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Cannabis, Inc.

Startups race to corner the market on medical marijuana

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CLICK AND TOKE With the growing legalization trend, the merging of medical cannabis, technology and investment dollars was inevitable.
  • CLICK AND TOKE With the growing legalization trend, the merging of medical cannabis, technology and investment dollars was inevitable.

For years, David Hua encountered problems when he ordered medical marijuana deliveries. Online menus were often outdated. Ordering over the phone took forever. Sending requests by email risked compromising private data. And delivery dudes were notoriously unreliable.

"Sometimes it took an hour, sometimes longer, sometimes shorter, but you never really know," he says. "The larger windows made it difficult to schedule your day. But since you're ordering medicine, you'd wait just like you'd wait for the Comcast guy."

Hua, who has used cannabis for the past five years to relieve chronic neck and shoulder pain, knew there must be a way to improve service, especially in the Bay Area, where one can order everything from takeout to manicures on demand.

So in 2014 Hua launched Meadow, a one-hour delivery service for more than 30 Bay Area pot clubs. Customers order by smartphones and get estimated delivery times with real-time tracking updates. Online menus update inventory. Patient information is stored on servers compliant with the Health Insurance Portability and Accountability Act. Meadow also offers video chats with doctors who can prescribe cannabis, and software to assist collectives.

Known as the "Uber for medical marijuana," Meadow became the first pot-related startup to land funding from the Mountain View–based seed accelerator Y Combinator. Meadow has joined a burgeoning medical marijuana industry, which has been dubbed the "green rush" but might as well be the modern-day gold rush, given its growth and profitability.

"Just as the gold rush once needed tools such as pick axes, shovels and jeans, now the tools are online ordering, compliance, streamlining their operations and making sure best practices are followed," Hua says.

Legal cannabis sales topped $5 billion in 2015, according to industry research firm ArcView Group, and the cannabis sector is expected to reach $6.7 billion this year. By 2020, the legal cannabis market could reach nearly $22 billion in sales.

"In Silicon Valley, entrepreneurs and investors are always looking for the next thing that technology can disrupt, the next marketplace where there's an incredible growth curve that they can participate in," ArcView CEO Troy Dayton says. "In that way, the cannabis industry is seen by many as the next great American industry."

But unlike other industries, Dayton notes, cannabis will be driven less by technological innovation or customer taste than by changes in public policy. In 1996, California became the first state in the country to legalize medical marijuana.

Since then, 24 states, as well as Washington, D.C., have decriminalized the drug to varying extents. California has yet to legalize general adult use—a ballot initiative is in the works after a 2010 effort fell 7 percent short. Meanwhile, 21-and-over adult use is now legal in Washington, Colorado, Alaska, Oregon and the District of Columbia.

The nation's shift toward legalization—58 percent of Americans now support it, according to Gallup—has opened the doors to a growing cannabis industry in California. Gov. Jerry Brown signed off on a slew of new regulations surrounding medical marijuana last fall, giving businesses and buyers more clarity on how to operate above board.

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