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Startup Eyes Cannabis Industry’s Growing Software Problem

Startup Eyes Cannabis Industry’s Growing Software Problem
By Andy Gordon
Date June 17, 2021
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Cannabis use has been exploding across the country. But it’s a disjointed market. 

Cannabis operators rely on software programs for their team communications, distribution, compliance documentation and more. And these programs are a tangled mess with no cross-communication. Operators typically spend $5,000-to-$7,000 a month on a half-dozen or more single-purpose programs

There’s a huge need for a cannabis Software-as-a-Service (SaaS) solution. And Bloomstack is addressing it. 

Bloomstack takes all of the systems and platforms cannabis operators are already using and migrates their data into one beautifully integrated platform that streamlines operations and processes, facilitates compliance and increases organization on the backend. 

Bloomstack’s impact on businesses is remarkable. Operations become smoother and quicker. Customers are happier. And sales increase. 

3 Perfect Advantages

Bloomstack is both the right company at the perfect time… and the perfect company at the right time. 

It’s the right company at the perfect time because the legal stakes have never been higher for cannabis companies. 

State-by-state legalization has been painstakingly slow but is expected to pick up. States that have already greenlit legal marajuana use are accelerating their approval of retail and medical outlets. And federal restrictions are expected to be loosened — if not entirely lifted — within the next two years.  

But with that growing legal acceptance comes increased regulations. Governments are beginning to implement “seed to sale” tracking of every single cannabis plant grown.

So for cannabis companies, compliance is no longer an option — it’s a requirement. In addition to saving cannabis companies significant time and money, Bloomstack helps them stay compliant and mitigates their risk of being shut down.

It’s also the perfect time because cannabis operators — from growers to processors to transporters to retailers — are currently making the transition from small mom and pop businesses to larger operations. Using a dozen different software programs is an unwieldy and costly roadblock to that growth. 

The endless documentation of various operational steps has made compliance THE major obstacle to growth. And that makes Bloomstack the perfect company at the right time because it’s the only one offering an effective end-to-end solution. These are just some of the things that Bloomstack’s platform does for its cannabis customers…

  • Tells them how much inventory they have to sell with a valid COA (Certificate of Analysis)
  • Documents their actual cost of goods sold to keep them audit-ready 
  • Captures changes made to compliance documents 
  • Processes sales returns while delivering to a dispensary and re-manifests returns 
  • Locates shipping documents for different invoices.

And Bloomstack offers much more. Here are three advantages that make its value proposition so attractive.

It’s a pick-and-shovel play. Brand-new markets like cannabis and hemp can offer unusually large opportunities. But brand-new markets that are also heavily regulated can offer even bigger opportunities. 

Think of the pharmaceutical industry. In its modern form, it came into being with the passage of the 1906 Pure Food and Drugs Act. Since then the industry has spawned a slew of giant companies, including Johnson & Johnson (with a $432 billion market cap), Roche Holding ($328 billion) and Abbott Laboratories ($195 billion). 

For investors, it was difficult to predict which companies would grow into behemoths. As a pick-and-shovel play, Bloomstack avoids that particular conundrum. 

Bloomstack’s software works just as well for non-cannabis companies. Several of its current users are outside the cannabis space. But choosing the cannabis and hemp sector as its first vertical is a brilliant move. The industry has explosive growth potential. 

And Bloomstack will help turn that potential into a reality by enabling cannabis operators across the board to grow and stay compliant.

It has spot-on timing. Bloomstack has been working on its software solution for five years. And its timing couldn’t be better. 

It’s now wrapping up its beta phase with 43 existing customers and is onboarding 15 more. Most of them are paid users. Bloomstack’s annual recurring revenue is nearly $600,000. 

But the serious revenue generation begins this summer. Within the next six months, Bloomstack expects four-to-eight companies to sign annual contracts of $110,000 each.

It has a super-defensive moat. End-to-end solutions are very hard to build. In fact, Bloomstack had to delay its product by a year. It was originally going to go live at the beginning of this year, but the company realized its product needed a more thorough build-out to document certifications and onboard at scale. 

The wait was more than worth it. Its product is more polished and versatile. It’s putting the finishing touches on a new and much better user experience. Its lead on the competition is now virtually insurmountable. And that increases its chances of being bought out by one of its bigger competitors… at a generous valuation. 

Thinking Bigger

Bloomstack founder and CEO Eric Delisle has understood the value proposition of his company for a long time. A number of software companies targeting some of the areas Bloomstack is addressing have attracted sizable investments or have been purchased by larger companies at premium prices. 

Bloomstack itself recently received a buyout offer. But Eric turned it down. 

He’s thinking much bigger… as he should. 

Execution is key. And this is an area where Eric excels. He has a history of pushing innovation, leading teams, building businesses and raising money. He’s done an admirable job so far. 

Bloomstack is raising $2 million ($1 million of which is through Bloomstack’s crowdfunding raise on Wefunder) at a $9.5 million cap. It’s a bridge raise needed to jumpstart serious revenue generation prior to a Regulation A+ raise later this year (at a targeted valuation of $35 million). 


Deal Details
Startup: Bloomstack
Security type: Convertible Note
Valuation (cap): $9.5 million ($8.5 million for investors who contribute to the first $500,000)
Minimum investment: $100
Where to invest: Wefunder
Deadline: April 30, 2022


How to Invest

Bloomstack is raising up to $1.07 million in this round of funding on Wefunder. You’ll need to sign up for an account there if you haven’t yet.

Once you’re signed in to Wefunder, head over to the Bloomstack raise page. Now enter the amount you want to invest and click the red “INVEST” button on the right-hand side of the screen. The minimum investment on this deal is $100.

Risks

This opportunity, like all early-stage investments, is risky. Early-stage investments often fail. Bloomstack will likely need to raise another round of funding in a year, if not sooner.

If it executes well, this shouldn’t be a problem. But that’s a risk worth considering when investing in early-stage companies. The investment you’re making is NOT liquid. Expect to hold your position for five to 10 years. An earlier exit is always possible but should not be expected.

All that said, I believe Bloomstack offers an attractive risk-reward ratio.

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