CannaBiz: aRe wE hiGh yEt?

CannaBiz: aRe wE hiGh yEt? 1920 774 Raymond Blijd
Read time: 3 min.

How can a strictly regulated industry become the fastest growing and among the most lucrative? Hold this bud while I explain..

For those of you who have never indulged in some weed and are curious about the experience? Stop reading now and Watch Bob Ross (R.I.P) for about an hour. Once you’re totally relaxed, you can return to reading this post.

So, founders got curious.

Standard advice to any founder was to never build products in regulated markets…That attitude is about to change…The most exciting billion dollar companies in the last 10 years have been launched in heavily regulated markets.

Steve Blank and Bradley Tusk

I lifted this wisdom from Steve Blank and Bradley Tusk. We see this theory of investing in regulated markets play out in the Legal Industry as well.

[ Fun fact: I found 224 synonyms for Ganja. ]

Now, investors and corporations are interested.

According to CB Insights, a total of $2.2 Billion was invested in marijuana in 2018 alone. Maybe because the market size is everyone over the age of 16 with anxieties. Since we are living in an increasingly uncertain age, there is little doubt that smoking herb will be a hit. Before the recreational use of Cannabinoids was only legal in a few circumstances around the world. Now acceptance is growing and the largest economy on our planet just legalized Kusk. So it is safe to assume that demand will outstrip supply very soon.

[ Fun fact: In Switzerland, you can get a little THC in any supermarket or tobacco store. ]

Why should the Legal Industry care?

We recently processed 10.000 of the fastest growing companies worldwide ranked on LinkedIn employee growth and Indeed job listings. Within this list, we identified the companies impacting the legal industry (1009) and noticed a small number (44) are distributors of Hemp. Here’s the insight: there were no Law Firms or Legal Tech companies within the top 20 fastest growing companies. However, we did encounter two handling the Purple Haze respectively Canopy Growth – #5 and Medmen – #14 .

To provide some context: the first LegalTech companies we found ranked in spot #771, #912, #1305 on the list of 10.000. Rejoice! All three were so-called, “A.I.” infused ventures within the LegalTech space. Nevertheless, if growth is measured by the companies hiring as mad, the Trees are reaching the sky. No wonder there is a thriving cottage industry of services all catering to La Cana. We see News Trackers, Legal and Compliance services, as well as Human Resource providers all focused on one substance. Both Wurk – #59 and Vangst #2121 are riding this high on the staffing front.

This brings me to my first point: a high growth but regulated industry needs skilled labor. Legal professionals are best positioned to help unravel regulation. Lawyers would be the stable underpinning for this blooming business. One reason the cryptocurrency craze was so chaotic wasn’t the lack of laws but the absence of legal sense. If you read up on all the crypto crashes, most likely cause was a security gap in the “smart contracts”. Usually, these ‘loopholes’ were the result of logic an engineer would use but a lawyer would never agree too.

[ Fun fact: Uruguay and Canada are the only countries were farming, distribution and, sale of Sinsemilla is legal. ]

Puff, I digress…where was I?

My second point: the Dutch may be the foremost experts in the authorized sale and distribution of ‘the Dutchie’. The Netherlands were legal pioneers in decriminalizing the possession of Pot back in 1972. While many still think this is a bad move, stats and society have proven otherwise. Every first-time tourist to the Netherlands will confess, Dutch Coffeeshops are one of the safest places to chill. And that is by an intricate legal design of do’s and don’ts. Maybe this expertise can become Holland’s next big export.

Reality is that the legal industry earns the bulk of its income servicing other businesses. Therefore growth for the legal industry needs these businesses to not crash but to safely reach a new high.

Now, don’t Bogart and pass it along..on the left-hand side.

[ Fun fact: I had way too much fun writing this post. ]

RiskTech: Will This Save The Legal Industry?

RiskTech: Will This Save The Legal Industry? 1920 975 Raymond Blijd
Read time: 3 min.

