Founded in 2010, MJ Freeway is one of a growing number of software providers catering their products for the cannabis industry. The Colorado-based company’s cloud-based solution captures compliance data for a growing number of state and local governments, including Nevada and Pennsylvania. MJ Freeway in April announced $3 million in Series B extension financing raised.
Techwire recently spoke with Amy Poinsett, the company’s co-founder and CEO, about how technology is serving the cannabis industry and her observations as California quickly stands up IT systems that will help regulate medical and recreational cannabis statewide.
The conversation is edited for space and clarity.
Techwire: What’s your opinion on how California will potentially structure recreational cannabis use? What are some of the lessons learned for your company in other states?
Poinsett: We are the track-and-trace provider for the state of Nevada. We will be competing for the California procurement [for the track-and-trace solution]. The objective of track-and-trace software is to provide regulators the tools that they need to get real-time visibility into cannabis transactions across the state, in order to help them regulate more efficiently and enforce the requirements of the program. One thing we’ve really noticed in California has done a good two-way conversation with vendors, with industry, to understand what track-and-trace software can do and doesn’t do.
T: You’re in the business of tracking cannabis “seed to sale.” Manufacturers use the software. Do localities use the software too? What’s the workflow?
Yes, localities do use track-and-trace software. We have a contract with Cathedral City, Calif., to provide software for them for their local regulations. It’s not uncommon for a local municipality to have slightly different regulations than the state would have, sometimes stricter in some ways. It’s also not uncommon to have a situation similar to what you have in California now, where local municipalities are trying to get their arms around how they deal with cannabis businesses and the regulation of them in advance of having a regulatory structure at the state level.
T: What have you learned via your other clients in other states about effective ways to enact this kind of system?
California certainly is unique, the market size, the diversity of the market, the fact that it’s been an unregulated market for so long. And the state is going to have to pull a large number of industry participants into a regulated system. That’s a tough thing to get your arms around. That’s one of the reasons we’ve been so encouraged by the really open dialog and two-way conversation that the state has had with industry and vendors over the last year or so. I think one thing that we’ve learned is that it’s critical to make sure that you’re able to work with both the regulatory agencies, the inspectors, auditors as well as the cannabis businesses and have good communication with everyone on the same page. Nevada has done a great job at that, they’ve worked very closely with us and had lots of open listening sessions with vendors. California seems to be on the same track, and I think that’s a key piece.
T: What are your thoughts on the aggressive time frame of getting a minimally viable product out in California by the beginning of 2018?
The state has indicated that what they’re looking for is a commercial-off-the-shelf product. I think that helps tremendously. I think the other valuable piece is that California has indicated that their regulatory structure needs to support this timeline as well. So as the state moves ahead, if they are able to rapidly select a vendor following the timeline they’ve indicated, any work to customize the system for California structure can be happening concurrently to the evolution of the regulatory structure. So we don’t need to wait until Dec. 31, 2017 to get things set up for California.
T: How long did it take for you to stand up the Nevada system?
It was about six months, a little bit less.
T: Is your product subscription-based? How are these types of systems typically paid for?
There are a number of different ways to price it. Some states have gone with a model that pushes the cost back to licensees. So in the state of Nevada, we have a contract with the state but we collect a monthly fee from each licensed entity — and that pays for the cost of the system. Or you can do it by seat.
T: You alluded to the unique challenges that California will face. When the rubber hits the road, what do you mean by that?
Going back to the Nevada example: When the state such as that does not have an active cannabis industry, they put in a regulatory structure and people build their businesses around that regulatory structure. California, on the other hand, has a very active medical cannabis industry now and that’s existing with certain business structures and organizations and distribution models and things like that that have evolved over time. So a regulatory structure is now going to almost certainly going to require changes to that. Required distribution is a great example, it’s not something that exists now; businesses are able to choose to use a distributor if they want to but they are not required to use a third party distributor. So that’s a pretty significant business change that’s being brought about by a regulatory structure, so I think that always makes it a little more challenging.
T: Does your software include a data platform?
We do. In addition to a really in-depth business intelligence data for the regulatory agency, we’re also able to leverage our depth of experience over seven years. For example, our system has the ability to create alerts and we have constructed some guidance for those alerts, like giving regulators an idea of what would a normal amount of loss for plants in the early clone stage. So you know that if more plants are being destroyed outside of an expected threshold, you can get an alert and choose to investigate or dig in on that. The goal is really to make the regulatory agency more effective and efficient.
T: The state of California is going to use Accela as part of a licensing system for cannabis. Does your system talk to Accela?
We have met with Accela and we’ve actually collaborated with them in some other states. We have not yet implemented an integration because we have not yet had a client in common. We have a state system and so do they for the licensing side.
T: Is it your understanding that kind of interoperability will be part of the California procurement?
I don’t know, but everybody we’ve met at the state of California has expressed a high degree of interest in making sure that the data that is needed for all various aspects of the cannabis regulatory program is flowing smoothly between the agencies.