One of the final events at this year’s CES is the Extreme Tech Challenge, a contest for startups in emerging areas of technology. Among the participants is MassRoots, a sort of Facebook for potheads.
The arrival of marijuana at the tech industry’s biggest trade show is causing a bit of discomfort both for the Consumer Technology Association, which oversees CES, and the organizers of the contest. This kind of tension is likely to grow for the show as pot legalization spreads. It could hit particularly close to home for CES by next year. The show is always held in Las Vegas, and Nevadans will vote on a proposal this November to make recreational pot smoking legal.
MassRoots was founded in 2013 in Colorado, and now claims 725,000 users. Its apps let people discuss their cannabis-related experiences, learn about pot dispensaries, and keep up on developments in the state-by-state campaign to liberalize drug laws. This is a potentially attractive destination for marijuana-related businesses to advertise, given the targeting opportunities and the lack of prohibitions that they often find on general-interest sites. “We’re not recreating the wheel,” said Isaac Dietrich, one of the site’s founders and its chief executive officer. “We’re just taking the business model that works for Facebook and Twitter, and applying it to the cannabis industry.”
The company is on firm ground legally. It said it only operates in the 23 states where medical marijuana is legal, and, in any case, is basically a place for people to communicate. But some companies want little to do with it anyway. The organizers of the Extreme Tech Challenge were courting Dell in the hopes that it would send a judge to the contest and give computers to the winner. But Dell decided against it after MassRoots was named one of the ten semi-finalists. “Our goal with programs like this is to provide computers to influencers who create positive impact through technology,” Dell said in a statement. “In this instance, we declined to participate because one of the companies in the contest did not meet our criteria.”
Kym McNicholas, the executive director of the contest, said she was unable to discuss any conversations with potential backers. “It would, however, make sense that some companies might be extra sensitive to industries that are subject to shifting legal landscapes,” she said. On the company’s blog, she’s used MassRoots’s participation as a way to play up the contest’s with-it-ness, boasting about how it would be “touching on the edgy topic of cannabis legalization.”
The CTA is also distancing itself from MassRoots. CTA CEO Gary Shapiro is one of the judges at the contest. But when asked about the organization's approach to companies focused on cannabis, Allison Fried, a CTA spokeswoman, said it had no oversight over the contest or its participants. Pot tech is not an officially approved category at CES, which means cannabis-related companies are banned from the exhibiting on the show floor. "If by chance a company sneaks on with such products, we could in theory pull them from the show floor,” said Fried. “The stance here comes down to relevance.”
It’s not clear if or when pot would become relevant to the CTA. Marijuana-related tech is certainly a niche market but one that is likely to grow if the current trend towards looser laws governing the drug continues. Pot smokers will want their versions of electronic cigarettes, and people who grow marijuana plants need things like software systems to track their operations and water-proof printers that can survive in humid grow houses.
Even though they are officially banned, some pot-related companies have quietly made it onto the show floor. Renting a small booth between a little smartwatch company and a startup with an app to encourage kids to brush their teeth was PotBotics. The company makes a brain scanner intended to help medical marijuana professionals determine which strains of marijuana to recommend. But the booth made no mention of cannabis, and displayed under the brand name Brainbit. “The consumer wearable EEG is something that goes beyond cannabis,” said David Goldstein, the company’s CEO. “It’s technology.” When asked where he expected his startup to make money in the future, he said he was focused on pot.
Leslie Bocskor, an investor who focuses on marijuana-related companies, was at the floor at CES looking for potential business opportunities and said he found some in the form of e-cigarette companies with potential to expand into pot. When asked whether these companies were openly touting this use of their products, he played it coy, saying, “It depends what you mean by openly.”
Dietrich of MassRoots said he’s frustrated with the barriers that the mainstream tech industry puts in the way of businesses like his. He took his company public after not being able to raise money from venture capitalists and said some potential employees are wary of working in the field. But he is also trying to leverage his outsider status to his advantage. Dietrich complained loudly after TechCrunch prevented the company from participating in Startup Battlefield, a competition at its conference in New York last spring. The snub was an example, he said, of how tech companies “hold themselves up as the most progressive companies in the country, but when it comes to cannabis, they have the most regressive policies.”
TechCrunch didn’t respond to requests for comment. When it held the most recent Battlefield contest this fall, Green Bits, a pot-focused software company, was the runner-up.
More fundamentally, both Bosckor and Dietrich said the mainstream skepticism provides a layer of protection for those companies willing to work on cannabis-related businesses. If bigger competitors aren’t willing to enter a market, it makes it much easier for a few guys from Denver to gain a foothold before it gets big enough to be attractive.
By Joshua Brustein - Bloomberg/Jan. 8, 2016
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