In May 2020, TIMIA Capital announced a $2 million investment facility for Cova Software, a Denver, CO and Vancouver, BC-based developer of an award-winning point-of-sale (POS) and inventory management platform designed to streamline cannabis retail.
Following the announcement of the partnership, we spoke to Cova CEO, Gary Cohen, to dive a little deeper into where the company came from—and where it plans to go next.
Where it all Began
Cova derived from iQmetrix, a leader in POS software solutions for cellular phone retail stores. With many disparate systems and ancillary partners to manage, cellular phone stores require a complex retail technology stack. iQmetrix has great success in this market as it helps carriers cut through the complexity and simplify retail operations.
With around 84% market share of cellular phone retailers, iQmetrix aspired to expand to other retail categories that deal with similar levels of complexity. The burgeoning cannabis dispensary market presented the perfect opportunity to apply iQmetrix’ retail expertise to a complex, high-growth industry. As such, Cova was established as a separate entity in late 2016.
“Due to the highly regulated nature of the cannabis industry, if your software doesn’t do what it’s supposed to do, it can cost you your business license,” said Gary Cohen, CEO, Cova.“Each state or province has its own laws and regulations so retailers need highly customized software that is compliant, reliable, accurate, and user-friendly.”
Today, Cova’s goal is simple: to usher cannabis dispensary owners into a golden age of simplicity, synchronicity, and efficient operations, all powered by Cova.
A Competitive Advantage from the Outset
Because of its ties to iQmetrix, Cova had access to back office systems and capabilities like legal, HR, marketing, finance, billing, and—most importantly—customer support. As such, unlike other startups, Cova launched its offering with scaled services fit for enterprise clients, which provided an ability to grow incredibly fast.
“There were already a lot of competitors in the space when Cova launched its solution. We probably entered the market in 50th place,” said Gary.
“However, having spun out of a larger company, we had the advantage of entering the market with scale. Today, after just 30 months, we’re the 4th largest POS provider to cannabis stores in North America.”
Cova’s incredible growth is not solely due to the support from its parent company, however. The company’s commitment to delivering exceptional customer experiences has helped it leapfrog the competition.
“When we launched our product, we had an MVP [minimum viable product]. However, we didn’t want just ‘viable.’ We aspired to be the most ‘loveable’ software POS solution in this space,” said Gary. “We’ve aimed to enhance every touchpoint in the client journey with us, from the sales process, to contracting, to the product, and to the setup and training. All is done with the customer front-and-center.”
Capital Efficiency…With Scale
Today, Cova employs just 44 full-time employees so it is incredibly capital efficient. Its relationship to iQmetrix means it has the ability to scale up and down based on volume. Since Cova effectively outsources from iQmetrix’ back-office teams, it only pays for the hours it uses for its accounting, payroll, and so on, scaling up quickly when demand calls for it.
Cova has also been very deliberate about its growth strategy. It only expands to states where cannabis dispensaries are legalized. The Cova teams assist new stores in their set up and hand-hold them through the compliance considerations and processes.
With TIMIA’s investment, Cova will expand into more new markets. The company also plans to use some of the investment to launch Cova+, a new integrated POS platform of cannabis services that includes functionality like menu boards, CRM, loyalty, eCommerce, and delivery—all in one place.
“Our goal is to be the most valuable company in our space,” said Gary. “We’ll do it by being the best run, most profitable, and best engineered solution on the market with happy loyal clients.”
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Why Revenue Financing?
Gary came from Silicon Valley and Cova is his sixth startup venture. As such, he knows a thing or two about growth capital.
“With COVID-19, there’s so much money parked on the side. It would have been easy for us to raise equity,” said Gary. “However, we are just months away from profitability so it made more sense to choose debt over equity financing.”
iQmetrix helped with the early funding but Cova needed a boost to get them past the tipping point of profitability.
“TIMIA’s investment has helped us accelerate our path to profitability. Our company valuation will skyrocket once we’re profitable so the sooner we get there, the better.”
Has COVID-19 Affected Cova’s Operations?
Despite COVID-19, Cova has done phenomenally well in the last four months. Cannabis has been classified as an essential service in all of the markets where Cova operates.
“We cautiously projected decreases in revenue from stores closing or asking for concessions,” said Gary. “But very few closed and hardly any went backwards in their sales. This pandemic has proven that cannabis retail is essentially recession-proof.”
Fortunately, Cova had already built the functionality for ordering online, curbside pickup, and delivery so it was well positioned to meet new retailing needs that arose from social distancing measures.
Cova is primed for sustainable growth and we look forward to following its journey as it continues to support the growing cannabis retail industry across North America.
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