The State of Cannabis Angel Investing with Troy Dayton

Troy Dayton CEO of the ArcView Group

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Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

It’s long been known that there is a group of insiders in San Francisco who see angel investment opportunities before anybody else. These angel investors meet with entrepreneurs just as they are beginning and often make investments in these companies while the valuations are still very favorable. Similar to how this has happened in the tech scene for decades. There is a group in the cannabis industry where cannabis focus entrepreneurs pitch their ideas to well healed angel investors. This group is called the ArcView Group and I’m pleased to have the Founder and CEO of the ArcView Group Troy Dayton with us today to talk about all the incredible things going on in the cannabis investment scene. Troy welcome back to CannaInsider.

Troy: Thanks for having me Matt. It’s good to be back.

Matthew: To give listeners a sense of geography can you tell us where you are today?

Troy: I am in downtown Oakland in ArcView’s offices that overlook Lake Merritt.

Matthew: Great. You didn’t start out in the cannabis business side of things you were an activist. Can you just give us a little brief on your roots in activism?

Troy: Yeah. Well when I was in high school and I tried cannabis for the first time it resulted in me being in handcuffs and put in the back of a car. It turned out it was a joke. My friends played a joke on me with a security guard and luckily I didn’t have to experience the pain and the downstream effects of a criminal record for that scare but what it did do was give me a sense of the fact that marijuana prohibition was wrong and that I wanted to change it, and so when I got to college I got involved with the Marijuana Policy Project when they were just getting started that year in 1995 and got involved in a local group on campus and that was the beginning of it. And then I helped Co-Found Students for Sensible Drug Policy during my senior year at American University in Washington D.C. and then worked in many different roles in the drug policy reform movement in the years until I started ArcView with Steve Deangelo in 2010.

Matthew: Troy we had you on CannaInsider in 2014 and we learned about the ArcView Group then but for new listeners can you give us a brief on what the ArcView Group is at a high level?

Troy: Yes. So the ArcView Group has had a number of groundbreaking ventures in the cannabis space. The one we’re probably most known for is the Investor Network where we have over 500 high net worth accredited investors that have placed more than 70 million dollars behind a 111 companies in the cannabis sector. And we’ve also raised just under a million dollars from stage at those events for the legalization movement. And then we also put out The State of Legal Marijuana Markets. We just put out the 4th Edition of the State of Legal Marijuana Markets this time in partnership with New Frontier, and this is sort of the definitive market report for the cannabis industry. It’s over 300 pages and it just goes deep dive into each of the state markets and some of the big trends in the sector and that’s mentioned in the news about a dozen times every day. And then we are also partners in Canopy, Canopy Boulder which is now expanding to a number of other cities which is a seed stage mentor driven accelerator for businesses in the cannabis sector.

We’ve had about 29 companies graduate or 20 companies graduate and then another 10 that are in there now and some really amazing companies coming out of there. And then we’re also partners in Cannasure which is an insurance company for businesses in the cannabis industry and we did that back in 2011. So that’s kind of who we are.

Matthew: So my key takeaway there is you’re lazy.

Troy: Yeah we’ve been busy.

Matthew: Yeah that is a lot. Now when we had on back in 2014 you gave us a brief of the investment scene and what it’s like at ArcView Events. How has it changed in the last two years?

Troy: Well let’s see 2014. When was it in 2014? Do you remember when we talked?

Matthew: It was about October-ish I think.

Troy: October okay. So by October of 2014 a lot of what we’re now seeing today really kind of started around then. Prior to about midway through 2014 really high quality entrepreneurs and really serious investors putting really serious amounts of capital into this space were kind of hard to come by, but I think after people saw that cannabis was being sold openly and legally in Colorado and that the federal government was going to take a hands off approach and more and more states started to pass I think that really woke people up. Both great entrepreneurs as well as great investors to come in and really start making deals and we’ve just seen that trend continue. We just get such higher rated entrepreneurs now and more and more serious investors coming into this space. To give you a sense of that 70 million of investment from our members into companies that have come through ArcView, 45 million of that occurred in 2015. So we’ve been doing this since November of 2011.

Matthew: Right.

