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Seed-to-Sale Competition Heated-up in 2015. Expect it to Intensify This Year

As we moved into the New Year, one thing was abundantly clear. The competition for the hearts and minds of Producer, Processor and Retail (PPRs) licensees seed-to-sale software and state trace-ability systems which was very competitive in 2015, was shaping up to become a no holds barred melee in 2016 between BioTrackTHC, Franwell METRC and MJ Freeway.

To set the stage for 2016 here is how the competition for state contracts looked by the end  of 2015. BiotrackTHC, having secured contracts in the states of Washington, New York, New Mexico, Illinois and just recently announced  Hawaii led the pack. Reports having MJ Freeway landing the highly visible, but yet to be formally announced, Nevada contract put them on the board.

  1. BiotrakTHC — 5 States (HI, Ill, NM, NY, WA)
  2. Franwell — 2 States (CO, OR)
  3. MJ Freeway — 1 State (NV)

The idea  of driving tax and licensing fees in legally licensed states will create new opportunities in 2016, CBE expects state’s seeking tracking software solution include Alaska, California, Maryland, Massachusetts, and Vermont.

Franwell, the winner of the $1.5 million Colorado contract and the maker of the Marijuana Enforcement Tracking Reporting Compliance (METRC) system, is led by Jeff Wells, Franwell’s President & CEO, and Scott Denholm, Executive Director, METRC. They filed suit against BiotrackTHC back in May. Lawyers for Lakeland, Florida-based Franwell say BioTrackTHC, based in Fort Lauderdale, lies in publicity material and lies about Franwell with its media and communications to state regulators. The intent, according to documents filed by Franwell, is to interfere with Franwell  and to sway officials to choose BioTrackTHC for a competitive contract in Jamaica. This case was dismissed but has Franwell filed an amended suit that has yet to be heard..

In late May, BioTrackTHC, led by CEO Patrick Vo, finished second in the April 2015 competition for the lucrative Oregon Liquor Control Commissions (OLCC) contract, filed suit in Marion County Circuit Court, where the firm alleged the OLCC improperly awarded the contract to a competitor, Florida-based Franwell, with a last-minute and unexplained scoring change. This case was dismissed.

MJ Freeway, which appeared on the Inc 5000 in 2015, generated a reported $2.5 million in revenues in 2014 and, according to COO Jessica Billingsley and CEO Amy Poinsett, doubled revenues in 2015. Growth has come from Software, which far exceeded 2015 projections, and Professional Services (Consulting). Their expanding retail offerings where they have leveraged their user base footprint to act as a channel for white labeled office product and goods supplies has expanded in the past year as well.

Additionally, in late December MJ Freeway has raised a significant capital stake with the announcement of a $8 million dollar in Series B financing. Investors include Roger McNamee, co-founder of venture capital firm Elevation Partners (Bono of U2 is also a co-founder) whose prior investments have included the likes of Facebook, Forbes, and Yelp among others and Tao Capital Partners and Joby Pritzker, which has investments in well known start-ups like Tesla (TSLA), SpaceX, and Uber.

Industry sources have told CBE that MJ Freeway was awarded the Nevada contract and their website indicates they are looking to raise additional capital in the form of an IPO sometime in the future.

In October, BioTrackTHC raised $5 million when Greenfield Capital Partners invested in the firm. In addition to the five states listed in the rankings above, they have added contracts with the cannabis regulatory bodies in Uruguay and Jamaica as well. BiotrackTHC has reported strong growth over the last year as well with revenues rising to $3.9 million in 2015 from $2.2 million the previous year. We expect more news from BioTrackTHC as they build their revenues and capital structure in the months ahead.

Another potential development in 2016 is local city and county governments in multiple states entering the trace-ability and regulatory fray with visions of sugar plums dancing in their heads (tax revenues) and international governments reaching out to U.S. companies/suppliers to help set up systems for their own trace-ability, safety and compliance programs as governments around the world deal with their own legalization initiatives.

Expect to see more efforts by all three players to diversify their revenue streams as they fight it out for State, international and possibly local contracts as well as end-user enterprise offerings for newly licensed Producer, Processor and Retail (PPRs) licensees. It should be an interesting year!

Rob Meagher

Rob Meagher

Rob Meagher, CBE’s Founder, President and Editor-in-Chief is a 30 year veteran of the media world. His career has spanned from stints representing the Washington Post, USA Weekend, Reader’s Digest, Financial World & Corporate Finance to the technology world where he worked at International Data Group and Ziff Davis where he was part of the launch team for The Web Magazine, Yahoo Internet Life, Smart Business and Expedia Travels before starting his own marketing and Publisher’s Representative Firm. He also ran all print and online media sales and marketing for the Society for Human Resource Management before partnering with Forbes and then Fortune to create Special Sections covering a variety of topics. Rob, who started CBE Press in 2014, can be contacted at [email protected]

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