From tech to toke

Sil­i­con Val­ley vet­er­ans turn to a new fron­tier: the cannabis sec­tor

Los Angeles Times - - BUSINESS - By Tracey Lien

SAN FRAN­CISCO — For much of her ca­reer, Natasha Pecor fol­lowed a path well-worn by tech work­ers. She built her rep­u­ta­tion with her first em­ployer in the in­dus­try, earn­ing the ti­tle head of plat­form at Yelp. Then she jumped to one of the giants, Ama­zon, where she worked as a prod­uct man­ager.

Most re­cently she par­layed that ex­pe­ri­ence into a lead­er­ship role at a smaller start-up — a com­mon move among techies will­ing to take a risk for a new challenge and per­haps a big pay­day.

But this start-up wasn’t ex­actly a tech com­pany.

Pecor was liv­ing in Seat­tle when the state of Wash­ing­ton le­gal­ized the recre­ational use of mar­i­juana. “I saw this huge shift,” she said. “I never thought it would hap­pen in my life­time, and I knew I just wouldn’t for­give my­self if I wasn’t part of it.”

So, two years ago she made the leap from Ama­zon to Eaze, be­com­ing vice pres­i­dent of prod­uct at the 4-year-old San Fran­cisco start-up, which op­er­ates an on­line cannabis mar­ket­place.

For decades, those look­ing to change the world ar­rived in Sil­i­con Val­ley seek­ing the lat­est fron­tier: so­cial me­dia com­pa­nies, gad­get mak­ers, delivery and transportation apps, e-com­merce plat­forms.

But as the emerg­ing mar­kets of yes­ter­day be­come to­day’s stal­warts, a grow­ing num­ber of tech­nol­ogy work­ers are mi­grat­ing to an even newer sec­tor — so new that it isn’t le­gal at the fed­eral level.

Pecor now works along­side more than a hun­dred de­sign­ers, mar­keters, en­gi­neers and lawyers who left com­pa­nies such as Mi­crosoft, Lyft, Square and Post­mates to help shape the fu­ture of the cannabis in­dus­try.

Other cannabis and cannabis-ad­ja­cent star­tups are also see­ing an in­flux of tech tal­ent. Pax Labs, a maker of sleek cannabis va­por­iz­ers, is run by the for­mer chief op­er­at­ing of­fi­cer of video game gi­ant Elec­tronic Arts and smart home com­pany Au­gust Home Inc. Its work­force of a lit­tle more than a hun­dred in­cludes de­sign­ers, brand­ing ex­perts, op­er­a­tions and pol­icy spe­cial­ists, and hard­ware mak­ers from Ap­ple, Nin­tendo, GoPro and Groupon.

De­sign agen­cies and con­sul­tants that once ex­clu­sively worked for tech­nol­ogy clients are in­creas­ingly work­ing with com­pa­nies in the cannabis in­dus­try.

Con­di­tions are ripe for this kind of mi­gra­tion, ac­cord­ing to an­a­lysts and in­vestors, who be­lieve three fac­tors make pot so at­trac­tive to techies.

The first is mon-

ey: Cannabis start-up wages are com­pa­ra­ble to those at small to medium-sized tech shops. But as cannabis sales soar with more states le­gal­iz­ing recre­ational use, there could be a po­ten­tial wind­fall for those who get in early. The U.S. cannabis mar­ket is ex­pected to grow to $23.4 bil­lion in sales by 2022, up from $11 bil­lion in 2018, said Troy Day­ton, chief ex­ec­u­tive of cannabis in­vest­ment and mar­ket re­search firm Ar­cview. Some an­a­lysts project U.S. sales to top $75 bil­lion by 2030.

The se­cond is the very rea­son Pecor left Ama­zon for Eaze: The op­por­tu­nity to leave a mark on a bur­geon­ing in­dus­try where there aren’t yet any clear win­ners.

“It’s like green fields,” said Joel Mil­ton, co-founder of Baker Tech­nolo­gies, a start-up that pro­vides soft­ware to cannabis dis­pen­saries.

He de­scribes cannabis as a “leap frog” in­dus­try — mean­ing it has by­passed the steps other in­dus­tries have fol­lowed. This is ap­peal­ing to many tech­nol­ogy work­ers who see an op­por­tu­nity to help de­fine a sec­tor that has spent much of its ex­is­tence un­der­ground.

The third is the com­pelling story of cannabis: a con­tro­ver­sial but in­creas­ingly ac­cepted drug that has the same clas­si­fi­ca­tion from the U.S. Drug En­force­ment Ad­min­is­tra­tion as heroin, ec­stasy and LSD, yet is widely used for medic­i­nal pur­poses and for fun.

“I have been a cannabis user for some time and I know quite a few peo­ple who use it for med­i­cal pur­poses,” said Jesse Sil­ver, vice pres­i­dent of prod­uct at Pax Labs, who pre­vi­ously worked at health­care start-up Omada Health and, be­fore that, de­sign firm Ideo.

What drew him to Pax, Sil­ver said, was the op­por­tu­nity to change the story around cannabis and to show that re­spon­si­ble use was pos­si­ble.

