Microsoft is breaking into the new field of marijuana compliance. The objective: to provide a tracking service that helps state governments keep tabs on newly legalized medical and recreational marijuana.
The entry of Microsoft into this market, which it is undertaking in partnership with a startup called KIND Financial, is a sign that the traditional stigma against marijuana is falling as fast as states can legalize the substance. This fall, several more, including California, are expected to follow Washington, Oregon, Colorado, and Alaska in regulating the drug like alcohol.
It’s also a sign of Microsoft’s search for revenue in its cloud division, and its willingness to risk its reputation to get access to a new market its major competitors in cloud services haven’t gotten to yet.
But one startup already leads this space: BioTrackTHC, a firm that originated with a pitch to track opioid drugs. It quickly found that its software was more lucrative when deployed by marijuana growers and dispensaries, and by states and cities seeking to control the legal marijuana trade. It has won contracts from five states—Washington, New Mexico, Illinois, Hawaii, and New York—as well as several cities. Another firm, Metrc, has government contracts in Alaska and Oregon.
BioTrackTHC’s system, which includes software as well as a hand-held scanner for data-entry inside growing facilities, tracks marijuana from production to the point-of-sale. This allows governments to enforce rules about how much one firm can produce and sell. It also helps track products for safety reasons, including the ability to recall edibles that prove to be safety risks.
“We stand alone as the only seed-to-sale tracking company in cannabis that has provided to both businesses and government agencies,” says BioTrackTHC’s CEO, Patrick Vo.
Vo says the next steps are improving the user experience of its tools and finding ways to leverage the data collected for clients. He compares the opportunity to that of Salesforce, the giant provider of customer-relationship management tools.
“There are hundreds of applications that you can hook into Salesforce to perform other things, above and beyond what Salesforce’s core function is,” Vo says. “BioTrackTHC’s core function is inventory tracking, inventory management and point of sales, but by having that you can create new applications that the user can leverage to generate revenues.”
The company, largely bootstrapped, now has 50 employees. Its revenue grew 75% last year. Vo won’t say what the financial plan for the company is, but says that a sale or even an IPO is possible. “Being a pick-axe and shovel company in a gold mining industry, we have every option available to us,” he says.
And that’s precisely what attracts a company like Microsoft to this field. It’s working with KIND Financial, a startup that previously developed applications to help marijuana businesses accept electronic payments. (This helped fill a hole left by banks that won’t deal with the industry.) Now, with Microsoft, under a deal announced June 16, it is developing a seed-to-sale tracking system for governments.
Large-scale operational support for business is something that the IT industry has become increasingly good at delivering. So the question for marijuana compliance startups that go it alone is whether they can leverage their industry expertise against the clout—especially in the political arena—of big corporate entrants.
Either way, one thing’s for certain: The marijuana business, if it ever was cool, no longer is. Microsoft has pushed up its glasses and decided it’s all enterprise now.