CanixStacey Hronowski | 2020-05-30
Could you give us a quick introduction to Canix?
Canix is inventory management software for cannabis operators. We are a Y Combinator alum and are currently serving 750 facilities across the US.
What was your career journey prior to starting Canix?
My educational background does contain a bit of computer science, but only a little. I was a computer science minor. I also studied legal studies and pre-med. I didn’t know what I wanted to do in college and a lot of my academic decisions were made to keep my options open. I knew that I liked puzzles and problem solving, so I went into investment banking after college, thinking it would be a lot of puzzles and creative work. It’s debatable whether that was actually the case. I did really appreciate my experience in investment banking but I did know, at that point, that finance wasn’t for me. Finance is interesting but it wasn’t my passion.
After that, I went into private equity. The summer between finishing investment banking and starting my new job in private equity, I thought about when I felt most excited and most happy. Investment Banking is so busy you don’t get a lot of time to think. You’re just doing. That summer was really the first time I had three weeks to just chill and think. It was at that point I realised I wanted to be an entrepreneur. I knew I liked working on small teams with talented people, feeling like I have ownership and feeling like I’m able to make a difference. I also knew that I liked doing novel things. I’m attracted to doing something – for lack of a better word – cool. Something that hasn’t been done before. I think I have a natural desire to keep changing and keep going after new things.
Through investment banking and private equity, I got a lot of exposure to entrepreneurs. Even though I wasn’t on the entrepreneurial side of things, I saw these people selling their companies. A lot of founders said things like “I’m a builder of companies, I’m not so comfortable in the finance environment”. It really struck a chord in me, because I realised that’s what I wanted to do. I wanted to build something.
After private equity, I knew two things. One, I knew I wanted to build a company and two, that I wanted it to be a software or technology company. Technology has such a power to transform and to scale, it was just the most exciting to me. At that point, I was very nervous. I was in Silicon Valley and there is a culture of really valuing technical skills and coders. I didn’t really have that background. I wasn’t sure if I’d be able to start a technology company without any tech experience.
This is where I made a critical decision, that did not pay off for the first few years, but did pay off later down the line. I decided to re-learn how to code. I had a bit of computer science education but I decided to really dive deep. It was so frustrating at first! I had an idea for an apartment rental app. I wanted to build one form that you could use to apply to any apartment. Technically, that’s not a very challenging project. So, I decided to build it myself. I was launching this idea and learning to code at the same time. I wasn’t making a lot of progress or moving forward. For any entrepreneurs who don’t have a rigorous technical background, my advice would be not to build the idea yourself. Ultimately that idea didn’t work out and the tech product wasn’t good. But, being familiar with coding and engineering really makes me a better CEO. I’m not building, but I am able to understand our data models, understand how long things will take and communicate with our engineers. I think it’s really important if you’re going to run a technology company, to have an understanding of technology.
How did you come across the idea?
After that, I was trying out a few more ideas and I got more adept at coding. After one year I was getting a little bit discouraged. I had been out of work for a year, I hadn’t been getting paid for a year and I didn’t have a lot to show for it. I had started this company called Swyvel, and it was doing ok, but it wasn’t nearly where I wanted it to be. I was debating going back to work and I applied to a few jobs. I got an offer from a cannabis delivery service. They noticed I really wanted to be a founder. I was very upfront about that. They mentioned that while my last startup, Swyvel, didn’t achieve product-market fit, cannabis has built-in product-market fit. People like this product! The only thing holding it back is regulation. It really did feel like we were in the age of alcohol after prohibition. I thought I may never see an opportunity like this in my life again.
I started learning more about the cannabis space and wanting to get more into it. Then, I came across a new regulatory system that was being rolled out in California. That kind of tipped me off. I thought that the new regulation would lead to inefficiency. I don’t know anyone who likes doing anything of the regulatory sort. So, I decided to explore the new system and see what’s inefficient about it. What I learned is that all Cannabis plants are required to be tagged with a barcode. And every time you move that plant, you need to record that barcode movement on a piece of paper. You have to do that like seven times in a plant’s life, and people have hundreds of thousands of plants. It’s just a ridiculous amount of data entry. People are literally writing down barcode numbers on a piece of paper and spending two hours at the end of every day doing data entry. No one should have to do that.
Canix, in its original form, was a mobile app that could be used offline to scan barcodes in the field. It directly integrated with the state’s track and trace system and sent barcode information back to that system.
How did you meet your co-founders?
We actually met at a cat’s birthday party. We had a mutual friend who threw this ridiculous party for her cat. It was December so everyone was dressed up in Santa outfits. I was literally wearing a Santa outfit when I met my co-founder, Artem. We just got to talking. I mentioned that I had this idea, but I didn’t want to build it all by myself. I was actually gathering candidates for a CTO role at the time. When I spoke to Artem he asked: “Do you need a part-time CTO”? I could not believe my luck. I was thinking – I’m so glad I went to this cat party. Artem was a senior software engineering manager at Facebook at the time. We did mutual interviews the next week and we really got on well. It was fairly low risk in the beginning because Artem stayed at Facebook. Artem, to his credit, managed his job at Facebook as well as part-time work for Canix. We launched the product six weeks later, with both of us coding.