The surge in tech­nol­ogy work­ers ven­tur­ing into the cannabis in­dus­try has ben­e­fited the mar­ket, ac­cord­ing to an­a­lysts. Draw­ing from their ex­pe­ri­ence at con­sumer hard­ware, soft­ware and delivery com­pa­nies, tech work­ers have launched plat­forms mak­ing it eas­ier for cus­tomers to find and buy cannabis prod­ucts, helped dis­pen­saries man­age their in­ven­tory and clien­tele, and dis­pelled some of the stigma sur­round­ing the cannabis in­dus­try.

The pol­ish they’ve brought to the in­dus­try has led to cannabis va­por­iz­ers that look more like dis­creet smart­phones and on­line mar­ket­places whose de­signs re­sem­ble Net­flix. Even the of­fices of cannabis star­tups re­sem­ble Sil­i­con Val­ley firms, with open of­fice plans, an abun­dance of nat­u­ral light, ex­posed brick walls and kitchens well-stocked with La Croix sparkling water.

De­signer Ge­orge De’ath, who runs de­sign agency Born & Bred, be­lieves the tech in­flu­ence has been a boon for the cannabis in­dus­try be­cause it’s help­ing trans­form a com­plex, dif­fi­cult-to-un­der­stand prod­uct into some­thing sim­ple and el­e­gant that fits into peo­ple’s lives — much like what Ap­ple did for the smart­phone and Fit­bit did for the fit­ness tracker.

“The tech in­dus­try used to have a sim­i­lar stigma,” De’ath said. Un­til com­pa­nies such as Ap­ple, Google and Ama­zon came along, tech was largely viewed as the realm of geeks. But to­day, even the most com­plex of tech­nol­ogy is pre­sented in a way that doesn’t in­tim­i­date cus­tomers.

“These prod­ucts are in­cred­i­bly so­phis­ti­cated, but you don’t want to know that,” De’ath said. “That’s what the tech in­dus­try nailed.”

While ven­ture cap­i­tal firms and hedge funds re­main skit­tish about the sec­tor, they seem less wary of in­vest­ing in prod­ucts that look fa­mil­iar, Day­ton said.

Eaze, which as­pires to be some­thing of an Ama­zon for pot, has raised more than $50 million from tech in­vestors such as DCM and Fresh VC. Pax Labs, whose cannabis va­por­iz­ers re­sem­ble Ap­ple gad­gets, has raised more than $100 million from Sil­i­con Val­ley and in­sti­tu­tional in­vestors. And Baker Tech­nolo­gies, which is es­sen­tially a Sales­force for dis­pen­saries, made it into 500 Star­tups’ pres­ti­gious ac­cel­er­a­tor pro­gram in 2015.

Al­though it’s dif­fi­cult to dis­cern how big a role tech’s de­sign in­flu­ence has played in grow­ing cannabis sales, tech work­ers be­lieve any de­sign that re­moves some of the stigma of pot and low­ers the bar­rier to en­try is a good thing.

“It’s fa­mil­iar­ity,” said Sheena Shi­ravi, Eaze’s di­rec­tor of com­mu­ni­ca­tions. “We didn’t have to change con­sumer be­hav­ior when we launched Eaze. Peo­ple ex­pect to get things on de­mand and through an app, so it was about giv­ing peo­ple what they know and what they’re com­fort­able with.”

But sleekly de­signed prod­ucts aren’t al­ways the best sell­ers, Day­ton said. In fact, he be­lieves that in­vestor pref­er­ence for highly de­signed prod­ucts, and the in­flux of work­ers with tech­nol­ogy back­grounds who live in largely af­flu­ent ar­eas such as Sil­i­con Val­ley, could po­ten­tially do a dis­ser­vice to the cannabis in­dus­try.

“While it’s trendy to ap­peal to the wealthy, high-end con­sumer, most peo­ple in the coun­try aren’t wealthy con­sumers,” Day­ton said.

De­spite the grow­ing in­flu­ence of tech-in­spired firms in the cannabis in­dus­try, he doubts the en­tire sec­tor will em­brace a Sil­i­con Val­ley ide­ol­ogy. While some of the most-hyped com­pa­nies in the mar­i­juana trade are tak­ing pages from the tech play­book, tra­di­tional cannabis prod­ucts, such as the col­or­fully pack­aged Cheeba Chews brand, con­tinue to sell well.

But he says there’s plenty of room in the in­dus­try for peo­ple will­ing to take a bet on the next big thing.

“This is where so­cial net­work­ing or wear­ables or ecom­merce was a few years ago,” Day­ton said. “These peo­ple in Sil­i­con Val­ley are pi­o­neer­ing spir­its, and pi­o­neer­ing spir­its look for pi­o­neer­ing in­dus­tries to be part of.”

David Butow For The Times

A GROW­ING num­ber of tech­nol­ogy work­ers are mi­grat­ing to an even newer sec­tor, cannabis. Em­ploy­ees in the in­dus­try in­clude vet­er­ans from such com­pa­nies as Ama­zon, Mi­crosoft, Ap­ple and Yelp. Above, work­ers at Eaze, a mar­i­juana delivery ser­vice in San Fran­cisco.

David Butow For The Times

MANY tech work­ers see an op­por­tu­nity to help de­fine a sec­tor that has spent much of its ex­is­tence un­der­ground. Above, at Eaze.

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