Troy: So that just shows you what happened since the last time we spoke. I mean people really opened up their checkbooks and it was a massive flood of investment from the year before, and I will also say that it’s still very nascent. It’s still quite; it’s not like raising money in or investing in the tech space for example right? I mean it’s not even close. We’re still very nascent. It’s still very hard for companies that are looking to raise more than two or three million dollars to do that, and the amounts are still pretty small in comparison to other industries but in comparison to our industry, boy it is really increasing at a remarkable rate.

Matthew: Tell us a little bit about the best pitch prize. I mean you hear a lot of pitches from stage and this prize to create a best pitch prize came up and now there is a fund around that. Can you tell us about that?

Troy: Yeah. So the great thing about ArcView is we’re not the ones choosing the companies right. It’s our members that choose them. So we hear from about a dozen companies every week that want to present and we choose the top three or four each week to put on a webinar and they get paired up with our Chief Mentor Francis Priznar and are kind of helped to prepare to give the best pitch that they can on that webinar and on that webinar there’s usually 30 to 50 of our members are on that webinar and they vote on the companies. They rank the companies and if a company gets a certain high enough rating they auto qualify for the next big event that we host that’s live where our members come from all over the world to attend.

And then there’s a selection committee that chooses the rest of them that make up the dozen or so companies that present from stage and then at the events people who are members get to rank the companies and vote on the companies and so we now award the best pitch prize at the end of each of the meetings to the company that received the highest votes. This time in just a week from now we’re doing something we’ve never done before which is if the company has a deal with our internal deal platform capital partner New Way and their ancillary is not available to companies that actually touch the plant then they can be in the running for a Winner’s Fund which is a $50,000 dollar investment at whatever terms they pre-negotiated with New Way prior to coming to the event and it’s going to be chosen by the members.

And so now when members are in that audience they are; their votes really matter. There’s actually going to be a $50,000 dollar investment made and that money is money that ArcView is putting up for it and so we’re now putting money behind companies but we trust the wisdom of our crowd, and so we’re hoping that the members make a great choice.

Matthew: Let’s back up to a little bit about how you said Francis preps the entrepreneurs because it’s really important to put your best foot forward when giving a presentation to investors. How does Francis help the entrepreneurs maybe go from an okay pitch to a better pitch and have a lot of questions answered ahead of time? What can listeners listening thinking about how to improve their pitch in terms of being more relevant to investors?

Troy: Yeah I mean I think Francis is able to just seeing so many pitches and understands this particular batch of investors really well because that’s how he got the job. He was an investor member who had made a bunch of investments and was mentoring companies through the group. So then we were like when we came up with the idea for this role we knew he would be a great fit for it. But the tough thing about being an entrepreneur is that you’re “in the weeds” right. You are looking so closely at everything that it’s hard to see the forest for the trees and having somebody with an outside eye who is knowledgeable can make a big difference in being able to help you kind of see that and really simplify things and help people understand things that they might not understand because you’re talking to a unique audience.

And so that’s really what’s helpful there and in terms of advice for entrepreneurs I think people spend a lot; I think people spend too much energy on their pitch decks and not enough energy on their relationships. At the end of the day investment is all about relationships. A good pitch deck might give people the sense that you’re really sharp but at the end of the day an investment is like a marriage right. This is a five to ten year relationship and an exchange of value and where someone is going to trust the entrepreneur to be a good steward of their resources. And so the relationship becomes so important, and so how are we looking at people not so much for what they can invest but also for what kind of person they are and what kind of relationship can I build with them and how can I make this exciting for them and how do I stay in good contact and good touch with them. That’s probably the biggest thing I think people miss.

Matthew: Now early on in the process there was more trepidation around investing in companies that touch the plant versus not touching the plant. Has that perception changed? Do you see a shift more where people are or investors are more likely to invest in companies that touch the plant because it’s perhaps more of a straightforward business model than a speculative ancillary business?

Troy: Absolutely. That’s one thing that’s changed in the last couple years. People are much more willing to invest directly in the plant and I think that has a lot to do with the fact that there is state licensing. Look if the state is going to give somebody a license and they’re going to take tax money from it like I think a lot of people feel like okay the water is warm. There are many, many investors who don’t fit in that category though and particularly a lot of new investors that are coming in particularly if they’re investing other people’s money. I tend to be a little more cautious on that and focus on the ancillary businesses. Also because investors tend to invest in things that they know and understand and the cannabis industry is not something most people understand but they may really understand point of sale software or online marketplaces or social media or they may understand packaging or they may understand lighting technology right and so for them they start looking where they know how to evaluate a business and so that’s often one of the reasons people wind up investing in the ancillary businesses.

