The average seed round in the nascent cannabis industry in the U.S. hovers around $1 million, according to hemp and cannabis-focused investment research by Poseidon Asset Management.
But Denver-based Baker Technologies Inc. has raised $1.6 million in seed funding for software that helps marijuana dispensaries win new customers, eliminate long lines in stores, and retain and reward their best customers for loyalty.
Founded in 2015, Baker originally began as an “order ahead” app to let customers reserve and go pick up the marijuana products they wanted for medical or legal recreational use.
For the unfamiliar, the marijuana products available at these shops, where the sale of marijuana is legal in the U.S., would range from buds or “flowers,” to edibles and concentrates in the form of waxes, oils and more. Products also include a huge variety of strains, like Indica or Sativa, known to help one medical condition or others known to give a certain feeling or have a certain aroma.
The Baker platform has, since its initial launch, evolved into something more than an order ahead tool, into a full-fledged customer relationship management, marketing and loyalty rewards solution. Think FiveStars or Belly, but for the cannabis industry.
Why can’t sellers of mary jane use the kind of tools that other mom and pop shops and retailers are using?
For one thing, there are too many local and federal regulations in motion for them to keep up without putting in a lot of effort, explained Baker CEO Joel Milton.
A tool like Baker also takes into consideration that the marijuana customer who comes to a dispensary could be a long-time enthusiast with plenty of knowledge about the products, or a tourist or occasional user who needs more guidance and information.
Baker helps impart that information online, so when a customer arrives, they won’t need to spend as much time in the dispensary figuring out what to buy, impacting wait times for customers behind them in line.
Milton said fundraising for a cannabis tech startup can prove challenging. “It’s a cool and new industry in the U.S. So investors all want to take a meeting, even investors from big Silicon Valley firms. But many say they can’t invest because of limited partner agreements. So you sort of have to safeguard your time,” he said.
Investors in Baker’s seed round included a mix of media entrepreneurs, cannabis and tech investors, ultimately.
Buddy Media’s Michael Lazerow led the round joined by Base Ventures, XG Ventures, 500 Startups, Poseidon Asset Management and the co-founders of Superfly, the organizers behind music festivals like Outside Lands and Bonnaroo, among others.
Poseidon Asset Management Managing Director Morgan Paxhia said he expects Baker to use the capital for hiring, continued product development and to raise awareness of its software-as-a-service in the growing cannabis industry in North America.
“With dispensaries, like any other retail business, it’s all about customer count,” the investor said. “Baker helps them serve a greater number of customers or patients each day, increase revenue per client visit, and develop a strong relationship with customers to increase recurring revenue.”
To-date, Baker is used by dispensaries in Colorado, Washington, Oregon and Ontario. The investors expect the company to use the seed funding to expand into California, Nevada, Arizona and Massachusetts.