Nabis Raises $5M Series A to Expand Cannabis Distribution

The cannabis sector is experiencing rapid maturation, with companies like Nabis playing a pivotal role in its development. The company recently announced the successful completion of a $5 million Series A funding round, which will be utilized to facilitate growth and broaden its service offerings.

Nabis functions as a business-to-business distributor, managing crucial aspects of the supply chain including logistics, payment processing, and warehousing. Rather than distributing conventional products like beverages, snacks, or pet supplies, Nabis specializes in cannabis distribution. The company effectively bridges the gap between cultivators and retail businesses, delivering specialized services to both parties. Due to federal restrictions on shipping cannabis through standard channels, most cannabis businesses rely on private transportation networks for product movement.

Established in 2017 by co-founders Vince Ning and Jun Lee, Nabis reports handling approximately $250 million worth of cannabis annually within the California market alone. With this new investment, the company anticipates expanding its reach to encompass 25% of the state’s legal cannabis market. To achieve this objective, Nabis is developing an online business-to-business marketplace, enabling manufacturers and growers to sell their products in bulk directly to retailers.

Nabis CEO and co-founder Vince Ning discussed the company’s funding and future direction with TechCrunch.

Nabis delivers vital services to the California cannabis industry. For growers and cultivators, the company provides access to retail outlets and storefronts while safeguarding their brand identity. For retailers, Nabis streamlines the ordering process, manages delivery logistics, and facilitates cash management – a particularly important feature given the challenges cannabis businesses face in accessing traditional banking services.

Products are collected from manufacturing facilities and stored in secure, monitored warehouses, undergoing testing before being dispatched upon retailer order. Deliveries to retailers are completed within 36 hours of order placement. During product drop-offs, Nabis also offers a cash collection service, depositing funds on behalf of retailers.

“In addition to product fulfillment, we also manage payment collection upon delivery of new orders,” Ning explained. “We aim to provide an Amazon Prime-like shipping experience, with a 36-hour turnaround time. Our frequent visits to dispensaries, often multiple times per week, allow us to collect payments promptly as invoices become due. We accept cash, checks, or electronic wire transfers, and we maintain strong banking relationships for secure cash deposits.”

“The cash deposit service incurs a fee,” Ning noted, “but it’s a more acceptable cost within the cannabis industry. We deposit the cash and then remit payments to the brands electronically.”

Currently, Nabis is concentrating its efforts on the California market, which represents one-third of all legal cannabis sales in the United States and is experiencing substantial growth. Ning is confident in his ability to build Nabis into a billion-dollar company solely within this market.

“California’s current market is valued at around $4 billion in retail sales,” Ning stated. “It has been growing by $1 to $2 billion annually, meaning we can establish a billion-dollar distribution business within California without expanding beyond the state. While we plan to become a national distributor, California’s prominence in the cannabis market – comparable to Napa Valley’s reputation for wine – makes it a crucial foundation for our growth. California cannabis is the source of much of the highest quality cannabis cultivated in the US.”

Looking ahead, Nabis aspires to expand nationwide, though regulatory hurdles remain. Federal regulations currently prohibit interstate cannabis commerce, and each state maintains its own unique set of regulations and licensing requirements. Ning indicated that the company’s software is readily adaptable, but establishing new warehouses and distribution networks will be necessary to serve customers in new states.

The $5 million Series A funding round included participation from Y Combinator, Doordash co-founder Stanley Tang, Gmail creator Paul Buchheit, Twitch co-founder Justin Kan, Babel Ventures, Liquid 2 Ventures, and Soma Capital. This round brings the company’s total funding to $10 million since its inception in 2017.

The company secured its initial funding following its graduation from Y Combinator in March 2019. Nabis currently manages 7% of California’s legal cannabis market and sees an opportunity to capture 25% with the additional funding. The company intends to invest the $5 million Series A into enhancing its software platform and strengthening its financial services to provide capital to cannabis operators.

Nabis presently collaborates with 1000 dispensaries and 200 delivery services throughout California. Future plans include the implementation of an online ordering system, allowing retailers to order directly from manufacturers, thereby disrupting the traditional sales team-based procurement process. Ning believes this platform will empower brands with greater control over their messaging.

“Currently, sales teams must visit each store or conduct video calls to place orders,” Ning said. “They then manually enter the orders into our system. This marketplace reverses the communication flow, with retailers coming directly to us to place orders with each brand. We provide them with not only ordering capabilities but also a chat function for direct communication and access to various brand marketing materials.”

Ning asserts that these communication channels are unprecedented in the cannabis industry, drawing a comparison to McKesson, an online pharmaceutical ordering platform with its own fulfillment and delivery infrastructure operating within a highly regulated environment.

Security is of paramount importance, given the company’s responsibility for collecting, storing, and distributing substantial quantities of both cannabis and cash.

Ning explained that Nabis is licensed in California to handle cannabis shipments and adheres to regulations governing delivery vehicle requirements. All operations are fully insured, and each delivery van is equipped with multiple cameras, floor-mounted safes, and GPS tracking devices. Furthermore, cash deposits are handled by a dedicated warehouse team while van operators are making deliveries.

The company enhanced its security protocols in response to increased civil unrest across the country.

Businesses like Nabis are rapidly expanding to address the evolving challenges of the retail cannabis market. As these emerging companies grow and navigate complex regulations, they are becoming significant market players with substantial market share. However, growth is constrained by federal regulations and political considerations, leaving many companies limited to operating within state boundaries. Most cannabis industry participants anticipate regulatory changes, but the timing remains uncertain.