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Cannabis Big Data

Big data solutions for cannabis industry businesses

Raised from 174 investors

Min: $25,000

Max: $107,000

$84,715

of a $25,000—$107,000 goal

Security Offered

Convertible Note

Minimum Investment: $100

  • Seeks to empower licensed cannabis businesses with access to over 30 data modules and 50+ data source integrations for advanced analytics and insight

  • Target clients include cannabis stores/dispensaries, cultivation/grow facilities, product manufacturers, distributors, testing labs, and vertically-integrated companies

  • Plans to launch a sustainability benchmarking tool in partnerships with the Colorado Department of Health and Environment, Cannabis Conservancy, and Sustainabis

  • Has raised just over $280,000 from past investors, including $250,000 from White Sheep Capital (formerly Initiative Capital) in October 2017 at a pre-money valuation of $2.5 million

Executive Snapshot

Cannabis Big Data aims to equip cannabis-related businesses with the tools necessary to harness data for informed decision making. It offers a robust platform that can track important metrics such as cultivation yields for grow operations and inventory levels for dispensaries. A dispensary equipped with Cannabis Big Data toolkits can assess and leverage real-time sales data to optimize inventory and future sales.

  • In the first two months of 2019, Cannabis Big Data added five new clients and generated more than two-thirds the amount of revenue it generated in all of 2018.
  • The company is collaborating with partners such as The Colorado Department of Health and Environment, The Cannabis Conservancy, and Growers Network to develop sustainability reports and benchmarking tools that compare various strain yields.

Terms

Investment Terms

Security Type: Crowd Notes

Round Size: Min: $25,000 Max: $107,000

Valuation Cap: $4,000,000

Discount: 20%

Conversion Provisions: In connection with equity financing of at least $1,000,000, the Company has the option to convert the Crowd Note into shares of non-voting preferred stock (Conversion Shares) at a price based on the lower of (A) a 20% discount to the price paid per share for Preferred Stock by investors in the Qualified Equity Financing or (B) the price paid per share paid on a $4,000,000 valuation cap. Please refer to the Crowd Note for a complete description of the terms of the Crowd Note, including the conversion provisions.

Overview

Opportunity

Cannabis Big Data, a Colorado-based data analytics firm, aims to make data more accessible and digestible for firms operating in the legal cannabis industry. Through its data modules, equipped with intuitive, user-friendly dashboards and automated integrations, the company seeks to help businesses adopt data initiatives to improve their decision making. Targeting dispensaries, retail stores, cultivation projects, and ancillary businesses, Cannabis Big Data aims to be a comprehensive solution for harnessing cannabis industry data.

In today’s business environment, more firms are adopting advanced tools to better utilize data in their decision making. In a 2018 survey conducted by NewVantage Partners, 97% of executives confirmed that they were implementing big data and artificial intelligence projects; most cited advanced analytics as the primary reason for investing in the technology. Though virtually all survey respondents were investing in big data initiatives, roughly two-thirds indicated that business adoption of data initiatives remains a major challenge; helping employees and executives adopt a more data-driven process represents the greatest challenge for these companies.i

In the legal cannabis industry, which is projected to reach a value of $23.4 billion by 2022,ii big data analysis may be used for decision making processes throughout the product cycle, from plant cultivation to product sale. Data-driven approaches may also be leveraged to improve consumer demand projections, thereby facilitating production adjustments to stabilize pricing. In the absence of big data analysis, producers and retailers may be unable to accurately estimate cannabis product demand.iii In the state of Oregon, for example, overproduction of marijuana has produced six years’ worth of excess supply, dropping prices and affecting farmers who anticipated higher profits for their crop.iv

CanopyBoulder Accelerator

Cannabis Big Data participated in the Spring 2017 class of CanopyBoulder, a seed stage accelerator for the legal cannabis industry. Cannabis Big Data utilized the Colorado-based accelerator to launch the first iteration of its alpha product and to validate its business model. The company also leveraged the accelerator to expand its cannabis industry network.

Product

Cannabis Big Data has built comprehensive data toolkits designed to provide actionable insights to cannabis retail stores, dispensaries, cultivation companies, product manufacturers, and other ancillary businesses operating in the cannabis industry. The company also provides tailored solutions to clients, offering one-off customized data services, unique reports, and personalized consulting engagements.

Retail / Dispensary

Dispensaries and stores need to be aware of their products and customers as well as their profit margins on each.  Cannabis Big Data helps owners and managers track revenue, costs, budtenders, taxes, and more.

