In a first for the legal marijuana industry, a prominent venture capital firm has made moves to cash in.
On May 23, Hound Labs, an Oakland-based startup that makes a breathalyzer for marijuana, announced a new $US8.1 million round of funding led by Benchmark Capital. In the past, the Silicon Valley venture firm made early bets on Uber, Snap, Dropbox, and WeWork, among other technology giants.
Founded in 2014, Hound Labs is on a mission to make a reliable breathalyzer that detects and measures THC — a chemical compound responsible for marijuana’s psychoactive effects. The device is moving into clinical trials and is expected to launch by the end of the year.
A working marijuana breathalyzer has the potential to revolutionise how police officers perform roadside drug tests.
As it stands, marijuana is hard to test for on routine traffic stops. If an officer pulls a driver over and suspects they are under the influence, the officer is likely to perform a field sobriety test (“Follow my finger.” “Stand on one leg.”) An officer may then bring the driver into the station and collect a blood sample for a drug test, which can take six to eight weeks to process.
THC stays in these body fluids for days or even weeks after a person last smoked. A failed drug test indicates a person has consumed marijuana — not that they are stoned.
The device from Hound Labs looks like a breathalyzer for alcohol. When a person blows into the mouthpiece, the breath passes into a single-use, disposable cartridge. A chemical reaction separates the THC molecules from the sample, allowing an automated mechanism to calculate the amount of THC present.
Dr. Michael Lynn, CEO and cofounder of Hound Labs, is a practicing physician in an Oakland emergency room. He hopes a breathalyzer for marijuana takes the guesswork out of roadside drug testing.
“With alcohol, it doesn’t matter what your car looks like or … whether you’re a man or a woman. At the end of the day, everybody pretty much knows if you’re above a .08 [blood-alcohol level] you’re going to be arrested,” Lynn tells Business Insider. “We want to do the same thing for THC and take the subjectivity out of it, make sure that everyone is treated fairly.”
The first clinical trials of the breathalyzer started earlier this month at San Francisco General Hospital and are being led by researchers at the University of California, San Francisco.
The breathalyzer will be geared towards law enforcement and companies that perform drug testing. It will retail for between $US600 and $US1,000, which is comparable to a breathalyzer for alcohol. The cartridges, which store samples and can be re-tested months later, will cost about $US15 each. Lynn says a more affordable consumer-grade breathalyzer is also in the works.
There is no legal limit for the amount of marijuana in a person’s system when it comes to driving. But as breathalyzer technology becomes more widely available, it could pave the way for a legal threshold.
Sales of legal marijuana topped $US4 billion in the US last year, outselling Viagra, tequila, paid music streaming services, and Girl Scout Cookies. The North American market is on track to reach
$US22.6 billion in revenue by 2021. Until now, most of the support for this industry has come from private equity firms that invest specifically in companies operating in legal weed.
The new round raised by Hound Labs marks one of the first occurrences of a traditional VC firm making a play in marijuana. In 2016, on-demand marijuana delivery startup Eaze closed on $US13 million in funding from DCM Ventures and Tusk Ventures.
Lynn says the new round of financing will allow the company to grow its team, continue extensive testing, and get the device ready for commercialization.
“This is a milestone for this industry as a whole,” he says.