Cannabis startup Fyllo just raised $30 million as mainstream investors place more bets on tech
As cannabis legalization surges ahead in the US, mainstream investors are looking for new ways to bet on the industry.
Fyllo, a cannabis software company launched in 2019, is the latest beneficiary of the trend. The company closed a $30 million Series B round on Tuesday, just 8 months after raising a $28 million Series A.
Over the past year, half a dozen states have passed cannabis reform, creating new markets for what could become a $100 billion industry. Federal leaders like Senate Majority Leader Chuck Schumer have emphasized the need for national legalization of marijuana, too.
Mainstream investors are gradually warming up to the idea of betting on cannabis-tech companies, which don't touch the plant directly but help service a multi-billion dollar industry as its navigates complex regulatory hurdles while processing significant sales.
Most mainstream investment firms can't invest directly in cannabis companies, since THC, the chief psychoactive compound of the plant, is illegal at the federal level in the US. Cannabis tech companies provide a loophole for those who want in.
Founded as a data and compliance software startup for the cannabis industry, Fyllo has now become a resource for mainstream brands, providing digital marketing, data, and compliance services to businesses looking to scale.
On top of servicing cannabis clients like Columbia Care and Grassroots that touch the cannabis plant directly, CEO Chad Bronstein told Insider that major brands in beverage and liquor, CPG, and retail regularly use Fyllo to acquire data on cannabis consumers.
Bronstein told Insider last year that the company was looking to expand into other highly regulated industries, like E-sports and online gambling. Fyllo has since acquired clients like consumer products goods company Clorox.
Its investor base — virtually all cannabis-focused venture capitalists before — is also expanding to include mainstream participants. JW Asset Management and Sol Global co-led the Series B.
Bronstein told Insider that 60% of the money raised in the latest round came from non-cannabis investors, mostly family offices.
Bronstein said part of the company's growth can be attributed to its entry into other lines of business.
"I would say that cannabis is the forefront of how we created our uniqueness," Bronstein told Insider. "We always said, if we could figure out the cannabis side, we could figure out any other vertical, because cannabis is so challenging."
"We always like to say we're like the Salesforce of highly regulated industries," he added.
Bronstein says this is because Fyllo has specialized sales teams that each target different groups of clientele. Its legal sales team sells to law firms while its retail team works with dispensaries; Fyllo's data sales team targets agencies and mainstream brands.
The startup declined to disclose its valuation but says it has several hundred clients and revenue is in the "high millions" of dollars.
Fyllo recently acquired CannaRegs, a regulatory compliance company, and DataOwl, a marketing and point-of-sales solutions business. Some of the funding could be used to fuel more acquisitions, Bronstein said, though his main focus will be on expanding its team to 200 people by the end of the year and growing its product offerings to clients.
Over the past year, Bronstein says Fyllo has tripled the number of its employees and now employs around 130 people.
"We're doubling our engineering staff, we're doubling our sales operations," he said.
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