Cultivation / Grow

Cultivation and growth facilities need to track inputs, cycles, and outputs as well as their finances and fixed assets.  Cannabis Big Data helps owners and managers track yields, revenue, energy, costs, taxes, and more.

Infused Product Manufacturer

Infused Product Manufactures need to be aware of their supply of raw materials and the demand from their wholesale customers, as well as their profit margins. Cannabis Big Data helps owners and managers track revenue, costs, salespeople, taxes, and more.

Vertically Integrated

Integrated cannabis companies need to track the supply and demand of their products, as well as the profit margin for each product. Cannabis Big Data’s solutions allow businesses to track revenue, costs, taxes, and more.

Distributor

Distribution companies must manage logistics while also forecasting supply and demand levels. Cannabis Big Data offers distribution companies modules to help forecast and track supply and demand.

Testing Laboratory

Testing labs conduct state-mandated product tests that are critically important for the safety of consumers and the robust growth of the cannabis industry. Cannabis Big Data supports these labs with their data needs.

Modules

Actionable Insights

 

Automated Data Syncing

 

Unlimited Users & Dedicated Training

 

The company’s toolkits are built from robust data modules. These modules serve as intelligence dashboards and are designed to allow users to glean valuable insights about business operations through intuitive, user-friendly interfaces. For cannabis businesses, these dashboards offer a succinct yet robust compilation of data relating to sales, marketing, operations, cultivation, products, and more. Each module is equipped with automated integrations compatible with most standard data sources, meaning that the module pulls data from existing applications, so users do not have to manually enter data. Once the module is integrated, Cannabis Big Data can analyze information regarding cultivation yield, inventory management, product margins, supply forecasting, and more. Currently, Cannabis Big Data has built over 30 individual modules. Featured modules include:

Cultivation Yield

Enables owners and operators of cultivation and growth facilities to assess the performance of specific plants, strains, and batches. Primarily used to identify the yield of each plant, strain, and/or facility.

Individual Customer Insights

Analyze historical purchase trends for specific customers or patients. Can be used to potentially upsell customers and patients based on purchase preferences.

Inventory Buy Planner

Helps dispensaries and retail stores identify what products need to be restocked and how much needs to be reordered to have enough days of inventory on hand. Used to prioritize product restocking.

Inventory Management

Allows dispensaries, retail stores, and distributors to anticipate stock outs and project how much money may be lost from products being out of stock.

Product Margins

Isolates specific costs, by product, for each unit in a production batch. Can be used to identify unit costs and gross margins for all products.

Sale and Demand Forecasting

Seeks to forecast what products are expected to sell and when. Can help businesses better align supply and demand across various business units.

Modules can be purchased a la carte or bundled in packages of three to seven modules with discounted bulk pricing. Featured packages include:

  • Inventory Management: Seeks to empower cannabis retailers with historical analytics and predictive modeling to know which products to order, when, how much, and why
  • Cultivation Management: Supports cannabis cultivators to know what strains have the highest yields and how to focus their cultivation resources to potentially maximize profits
  • Customer Insights: Aims to increase average order values (AOV) and lifetime values (LTV) with an analysis of customer purchasing patterns at the individual level and with customer segmentation
  • Financial Hub: Analyzes gross and net margins down to the stock keeping unit (SKU) level to help maximize top- and bottom-line metrics

Analytics and Custom Data Services

Cannabis Big Data also offers clients one-time data services, unique reports, and consulting engagements specifically tailored to the needs of each individual customer. The company offers a range of services and allows clients to craft custom engagements for added flexibility. Featured services include:

Pro Forma / Financial Model Audit

A comprehensive review of a company’s existing financial model. Upon completion, a report is issued detailing potential issues and recommendations.

Competitive Matrix

A comprehensive analysis of a retail store or dispensary compared to all other stores within a 50-mile radius. Meant to help increase revenue by notifying owners and managers which products to carry at what prices.

Due Diligence Analysis

A deep-dive review of a company’s data room or investor materials. Cannabis Big Data acts as a potential investor, evaluating materials to find possible issues and provide recommendations.

Secret Shopper

Cannabis Big Data’s Secret Shopper scorecard covers the entire customer lifecycle, offering clients an overall score with breakdowns of each element of the buyer lifecycle, identifying areas of opportunity for improvement

Company Valuation

Cannabis Big Data analyzes information regarding accounting, products, customers, and team to identify an expected valuation for an enterprise.