But certainly there is much quick returns usually in a business that touches the plant because usually you’re talking about limited licensing. So if there’s only a small number of people that are able to have a license to do that in a given state you’re getting a bit of a protected market and you’re looking at cash flows pretty quickly. So it tends to be a bit of a different value proposition for investors but you’re unlikely to have a 100X return on a dispensary whereas when you get into things that have an exponential growth potential that rely on network effect and specialized technology that’s either going to be a zero out or a big win and so it’s a bit of a different investment game.

Matthew: You mentioned you been doing this since 2011. Looking back these last five years is there a certain type of entrepreneur or a market segment that seems to appeal to the investors at ArcView?

Troy: Well I think the best teams are always a mix of cannabis knowledge and experience and business knowledge and experience. I think there is a tendency for cannabis people to get together and start companies. People that what they’re bringing to the table is their experience in the cannabis industry. Those teams are not likely to succeed and the reason is because while they’ve been spending the last decade learning about the cannabis industry, the cannabis industry where it’s going is not where it’s been so by its very nature they probably won’t have the skills and requisite experience to really build that business.

Vice versa if you’ve got a group of people who’ve only spent the last 20 years really immersed in other types of businesses and not the cannabis industry they’re going to misunderstand the consumer. They’re going to misunderstand the idiosyncrasies of this market. They’re going to miss out on cause marketing and other things that just are very unique that you just can’t get unless you’ve really worked in this industry and understand where it’s going and how it’s getting there. And so I think both teams like that are at a disadvantage and I think when they build teams that are a mixture of the best suited to succeed in this marketplace and also there often tends to be some cultural translation and sharing that needs to happen there as well so it’s more challenging but ultimately overcoming that challenge really sets those companies up to succeed.

Matthew: That’s a great point. People with different backgrounds and different experiences can often see around a corner that other can’t so it sounds like a diversity of thought backgrounds is really kind of key as we evolve faster and faster in this industry.

Troy: Absolutely.

Matthew: Now how about investors? I mean is there a profile of investor that you say hey this is a typical ArcView investor or is there a lot of diversity there in terms of backgrounds, where they come from, how they think, and who’s a good fit as a potential candidate to become an investor?

Troy: Yes. There’s a wide range of investors that are part of ArcView. I think at the top end you’ve got people who have a couple million dollars they want to place into this space, whether they are small funds or they are ultra high net worth individuals billions, etc. We have those people, family offices, etc. that are part of our group, and then on the other end of the spectrum we have people who are high net worth because say they’ve owned a restaurant or they sold their small business and now they’re kind of retired and they’ve got a couple million dollars from their work that they’ve done and are looking to invest in the next great American industry and they want to put a $100,000 dollars or $200,000 dollars into the space. Those are great investors for this as well. Even people who don’t have any angel investing experience but this is the industry that really inspired them.

We also have people who sold companies and active in the Silicon Valley Angel Investment world. We have celebrities that are members as well. We have people who are doing that piece and then we also have some of the top, the biggest people in the whole space the heads of the biggest companies Tripp Keber and Steve Deangelo and the heads of Open Vape and all these who are there and are really looking to make acquisitions and partnerships and so it really runs the gamut.

Matthew: There’s probably a lot of listeners that are thinking hey am I a fit for this. What’s it like at an ArcView Event? Are people doing bong rips and playing hacky sack? What’s it like here? What’s it like to be a fly on the wall at ArcView? I mean.

Troy: That would be great Matt. I wish we had more hacky sack and bong hits on the tables. It’s very professional but it’s professional with a lot of more excitement right. I think when a lot of people think about business conferences or investment conferences they picture people kind of being all business and I would say that at our events I think you’d be very impressed with the caliber of people that are there but I think you’d also be really surprised to see how relatable and how relating and collaborative they are. We’ve really built an interesting and valuable community because a lot of these people come to each of the events throughout the year and they’re engaged on the webinars and everything so it’s really become a family and the kind of intimacy that builds in that kind of a space.

