As cannabis goes mainstream, Cannalysis looks to standardize the testing process

The company raised a $22M funding round from CanLab last week

It wasn't that long ago that cannabis was still considered outside the mainstream, but a lot has changed in just the last 10 years or so. Now it's a market that's expected to be worth over $45 billion by 2026, as the percentage of people who want it to be legalized has nearly doubled, while the percentage of people who want it to remain illegal has been cut in half.

Yet, while the acceptance of cannabis is growing, that doesn't mean that it's going to be smooth sailing from here on out; the cannabis testing space, for example, has seen at least two labs be shut down in just the last past year for falsifying reports. First there was one in Sacramento in December of 2018, and then another one in Michigan just last month. 

Part of the problem that led to those shutdowns, according to Tyler Autera, co-founder and COO of cannabis testing lab Cannalysis, is that "there is no standard for cannabis testing." The mission of Cannalysis is to be the lab that creates that standard.

"Our mission is to legitimize the cannabis industry by setting a high bar for scientific integrity, and we're delivering on that through the combination of software, robotics, data-automation and validated scientific methods. We’re providing the supply chain, which includes cultivators, manufacturers, retailers, and distributors, with a seamless testing experience that’s backed by science that they can trust," said Autera.

"Between our people, our science, technology, and robotics, we have a robust, customer-centric production lab where data is accurate and turn around times are quick and predictable."

The Cannalysis solution

Founded in 2015, Cannalysis uses a robot to automate the analytical preparation of samples for both potency and chemical residue tests. The robot, which is comprised of several components and stations that have all been custom-designed and configured for cannabis analysis, starts with the weighed out portion of a sample to be analyzed and proceeds to add all reagents, including internal standards. It then conducts extraction, agitation, filter/clean-up, dilution, miniaturization, plating, and mapping of the samples.

Cannalysis' bot can prep 96 samples for three separate tests simultaneously, for a total of 288 tests, in under two hours, whereas that process normally takes two separate people between three to four hours to complete.

The company currently has several hundred active customers, typically distributors, manufacturers, and cultivators, who most often use its solution for regulatory compliance testing at distribution.

"Under CA state cannabis regulations, each batch of cannabis product must be tested by a third-party laboratory before it can be released from the distributor to the retail store. This ensures that each batch of product sitting on legal retail shelves is safe to consume," Autera explained.

In addition, Cannalysis also provides R&D testing services to cultivators and manufacturers who are looking to gain insight into things like product formulations, sourced raw materials and in-process.

New funding

Last week, the company announced that it raised $22 million in funding capital from CanLab, giving it a total of $23.6 million following a seed round in 2017 led that was by Casa Verde Capital. 

The company plans on using the new capital to double the size of its headquarters, and to open a second facility in Oregon within the next four to six weeks, which means growing its team from 60 people to more than 100 employees by the second quarter of next year. It also plans to well as to expand into new states and markets as well.

"There are several factors we use to evaluate markets. Most of these factors come out of the regulatory framework that is being proposed or is in place. Things like the application/licensing process and types, supply chain constraints, testing regulations, maximum batch sizes, are all taken into account. Having worked within California and Oregon regulations, we have a strong understanding of how the different facets of regulation impact the health of a legal cannabis market," said Autera. 

The funding will also toward continuing to scale its robotics and data-automation testing services and operations. 

"Robotics and data-automation help to eliminate opportunities for error while simultaneously increasing precision and accuracy. As a production lab, we are running hundreds to thousands of individual tests per day, so it is imperative that we are focused on improving these metrics in order to output the highest quality data," Autera explained.

Additionally, the robotic platform will be integrated with Cannalysis' current cloud-based software to become part of the data-automation workflow. The data automation saves Cannalysis' lab technicians hours of time that would otherwise be spent manually entering data.

"We are entering a period of high growth, the new capital will fuel the ongoing development and scaling of our state-of-the-art lab while simultaneously (and aggressively) expanding our geographic presence in the U.S., starting with the West Coast. But it is also equally important for us to maintain the utmost integrity and transparency with our customers and the industry during this expansion. We have the vision to accomplish a lot of great things, but we need to do it the right way in order for us to consider it a ‘win’."

A quickly changing space

The cannabis space is evolving quickly, not only in terms of societal acceptance, but sophistication within the space, in part thanks to more people entering into the space, bringing new perspectives and expertise and helping to legitimize it. Cannalysis wants to help with that transition by making sure cannabis products are properly tested before they go to market, which Autera says, "helps consumers be confident and more educated about the products they are buying."

"A majority of California cities still have an effective ban on recreational cannabis, which has made it difficult for the legal market to flourish. But, as the industry matures, the perception begins to change and it will be difficult for these cities to continue to justify their ban on the industry. Once the dominoes start to fall it will be a snowball effect that will drive both industry growth and positive public perception," he said. 

What Cannalysis wants to ultimately become is "the de-facto scientific authority, and the largest testing lab by volume, in the legal cannabis market."

"Success to us is when we are the first company people think of when they hear ‘cannabis testing.’ Success to us is operating in multiple states across the country."