Data Integrity Audit

An analysis of the data flow and consistency of an organization. Cannabis Big Data reviews all of a business’ data sources and how information flows between systems to provide an audit of the data environment.

Use of Proceeds

Should the company raise the minimum target amount of $25,000, it plans to use 100% of the proceeds to aid in customer acquisition via a combination of search engine optimization (SEO) of original and syndicated content, direct outreach efforts via lunch-and-learn opportunities, and attendance of industry conferences and local events. If it raises the maximum of $107,000, the company plans to devote 45% to customer acquisition through SEO of original content and lunch-and-learn opportunities, 25% to general marketing for advertising and promotion, 20% to product development, and 10% to business development via tradeshows and conference attendance.. The company may alter the use of proceeds at its discretion.

Product Roadmap

In 2019, Cannabis Big Data plans to launch its sustainability benchmarking tool, partnering with the Colorado Department of Health and Environment, Cannabis Conservancy, and Sustainabis. This initiative will seek to combine production type data (e.g. indoor vs. outdoor yields and cultivation cycles) with data relating to energy, water, and waste to create regional reports for different types of cultivators. The company is also working with Growers Network to develop a strain benchmarking tool, which will combine strain and yield data to provide cultivators with local and regional comparison analysis.

In addition, the company is collaborating with Cannabis Retail Advisors to launch a more comprehensive store, vendor, and inventory management tools for retail businesses. In Q3 2019, the company intends to revamp existing toolkits and modules, while deploying analysis capabilities for cannabis investors as well as deal analyzer functionalities. In Q4 2019, the company hopes to integrate its products with two additional point-of-sale (POS) systems; currently it can integrate with three POS systems (BioTrack THC, Weave IQ, and Flowhub).

Business Model

For each module, Cannabis Big Data utilizes a software-as-a-service (SaaS) business model with a one-time fee for deployment, which includes source integration, data normalization, and an hour of training for all users. Set up and monthly module fees vary based on the specific data streams of the client. Individual modules start at a $400 set up fee with a recurring monthly charge of $30 per business, while more robust modules such as the “280E Tax Scenarios” module, designed to help users identify the lowest impact tax methodology, are priced at a $3,500 set up fee and a $95 recurring monthly charge.

The company also charges fees for one-off custom reports and analytics and offers bulk pricing and discounts for its module packages. Custom analytics and reports start at $850 with reports such as its company valuation analysis priced at $1,750. Cannabis Big Data determines pricing for various reports based on the scope of the engagement, such as the amount of retail locations being monitored, and the complexity of the data being analyzed.

User Traction

Currently, Cannabis Big Data has seven paying clients, including six dispensaries in Colorado and one Oregon-based CBD oil extractor. In addition to its partnerships with the Colorado Department of Health and Environment, Cannabis Conservancy, Sustainabis (to provide sustainability benchmarks for cannabis grow operations), and Growers Network (to aggregate crop yield data by flower strain), the company has partnered with Cannabis Retail Advisors to develop a purchase planning and inventory optimization package for cannabis stores.

Clients

Partners

Historical Financials

In 2018, Cannabis Big Data generated $7,950 in revenue, down from 2017 revenues totaling $17,516. Revenue in April 2017 from a one-time client integration of $10,000 represented the majority of the year’s revenue. Other spikes in revenue throughout the last two years are due to one-time set up fees for new clients. In the first four months of 2019, the company generated revenues of $10,400, up from 2018 revenue of $5,050 over the same period. Since its incorporation in 2017, the company has generated $31,116. In 2018, Cannabis Big Data average profit margin was 51%, compared to 85% in 2017. Profit margins decreased as a result of increases in hosting costs and licensing fees for software such as the company’s customer relationship management (CRM).

In Q1 2019, the company added an additional four clients. In 2018, the company signed three new customers, after signing three in 2017. In 2018, the company had three clients choose not to renew their services. Of the churned clients, two chose to cancel because it no longer needed the analysis, while one chose to switch to an internal accounting reporting system. The company’s MRR dropped from February to March 2019 due to fee waivers provided to a client for software integration issues that have since been corrected.