I remember someone telling me I can’t remember the last time I was at a business conference where people in suits were hugging each other and so there’s a real and I think it’s because we’re doing something different. I think for a lot of people either they’ve been cannabis consumers or have been really excited about this opportunity for a long time but maybe they come from a place or come from an industry where that wasn’t really accepted. They couldn’t talk about that and so they finally find their tribe of people where they can talk business and everything else but they’re also are involved in something somewhat irreverent in the world and they’re changing the world in a powerful way and they’re up to something together that’s special and that I think is what makes it unique at ArcView and I think a lot of people come for the economic opportunity but they stay for the people, they stay for the change, and they stay for the value that we’re creating in the world by making it more free.

Matthew: Now what about investors that come maybe for the first time and they hear some pitches and that sounds great. They’re considering investing but they don’t really have context yet. Maybe they see the promise of the industry or they’ve heard some things that are interesting about cannabis so they think they know something but they don’t have the full context of what’s important or considerations.

Troy: Yeah.

Matthew: How do other investors or kind of the ArcView eco system help to orient new members?

Troy: Yeah. I think that this is the reason why we started ArcView right was because so many people were making bad decisions or doing it without the benefit of collaboration and so one of the first things we do when a new member signs up is we introduce them to either other investors or other companies depending on where they are in their process. If they’re really early in the process before we introduce them to companies we introduce them to their investor peers so they can find people who can kind of welcome them to the crew and figure out what they’re interested in and kind of start to build that peer network to build that kind of comfort and then some people are like no send me the; I want to make some moves here introduce me to the companies and I say what’s nice about it is that we have a whole internal deal platform where people can look at deal after deal after deal.

You can watch the pitches that they gave on the webinar or from stage. You can look at all of these various aspects of the deals because one of the biggest problems in investing especially in a new area that you’re not familiar with is that we don’t have a way to judge deal against other deals like it to see whether the company really matches up, if the team is strong, if the opportunity is good, and all those pieces and so they say when you’re going to buy a house you should start looking months ahead of when you plan to buy because you want to look at a dozen or so houses before you choose one and I think similar with investments in the cannabis industry and so it’s all about building that peer network and it’s also about getting face to face time with entrepreneurs so that you can look in their eye and say hey is this somebody I believe in, is this somebody I want to be in business with for the next few years, is this somebody I think is going to be a good steward of my resources.

And then the other thing I would say is maybe start small. One of the nice things we have at ArcView is the opportunity to in many companies invest as little as 5 or $10,000 dollars in a company when that company may have a minimum of $50,000 or $100,000 and that’s because of this internal deal platform that we have and this relationship we have with our capital partner to be able to create what’s called single purpose vehicles. It works very similar to how AngelList works and that allows people to diversify over a wide range of investments and it allows them to get their feet wet without betting the farm.

Matthew: Right.

Troy: And so the way to learn is often by doing and so if people invest 5 or 10 grand in a couple companies they think are interesting it’s through that process that they’ll start to really get a feel for what they; where they really want to place bigger bets.

Matthew: Well let’s talk a little bit about BreEZe. It’s an online investing platform. If we were to log on right now and take a look at it just walk us through what we’d see and how it works.

Troy: Yeah. It’s where all of the deals that come through ArcView go and so entrepreneurs upload their pitch deck and their deal terms and then we upload videos of their presentations and the Q & A that happens afterward from the members. So whether it’s the webinar or from stage and then there’s a space where the investors can talk to each other and evaluate the deal together and express in a deal through that as well and this is great because you can really search through a wide range of deals to really see what’s out there and be able to narrow it down by sector or by stage of the company, look at their ratings, look at only highly rated companies, or etc. so and then on some of those companies have a pre-negotiated deal with New Way Capital and for those companies that have a pre-negotiated deal with New Way Capital there’s a little button that says invest now and that allows members, accredited investor members to click that button and reserve a slot in that company and that’s where you have these special purpose vehicles where the investor is not the person on the cap table of the company right. They invest into kind of a pooled vehicle and then the head of that particular SPV is the one that represents all those investors on the cap table of that company. It works very similar to how AngelList works.

Matthew: Yeah that really makes it easier for your first couple investments. It takes all the different permutations and variables out of it so you can just kind of focus on whether you want to do it or not at that valuation. So it’s a nice way to get your toe in the water.

Troy: Yeah. You also get the benefit of having somebody professionally negotiate and manage and keep up to date with the company because some people don’t want to do that and that’s valuable. You also; there’s also other obviously a lot of the funds that are in the cannabis sector are also members of our group too so it’s not uncommon for somebody to come in, maybe they make a few small bets but they ultimately decide that they really met somebody that runs a fund at the events and that they really trust that person. They really like their strategy, their investment thesis, and so they want to just put money behind the fund and that’s not uncommon for people to kind of play on both sides of that.

