Two of L.A.'s fastest-growing sectors, tech and cannabis, have collided to get the ball rolling on innovations that likely will have a big impact well beyond the world's largest cannabis market in Southern California.
While the combination of federal law and the previously freewheeling nature of the L.A. cannabis scene kept many entrepreneurs out of the cannabis space, being in the heart of the now-regulated California and global cannabis industry is proving too good to pass up. Previously cannabis technology was a phrase synonymous with San Francisco and Denver, but the tech minds of L.A. are ready to stake their claim a bit closer to home.
Recently CBRE, the world's largest commercial real estate services and investment firm, gauged the state of the L.A. tech workforce along with 50 others across the United States. Though L.A. is in the middle of the pack overall, it ranked a lot closer to the top when it came to growth. L.A. was home to the largest rise in tech jobs in the country last year. The only place on the continent that did better was Canada's capital, Ottawa. And that was despite the comparative expense of running a tech company in L.A. CBRE's analysis found L.A. to be the seventh most expensive market to run a 500-person tech company needing 75,000 square feet of office space.
The folks at the California Cannabis Industry Association are watching the L.A. tech wave make its way into the business.
“My feeling on Los Angeles is that it really could be a hub for innovation,” CCIA communications and outreach director Josh Drayton tells L.A. Weekly. He also noted the medical innovation happening at various SoCal universities as proof that local catalysts exist for that kind of big tech.
The biggest challenge for the continued growth in the sector? Drayton points to ongoing licensing issues. But those same challenges present an opportunity to L.A. technologists to create new solutions.
According to Drayton, the membership expansion in Southern California for the industry's oldest statewide trade group is a clear indicator that the pot technology scene is less attached to its original incubator the Bay Area. But many of the most innovative minds will face unique regulatory challenges wherever they end up in California, especially if they need to put hands on the plant in-house for R&D purposes.
“I think being a tech company is very challenging both inside and outside the cannabis industry,” Drayton says. “Tech platforms have become a part of our everyday life, for good and for bad. I think across the board we're trying to figure out what role they could play, should play, and what responsibilities they have.”
Drayton referenced Facebook's Mark Zuckerberg testifying in front of Congress. Never mind the Russians, imagine an even scarier situation where user data at a dispensary was breached in a trackable way against something like a driver's license number.
As for the still unknown regulatory challenges pot tech will face in L.A.?
“I know they're taking it slow,” Drayton says. “But I do think there is a desire for L.A. to do this right. They have a great leader in Cat Packer [executive director of L.A.'s Department of Cannabis Regulation], who is very thoughtful in going through all the nuances. So I'm cautiously optimistic about the future of cannabis in Los Angeles.”
Paragon founder Sam Zartoshty has found himself at the crest of the L.A. pot tech wave over the last few years while working to develop a staffing solution for the industry and leading the popular “Blunt Talk” series, which brings together some of SoCal's brightest weed industry minds for Ted Talk–style presentations. Zartoshty did a lap through Berkeley as part of Canopy accelerator's 2016 Berkeley class, which enlightened him on the experiences of developing a platform in both markets.
“A lot of people in this industry just aren't ready for new technology. Unless they really need it right away, like the track and trace system and all that. But we're creating recruiting technology, and it's really hard to get people to take the time out of their day to create a profile,” Zartoshty says.
Besides convincing operators who not too long were scared of getting locked up to use new tech, there are other issues once your foot's in the door, as Zartoshty sees it. “You have no idea how hard it is to get a job description from a legacy operator. Most of the corporate people always have one ready to go, but there aren't too many of those in L.A.,” he says.
Zartoshty has led Blunt Talk for the past two years, and credits the general enthusiasm for both cannabis and tech in L.A. for its rise in popularity.
“Our main advertising for Blunt Talk started through the Los Angeles Cannabis Tech Meetup group. We created that group and it grew organically to 1,800 members. We get a ton of people from the tech industry who are just interested in cannabis, getting a job in the industry or starting a company,” Zartoshty says.
One of the most notable trends he's seeing is the rise of blockchain technology in the cannabis space. There are tons of folks trying to integrate the tech into the inventory supply chain. We asked Zartoshty if that kind of tech was over the top in an age where so many proven inventory logistics mechanisms could be integrated from other industries. “I don't want to talk down about what anyone is doing, but it's definitely overkill. At the end of the day, I think there is going to be one solution,” he says. Zartoshty thinks the fact that hundreds of people are working on blockchain inventory controls will result in a higher-quality product in the end but it's going to take a lot longer.
When he first headed north for the accelerator program in Berkeley, Zartoshty says, he was focused on being in the heart of the regulated cannabis industry. He would spend the first few months saturating himself in the cannabis scene before spreading his wings.
“What I learned is the Bay Area cannabis community is a lot harder to break into than the L.A. cannabis community. What I felt like in Berkeley? I felt like an outsider. It's a lot harder to build relationships in Oakland and San Francisco than it is down here,” Zartoshty says.
After his rough start in pot, things would go a lot better on the Silicon Valley side of things for Zartoshty.
“They were a lot more open to helping me out. They really liked the idea of helping me because they found the cannabis industry interesting. And I got a ton of great advice from going outside of cannabis into Silicon Valley,” Zartoshty says.
Another SoCal-born pot tech mind who came home after a lap through the Bay Area is Eaze founder Keith McCarty. Eaze's consumer-facing platform — which allowed permitted dispensaries to deliver under the Eaze brand as Eaze handled the back-end tech — made waves as it expanded from San Francisco. Now back home, closer to his roots, McCarty hopes to have similar success connecting brands to licensed retailers with his new effort, Wayv, which has planted its flag in Silicon Beach.
“We're really focused on the logistics,” McCarty tells L.A. Weekly. “There are a lot of additional complexities in this very quick-growing industry, all the new regulations that are coming out and ever-changing. And we feel the logistics through technology is really the only way to scale in the way that these brands and retailers need to.”
McCarty notes that's not some random hypothesis but a result of the experiences he had in his role at Eaze. Even before the challenges of the legal market, McCarty saw how much trouble some people had keeping their shelves stocked.
“I think what we're really trying to solve is not only streamlining the process through the technology but layering the compliance features so that as they're navigating through the technology, it's just working and they don't have to worry about compliance at all. It just happens automatically,” McCarty says.
We asked McCarty what it's been like developing Wayv in L.A. after a decade in San Francisco. When he first got to San Francisco, most of the startups in the area weren't located in the city, but as time passed the number soared and presented the challenges of what became one of the most absurd commercial real estate markets in the world.
“If I wasn't in cannabis, I would probably still be in the Bay Area,” McCarty says. “But because L.A. is the biggest market in the world, and also because Silicon Beach has come along so much with Bird and other companies popping up, I just think there is an incredible amount of talent. Much more so than 10 years ago, when I made the decision to move.”
McCarty said both cities are amazing but, at this intersection of time and the cannabis industry, L.A. is where he needs to be. As for the rest of the L.A. pot tech scene?
“I think people had the same idea we did — why would you not be in L.A. if you're going to be in the cannabis industry? There is a lot of osmosis for tech in Silicon Valley. In L.A., specifically Silicon Beach, there is a lot of osmosis for cannabis as well as tech.”