  • Current average set up fee per customer: $750
  • Current average recurring monthly fee per customer: $350
  • Monthly recurring revenue (MRR) as of April 2019: $1,900

In 2018, the company incurred expenses totaling $166,271, an increase from $39,482 in 2017. 2018 expenses increased due to an $80,000 expense related to the recruitment and hiring of contract sales employees, categories in which the company did not incur expenses in 2017. Cannabis Big Data paid roughly $15,000 in recruitment fees in July 2018, accounting for the spike in expenses for that month, and roughly $65,000 in contract worker compensation, nearly half of which was paid in Q4 2018.  The company also increased its sales and marketing expenditures by 662% year-over-year, totaling $32,571. In 2018, total expenses were primarily attributed to:

  • Contractor fees – 39%
  • Professional fees (i.e. legal and accounting) – 15%
  • Sales and marketing – 20%

Since incorporation, the company has incurred expenses totaling $226,199. In the first four months of 2019, the company incurred expenses of $31,265, an increase from 2018 expenses of $27,664 over the same period.

In 2018, Cannabis Big Data recorded a net loss of $158,223. It had a net loss of $21,962 in 2017. Since incorporation, the company has recorded a net loss of $194,977. In the first four months of 2019, the company recorded a net loss of $20,862, while over the same four months in 2018, the company recorded a net loss of $22,590. In 2018, the company’s average monthly burn was $13,185. As of April 2019, the company had roughly $2,000 in cash assets. As a result of its low cash on hand, the company has decided to halt salaries for all employees, which accounted for roughly two-thirds of operating expenses in the first two months of 2019. In the absence of paid salaries, the company has transitioned to an equity-based compensation model until it is able to raise additional capital. Currently, Cannabis Big Data is only paying for its core software services to keep its cash burn to a minimum.

Industry

Cannabis

According to a report by Arcview Market Research and BDS Analytics, the U.S. legal cannabis industry increased 31% year-over-year in 2017 to reach $8.5 billion. The report forecasts that nationwide spending on cannabis will increase to $23.4 billion by 2022, growing at a 22% compound annual growth rate. This growth is expected to be driven by continued state-by-state roll-out of medical-use programs and adult-use recreational legalization. The research report also predicts that the industry could generate more than 467,000 full-time jobs by 2022. Globally, the market was estimated at $9.5 billion in 2017. As more international markets legalize cannabis, the worldwide market is projected to reach $32 billion by 2022, while lowering the U.S. share from 90% to 73%.v

U.S. states have varying levels of cannabis legalization, with some states electing to legalize marijuana for both medical and recreational use. Two such states, Washington and Colorado, sold $1.3 billionvi and $1.5 billionvii of cannabis, respectively, in 2017.

Countries like Canada are also beginning to legalize marijuana for recreational use. In June 2018, Canada became the second country in the world—and the first G7 nation—to implement legislation to legalize recreational marijuana use nationwide.viii Canada and California are poised to capture 41% of the world cannabis market by 2022, reaching combined revenue of $13.2 billion.ix

In 2018, venture capital financings in cannabis companies surpassed $1.6 billion, a record high, and a 193% increase from 2017. Deal count in 2018 was also record-setting, with 225 venture financings. 2017 also saw significant growth in funding towards cannabis companies, with nearly $555 million invested, a 143% year-over-year increase, across 173 total deals. Deal count surpassed 100 total deals for the first time in 2015, with 123 such venture financings, a 124% increase from 2014. Between 2008 and 2018, there has been $2.97 billion invested across 722 venture capital deals in cannabis companies. Over 70% of capital invested from 2008 to 2018 occurred in 2017 and 2018.x

The ability to leverage consumer data may provide cannabis enterprises with an edge over industry competitors. According to a 2018 Deloitte study, retailers who are capable protecting and analyzing consumer data may be “well positioned to achieve a competitive advantage.” The consulting firm also notes that, similar to traditional retail verticals, in order for the retail cannabis industry to succeed it must derive insights from customer information and analytics and deliver a superior customer experience. Cannabis consumers are also demanding that the data collected by online retailers be kept private and managed by trustworthy systems. Deloitte found that 22% of respondents—the highest percentage in the survey—stated that features tied to privacy protection and data security were the  most important feature when choosing an e-commerce cannabis retailer.xi

Big Data

The global big data analytics industry was estimated to generate $42 billion in 2018 and is projected to grow at a compound annual growth rate (CAGR) of 10.48% to reach a market size of $103 billion in 2027.xii According to a survey conducted by McKinsey and Company, nearly half of the executives surveyed noted that data and analytics have significantly or fundamentally changed business practices in their sales and marketing functions.xiii Separately, New Vantage Partners, a data-driven strategic advisory firm, found that 97% of its survey respondents have started big data initiatives, with 73% of respondents reporting measurable results from their initiatives.xiv