Matthew: Pivoting to ArcView market research. You recently updated The State of Legal Marijuana Markets and I believe it’s the 4th edition.

Troy: Yes.

Matthew: What kind of jumps out at you? Was there any nuggets where you were kind of leafing through when you’re creating the research and you’re like wow this is something that I probably would have not expected from last year that really is an interesting bullet point?

Troy: Yeah. I mean one of the things is just the growth of the market. I mean it’s looking at a 31% compound annual growth rate between 2015 and 2020.

Matthew: Wow.

Troy: That’s unheard of. We’re talking about in 2015 this is a 5.7 billion dollar industry growing to a 22.8 billion dollar industry by 2020. That’s remarkable. You will not find another market that’s growing at that kind of pace. That’s a multi-billion dollar market where there aren’t any big multi-national players or big banks making plays in it and so what that presents is probably the most amazing business opportunity for the small of medium sized player to really take a crack at this before they’re competing with big multi-national companies. It’s a very unique moment in economic, social, and political history and we have a really unique opportunity to succeed there.

I would say another thing that’s really interesting is the price wars that are happening between Washington and Oregon because this is the first time where you have two adult use markets that are contiguous where they share a border and their key areas of population are also fairly close to each other. I mean Portland and Seattle are not that far apart and so you also have very different regulatory structures. Oregon has a very loose regulatory structure and low taxes and Washington has high taxes and a pretty tight regulatory structure and so being able to see some of the numbers and how they interplay of what happened when Oregon came online with its adult use market and how that may be impacting the Washington market. So I think that’s a fascinating exploration which we’re going to keep an eye on for sure that came out of the report.

Matthew: Now half our listeners are in California which is kind of a shocking statistic but California’s cannabis market is just so huge and deep that it really just wharfs almost everything else.

Troy: Yes.

Matthew: And I think it’s for people that might be new listeners might have a difficult time understanding just how big it is but it’s absolutely enormous. When you look ahead I mean California do you think it is kind of moving into a leadership role where Colorado and perhaps Washington were kind of the early runners in terms of hey it’s legal here for adult use but now the pole, the capital, technology people and resources are moving to California in a bigger way?

Troy: Absolutely. People are salivating over the California market right now because it’s really; there’s a lot of pent up demand for innovation and investment and growth in California because it’s really been hampered by a lack of regulations, a lack of state regulations, a lack of clarity as to how that relates to the federal priorities. A patchwork of different regulations in each city as well as a nonprofit requirement meaning the companies had to be set up as not for profits and so that really kind of but despite that it became the largest market and it was the first market. So you’ve got this really interesting conundrum there. It’s also the core place for culture around cannabis. I mean it’s like this is where the cannabis culture has really created when most; when you ask people what state do you associate with cannabis prior to 2014 everybody would say California.

So it’s both; it’s got a lot of elements of that and what’s changing is now that there are state level regulations and also there is a ballot initiative that looks quite likely to pass people are really lining up. But it’s something a bit paradoxical about that because in our report we predict that the medical market actually is going to be losing a little bit each year. It’s probably the only market that’s not expected to grow and that’s because these new regulations are quite tight and onerous and so we expect that there will be a bit of a constriction in the market. In part because elicit cannabis is so widely available here. So you don’t need to push consumers much to have them be like screw it I’m going to the dude down the street.

Matthew: Right.

Troy: And so I think that’s going to be interesting but with the advent of legalization coming in 2016 by 2018 that adult use market goes actually online right because it takes a while for them to implement these regulations and that’s when you see really big growth start to happen once there is adult use legalization in California and so we’re looking at by 2020 at a 6.4 billion dollar market just in California and that’s not even a fully matured market because it will only be online for two years and it won’t be fully online in that first year. So 6.4 billion I mean that’s bigger than we put it out in 2015 right. So the whole market in the U.S. So it’s really a unique opportunity and also one of the challenges that you have in this market is the fact that you can’t have interstate commerce right so if you’ve got a facility in Colorado or in Washington that facility can only serve Washington or Colorado. Well these are relatively small states in terms of population.