Were there any other ideas that you were considering when you were starting out?
There were other ideas I was considering. I wanted to stay in the cannabis space because it was so interesting to me. The idea of this being like alcohol after prohibition – I just couldn’t shake that. I wanted to stay around because I felt like there was a lot of opportunity. I had a lot of different ideas within the cannabis space. One idea was an AI bot that would help labs to respond to customer enquiries, because labs were really overwhelmed. Another idea was a data-sharing product that could help dispensaries share information about how products are selling with their vendors. I came pretty close to pivoting to the data-sharing idea before I met Artem. My mum actually convinced me to stick with Canix. The data idea sounded sexier but Canix just seemed so useful. My mum said you should definitely go with Canix, don’t worry about how sexy it can be, just do the thing that is useful. Starting with something small, that people actually want, is the best advice I can give to people thinking about ideas.
How did your previous experience prepare you for your current venture? In what ways were you unprepared?
I was a solo founder in my previous ventures. It’s a lot harder as a solo founder. There is a lot more mental energy that needs to go into propping yourself up, believing that you are onto something and not thinking that you’re just wasting your time as you make no money. It takes a lot of mental effort. I think I was used to the ups and downs of Canix because of my experience as a solo founder. Now I just expect ups and downs every day. I think that private equity and investment banking made me very quantitative. One strength I think I have is putting a number behind everything. If we say – customer usage is up. Up how much? How do we know that? What number are we comparing against? Quantitative thinking really helps hone assumptions.
After you had the idea what were the next steps?
I had done a few customer interviews before building anything. I honestly just posted on Craigslist and Reddit. I just said “Hey, I have an idea. Is anyone a cannabis grower that can talk to me about it”? There were actually some really nice people that did. I was surprised by how much putting yourself out there works. Accept that you will get some trolls and some haters, but there will also be one or two nice people willing to talk to you, and they will have the information that you need. I got confirmation that way, that this is a good idea.
Did the idea evolve as things progressed?
All the time. Canix right now is much more than a mobile app. We do invoicing, inventory management, and have a QuickBooks integration, it’s a big system now. We have four different technologies that we use. The biggest thing that changed was the assumption that scanning the barcodes would be the most useful thing. It’s not that the assumption was wrong. It’s more that people don’t want to be switching between systems. We realised we had to build a comprehensive system that saves people time across all of their activities. We needed a management system, not just a time saver.
What was your experience of Y Combinator? Any tips for readers on getting into a program like this?
YC’s motto is “make something people want” and it’s really such good advice for a startup. I feel like so many people focus on “How is this going to explode”? or “How is this going to be a huge company”? When you’re small and starting out, you just want to make a product people actually want and are willing to pay for. That is your only job. The best traits for a very early stage founder, I think you have to be smart, and I also think you have to be a little bit shameless. You have to be willing to put yourself out there and ask for help from strangers. You have to be willing to make cold calls and talk to random people who really don’t want to talk to you sometimes. You really do need to be brave, and YC wants to see that. They want to see that you have that hustle. The best way to show them that is to develop that skill.
Were there any low points that you can think of, along your journey so far? How did you get through them?
A lot of low points! Three months in, we only had one paying customer, our usage was down and it was so disappointing. We’d worked so hard and we had all these free trials. We actually got a phone call that day while we were looking through our metrics, it was someone who said he had got a referral from “toothless Mike”. Toothless Mike had signed up and said he loved the system and was really excited about it. It was good to know that, things look bad, but considering that we’re three months in, they’re really not that bad. Artem and I have been able to prop each other up and help each other through the low times. It’s one of the advantages of having a co-founder. I remember I was really down after a call with a customer hadn’t gone well. And Artem said, “there are thousands of customers out there – we don’t need every single one”.
Any funny or most memorable stories along the way?
We were visiting our customers in Humboldt, a region with a lot of cannabis cultivators. It was our first trip there. We did a talk on regulation to a group of 100 growers, which was way more than we expected. Everyone was so angry because these new regulations were coming out and there was so much extra time added by them. People were acting like we were the ones forcing this regulation on them. I still remember, standing in front of all these super-angry growers and trying to talk them through the regulations. It was scary but we got through it. That was one of our biggest customer acquisition events; I think people appreciated it in the end.
If you could go back and give yourself one piece of advice, what would it be?
It’s so hard to say because you don’t know how things turn out. I would say it would be to do a computer science major, but I don’t know if I would be here right now without that investment banking and private equity experience. I think my advice to myself would be to not feel so rushed. I think I felt, throughout college and through the startup journey, that I had to be successful…yesterday. I just felt this sensation that I was running out of time and that made me feel frantic and anxious. But I wasn’t. I think I could’ve been happier if I didn’t feel so anxious about running out of time.
What are your favourite books?
Harry Potter and the Methods of Rationality (http://www.hpmor.com/). It’s a Harry Potter fan fiction book and its really, really good. It continues off of the Harry Potter universe but it talks about logic. It’s really hard to describe. It’s part maths, part Harry Potter – I really like it.
Find out more about Canix at: https://www.canix.com/
Find out more about Canix at: https://www.canix.com/