In 2018, big data startups raised $26.42 billion in venture capital investment across 1,790 deals. This represented an increase of 66.8% in capital investment over 2017, but a 13.4% drop in total deal count. From 2008 to 2018, the big data industry received a total of $74.16 billion across 10,370 deals.xv

Competitors

Headset

Founded in 2015, Headset is a business intelligence company specializing in the cannabis industry. The Seattle-based firm has three main product offerings: Headset Retailer, Headset Bridge, and Headset Insights. Retailer provides businesses simplified insights via reporting dashboards that display information on sales, inventory, vendors, products and budtenders. Bridge aims to enable a collaborative relationship between suppliers and retailers by automating the inventory and sell-through process. Insights provides users with market data to help enable data-driven business decisions. In January 2019, Headset raised a Series A round totaling $12.1 million, led by Poseidon Asset Management, AFI Capital Partners, and Canopy Rivers.xvi

BDS Analytics

Founded in 2015, BDS Analytics is a Boulder, Colorado-based market intelligence firm focusing on the cannabis industry. The company has three main products specializing in retail sales tracking, consumer insights, and industry intelligence. BDS’s retail sales tracking product provides clients with actionable data on when, where, and for how much products are being sold. The consumer insights platform provides interactive dashboards with drill-down capabilities for specific geographies and consumer segments. BDS’s industry intelligence product provides users with forecasts, financial models, and actionable insights within the cannabis sector. The company also offers physical copies of industry reports that range in price from $297 to $1,975.xvii In May 2018, BDS raised a Series B round totaling $3.5 million, led by CanopyVentures and Altitude Investment Management.xviii

New Frontier Data

Founded in 2014, New Frontier Data is a tech-driven analytics company specializing in the cannabis industry. The Washington D.C.-based firm provides analyst reports as well as a business intelligence portal. The company also provides custom research consulting services. Digital access to New Frontier’s analyst reports ranges in price from free to $599.xix The company utilizes a subscription-based model for access to its business intelligence portal, with tiers ranging in price from $99 to $625 per month.xx In September 2018, New Frontier received a $500,000 investment from Gladstone Financial Corporation.xxi  In February 2018, the company acquired Hemp Business Journal for an undisclosed amount.xxii

Brightfield Group

Founded in 2015, Brightfield Group is a full-service market research firm focused on the legal cannabis industry. The company offers both cannabis and CBD industry insights for the U.S., Canadian, and international markets. Brightfield also offers customers solutions in market entry strategy, product development strategy, brand development, and marketing and advertising. The company also offers custom research and analytics projects to meet specific client needs.

Team

Henry Finkelstein

Co-Founder & CEO

Henry has been the CEO of Cannabis Big Data since its inception. Prior to Cannabis Big Data, Henry served as the Director of Business Intelligence for Tepa. He also started his own management consulting firm, Green Peak Labs, which focused on data-driven marketing, sales, and operations consulting for small and medium businesses (SMBs) in the service and consumer goods industries. Henry has also held positions at STI Innovations and Provide Commerce. He earned his bachelor’s degree in Economics at Yale University, where he helped run the Yale Entrepreneurial Society.

Jason Cooper

Co-Founder & VP of Architecture and Integrations

Jason has extensive enterprise experience leading system architectures in the public and private sector. His data career began in the armed forces, both in direct service with the U.S. Army as well as with various government contractors supporting stationed troops in Afghanistan and other active conflict regions. Jason has also held positions at Insight Global, Kaiser Permanente, and UDR. Jason earned his Associates degree in Applied Science and Programming from Kaplan University.

Levi Martin

Co-Founder & VP of Systems and Analytics

Levi brings extensive experience in large-scale operations to Cannabis Big Data, helping apply those lessons and technologies to smaller, less sophisticated owners and operators. Prior to his time at Cannabis Big Data, he served as Senior Business Intelligence Manager for Colas IS Support. He also founded 9Nineteen Solutions, an IT consulting firm. Levi also has experience in the real estate sector, holding positions at REITs such as UDR and Aimco. Levi earned his bachelor’s degree in Business Administration from the University of Northern Colorado.

Past Funding

Cannabis Big Data has raised just $280,000 from past investors, including $250,000 from White Sheep Capital (formerly Initiative Capital) in October 2017 at a pre-money valuation of $2.5 million. The company has also raised $30,000 from CanopyBoulder, in the form of a convertible note. The proceeds of the raise were used to increase customer acquisition efforts, as well as to further develop the company’s products.

Discussion

Endnotes

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