Five years ago, my good friend Jon and I attended our first cannabis conference in Seattle. Washington had passed adult recreational cannabis and sales had just begun in 2014. There was a goldrush by entrepreneurs to get involved on some level. We were no exception.
In the early days of legalization, cannabis conferences attracted a wide array of people. There were growers who had just started farming, processors and scientists with advanced methods for refining THC, and brand new retailers whose licenses had just come in and recently began selling to consumers.
But amid all the chaos to be early to market, no one was talking about software.
To be fair, we didn’t notice this by some coincidence. I’d spent 16+ years at Microsoft leading software development running both consumer and large scale enterprise products for the company. In 2011, I left Microsoft and founded my first software company, PlaceFull, an online booking solution. Jon brought his own extensive sales experience in software technology, with several decades of business development and sales years in the field.
We wanted to bring something to market that no one else was offering. After talking with retailers and other industry stakeholders, we came to appreciate that one of the biggest pain points facing the industry was the lack of access to traditional banking and merchant services. Put another way, cannabis businesses were being forced to operate as “cash only” with no ability to take alternative forms of payment or credit/debit cards.
In this day and age, every customer has come to expect the ability to pay with their card for any purchase. We felt that the cannabis retail market shouldn’t be any different. Unfortunately, there were several regulations for dispensaries – namely that big payments processing companies had to abide by a federal regulation (The Substance Control Act) which in their own card policies strictly prohibited the direct purchase of Cannabis via debit or credit. So the question remained: how could we offer a payments solution that was compliant with the card brands and of course fully legal within Federal and State laws?
At the time, cryptocurrency was having a moment. Bitcoin had gone through the roof, and it was all investors and entrepreneurs were talking about. We decided we could develop a solution for dispensaries to accept payment through cryptocurrency that was compliant. Using our system, dispensary customers would swipe their cards – just like in any other retail transaction – to purchase cryptocurrency, which would allow a customer to either keep the cryptocurrency they purchased (as an investment) or have it converted into store credit. In this sense, it was no different than making a cash withdrawal and using that cash to buy cannabis, but in this case it was cryptocurrency being used to make the actual purchase.
A few months later, we brought our first product to market: a fully-compliant way for dispensaries to bring card payments to their store.
This bet turned out to be a good one. After working closely with state regulators, the Department of Financial Institutions, and obtaining all the required federal licenses, we were up and running in several dispensaries in Washington, processing card payments for cryptocurrency which could then be held or used to purchase cannabis.
With the success of our payment offering, we invested in bringing more software solutions to dispensaries through their point of sale. We acquired an existing point of sale company called DoubleBeam, which already had great success in the corporate cafeteria and events space. They had a proven track record of being a great customer-focused software solution. We hired a team of developers and product managers to take the DoubleBeam point of sale solution, and adapt it to cannabis retail. Or, as we like to say, we “cannabatized” it.
Acquiring DoubleBeam had major advantages for our point of sale system. DoubleBeam’s POS was built with a retail setting in mind, so the checkout process was identical to one that consumers would come to expect. Our competitors were building point of sale offerings with the complicated laws and regulations in mind first, building out their solution from there. What results is often a clunky implementation that is unfamiliar to both customers and staff alike. By putting the retail experience first, our point of sale was intuitive, particularly to anyone with retail experience.
Expanding our product offering to a point of sale system also turned out to be a good decision. Just as with our payments offering, our solution was recognized as adding tremendous value, in a unique and meaningful way, and we quickly gained market share in Washington State.
That’s not to say the mission has been easy. Many people think the battle for legal cannabis ends with the signing of a bill, but this is far from the truth. The reality is a series of small battles to ensure we’re always providing our stores with compliant solutions. Our goal has always been to ensure owners and management don’t have to spend time worrying about the complicated rules and regulations of the industry, so they can focus on what’s most important to any retailer: growing their business.
But through blood, sweat, and tears, we’ve created a point of sale solution that allows our dispensaries to thrive. We’ve created a seamless online ordering system, given stores the ability to message their customers about promotions, and offer store rewards to increase lifetime customer value, to name a few. We’ve expanded our operations from our home in Washington state, to dispensaries in California and Colorado, the two biggest legal cannabis markets. As more states pass legalization – like Illinois this week – we will be aggressively expanding our offerings to these new markets as well.
The cannabis industry is on pace to reach 20 billion dollars in the United States by the year 2020. At POSaBIT, we’re excited to be part of that growth, and for what the future holds for this blooming industry. This is just the beginning.