Cannabis is one of the world’s fastest-growing industries, currently worth $7.2 billion and projected to be valued at $20.5 billion by 2020, while creating nearly 300,000 new jobs. Those numbers, from the marijuana-business data firm New Frontier, have made the tech world sit up and take notice: They’ve been cited everywhere from Wired to Fortune to PC Magazine, in articles encouraging geeks and suits to launch or invest in startups serving the upstart industry.
Last October, when Richard Branson keynoted the New West Summit 2.0—billed as “the first conference to focus exclusively on the game-changing, disruptive developments in technology, investment and media within the cannabis space”—he told the crowd of more than 1,000 gathered in San Francisco that cannabis “has enormous potential, with the ability to do a lot of good.”
The New West Summit 2.0 was an important event in the evolution of cannabis, because, as Harborside Health Center founder and CEO Steve DeAngelo explained to CNET, “this plant has been illegal and underground since the invention of technology.”
As the cannabis industry moves from prohibition’s black-market obscurity to a new age of grueling transparency and highly competitive legal markets, the “geeks” are catching up with the growers. Tech companies are eagerly offering solutions to cannabusinesses for everything from monitoring grow-op conditions to analyzing point-of-sale data, as well as developing apps and technologies to improve cultivation, extraction and ingestion.
Sweet Leaf Marijuana, the nation’s fifth-largest cannabis producer, processor and retailer, with 13 outlets in Colorado, Oregon, Illinois and Massachusetts, is a prime target for every new technology developed for the cannabis industry. These days, the Denver-based company gets so many calls from tech companies that the front desk has been trained to wean them out.
“They see us as cash cows,” said Sweet Leaf vice president Nichole West.
“For us, everything costs three times as much,” added Sweet Leaf co-founder Matthew Aiken. “The marijuana light bulb? It’s really expensive.”
Sweet Leaf was started in 2010 by three partners with $9,000 and co-founder Christian Johnson’s American Express card; last year, it earned $70 million and now employs 350 people. To build this mini-empire, Sweet Leaf has reinvested more than 80 percent of its profits, much of that to keep up with technology. And, for the most part, the investment pays off: A Futurola machine that cranks out 100 joints in 10 minutes paid for itself in 10 days.
In Colorado, cannabis plants are tracked digitally from seed to sale, and grow ops and retail outlets must be monitored by systems that require a whole lot of bandwidth. Sweet Leaf uses Complia software for its compliance documentation as well as Flow Hub, point-of-sale software that automatically reports to the state’s cannabis-tracking system. At the company’s retail stores, employees can scan the barcode from customers’ IDs and immediately update their information, speeding up the check-in process by about 70 percent. And because the software tracks plants from seed to sale, it also provides helpful data on strain yields.
Keeping up with technology is expensive, said Johnson, who measures Sweet Leaf’s growth not by profits or even plants but by the number of grow lights (the company started with around 40 and currently boasts 3,500). He’s happy with the Nanolux DE Commercial Series lights used in Sweet Leaf’s 250,000 square feet of warehouse space in Colorado, because the exposed bulbs don’t have to be cooled and are easier to clean and change.
During a tour of the company’s cavernous West Denver warehouse, which produces about 65 pounds of cannabis per day, Johnson—who built houses, restaurants and fiber-optic networks before starting Sweet Leaf—looked around at the concrete walls. “With indoor cultivation, there’s no way to save money,” he lamented. “How much longer are we going to be growing marijuana in warehouses? This was all state-of-the-art three years ago.”
In Sweet Leaf’s growrooms, an automated sun rises and sets, sensors monitor humidity and CO2 levels, and Doseatron machines inject nutrients and chemicals into water lines. Yet, West insisted, “our farming systems are still very farm.” There are certain things the Sweet Leaf team doesn’t believe should be automated, she explained: “We don’t want to lose the human connection.”
