Vangst ropes in $19 million more to place employees with work in the growing cannabis industry
In a tight labor market, so-called vertical labor marketplaces that zoom in on one industry, like nursing or hospitality, are drawing funding. Trusted Health, a healthcare staffing platform, raised $149 million in funding in November, for example. Seasoned, a hiring platform for restaurant workers, closed on nearly $19 million at roughly the same time.
Investors are similarly betting there is plenty of upside in a hiring platform focused entirely on the fast-growing cannabis industry, in which an estimated 320,000 people were already working as of last fall, a 32% increase from the year earlier.
Indeed, an investor syndicate led by Level One Fund just plugged $19 million in Series B funding into Vangst, a six-year-old, Denver-based outfit that pairs both short-term workers and full-time employees with job openings at cannabis companies around the U.S. It's no surprise, given the traction the outfit is seeing, along with the variety of revenue streams it has built.
According to founder and CEO Karson Humiston -- who launched the company while an undergraduate student at St. Lawrence University -- Vangst currently features 500 "gigs" per week that the platform takes on average 48 hours to fill. (Vangst treats these individuals as W-2 employees, and pays them through its own payroll.) It also right now features nearly 2,000 full-time positions that represent $85 million in gross salaries.
It can start to add up financially. Vangst charges its customers 50% more than it pays its part-time employees, so paying $15 per hour, it might charge a client $22.50 for that employee's time. As for full-time roles, in exchange for vetting talent that it connects with companies, Vangst takes a percentage of each candidate's first-year salary.
Vangst also charges employers both monthly and yearly subscriptions for the privilege of posting as many openings as they need to fill and, more recently, it began to build out a content business with priced-out modules about retail roles and other positions in the cannabis industry that those new to it might not understand. (Not everyone knows what a trimmer does.)
It hasn't all been a bed of rosettes for Humiston and her team. Though Vangst had gained momentum following its Series A round, which closed with $10 million in 2019, like a lot of other hiring businesses, it was hard hit by the immediate ripple effects of the coronavirus. In March of 2020, Humiston says, Vangst was forced to lay off half its then 70-person team as its customers shrank their own payrolls and began operating at 50% of their previous capacity.
In fact, it was because of Vangst's dwindling revenue that it decided to jump into the business of placing full-time salaried candidates in roles. Think accounting managers, product managers and software engineers. "That was sort of our COVID strategy," she says.
Gradually, when business bounced back, Vangst had built up an entirely new book of business, says Humiston.
Now the challenge is no longer demand but supply. Like nearly every other employer in the U.S., Vangst, which has 56 employees, is working hard to find people to fill the roles on its platform, including by attending trade shows and spending money on SEO services.
Part of its new funding round will be used to build up its small marketing team, unsurprisingly.
Vangst's own customers are meanwhile having to sweeten their terms in many cases in order to secure help. As Humiston tells it, "We encourage them to pay above minimum wage" and to "show their mission and values and the perks that they offer."
The good news: Many more new jobs are expected to come online to fill, which should bode well for Vangst when the labor market finds its footing again.
The state of New York, for example, legalized recreational cannabis use last September, and though it is still in the process of doling out retail licenses, that decision is expected to open up 60,000 new jobs, according to former New York Governor Andrew Cuomo.
Last fall, New Jersey also signed into law three bills that permit and regulate the use of recreational marijuana, and businesses are already opening up there.
That's saying nothing of Michigan, which is "growing extremely quickly right now" as a market, Humiston says. (Vangst also has clients in Colorado, California, Nevada and Arizona, among other places to have already embraced recreational marijuana. There are currently 18 states altogether where it's legal.)
Eventually, says Humiston, Vangst also hopes to go international. Toward that end, it has upcoming plans to spend time in Barcelona with one of its investors, Casa Verde Capital, which is investing more money in European startups these days.
Still, the team has much to master first, she offers. "As here [in the U.S.], where we had to do a lot of learning about business needs and regulatory stuff, we're eager to learn about international markets. We're starting that exploration process this spring."