Headset is undergoing beta testing and is expected to officially launch this fall. It’s backed by institutional investors such as Poseidon Asset Management, along with accredited individuals. They have yet to pitch the project to Privateer executives, Scott said.
Scott, Vickers and Wansolich have already secured about two-thirds of the $750,000 they plan to raise in Headset’s first round of financing, which has gone “pretty well – much more quickly than it did five years ago,” Scott said.
It doesn’t hurt that they have strong name recognition in the industry, said Patrick Rea, co-founder of CanopyBoulder, a marijuana-focused business accelerator. It also helps that venture capitalists, angel investors and other financiers are willing to meet with cannabis companies.
“A strong track record and a successful exit always improve chances to fundraising,” he said. “The fundraising environment has certainly changed from five years ago.”
It’s not without its challenges, though, as investors are still skeptical about the cannabis industry as a whole thanks to some fly-by-night companies that have populated the space. The seemingly unending potential for regulatory changes also makes investors nervous.
Savvy investors today will only put money into the right company run by the right people, Rea said.
“You still have to have a good team, the right concept and appropriate timing for the launch of your concept,” he said. “Raising capital isn’t a foregone conclusion for teams looking to start businesses in the space.”
As for Headset, it also faces challenges, Scott said. Finding companies to embrace the technology and purchase the data is going to be a formidable task, Scott said.
“The biggest challenge is going to be adoption and getting people on the platform,” he said. “It’s typical when you’re starting up to find those partners.”
Still, Scott said, he and his business partners are more than confident their business will be a success because it tackles a problem – a severe shortage of data for cannabis businesses – in the industry that needed to be solved.
It’s something that will continue to happen in the cannabis industry because it is so new, he said. Hungry entrepreneurs are going to find niches that nobody’s filled and take advantage,.
“There are a lot of gaps and needs that technology can solve so we’re going to be seeing that trend more and more,” he said. “That, combined with the fact that venture capitalists are more interested, will help the industry. It’s easier to talk to them, and that encourages a lot of startup individuals.”
Tony C. Dreibus can be reached at [email protected]