Representing one of the most vital components of the cannabis ecosystem, seed-to-sale is arguably the hottest market segment in the cannabis industry. And, one company has been making a big splash in the industry! With a seed round of funding that was led by Snoop Dogg’s venture capital firm (Casa Verde Capital), Trellis Software has quickly emerged as one of the hottest startups in the cannabis industry.
Given the tapestry of regulations that vary significantly from state-to-state (and country-to-country), coupled with the fact cannabis remains federally illegal, maintaining compliance as a cannabis business owner can be a daunting task. The goal of seed-to-sale platforms to help businesses stay compliant. But, given the unique needs of distinct businesses within a diverse supply chain, seed-to-sale has become highly fragmented leading to confusion and overwhelm among many cannabis business owners trying to understand the differences between providers and how they should decide on a solution.
Fortunately, we had the opportunity to sit down with Pranav Sood (founder of Trellis Software), to help even the most tech-challenged business owner make sense of seed-to-sale.
In this interview, Pranav shares his insights as an entrepreneur in this exciting space. Pranav provides essential foundational knowledge on what seed-to-sale is and why it’s so vital to our industry. He addresses some of the most common questions business owners in the cannabis space have about seed-to-sale, such as:
- What is seed-to-sale? Is it different from track-and-trace?
- Why is seed-to-sale so important in the cannabis ecosystem?
- What was the inspiration for Pranav to found one of the hottest startups in the cannabis industry
- Lay of the Land: What does the cannabis supply chain look like and what business segments comprise the supply chain?
- What should I look for in a seed-to-sale system and how do I choose the right solution for my business?
What is Seed-to-Sale?
Before we get started, let’s define seed-to-sale. (We’ll take a deeper dive in the interview.) In the simplest terms, seed-to-sale software refers to cannabis tracking and compliance platforms that help cannabis businesses across the supply chain — from cultivation to retail — maintain compliance with local regulatory agencies.
Seed-to-sale also helps regulatory agencies oversee, manage and enforce compliance. From a consumer perspective, it helps protect customers against contaminated or mislabeled products.
[The interview was edited for length, but you can listen to it in its entirety on NerdCast, a science and technology podcast. Listen to “S01E03 Entrepreneur & Founder of Trellis, Pranav Sood, Talks Compliance & Seed-to-Sale” on Spreaker.]
Jeremy: Pranav, great to have you on today as a guest! Let’s start off with a little bit of your background. Share with us a little bit about your personal background and then what inspired you to develop Trellis’ seed-to-sale platform:
Pranav: Sure. I come from a business background. I went to a school in Canada called Ivey School of Business and once I went through that, I worked for Deloitte doing corporate strategy consulting for two years, then I launched a small venture. I took my venture to Dragons’ Den, which is like the Shark Tank of Canada. I went on the show got a deal, so I was building this business while working at Deloitte. I left both around the same time in 2013.
I got involved with Trellis when the new regulations came out in Canada, which was around 2014. The new medical regulations essentially commercialized the industry — from a homegrow model where you get a license to grow, towards a federally licensed commercial model. It is a very unique model where licensed producers not only produce the product, but they also sell directly to the patient. And I knew this was pretty unique in that you don’t really see vertically integrated markets in regulated industries like that.
Because I was just interested in new policy, I read the regulations. I basically knew what the old system was, now I know what the new system is, and it was such a vast difference that I knew there weren’t any solutions out there that would be able to handle or manage the process.
There’s no real other industry I’ve seen that combines manufacturing, agriculture, healthcare, retail, distribution, all in a vertically integrated market, and this is the responsibility of the licensed producer. I knew, obviously, there wouldn’t be any tools in place to help manage something like that.
I knew someone that was in the industry, asked them if they were applying for a permit and they were, and then together we confirmed there weren’t any tools. We partnered together to build something very custom to the industry and to their workflows. After that, we essentially scaled and worked with several other clients.
I would say 95% of our software was really built based on feedback. We have an idea of how things work or could work. But, It’s really our clients that use it in the field who give us ideas on how technology can help mitigate or even eliminate their pain points.
