MassRoots Building Digital Hub for Multi-Billion Cannabis Industry

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Colorado took a big step toward becoming “the Silicon Valley of cannabis” on Wednesday when it became legal to sell marijuana in the state, according to the founder of MassRoots, a tech startup that’s moving here to take advantage of the state’s burgeoning cannabis economy and friendly laws.

MassRoots is an app-based social network for cannabis users. Since launching in July, the network has grown to more than 25,000 active users, according to co-founder, president, and CEO Isaac Dietrich. On Thursday, MassRoots announced it has raised a $150,000 seed round from three high-net-worth investors.

MassRoots offers users an anonymous community and doesn’t ask for information like names or e-mail addresses, Dietrich said. While marijuana use has been losing its stigma, privacy remains important for a lot of people.

“Most cannabis consumers can’t post about marijuana on Facebook and Instagram and Twitter because their families and coworkers are on these networks. Our goal was to create an anonymous and private network where they can do comparable postings about what they’re smoking, post pictures of them consuming cannabis with friends, post things of that nature,” Dietrich said.

Dietrich and his co-founders are cannabis users in their early 20s, and they fit a new archetype that is emerging in both the cannabis and startup worlds. It’s not the stereotype of a stoner, but rather a savvy young Silicon Valley-style entrepreneur able to discuss lean startup methodology, monetization strategy, and market research.

For the parts of the cannabis industry that are following the law, market researchers are predicting great things. ArcView Market Research estimated in its annual “State of Legal Marijuana Markets” report that the industry was worth $1.44 billion nationwide in 2013 and is expected to grow to $2.34 billion in 2014. The report projects that in 2018—by which time ArcView expects that 14 states will have legalized retail sales of marijuana—the industry will be worth $10.2 billion.

(The illicit market currently is estimated to be between $18 and $30 billion.)

“The entire cannabis economy is about to explode,” Dietrich said.

MassRoots is hoping to take advantage of the trend, and thinks the Centennial State could be a major beneficiary. Currently MassRoots’ founders are spread between Virginia, California, and Colorado, but they plan on relocating to Colorado.

In September, the founders travelled to Denver to meet with potential investors. They found three invidual investors willing to commit to MassRoots’ $150,000 seed round.

Dietrich said the investors were sold on the company’s early traction and a shared belief that the legal cannabis industry is here to stay, not just in Colorado but across the U.S.

“Legalization is coming,” he said.

With the money, MassRoots will try to expand its set of features and recruit more users. Dietrich said 90 percent of users are between the age of 18 and 24, consume cannabis daily, and are participants in the cannabis culture. MassRoots wants to become a key part of their routine.

“We plan to turn MassRoots into the central hub and an essential component of the marijuana user’s daily habits,” Dietrich said.

While the startup has yet to decide on a monetization strategy, they do want to make MassRoots an essential sales and distribution channel for retailers who sell cannabis or who sell products like pipes. That suggests the startup could sell advertising or take a cut of sales generated through the app, but Dietrich said the startup’s business approach remains to be determined.

Michael Davidson is the editor of Xconomy Boulder/Denver. He covers startups, venture capital, clean tech, energy, aerospace, telecoms, and whatever else happens above 5,280 feet. Contact him at mdavidson@xconomy.com. Follow @MichaelXBD

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