As the cannabis industry grows, people and companies from other trades are rapidly migrating toward it. From Fortune 500 execs to former politicians, and from banks to beer makers, smart money seems to want a piece of the green rush.
However, it is not usual to hear that a cannabis-focused company is venturing outside of the cannabis arena. Yet, this is what CannaRegs, co-founded by Amanda Ostrowitz, former regulator at the Federal Reserve Bank of Kansas City, is about to do.
As Ostrowitz revealed exclusively today, Regs Technology – or RegsTech for short, the parent company to CannaRegs, which operates a data platform that provides comprehensive cannabis-related legal data, including rules and regulations from municipal, county, state and federal sources, just closed a $2 million funding round. Money will be used to expand the company’s services and features, as well as to take a leap outside the cannabis industry. The raise will be announced later on Tuesday.
About The Company
RegsTech is a legal technology platform for highly regulated industries that are hyper-localized in nature. Its first product offering, CannaRegs, is a subscription platform that enables cannabis operators, law firms, investors, real estate professionals, consultants, and governments to track cannabis regulation and policy in real-time. Among its customers are pot behemoths Caliva (which recently received investments from former Yahoo CEO Carol Bartz and NFL legend Joe Montana) and Cresco Labs, the City and County of San Francisco, the City of Sacramento, and law firms like Akerman.
Back in 2017, publicly traded MassRoots almost acquired CannaRegs for $12 million. However, the deal fell through after MassRoots’ CEO, Isaac Dietrich, was ousted by his board. While Dietrich regained control of his company only a few days after the ordeal, the whole saga stunted the M&A effort in relation to CannaRegs.
Since that moment, CannaRegs has been focusing on expanding its features, clientele and funding. In a brief chat held Tuesday, CEO Amanda Ostrowitz told me that, once her team started building out the company’s local law platform, they realized they were “the first to comprehensively track municipal law, and that there was a similar need in other highly regulated hyper-local industries.
“My theory was quickly confirmed as top executives at the big law and lobbying firms repeatedly stated that local law is the Holy Grail,” she said.
Ostrowitz believes the demand for regulation technology already exists in many markets – and her company is ready to fulfill it. It is her view that everything Regs Technology is building in and for the cannabis sector can be scaled seamlessly for any other highly regulated, hyper-local industry.
“Clearly lots of companies have taken a stab at local law before but we are the first to figure it out,” the young entrepreneur added. “It’s a much harder task than state or federal law. There are more than 40,000 local governments in the U.S. and each one puts out information in their own unique way, with varying rules, timing, and complexities. We are uniquely positioned to capitalize on the complexities this local level data.”
Interested in hearing what other big cannabis-focused tech companies thought about RegsTech, I reached out to Jeremy Siegel, senior director of compliance at weed delivery giant Eaze. Siegel explained being compliant “from top down is of paramount importance” for the company. “Our compliance team uses Cannaregs to ensure that it has access to the most up-to-date and accurate local regulations,” he said, delivering a vote of confidence in Ostrowitz’s project.
About The Raise
Beyond the interesting transition toward non-cannabis clients, this $2 million round was noteworthy because it was led by two of the leading investment firms in the cannabis industry: Phyto Partners and Panther Opportunity Fund. Other high-profile venture capital investors also chipped in.
The company’s banker, Gregory J. Berlacher, president a chief executive officer at Emerging Growth Equities, Ltd., said: “As a technology and healthcare investment banking firm, who reviews hundreds of companies per year, we were very impressed and excited with Regs Tech’s platform technology approach, their execution of the business plan and the laser focus of the team. These three attributes are rarely seen in an organization at the stage of development where Regs Tech resides.”
By means of conclusion, Jordan Tritt, principal at Panther Opportunity Fund said, “As a cannabis venture fund focused primarily on ancillary investments, we look to maximize our returns by investing in companies that can penetrate multiple markets, including cannabis. Regs Technology is uniquely positioned to serve a variety of highly regulated, localized industries, creating the potential for a significant exit as a legal tech software provider.”