Cannabis tech startups are continuing to land millions in funding as the industry looks to rebound from the economic turmoil caused by the coronavirus pandemic.
Chicago-based Fyllo, a data and compliance software startup for the cannabis industry, closed a $26 million Series A funding round led by JW Asset Management and K2 & Associates on Wednesday.
Fyllo raised the first $16 million of the round when it launched in September of 2018, and added a further $10 million over the past few months.
Details of the round were shared exclusively with Business Insider, and the startup declined to disclose its valuation.
Fyllo’s software platform has four parts: compliance, media, data, and regulations. Its client list includes everything from cannabis brands who are looking to engage with customers, up to major consumer-packaged-goods companies who are looking for insights into the developing cannabis industry, Fyllo’s CEO, Chad Bronstein said in a phone interview.
Bronstein said that while the startup’s focus is on the cannabis industry, it eventually hopes to broaden its scope to other highly-regulated industries, like E-sports and online gambling.
“Our TAM [total addressable market] is very sizable because we built a data ecosystem that mainstream brands could target,” Bronstein said in a phone interview. “You could be a Fortune 100 brand wanting to be able to target a cannabis consumer. You may not want to say it, you may not be running cannabis ads per se, but you can want to target that consumer because that consumer is very much a consumer of other products or have other behavioral traits the company wants to target.”
Investors ask these three key questions during pitch meetings
Bronstein said that the recent round took around three-and-a-half months to close from start to finish. Fyllo had lots of follow-on investors from the previous raise — though the startup is bundling the two raises together as one mega-Series A — and Bronstein said that amounted to a vote of confidence in Fyllo’s growth trajectory.
For the most part, Bronstein said pitch meetings come down to three key questions.
First, investors want to understand a startup’s revenue projections. Next, investors want to understand who the startup’s executive team is and whether they’ll be able to grow a company from a handful of employees to hundreds.
“If they’re going to give a company millions of dollars, they’ll want to see those dollars in good hands,” Bronstein said.
Last, investors want to understand what the startup’s market is. Bronstein says he explains to investors that Fyllo isn’t trying to be a cannabis cultivator. Fyllo has an addressable market, Bronstein said, that’s larger than cannabis since its software can be tweaked and targeted to other highly regulated industries.