As a consumer, West is equally selective. She wants to choose her buds and watch a budtender package them; she hates buying cannabis that was separated, weighed and packaged by a machine. It’s like the difference between ordering hand-cut steaks from a neighborhood butcher and grabbing a plastic-encased tube of ground beef from the grocery store.
When it comes to her job as chief buyer for Sweet Leaf’s stores, however, West is decidedly new-school. She sees just about every new tech innovation for ingesting cannabis before it hits the market. Before any vaporizer, rosin or transdermal patch makes it onto Sweet Leaf’s shelves, West distributes samples to the managers and budtenders and records their evaluations about taste, effects and marketability on a spreadsheet she’s been building since 2015.
“Look at this data I’ve compiled!” West said as she pulled the spreadsheet up on a large monitor in her Denver office. In an industry starved for data, West knows that this spreadsheet may be one of the company’s most valuable assets.
West’s data—and her instincts—tell her that transdermal technology will be the next big thing among cannabis consumers. Sales of flowers still crush everything else in Sweet Leaf’s stores, but transdermal patches are on the rise, accounting for 7 percent of sales and, more importantly, appealing to the 50-to-60-year-old demographic that is Sweet Leaf’s largest customer base.
“Everyone—people you never would have thought would be interested in cannabis—is utilizing that technology,” West said. “Transdermal technology is really bringing people out of the woodwork … more than the vape pen.”
Transdermal technology isn’t new, but it’s relatively new to the cannabis industry. It emerged in the late 20th century with nicotine and fentanyl patches, and it crossed over to the cannabis industry in 2013. Mary’s Medicinals demonstrated the very first transdermal THC patch, which had been 10 years in the making, at the first High Times US Cannabis Cup in San Francisco. When it’s placed on a venous part of the body (an ankle or inside the wrist), the patch is activated by body heat to begin releasing controlled doses of medication directly into the bloodstream, bypassing the liver and gastrointestinal tract.
Dr. Noel Palmer, Mary’s chief scientist, likens the delivery of THC, CBD and other cannabinoids through timed-release transdermal patches to “smoking, but much slower.” And because the cannabinoids don’t get broken down in the liver or digestive system, he added, they deliver more potent medicine.
Mary’s Medicinals, a $6 million Denver-based company with 26 employees, develops cutting-edge approaches for isolating, manufacturing and delivering medicinal cannabis. It’s the leading producer of pharmaceutical-grade cannabis products, now available at about 1,000 retail outlets in Colorado, Arizona, Oregon, Nevada, Vermont and Washington. Even more significantly, Mary’s was awarded a US patent for its transdermal cannabinoid-gel technology—a cannabis-industry first.
“We found a niche for people who were curious about cannabis therapeutics or wanted alternative delivery mechanisms,” Palmer said. “That’s where we formed our reputation and our name, and that’s where we’re really doing good.”
Palmer is most enthusiastic about Mary’s gel pen. According to the patent, the gel is composed of a surfactant (lecithin organogel), a cannabinoid such as THC or CBD, and sometimes an exogenous terpene that are “diffused into the bloodstream of the user” to treat pain, nausea and emesis, convulsions, muscle spasm, inflammation, depression or cachexia. Every time a user squeezes the pen, it delivers gel with 2 milligrams of THC or CBD, which are quickly absorbed into the bloodstream when the gel is rubbed onto the skin. It’s an especially welcome breakthrough for chemo patients experiencing nausea.
Mary’s was also one of the first manufacturers of cannabis-infused products in Colorado to employ in-house HPLC (high-pressure liquid chromatography) testing equipment to separate, identify and quantify cannabis compounds. The company tests for cannabinoid and terpene levels, as well as for pesticides and other adulterants, several times: first when the cannabis comes into the lab; a second time when it’s distilled into oil using old-fashioned alcohol (because, as Palmer said, “you don’t need a Ferrari to drive around the block”); and a third time when it’s formulated into products. No product goes out the door until internal testing has assured that it will pass state-mandated third-party tests for cannabinoid levels and pesticides.
