Investments

Cannabis Dispensary SaaS Provider Baker Technologies Raises $3.5M

Is the way March will end for the Investment Tracker, not with a bang but a whimper?

In the period that ended March 17, investment activity could only be termed anemic. The week saw only $159 million in fund flows, with no triple-digit deals seen at all. The B2B space took sway in the period. All told, activity measured barely a sixth of the previous week’s.

ProducePay, which buys farmers’ crops at a slight discount and sells them on marketplaces and then returns profits to farmers (taking a slight discount), got $77 million in debt and equity financing from CoVenture. The total package was $7 million in equity financing, with the remainder in debt. Several existing investors also were also tied to the financing. The funding will help with upfront capital provided to those farmers.

Within banking, SolarisBank garnered $28 million, with venture capital provided by Arvato Financial Solutions, among others, which will be taken to expand the European technology platform, furthering geographic reach.

Cannabis Dispensary Software-as-a-Service Provider Baker Technologies Raises $3.5M

When Baker Technologies cofounder and CEO Joel Milton looked at the growing recreational cannabis industry in Colorado, one of the first things he noticed were long lines.

“Being in New York at the time,” Milton said, “we were used to everything on-demand — ordering food, calling an Uber.”

Founded in 2014, Baker Technologies began as a tool to allow recreational cannabis customers to order ahead online. And while this functionality remains a pivotal part of Baker’s tool set, it’s far from the only focus.

The founders studied how the Colorado cannabis market grew. (Hint: It grew rapidly.) Hundreds of businesses sprung up, all competing for the same end users with similar product catalogs. Now, Milton said, there are more cannabis dispensaries in Denver than there are 7Eleven and Starbucks combined.

Viewing this growth, Milton said he and his cofounders realized that while everyone entering the space was trying to attract the end customer, no one had yet built an elegant B2B solution for the cannabis dispensaries.

“Everyone wanted to be a customer-facing brand that people recognized,” Milton said. “So we saw an opportunity to become that behind-the-scenes, B2B solution that actually lets the businesses grow.”

In January 2016, Baker launched a full suite of products to enable dispensaries to understand, connect with and build a relationship with their end consumer to engage and retain them — all key elements in the cannabis industry.

“At the end of the day,” Milton said, “dispensaries all sell very similar products. The key is retention — to focus on creating a brand, a store and an experience that people like.”

First, Baker Technologies’ tools allow dispensaries to turn their websites into eCommerce destinations. Customers can browse a dispensary’s menu, and Baker enables online ordering for pickup or delivery. Baker syncs with the point of sale, Milton said, to allow customers to see what products are currently in stock.

In-store, customers use iPads with Baker’s technology to sign in. This gives the dispensary an opportunity to capture their foot traffic and entice them to sign up with loyalty and rewards. Lastly, Baker uses the customer and sale data to send personalized, targeted messages, driving sales and building customer loyalty.

For instance, if a customer routinely purchases edibles, they might receive updates on stock or promotional information if state regulations allow it. (In Washington State, for instance, dispensaries aren’t allowed to distribute products below wholesale value.)

“Being able to manage those processes for our clients and help them stay compliant is something that Baker focuses on,” Milton said. Which is why Baker has yet to break into facilitating payments, he noted. As of now, all transactions happen in-store or with the delivery driver.

That being said, Milton noted that Baker is in conversations with companies who are working to solve the payment challenge in the cannabis industry.

“Our ultimate goal is to integrate with several of them — to find which ones have the best product and are the most compliant,” Milton said. “But it’s something that you can’t rush into — we’re still trying to learn and keep up with the rules and regulations.”

Payments can get complicated in the cannabis space. The same is true for investments. Earlier this month, Baker Technologies raised $3.5 million in venture funding from Base Ventures and XG Ventures among a number of others.

On the macro level, people see cannabis legalization reform progressing, Milton said. Investors hear of the billions of dollars in just tax revenue and potentially hundreds of thousands of new jobs the industry and its ancillary businesses could create.

“All of that is attractive to investors, but without the federal legislation changing, there is still that element of risk,” he noted. “It definitely makes for an interesting fundraising environment.”

Some investors had Milton sign a nondisclosure agreement to not reveal their participation; others asked Milton to clarify that their actions don’t represent their other business ventures. Additionally, Milton said, larger institutional funds remain hesitant to enter the cannabis space due to anti-vice clauses.

While they await broader institutional change to clear up the messiness around the cannabis industry at the federal level, Milton said the company plans to keep doing what it does well — helping dispensaries in the in 10 U.S. states and two Canadian provinces Baker serves to manage their customer relationships.

“We don’t want to spread out and try to do too many things,” Milton said. “There’s a lot of interest and competition in the space; everyone has their own unique angle. We’re going to keep making our product better and providing additional tools and updates and more staff to continue to support our clients.”

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