Software giant Microsoft is getting into the marijuana business. Announcing a partnership with Kind Financial, software designed to serve the cannabis industry will be added to Microsoft’s list of products.
Kind Financial, a software company that specializes in the legal marijuana industry, offers services to cannabis growers that helps track pot plants from “seed to sale.” States with legalized medical or recreational cannabis can also use the software to ensure transactions are within the law.
While many tech start-ups have been eager to get involved in the controversial weed industry, Microsoft is the first major corporation to jump on board the growing industry. The Kind’s customized software will be a new product in Microsoft’s cloud computing business.
“Nobody has really come out of the closet, if you will,” said Matthew A. Karnes of Green Wave Advisors. “It’s very telling that a company of this caliber is taking the risk of coming out and engaging with a company that is focused on the cannabis business.”
Since marijuana is considered illegal under federal law, most large and established companies have avoided the weed industry, fearing legal problems from the U.S. government. The ongoing conflict between federal and state laws has created considerable ambiguity in the legality of cannabis sales. While unlikely, the Fed could still put up barriers to slow or stop the legalization movement happening within many states.
Generally, banks are unwilling to open accounts for cannabis industry participants. Los Angeles, California-based Kind Financial is one of only a small handful of companies willing to offer financial solutions to marijuana growers and sellers.
Many stores that sell weed have relied almost entirely on cash transactions or payment-taking kiosks provided by companies like Kind. Working through the few state-chartered banks that are friendly to the weed industry, the software start-up has a range of products, including A.T.M’s that simplify marijuana sales.
Microsoft itself will stay away from the money machines as well as the plants. Instead, the tech juggernaut will be interacting with Kind’s “government solutions” department to develop software systems specifically for state and local governments.
Moving from Philadelphia to California to start the company, Kind Financial founder David Dinenberg said finding companies to work with has been quite a challenge.
“Every business that works in the cannabis space, we all clamor for legitimacy,” the former real estate investor said. “I would like to think that this is the first of many dominoes to fall.”
Microsoft’s indirect entry into the marijuana business is likely a step to shore up revenue from its slowly diminishing desktop software business. The surprise announcement earlier this week that it is acquiring social network LinkedIn is a strong indication that the once king of software is now focusing more on its cloud division, Azure.
While Kind has no current state contracts, users of Microsoft’s Azure Government will have access to the marijuana-related software. The company hopes Puerto Rico, which just recently legalized medical cannabis, will be the first administration to implement the program.
Other states may already be using similar systems to Kind’s software. New York has publicly announced a partnership with Oracle to develop software to track patients who buy medical marijuana. Florida software company BioTrackTHC was hired by Washington state, New Mexico, and Illinois to track the marijuana trade in their states.
Should the Kind Financial and Microsoft partnership work, both have a chance for a substantial gain. According to Karnes, expected sales of legal marijuana will surge to at least $6.5 billion by the end of 2016, up from $4.8 billion last year. He believes annual sales could easily rise to around $25 billion by 2020.
So far, 25 states have laws that legalize marijuana for either medicinal or recreational purposes. As the legal weed industry continually grows and more states loosen their cannabis restrictions, the partnership between Microsoft and Kind Financial could turn out to be significantly profitable.
[Photo by Justin Sullivan/Getty Images]