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- Cannabis software startup Springbig closed an $11.5 million Series B funding round on Friday, led by San Diego-based venture fund TVC Capital.
- Details of the funding round were shared exclusively with Business Insider.
- Springbig CEO Jeffrey Harris told Business Insider he was looking for a tech fund, rather than a cannabis fund, to lead the round as he wanted a partner who could help advise on the startup’s growth.
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Investors are betting big on cannabis tech.
Springbig, a software platform for cannabis brands and dispensaries, closed an $11.5 million Series B funding round on Friday, the company told Business Insider. The round was led by TVC Capital, a tech-focused venture firm based in San Diego, and included Denver cannabis fund Key Investment Partners. It brings Springbig’s total funding to $20.5 million.
“We were primarily looking for a technology fund to lead this round,” Springbig CEO Jeffrey Harris said in an interview. “That’s nothing against cannabis funds, we love cannabis funds.”
But as a SaaS (software-as-a-service) company, Harris said Springbig needed an investor that knew software inside and out and could advise on the startup’s growth.
“Just through the due diligence process, I learned a bunch of things that we’re already implementing just by the questions they were asking us,” he said.
TVC Capital and Key Investment partners join a long list of Springbig’s backers, including Argonautic Ventures, HALLEY Venture Capital, and Salex Capital, the company said.
Most mainstream venture firms are barred from investing directly in cannabis companies, since THC, the chief psychoactive compound of the plant, is illegal at the federal level in the US.
Cannabis tech companies like Springbig, among others, have provided an attractive way for VCs to bet on the upside of the cannabis industry while avoiding much of the risk, since they don’t grow or sell the plant.
Options trading Negotiating and signing a term sheet, virtually
Harris said he started to talk to investors about raising money in January. By early March, he and his team were negotiating on two separate term sheets, though neither deal ended up closing as the coronavirus and its associated lockdowns started ramping up.
In April, Harris said he began talking to TVC after the firm reached out.
“At first, I thought maybe we should wait a bit,” Harris said, as the company still had cash from its last raise, a $5 million Series A in December 2018. He figured he’d have more luck finding investors after the pandemic.
By May, with no sign of the pandemic slowing and after a few Zoom conversations with TVC, they started to work on a deal. They came to an agreement in the middle of July.
He said he still has yet to meet his lead investors in person, but that the virtual process went smoothly.
Options trading Cannabis brands have a ‘real problem’ in getting in front of customers
In terms of his top priorities for the fresh capital, Harris said Springbig is launching a platform for cannabis brands to engage with customers. Previously, its software was only available to retail dispensaries operators — a client list of about 700 that includes Green Thumb Industries, Curaleaf, Cresco Labs, and others, Harris said.
Because cannabis brands are restricted from advertising through Google and other social media platforms, they have a “real problem” with getting in front of customers, Harris said.
Springbig’s new software will help cannabis brands reach customers in their database directly through targeted text messaging while staying on the right side of local and state regulations around cannabis advertising. Retailers, in turn, can see which brands are selling the most or driving the most engagement and stock their shelves accordingly, Harris said.
Part of the new cash will go toward staffing up a team to work on the brand platform. Harris said he has a 10-person team working on it already, and the startup has hired 15 people over the last few weeks alone.
In total, he said Springbig will have close to 100 employees by year-end, up from about 70 now.
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