Simplifya's CEO On The Crucial Need For Cannabis RegTech In A Shaky Economy

Cannabis companies continue to rely on regulatory technology to keep up with varying state-by-state rules.

Simplifya, a Denver-based software developer, is one of those "RegTech" players that help pot pros navigate the market. That's especially the case now given the mounting devastation caused by the coronavirus outbreak, which has forced several companies in the space to furlough employees and close facilities.

Under the helm of CEO Marion Mariathasan, Simplifya has been improving its tech and even deepening its bench with engineering talent while so many other industries are cutting staff.  

"We set out to do something that really had no prior playbook from a technology and content perspective," Mariathasan said. "In order to provide a value-add product to operators, we had to first understand the pain points they faced."

Mariathasan spoke with Benzinga about the various challenges he and others face during the COVID-19 pandemic — and how the cannabis space at large can pull through. 

Companies are struggling despite consumers stockpiling cannabis. What are your thoughts?

MM: While I think COVID-19 certainly is one of the biggest driving forces behind the uncertainties we see today with the market, economy and society in general, I think layoffs are a part of a bigger problem that has been brewing since probably mid-2019.

Many investors were shying away from making new investments as there were fears that we were due for a recession. The general consensus was that one was around the corner. As an angel investor, I think I only made three investments last year, and that was during the earlier part of the year.

When the pandemic panic set in, most companies had realized that raising money was getting tougher, and the valuations that many cannabis companies were enjoying in prior years were gone.

Many executives started thinking about how to best create the longest runway possible for their companies if the markets continue to collapse. COVID-19 just panicked cannabis executives so bad that many companies that were planning to raise money now had to go into survival mode. They had to buy time to come out the other end of this crisis — not knowing how long it was going to take.

We now know that many states have deemed cannabis as an essential, but a few weeks ago nobody really knew for sure how cannabis was going to be treated and whether governments would view cannabis as a necessity. Companies rushed to cut their burn, and that's why I think many started to lay people off.

Will sales continue to go up? 

I do think sales will continue to go up. Cannabis is showing to the world that it may be recession-proof — similar to alcohol. I think people are anxious, nervous and panicked about an uncertain future we all face and so cannabis becomes a necessity to calm nerves whether from a recreational or medical perspective.

As for production, it remains to be seen. It all depends on how many people in the supply chain become infected with COVID-19 and therefore cannot produce for the industry.

Is Simplifya hiring?

Simplifya just added to our business development team in February and has no further plans for any new hires at the moment. In order to continue to build and innovate technology for our now multiple types of customers, we’ve had to bolster up our engineering team so that we can meet varying needs of our diverse customers.

Simplifya started out with 13 people back in 2016 — a small team of engineers and product people. Today, we have close to 50 employees. As a regtech company, a majority of our staff consists of engineers and regulatory affairs employees, which are lawyers and policy folks.

How has Simplifya changed since the coronavirus outbreak? 

Much has changed for us in that we are no longer able to brainstorm ideas in person or just be around the team for comradery or friendship. Fortunately, being a tech company, we were able to transition to the entire staff in Denver working from home quite easily.

Outside of our director of engineering and product manager being in Denver, our entire engineering and quality assurance staff have been overseas in Sri Lanka through a software company called Ceylon Solutions. So we’ve been accustomed to working with remote people since the inception of the company.

Our regulatory affairs team have had their hands full and that’s putting it lightly. Simplifya’s CORE product is now available in 18 states and that means that not only does our Reg Affairs team have to update state regs due to COVID-19, but also local regs that pertain to Covid19 — and that is a lot of work. Fortunately we have a dedicated and super bright group that truly enjoy what they do and ensure that we don’t let our licensed operators down.

Are there any risks that come with the Ceylon Solutions partnership being offshore?

Because Ceylon Solutions is a Colorado company that wholly owns the development center in Sri Lanka, we don’t face the typical risks that companies face when off-shoring due to international laws and owning our IP.

The relationship started because I was the founder of Ceylon Solutions 15 years ago and I currently serve as the chairman. Simplifya needed a dedicated team of bright and capable engineers to build the Simplifya platform. As a startup, we needed a cost-effective solution, as we had a limited budget, and so Ceylon was an easy option.

Any new features Simplifya hopes to deploy? 

We have some cool new features coming out this year that I can’t talk about too much. But we did launch a new feature at the beginning of the year called Simplifya Verified.

This is a risk mitigation tool for anyone that works with a licensed operator — including other licensed operators. Essentially, any and all businesses that work with a licensed operator need to ensure that they are in fact working with a licensed operator who has a valid license.

Licenses can expire, be revoked, denied and so forth. If any business, including a valid license holder, transacts with a unlicensed operator, that business has transacted with an illicit business, which carries serious consequences. Simplifya Verified mitigates this risk and ensures all parties are working with operators with valid licenses.

What's your advice for other CEOs in the cannabis space during this difficult time?

It’s worth pointing out that we have a wonderful community of smart and talented CEOs and employees in our industry. But my advice for them is what I tell myself: we have a responsibility to our shareholders, our employees, our communities and the world as we continue to proudly serve an industry that is clearly proven to be an essential part of daily life — and even more so now with a pandemic and financial crisis at our doorstep.

As we face uncertainty, chaos and panic, my hope is that the industry bands together even more and helps each other any way we can. As a united industry, we can better serve one another and the world. We are all the same: citizens of this wonderful planet. And it’s been made clear that none of us can do it alone.

Marion Mariathasan, founder and CEO of Simplifya. Courtesy photo.