“You have to test,” said Mary’s chief executive officer, Liz Honderd. “You have no way of knowing if you’re accurately dosing without testing. That’s why our internal testing is above and beyond.”
In the cannabis industry, companies are spending a lot of money and brainpower to make guaranteed dosage the new norm. At the Ebbu labs overlooking Floyd Hill west of Evergreen, Colorado, scientists have spent two years and $9 million developing proprietary pharmacological technology that extracts, isolates, and recombines cannabinoids and terpenes to deliver predicable, consistent results. Unlike Big Pharma’s mono-pharmacological approach of relying on single, isolated compounds, Ebbu—the name purposely means nothing and was chosen from a list of open domain names—is playing with poly-pharmacology. Its scientists use custom SuperSep 1000 chromatography equipment from the global pharmaceutical-technology provider Novasep to isolate and purify up to 18 different cannabinoids at the same time so they can be combined in new formations.
Led by the company’s chief scientist, Dr. Brian Reid, the Ebbu team grows live cells with a variety of special human receptors that respond to THC, CBD and other cannabinoids, then uses delicate equipment to measure the biological reaction when different combinations of cannabinoids and terpenes are introduced to these cells. It’s Dr. Frankenstein meets the “entourage effect” (the theory that cannabis is most effective when all of its cannabinoids, terpenes and other compounds remain intact). “This is the real fun, and where we diverge from what pharmaceutical companies do,” said Reid, who left the University of Colorado to build and run Ebbu’s labs. “We take all the things Mother Nature has given us and mix and match them to a different effect. We’re taking apart the entourage effect and recombining it to make consistent products with distinctive experiences.”
“The ‘entourage effect,’ to this point, has been this magic voodoo term,” added Ebbu CEO Jon Cooper. But they mean to demystify it.
To that end, in November of 2016, Ebbu introduced Bold Genesis, a vaporizer and patented high-potency cannabis oil that promises to deliver “predictable and reliable consistency,” according to the company’s press release. By isolating various cannabinoids and recombining them to create a pharmacologically consistent product, “we believe we have created something that is entirely new,” said Ebbu scientist Jon Martin. The Ebbu team has identified three cannabinoids and three terpenes that enhance THC’s effect at cannabinoid receptors in the human brain to induce “a long-lasting, potent but clearheaded experience ideal for any type of social setting,” Martin continued.
According to Cooper, Bold Genesis delivers a lucid and functional high: “Whatever you’re doing, you just want to do more of it.”
Ebbu’s scientific team, led by four PhDs with deep roots in the commercial-drug industry, has also been collecting data from a pool of about 500 volunteers for a premium oil line called Feelings, which will offer formulas like “Chill,” “Energy,” “Create” and “Bliss.” They’ve built “a huge data set of how each formulation works, from early dose to late dosage,” Cooper said. Ebbu has developed three prototypes and plans to launch Feelings later this year.
In the company’s R&D lab, lined with vials of concentrated cannabinoids designed to deliver specific moods or soothe certain aches, scientists are developing water-soluble solutions and other innovative delivery mechanisms that can offer cannabis products in single-serve, premeasured doses to be mixed with liquid or dissolved under the tongue.
Ebbu is also innovating out of necessity. In order to make many of its formulations, the company needs hard-to-find cannabinoids like CBG and CBD-V (the ones most people have never heard of). To meet those needs, Ebbu’s genetics division is breeding plants high in such rarefied cannabinoids and terpenes.
Cooper won’t say much about the company’s work with genetics, except that Ebbu’s scientists are also working on plants that will increase the yields of these harder-to-get cannabinoids. “THC and CBD are commodities now, but there’s a lot of important potential value in other compounds,” Cooper said. “The problem is, you can’t get them. We’re working on a number of things that would allow us to access these other compounds.”
For Ebbu’s purposes, the individual traits that have traditionally made cannabis strains attractive no longer apply. “We don’t really care about strains, but more about how much CBG and CBN we can get out of plants,” Cooper said. “It becomes more of a math formula at that point.”
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