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Cannabis: A Technology and Synergy Story

May 18, 2015 • 1:59 PM EDT
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3 MIN READ  •  By Michael Berger
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Technological innovation has always played a major role in the growth and development of industries in the United States. The market has seen technological innovation serve as a game changer to the domestic oil industry through the development of horizontal rigs. The cannabis industry has also seen significant improvement through technological innovation and this is a trend that we expect to continue.

Dan Sutton is the managing director of Tantalus Labs in Vancouver and he is a testament to this technological boom. During the last three years, Sutton and a group of biologists and engineers have worked to design a greenhouse system with the lowest energy costs and the highest crop yields. Sutton’s group has experimented with digital sensors, lighting arrays, software programs and ventilators to make this dream a reality.

Tantalus Labs has almost completed the build out of its 120,000-square-foot greenhouse. This multimillion-dollar facility is far more expensive than a typical greenhouse of this size, but the company expects that the energy and water savings will offset the difference.

Sutton said, “We said, let’s assume everything that’s ever been done in cannabis cultivation is wrong, and we have to build from the ground up. We have this broad realm of science that no one has been able to previously explore.”

A race to success

There has been a surge in the number of startup companies in North America focused on the design of products and systems specifically for the cultivation of cannabis. Although greenhouse technologies have been around for decades, the industry has never seen such a large surge in capital, including human capital.

Marijuana deregulation reform is happening all over the world and companies are racing to become the industry leaders in data-mining software, ultra-efficient lamps and irrigation systems. These innovations will not only help cannabis businesses, but industrial food producers and tree growers will be able to adapt the same technologies to cut energy costs and water consumption. Operators of large buildings will also be able to use the systems to lower their electricity use.

“There’s so much crossover. The production cycle is similar, and you need a tightly controlled environment,” Sutton said. “The business of growing saplings will benefit from innovations that come out of the cannabis industry.”

Currently, 23 states and the District of Columbia have legalized medical marijuana and three states legalized recreational marijuana. This is just the tip of the iceberg as states like Texas, Ohio, Nebraska, Alabama, Georgia, and Tennessee are considering voting on similar initiatives.

Three reasons why companies are entering the cannabis industry

Companies are moving into the cannabis space for three key reasons. The first reason is cash. Cannabis growers generate a lot of revenue at much higher margins than they would generate from growing ordinary produce. Second, young technology entrepreneurs and biologists are able to bring their skills to an industry poised to see incremental growth for years to come. Third, there is plenty of demand among growers.

Sutton said, “We have an opportunity to play in a space with beautifully broad margins. That’s not true of most food production. With tomatoes, if you take on an extra 5 percent on your bottom line to experiment with new technology, that could affect your competitiveness.”

Outlook

We recently posted an article that explained how the cannabis industry has seen increased interest from mainstream businesses. The article was about Scotts Miracle-Gro Co. (SMG) and how its Hawthorne Gardening subsidiary acquired General Hydroponics Inc. and Bio-Organic Solutions Inc., which make liquid nutrients for indoor marijuana cultivation.

We expect this trend to not only continue, but to accelerate. Companies are always searching for new revenue streams and some of them will turn to cannabis as a new revenue source. Those companies that move quickly and take advantage of being a first mover in their respective industry will have a better chance of being successful. 

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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