Since 2016, the only sector impacting the legal industry which showed measurable growth of new ventures and funding is RiskTech. So is this the new “LegalTech”?

What is RiskTech?

RiskTech is technology that is helping you avoid prosecution from the government, litigation from anyone or bankruptcy by stupidity. We’ll get to the stupidity in a bit.

Originally the term RiskTech is derived from the more broad sector term RegTech which stands for Regulation Technology. RegTech was used to describe the companies and technologies that assisted FinTech companies in implementing financial regulations. How did RegTech become an industry in itself? I once studied the number of laws per sector in the Netherlands and the financial sector was a clear winner with the most number of rules.

We quickly realized that RegTech wasn’t limited to the financial sector during the analysis of profiles. We discovered a breed of technology companies managing risk and regulations in heavily scrutinized areas like Cannabis and Health. Recently Snoop Dogg backed Metrc raised $50 million to track weed. Other popular topics companies are tackling are Identity, KYC (Know Your Customer), Fraud and Privacy.

Not only the companies that prevent risk but also the ones that are insuring against it are considered RiskTech. While a lawyer may offer a legal product, like a contract, to cover a defined set of risks. Insurance companies use complex calculations on data to issue you a blanket coverage on the same set. Therefore almost everyone regularly pays for some kind of insurance policy but few have a legal counsel on speed dial.

Last but probably the first RegTech in human history is Tax. Everyone needs to pay taxes and not paying them puts you on a likely path towards bankruptcy.

There are over 170 unique labels we managed to put on RegTech companies in the Legalpioneer dataset. Here’s how we aim to make sense of the landscape:

SectorMarketAnd they do?
LegalLegalTechdoes legal work
 Lawfind legal work
RegTechRiskTechavoid legal work
 FinTechcomply with regulations
 WealthTecha (rich) FinTech subset
 CivicTechinfluence the law

Why is RiskTech growing?

First, we were digging for gold, then we were drilling for oil, now its hoarding Data. Tim Cook’s blistering attack on the ‘data industrial complex’ wasn’t just an indictment of “free” services such as Google and Facebook. It actually was the best marketing for the RiskTech industry.

This simple dynamic of danger in data has driven the growth and there is a metric that revealed this: Valuation. The average valuation based on our data set is calculated by taking the total number of companies in each sector and dividing them by total dollars raised in their sector. The horizontal ax shows the year a company was founded. By this measure, RegTech companies started in 2010-11 are now hitting full stride and for “as little as 14 million dollars in the bank, you have a fair shot in this market.

[chart id=”4881″]

How does RiskTech work?

Just like your email spam filter, RiskTech uses smart technologies to filter risk in data. A straightforward way to achieve risk-free data is to anonymize it. The latest 2018 funding dashboard featured two FinTech companies that offer to process payments anonymously in crypto or cash transactions.

Another approach to minimizing risk in data is to lock it up cryptographically with Blockchain. In our analysis of Initial Coin Offerings (ICO’s), we discovered that the second most popular use case for Blockchain was securing user data to monetize it. Ventures like ONO Social and Yours collectively raised 61.7 million dollars this year alone which is part of 133 million dollars raised in this area.

Finally, as an individual, you would like to avoid having a lapse in judgment send you to jail. It took Elon Musk a single tweet with two specific words (“Private” and “Secured”) and one $ amount (“$420”) to almost accomplish this.

If tech could have stripped any of these terms from the tweet before it hit the net, the Tesla board would have been very happy. This tech is already in use but, unfortunately, not for this purpose.

Saving A Fair Society

This post started as another RiskTech love story since the numbers showed more money sits in RegTech as opposed to Legal. However this year, all markets have been receiving a firm handshake from investors.

We all enjoy free but it comes at a price and giants like Facebook are slowly coming around to regulation. Therefore, RiskTech is making Legal great again.

So when you need to diffuse a bomb or clean up the damage, you hire a lawyer like Elon or testify before Congress like Mark.

But if you like to avoid the hassle or contain the drama, you build or buy RiskTech.

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