After expanding out in this [California] market, fine-tuning the product, we’re now in super growth mode. We’ve been growing very quickly, month over month for the end of last year, and moving into the beginning of this year. We’ve got some major projects that we’re working on coming out over 2018 as well.
Jeremy: You raised $2M in your seed round with the investment led by Snoop Dogg’s VC firm, Casa Verde. How did that happen? How did it help you (beyond providing capital)?
Pranav: Coming out of Gateway’s Accelerator program, our next step was to raise our seed round and build a team that can help scale the business. We were introduced to Casa Verde through a few different sources and after a thorough due diligence process, CVC provided a term sheet that would set the stage for the round. Being one of the stronger investment opportunities in the industry, we were able to garner investment from several strategic investors. Outside of the capital, we are excited about working with our investor group that has expertise in cannabis, technology, and institutional finance.
Jeremy: You started in Canada, and now you’re now in Oakland as part of Gateway, a cannabis-focused incubator. How’s the experience been working in that sort of ecosystem?
Pranav: We did start the company in Canada, where our development team continues to reside. I moved to Oakland in May 2016 for Gateway and graduated in September 2016, so we would be considered alumni. We were actually part of the first cohort ever and proud of it. The experience was tremendously impactful to our success. It gave us the opportunity to connect with and integrate into the Californian cannabis community and arguably in the birthplace of the cannabis movement, Oakland. Our office is now in downtown Oakland, neighbors with Oaksterdam. We met our first California clients through Gateway, who we collaborated with to fine tune our software. The rest was history.
Seed-to Sale Defined
Jeremy: So seed-to-sale, it’s a huge buzzword in the cannabis industry. Most people connected to the legal cannabis industry hear the term constantly. But, I don’t know that everyone fully grasps what exactly it means. Most people have a rough idea what it is, but for the edification of listeners or readers, can you explain in simple terms, what seed-to-sale is and why it’s so important?
Pranav: Yes, for sure. It’s basically the process of bar coding or using some sort of unique identification process to identify any cannabis material from start to finish. So when you think of cultivation, that could be from seed, that could be from a clone. But, essentially, you need a system in place that can track and trace your product from beginning of production to the end. In our case, when you bring in seeds or clones into the system, it gets an inventory ID, then you create batches of plants. Each plant gets a plant’s ID, and those IDs are transferred through the system with scanners until the plants get to flowering.
At that point, you create a harvest batch which gets its own unique identifier, and then you record how much yield you got in that batch and what plants went into it. All along the way, you’re recording any transformation of the actual product, and you’re assigning a unique identifier. By the time you get to the end of it, if you wanted to you could scan your final packaged product and go all the way to the supply chain and be able to identify the source of it. Seed-to-sale generally gets a bad rep in the industry because it can be cumbersome. That’s why people like us exist to make it easier. But, the value of it is really … from my perspective, public safety. Think of a recall scenario, right?
These are actual scenarios that people in Colorado, in Canada, etc. have already faced under a regulated market. You need to have a sound system in place where it’s keeping track of the transformations of your product, and being able to isolate where the problem is, what batch that came from and then be able to identify where products from that batch are. Whether it’s currently on site, or it’s been sent out in an order, and then initiate a whole collection and destruction process. You can only go to that extent by having a good system in place, and that’s where seed to sale and track & trace comes from.
Jeremy: What’s the difference between seed-to-sale and track-and-trace. Are they interchangeable?
Pranav: Very interchangeable. The state basically calls it a track & trace. Seed-to-sale refers to compliance-focused systems that encompass managing the inventory from the start of production all the way through the end sale, to the customer and being able to track it all the way back. But, for the sake of this discussion, it’s interchangeable.
The Cannabis Supply Chain
Jeremy: Now, within the cannabis ecosystem, from cultivation to retail, how do you characterize the segments within the supply chain. Who all uses seed-to-sale?
Pranav: Everyone. The best way that I’ve heard it described is segmented into four categories. You start with cultivation, extraction, distribution, and retail. Then you’ve could have a couple ancillary services along the way, like processing, labs for testing, and technology. Generally, the supply chain is cultivation, extraction, distribution, and retail. Along the whole supply chain, every player needs to be able to track their inbound material, what they’re doing with that material, and then where that material goes.
