18 million lines of cannabis regulations.

That’s what Marion Mariathasan, CEO of cannabis compliance software provider Simplifya, estimates his company currently tracks across 28 state markets.

Launched in 2016, Simplifya is one of the cannabis industry’s leading compliance software companies. The Denver-based SaaS venture boasts as clients Curaleaf, Columbia Care, and Cresco Labs–some of the industry’s largest multi-state operators (MSOs)–and has so far raised $15.5 million from investors like Merida Capital and the founding partners of Vicente Sederberg, among others.

Early into the cannabis industry’s nascency, partners at Vicente Sederberg spotted a bottleneck: compliance. Attorneys could spend hours poring over state regulations on client matters, performing audits that were both time- and cost-intensive.

Mariathasan remembers the early conversations he had with Vicente Sederberg’s partners, noting how they identified that “there needs to be some sort of a software play that helps streamline and create efficiencies for these license operators, but also to reduce the cost for them.”

It’s the combination of industry experience and strong financial backing that Mariathasan says will carry Simplifya through the macroeconomic turmoil that has plagued and will continue to plague cannabis companies–and ancillary companies in particular.

“I think over the next year it’s gonna be interesting because what I’ve seen during Covid was a lot of ancillary tech companies that were providing services for the industry literally go away overnight because they were either not cash positive or they were just unable to raise money,” Mariathasan says. “And I think, unfortunately, we are probably in for some more of that kind of downturn for the industry in the software companies.

“Fortunately, we’ve … been very blessed with good investors that understand the mission of what we’re trying to do here,” he adds.

Compliance from A through Waste Management

What Simplifya seeks to do is go beyond sales compliance and seed-to-sale tracking and  “ingest everything from A to Z of regulations that are published,” Mariathasan explains, “from waste management all the way up to accounting.” From there, Simplifya’s Regulatory Affairs team breaks down regulatory jargon, translating it into easy-to-understand text for operators across the cannabis supply chain. Information is cited to the appropriate government agency (and updated by the effective date of any changes), facilitating internal auditing and compliance maintenance.

“But in addition to that, our core product also has SOP bundles,” Marithasan says. “… Our Reg Affairs team, these are lawyers and policy people, [creates] standard operating procedures for the operators based on the license type, their location.”

Simplifya’s software also will keep track of records and compliance documents that need frequent updating through a feature called “Smart Cabinet … a cheat sheet that tells you what you need to keep, what you need to update, and what you need to be able to show to regularly if [regulators] walked in,” the CEO says.

At $289 per month, per location, the company’s services are both affordable for small operators and potentially considerable investments for operators with multiple sites. With that, however, comes unlimited users and audits, meaning compliance tasks can be delegated to anyone in the organization. With severe compliance violations potentially costing operators their license, Mariathasan notes the ounce of prevention is worth a pound of cure.

Building on a Library

With a rich regulatory data bank, segmented with multiple dimensions, Simplifya has also built a platform called Simplifya Light targeted for non-licensee actors in the cannabis space. “We’re a reg tech company,” Mariathasan says. “Even though there’s a bunch of lawyers and policy folks, the other half of the company [is] engineers and product people.”  

For example, the company offers a platform for financial institutions working with licensed cannabis operators. “By nature of the work that we were doing in operational compliance, we’ve had financial institutions that reached out to us and said … ‘is there a product you can provide to us that we can work with our license operators to show our regulators here are 50 cannabis businesses, here’s how they abide by FINCEN guidelines and Cole memo priorities,’” Mariathasan says. After more than 12 months of development, the product launched in July 2022.

The company’s Market Guide product, launched earlier in the year, offers regulatory summaries pertinent to non-licensees such as banks, investors, vendors, and consultants. For example, Mariathasan says a user could look up a summary of lending regulations in Michigan’s cannabis industry. “Simplifya market guide is a product that just gives highlights,” he says.

Meanwhile, Simplifya Verified is the company’s license verification tool. “If you’re an entity that interacts with [an] … operator that doesn’t have a valid license, at that point you’ve transacted with an illicit business,” Mariathasan explains. “People can search for a name or a license number, and we’ll give them a response that says, ‘This is a valid license’ … And if not, we’ll say, ‘this license is not valid and here’s the reason why.’”

These ventures into new audience segments are part and parcel of Simplifya’s longevity plans, especially as it navigates tricky market conditions. The company has plans for a searchable regulatory database, and a platform for regulators and enforcement agents–although Mariathasan couldn’t comment on which markets the company is currently in discussions with for the latter. 

That said, the CEO is not closed to the idea of being acquired or merging with the right partner. “We always joke internally that we’re the least [sexy] company in the industry,” Mariathasan says with a laugh. “But I think now everyone recognizes, especially the more sophisticated MSOs, that compliance is something that they have to do. It’s not gonna go away. And so we are starting to get a little bit sexier, if you will, as a company.

“Consolidation has already started to happen on the operator side. On the software side, we’ve had lots of conversations with people that have approached us trying to merge or acquire,” he says, adding that the company has received three offers in the last six months alone.

But after spending the last six years building a platform, and relationships, in the cannabis market, Mariathasan wants to ensure the company doesn’t lose itself in the next M&A surge. “As long as Simplifya as a company still gets to maintain what we want to provide for the industry, then, who knows?”