A sit-down with Andrew Freedman

Last Friday, Marion offered me the chance to sit-down with himself, John Vardaman, and Andrew Freedman. Introduced to me as the “Boy wonder of cannabis,” Andrew was Colorado’s first marijuana czar under Governor Hickenlooper. He then founded his own law firm, offering consulting and services to help state and federal governments “get legalization right.”

Not only was it a very informative conversation as we think deeper about our software’s value to governments, but he also had some great perspectives on where we sit in the marketplace, the holistic process of government regulation, and the current environment for government enforcement (or lack thereof).

Starting with a Dose of Validation

Describing Simplifya’s course of the past few years as one starting in the private sector and now thinking about government, Andrew affirmed that’s the better way to do it. In his words, government’s are “skeptical of any provider that has two products” (i.e. private and gov’t products). In other words, the fact we’ve learned how to work in the private sector bodes better for us than starting with the government side and moving to private.

We also discussed the value of “RegTech” (or regulatory technology) in the world of cannabis, a sphere Simplifya is on the cusp of if not already in. In short, the plant is the commodity. The technology that regulates the industry is where the real opportunity lies.

Lastly, we talked about how cannabis leap-frogged other regulated industries (tobacco and alcohol). In his opinion, the learnings from cannabis are set to trickle into those other industries at some point.

Insights on Simplifya and Government

Besides being with the state for the entire rollout of adult-use marijuana, Andrew has worked with double-digit states as they try to figure out what regulation looks like. So his macro and micro views offered a lot of insights into where Simplifya can be inserted into the government sector. Those insights can provide a lot of direction from the sales, marketing and product standpoints.

What we stand to offer

Our gut has always told us that there are two main ways to interact with government: as a licensing tool and as an auditing tool. This chat verified that, but there are some significant differences in what each of those would mean for us directionally:

In terms of being an auditing tool, the value prop is in saving regulators time in auditing and identifying non-compliance overall. Compared to licensing, it’s a smaller effort from a product perspective, and not only because this is already a sweet spot in our feature set.

As a licensing solution, we have a lot further to go in terms of product and due diligence. But beyond the value of centralizing documents, a big gap we discussed was the difficulty in how the concurrent and often dependent processes of state and local licensing. It’s a pain point that’s even caused valid applicants to be rejected at times. In other words, there’s an opportunity in a system helping state and local agencies track a single applicant through the licensing process.

In regards to the above, I’m making an open request to anyone on the RA team who can give me a crash course in “Conditional Licensing.”

The Road(s) into Government…

Reading between the lines, a takeaway was it’ll be easier to get in the door as an auditing tool. Licensing softwares go through a formal procurement process (much like seed-to-sale) at the state level. The time and upfront investment stand to be heavier, given the length of these procurement processes. We’d also be competing with larger players like Accela. But, of course, it stands to be more lucrative.

With an auditing tool as a value prop, the entry can be more flexible, with landing pilot contracts in the six-figure range not being unheard of.

And what it means strategically…

Strategically speaking, a handful of points resonated with me:

• At the state level, the biggest indicator of opportunity is the buy-in of the executive branch. Until that happens, the level of internal inertia makes the sell that much harder.
• We can gain momentum at the state level by gaining traction at the local level. That’s to say if we can grab major local markets in a given state, our credibility with the state government goes up.
• In the regulatory process, governments begin thinking about enforcement after the first draft of the regulations. This is when enough lines are drawn to think about resources needed for enforcement. As Andrew put it: “they immediately jump to thinking they need to hire 300 people.” Speaks to the sweet spot of an auditing tool, in particular.

More on Today’s Lack of Enforcement

I was shocked to hear Andrew thought Colorado was taking the most enforcement actions of anyone in the country. He said he hadn’t seen the numbers in a bit, but that last time he looked the number of fines and revocations supported this.

He attributed that low level of enforcement to states being scared, particularly in newer markets. That fear is really the fear of being sued, and the rationale makes sense. A state department with a budget of $5 million can’t afford to spend a tenth of that budget on legal fees. And even when actions are taken by an agency, Andrew made it sound like those actions were often minimized by pressure from higher offices.

In all, it was an amazingly insightful conversation. Andrew was open and informative. Beyond that, he said he loves what he’s seen and heard of Simplifya. Great stuff, and a huge pat on the back for everyone at Simplifya. Let me know if you have any questions, happy to chat more about it!