So for cultivators, where did that seed or clones come from? Are they from existing plants, or from other vendors? Then it’s tracking harvests and their sale to a distributor. The distributor would sell to the manufacturer who uses the trim. But, without the regulated distributor requirements, cultivators could likely sell directly to the extractors. Manufacturers log the trim coming in and the oil going out, ID’ing where it came from, how much there is, and tracking everything in between. That oil is then sold back to the distributor to go to the dispensary.
The distributor would sell to the dispensary and the retailer needs to track what’s coming in, including what the lot IDs / Batch IDs are and where it’s coming from? And then, who the retailer is selling it to. If there’s a recall scenario retail needs to identify the source, and if the source is the distributor, for example, they’d have to look into it and identify their source. If it ends up being the cultivator, then the cultivator has to figure out what ended up happening with that batch. Where it’s all at, and work with other players to manage the recall process. But, that’s essentially the whole benefit of track and trace being able to identify a product from start to finish, even though it’s moving across the supply chain.
Jeremy: Within the supply chain, I’d imagine that each of these segments has very unique needs. Some solutions would probably be better for companies operating in let’s say retail, while other solutions would be better for companies that aren’t consumer facing.
Pranav: Yeah. From our perspective, we actually see it in two segments. B2B and B2C. Everything B2B, we found to be fairly similar standards, in terms of the inventory tracking, and seed to sale requirements. The key differences are in the workflows between production and retail. For example, for cultivators, we have a whole set of cultivation modules to track, plants, and the different stages. How many are being destroyed? How many have been transferred? Etc. Then you have your whole harvest module, with specific components that will track the transformation of the product within the harvest process, and that’s where the real nuances come in. Then once you have that bulk product, distribution will take it to package, or pass it through to extraction who would extract and fill. We made dedicated modules for each of these areas that fit into the broader supply chain.
We found the requirements across the supply chain to be pretty much the same outside of a few specifics in each module that track the workflows of the conversion of that product. Inventory management stays the same, but the workflow is very different when you’re talking about retail.
Seed-to-sale is a broad category and we don’t really play in retail. We focus mostly on production and distribution because from the B2B perspective, those workflows tend to be similar outside of the actual transformation of the product, which we build specific modules for: cultivation, extraction, and distribution.
Jeremy: As an outsider looking at the market, the market seems sort of fragmented. It’s like, well, these guys are stronger at features best suited for cultivators, while these guys over here are stronger on the retail side. Given your focus, who do you guys run head to head with most?
Pranav: There are very few people like us that end up doing many parts of the value chain. Most people end up focusing on just retail, which is POS providers, or they focus on distribution or cultivation. We haven’t really seen anyone really target the extraction space specifically. The folks that we end up going head to head against most often are MJ Freeway, for example, or BioTrackTHC. The difference there being these guys are incumbent competitors that have built for early, early regulation.
How to Choose a Seed-to-Sale Provider for Your Cannabis Business
Jeremy: From a business owner’s perspective, what sort of advice would you give in terms of determining what the best solution is for my business?
Pranav: The best advice I would say is for anyone, not just people looking for seed-to-sale, or track and trace software. Look at your options and take a look at everything and take the time to make an informed decision because we definitely help a lot of people in the industry, and we’ve got great momentum in terms of people being really excited about our product. If you think about inventory management or track and trace, it’s somewhat a boring area, but if you can make it helpful, customers are super engaged and excited about the product.
But, that being said, we may not be the right fit for everyone. People are going to look at their software systems in different ways, and they’re going to want different outcomes from their software. So, some folks really like data-centric, and they’re like, “Yeah, compliance is just table stakes, but we need the data, so we know how to operate better, so we know how to become more efficient etc.” That’s the value here and that’s why I’m looking for software while other people are like, “Look, I have to do this for compliance if I didn’t have to, I wouldn’t, but I do have to.”
Depending on what you’re looking for, what you’re budget is. Take a look at all the different options out there, and some will stick better than others, but you really got to look at everything to make sure it’s sufficient.
Jeremy: Perfect. Actually, that’s a great lead-in to my next question. Who would be your ideal customer versus your least ideal customer?
