Venture capital continues to flow into cannabis-focused software companies as Chicago-based Fyllo this week announced a $30 million close to a Series B round of venture capital financing.
Founded in 2019 by advertising technology veteran and serial entrepreneur Chad Bronstein, Fyllo helps multistate operators including Wakefield-based Curaleaf and New York-based Columbia Care monitor and manage compliance requirements to better inform their marketing campaigns. As cannabis is federally illegal, operators need to adhere to a myriad of state and municipal guidelines in their marketing messages.
Toronto-based SOL Global investments and existing investor New York JW Asset Management co-led the round, which also included investments from Chicago-based Salveo Capital, New York Yankees’ scion George Steinbrenner IV and others.
Peter Kraus, former CEO of famed New York-based investment manager AllianceBerstein, will join Fyllo’s board of directors. Additional board members of the company include Mitch Kahn, whose previous company Grassroots Cannabis sold to Curaleaf last year for $840 million, and investor and former publishing executive Christie Hefner.
The company to date has raised approximately $60 million.
“Fyllo from the very beginning was able to attract investors,” said Michael Gruber, managing partner at Salveo, which invests exclusively in cannabis-oriented companies. We believe it could be an active acquirer of other businesses and has the ability to go public.”
Fyllo’s growth to date is partly attributable to acquisitions. In January 2000, Fyllo acquired Denver-based CannaRegs for $10 million. CannaRegs in 2014 began tracking municipal laws related to cannabis and other highly regulated industries. Founder Amanda Ostrowitz is on Fyllo’s leadership team, and the company’s Denver office was opened after the acquisition.
In January 2021, Fyllo announced the acquisition of Scottsdale, Arizona-based Dataowl for an undisclosed sum. Founded in 2017, Dataowl marketed a customer relationship management system and loyalty marketing programs for cannabis companies.
Valuations for cannabis software companies with multiple enterprise plant-touching customers are rising. Last month Bend, Oregon-based Dutchie raised $200 million in a Series C round of financing that valued the company at $1.7 billion. Dutchie, which develops online ordering and delivery services, used some of the proceeds from the round to acquire leading cannabis point of sale software companies Leaflogix and Greenbits.
“What’s clear is that tailwinds have finally come behind us as they relate to ancillary companies,” said Gruber, an early investor in Leaflogix. “Big money is coming in.”
Salveo also invests in plant-touching companies, including New York-based Ascend Wellness Holdings which plans to become publicly traded later this month.
In recent weeks, institutional venture investors also backed Chicago-based cannabis software startups leaf.trade and AeroPay. In addition to co-founding and serving as CEO of Fyllo, Bronstein is the co-founder and executive chairman of Wesana Health, a Chicago-based Psilocybin startup founded by former National Hockey League enforcer Daniel Carcillo. Earlier this year, Wesana raised a $4 million seed round of financing that attracted existing Fyllo investors Kahn and Chicago-based Panther Capital, an early backer of CannaRegs.