Investment Notes: Blakthumb - the operating system for indoor farming
Our Investment Notes deep dive into our investment decisions. We unpack what we loved, where we needed to build confidence, and how we ultimately gained conviction to invest.
Around the world, indoor farming industries - particularly cannabis - are experiencing a serious boom. As a result, producers are trying to scale and optimise their operations to keep up with customer demand. Empowering teams to be maximally productive and cohesive is essential to staying competitive and profitable, but - it’s hard. Indoor farming has historically been plagued with manual processes and high staff turnover - leading to managers storing huge amounts of critical information in their heads or on whiteboards and clunky spreadsheets.
Enter Blakthumb - an intuitive, end-to-end operating system that helps indoor farm managers optimise their operations and frontline teams. This simple software solution has the power to supercharge the industry by making it more efficient and consistent, while keeping employees engaged and thereby driving retention. With this software, the Blakthumb team has an ambitious goal to play a foundational role in every decentralised production environment.
We are excited to be investing in Blakthumb’s pre-seed round led by Tidal Ventures, alongside Black Nova Venture Capital and LUXEM.
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What we loved about the opportunity
A clear ‘why now’
As VC investors, we think a lot about timing. As we’ve written in our Investment Principles:
Early stage startups only have a short window to achieve momentum. Without momentum, everything becomes difficult: raising funds, hiring top talent, and keeping the team motivated. Whether a startup can achieve early momentum is not purely within the control of a given company; some ‘windows of opportunities’ will significantly skew luck in a company’s favour. This means that startups can’t be assessed on their merits in a ‘vacuum’ - the analysis must always be connected to a robust understanding of overarching waves of disruption.
As Invest Like The Best host Patrick O’Shaughnessy and guest Justin Singer brilliantly unpack in this episode of Founder’s Field Guide - changes in regulation unlock opportunity:
As Justin Singer, founder of Caliper Foods - a CPG company that sells hemp-derived soluble cannabinoids, reflects about the cannabis industry:
The lack of structure is the opportunity. I'm like a big believer that once there's a vault guide to something, all of the real opportunity is gone... There was no vault guide to cannabis.
As cannabis is legalised for medicinal purposes across the globe, we’ve seen a proliferation of cannabis businesses spring up around the world - but primarily related to the distribution of cannabinoids and other cannabis products. What’s been overlooked has been growing operations - particularly software to manage frontline teams and streamline processes. We believe the timing is ripe for a solution that improves the operation of growing cannabis as the industry scales and matures.
A large and growing market
The pace of growth in medicinal and recreational cannabis is incredible. In the US alone, legal cannabis sales increased by 67% in 2020. Estimates but the size of the global legal cannabis industry at USD $21 billion, with projections that it’ll grow to between $150 and $200 billion by 2030.
Right now, only 19 states across the US have legalised cannabis for recreational use, with 39 legalising cannabis use for medical use. Additionally, the time between cannabis is approved for medical use and when it’s approved for recreational use is decreasing: where California’s landmark legalisation of recreational cannabis occurred more than 7,000 days after it was approved for medical use, Massachusetts took less than 1,500 days to make the same transition.
Investment into the space is following these legislative changes. After the US Democrats (who have a traditionally more liberal stance on cannabis legalisation) were elected into office in January 2021, billions of funds followed into companies enabling the green revolution: including CPG brands, marketplaces, and compliance software - all of whom are customers or partners for the Blakthumb team.
Fearless, focused founders with an intimate connection to the problem
Blakthumb’s co-founders Mel Fyfe and Carey Taylor are laser focused on their vision to help the indoor growing community build resilience by unlocking streamlined, decentralised production. Having been producers themselves, they understand the pain points that indoor growers face, speak the lingo, and have connections across the industry. For six years they’ve researched the industry, fine-tuning a product proposition that met the industry’s needs.
Mel and Carey’s vision is not purely commercial - they want to serve people who have been systematically ostracised and targeted by the war on drugs and by food insecurity. By improving output, Blakthumb wants to do their part to feed the world, improve employee satisfaction and retention, and accelerate the uptake of indoor farming globally - something necessary for resilience to local food shortages.
Becoming the bedrock infrastructure for all indoor farming companies
Cannabis infrastructure has seen a few waves of innovation: hardware (vertical racks and LED lights), environmental control solutions, nutrient mixes, and compliance focused software.
What’s is lacking from this ‘stack’ is software for teams to streamline their operations.
This means producers have been relying on clunky spreadsheets or carrying large amounts of data in their head - with no method to comparing harvests, standardise processes, or streamline communication across teams. As a result, outputs have suffered. Inefficiency is rife, and teams lacking in cohesion and alignment experience high turnover (across the industry, 40 - 60% of staff leave within 2 months).
Blakthumb’s software aims to add order to this chaos. Blakthumb provides visibility into the workflows and performance metrics, allowing for the automation of planning operations and the coordination of teams.
The challenges we saw
Are customers open to adopting a new way of running their organisation?
The Blakthumb product is dense and comprehensive. There’s lots of functionality - including task management, checklist aggregation, monitoring, data capture, team coordination, and more. At its core, the product provides visibility over the cultivators end-to-end production environment.
We were concerned that the product - while adding a lot of value - would represent a steep learning curve for managers and frontline staff.
We were given assurance when we heard from multiple growers - large and small - who have raved about Blakthumb’s functionality and ease of use. Moreover, Blakthumb is solving problems that are existentially critical to the success of the business. For example, in a large facility, there are hundreds of tasks that need to be done - it’s crucial that a manager has oversight into what has been done, what hasn’t, and where things might be breaking. The stakes are high - in the blink of an eye, a $500k batch of product can go bad because one room was no tracked at a crucial moment.
Can this team crack distribution?
Mel and Carey’s earliest customer come from their existing networks - acquired through a combination of outreach and generating inbound interest. However, selling at scale is a different beast - growers are fragmented, decision makers are juggling a thousand different priorities, and some are unwilling to try a new way of doing things, or rely on a new tool to manage the most crucial parts of their business.
Ultimately, we were convinced by Mel and Carey’s coachability in this area - not only have we seen them iteratively improve on their sales pitch, they’re leveraging their investors to supercharge their marketing and community functions.
How we built conviction
Ultimately, we were impressed by Mel and Carey’s commitment, passion, and knowledge. For the past six years, they’ve worked on a shoestring budget develop a prototype, build a supportive community, pressure-test their idea, and launch a refined product. We’re excited to partner with Mel and Carey as they arm those working on the frontlines of decentralised food and cannabis production with an intuitive, elegant solution that makes their jobs more streamlined and delightful.
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