Pranav: We don’t have any least ideal customers, but what our customer base looks like right now, and we’ve been fortunate that this has happened, we’ve essentially got the largest operations in California. I think the reason being is that most of these folks were early adopters. Having large operations, they have more at stake, and there’s definitely a lot more scrutiny, and there’s a lot more to be gained by being fully compliant, first to market in their industry. Those are the folks that went out and did the research, and looked around and saw that there was, and these are the same folks that need to resolve growing pains from scaling.
Our customer base tends to be larger brands, larger volume companies, operations, and definitely, we have a stronghold in cultivation and extraction. We just started focusing on distribution. We have our first initial set off standalone distributors that are using the software, and then we also have customers that stack multiple permits together, so they may have a cultivation permit, but they also have a distribution permit to self-distribute. 80% of our customers end up using the distribution software to either self-distribute or as a standalone distributor.
Those three verticals would be our core, with higher volume folks that benefit from a large set of data and are data-driven. Then on the smaller side, we have a very flexible pricing structure that aligns with the size of the operation and the functions that they’re using. We can scale with our customers and we can manage smaller sized operators all the way to the largest operators in the state. Anyone that cares about their data and that wants to improve their workflow, and their inventory management using technology would be the ideal customer. I guess that’s a long-winded way of saying size doesn’t matter. It’s really about the value you’re seeing coming out of the software.
Seed-to-Sale Competitive Differentiators
Jeremy: You actually sort of answered my next question. But maybe in like 60 seconds, how does Trellis differentiate from its competition?
Pranav: I would say it’s probably a mix of two main things. The first being product, not only regulatory compliance but also very detailed workflow management. We continuously get feedback on how our cultivation software is so detailed and so flexible that it just works plug and play in almost every type of environment for cultivation, and that only happens by listening to feedback and getting those details into the product. By and large, we definitely make a good impression on the ease of use, the intuitiveness, and then the value of the data that the software presents and obviously managing the compliance with the Metrc integration.
It’s table stakes for us. I don’t think anyone would use our software unless that was part of the deal, but it’s that additional gravy on top which is being able to manage my workflow, I’m able to manage my employees, I’m able to see my raw materials , my end products, I’m able to see my fully loaded cost per gram of what I’m producing, so I can make better decisions for my business. Those are definitely key, and then our core belief that customer support and customer service is the driving force of the business.
It’s part of our core values to get feedback, and that’s also the reason why folks end up either switching to us or choosing us over our competitor. Our response times are much higher, we care about the product, we care about people’s opinion and how they’re using the product, and we want feedback. It has gotten to a point where our customers actually get excited about new releases because we incorporate their feedback and they’re like, “Oh, I suggested that and now I’m seeing it in my software.”
Again, I feel that in terms of inventory management, seed to sale, ERP, generally, it’s not something that folks get excited about. So, we’ve been blessed to have a customer base that cares that much and is as excited as we are. I think that really stems from our focus on customer support, being there, being available, and being collaborative and responsive to our customers.
Jeremy: I’m not sure if you can talk about this or not, but I heard you’re coming out with a big new feature that’s not available at all within the industry. Is that something you can share a little bit about, or is it confidential right now?
Pranav: We can talk about it. We’re coming out with our task manager, and then we’re coming out with a few really high visibility integrations with some key partners. So, I’ll keep that on the low, but there’s definitely a lot of collaborations that we’re working on, but I think it’s all with the intent of driving the best user experience for the users and giving them the flexibility to use other systems with Trellis as the backbone of their inventory tracking.
Jeremy: You’re launching your Series A round in mid-2018, right? Have recent statements from AG Sessions impacted investors perspectives on investing in the industry? We are launching our Series A mid-2018.
Thus far, we have not seen the impact of Sessions statement flow down to investors, but we also have not been actively raising at the time of the Cole memo being rescinded. Being an ancillary software company, it is much easier for investors to wrap their heads around our business model and the numbers ultimately drive the decision. We are revenue generating, close to breakeven and have demonstrated significant growth in a short period of time. Agnostic of the industry, we feel this would be a strong investment opportunity.
Jeremy: If someone is interested in learning more about Trellis, what’s the next step they should take?
Pranav: What we would ask is if they could go on our website and request a demo through the “Request a Demo” button [located at the top right of the website.]