Meadow, a leader in building tools for cannabis dispensaries, is expanding out of California. Since its founding in 2014, the company has focused its efforts on its home state, but recently partnered with Michigan-based Wellflower.
The company retooled its cannabis platform for the Michigan market and now offers the service state-wide.
"California is challenging," CEO and co-founder David Hua told TechCrunch. "We're still growing, but there's a need to look at other states with more density."
Hua explained that the company has gone as deep as it can in California. As a result, the company is in a healthy position, profitable and not seeking additional fundraising at this time, and able to choose its next market carefully.
"We're liking Michigan so far," Hua said. "In California, we work with operators who have been operating for over a decade, and they may have a bit of a counterculture demeanor. Whereas in Michigan, operators have professional experience and have worked in a bunch of other shops. And they're trying to verticalize, a trend we're also seeing [in California]."
Meadow sees Michigan as a stepping stone to the East Coast, mainly New York, New Jersey and Massachusetts.
"Massachusetts is up and running," Hua said. "New Jersey is just getting their feet on the ground. New York is sort of where everyone is eyeing how they will structure the regulations."
Cannabis operators have a growing set of tools available to them, and Hua is finding that they're often overwhelmed with the various single-use platforms available. Rather than stacking different APIs and platforms, Meadow's all-in-one solution offers a complete toolset -- from marketing to e-commerce to delivery to customer loyalty programs.
Meadow's expanding without the help of additional outside capital. The company's last raise was in December 2018, and it has only raised $2.34 million since its founding. Hua told TechCrunch it had offers to go public in Canada but is pleased with its decision to keep the company private. He points to the slower-than-expanded growth of the cannabis industry as one of the troubles with seeking VC capital in the space. There's a reckoning of sorts, he says, in that local and state regulations artificially limit the growth of cannabis dispensaries, and this runs counter to the startup mentality of exponential growth.
"Alright, you raised all this money," he said, "and you're going to 10x, and there's not enough room to 10x." In his view, this leads cannabis startups to look at other areas to grow, leading to building products and services away from the company's core competencies. "The complexity of what you're trying to execute increases dramatically."
Meadow's strategy has always been different. The company was part of Y Combinator's Winter 2015 class, but didn't raise a Series A and stayed small. It hit profitability in early 2022 and feels it can serve its customer base without outside influences. Currently, the company employs 14 people, with the average employee tenure around five years.
Expanding outside of California could force Meadow to change its strategy of growing slowly. However, Hua does not foresee needing outside funding unless there's a cataclysmic moment -- the de-scheduling of cannabis, federal legalization or interstate commerce allowing operators to freely move cannabis over state lines.