In California you get to have economies a scale so it’s much more interesting for a business owner to own something in California because it’s more like; it’s one of the largest economies in the world. So if you have a business in California it’s like being able to have interstate commerce with your business for the whole Eastern seaboard right.

Matthew: Right.

Troy: Which you can’t do even if all of those states passed those laws. So you get a much more efficient market and marketplace. Of course the big pull on that is that at least what’s presented in the ballot initiative in 2016 and what’s in the regulations that passed for state level regulation for medical wow in both cases they’ve really gone overboard with the regulations in ways that are going to create some pretty remarkable inefficiencies in the marketplace that is going to ultimately raise prices and impact consumers in a negative way. My hope is that we get some reforms on that. We don’t need to treat cannabis like its plutonium. I think we can have reasonable regulations and follow in the footsteps of these other states. But of course California has got to do it California’s way and so we’ll live.

Matthew: Troy before we close just a couple personal development questions. Is there a book that has had a big impact on you that perhaps over the arc of your life you look back and gives you a different lens on how to perceive your life and where you want to go and what you want to do that you might recommend to CannaInsider listeners?

Troy: Yeah. I’m actually reading a book right now that I’m about a quarter of the way through that’s kind of blowing my mind. It’s called “Originals” and I don’t know the name of the author but it’s a fascinating look at people who’ve been innovators and people who’ve made really big impacts on the world and looks at the psychology in the data behind what makes people succeed in that way in creating a really unique imprint on the world and so it’s a lot less; it’s not just fluffy right? It’s not just like; it uses really solid research. So it kind of reads a lot like a Malcolm Gladwell kind of a book.

Matthew: Okay.

Troy: About that topic but I think it’s interesting and I think for anybody that is looking to make a unique mark on the world it’s important to challenge the conventional wisdom about who does it and why they do it.

Matthew: And if you could go back and talk to the 18 year old version of Troy Dayton what advice would you give him?

Troy: I would just say that maybe be careful what you wish for right that you actually have more of an impact then you imagine that you do or you have the capacity to have more of an impact then you imagined it and also that when you look up to people as people who are really; that you look up to as mentors or you look up to and say I’d love to be like that someday or whatever that it doesn’t look that way as you get there right. At the end of the day people just put on their pants one leg at a time and you don’t need to be that special or that perfect.

Matthew: Right.

Troy: In order to make such a big impact and as I’ve gotten older and as I’ve spent time with celebrities or spent time with people who are just at the very, very, very, very, very top of their field. There are some differences but they’re not the differences I imagined when I was eighteen.

Matthew: Okay. Do you boil it down to persistence or just focus? I mean when you see that just this person knows what they want?

Troy: Yes. That’s really well said Matt and also in luck and the power that luck has on people. The confidence that luck can give you can take you places right.

Matthew: Yes.

Troy: I mean I think that our consumer culture has really created a nation of insecure people right. Everyone’s insecure. Am I enough of this? Am I enough of that? Am I this, that and it creates this overall sense of insecurity and it’s only when you achieve something that the society kind of rewards you with praise for that you get to move into the sort of God given sense of security and confidence that we should all have all the time.

Matthew: Oh this could be ammunition for a whole other show here. I mean these are great topics.

Troy: Yeah don’t get me started, don’t get me started.

Matthew: Well Troy tell us about your next ArcView Event and how listeners can learn more about it?

Troy: We’re going to be in Oakland, June 18th, 19th, and 20th and that’s going to be cannabis week because on the 18th during the day Canopy Boulder is going to be doing their demo day so that’s going to be the companies that are graduating from this class are going to present at that demo day and then we have our two days of our event and then after our event it’s the National Cannabis Industry Association’s Annual Conference. So I highly recommend that people participate in that as well and then the other thing I would just say that we didn’t address here today that I just want to make sure people understand because there is a really short timeline on this which is that we’re on the ballot in nine states in November. Nine states are either going to be voting on medical or adult use legalization and those ballot initiatives are severely underfunded right now because we got on so many ballots and so I just really want to take this opportunity to remind your listeners to really consider what kind of impact you want to make and make a donation.

Whatever is meaningful to you? Some people a meaningful donation is $20 and other people a meaningful donation is 200,000 dollars. To really think about what kind of impact they want to make this November. It’s a rare opportunity to really; to basically put the final nails in the coffin of marijuana prohibition. If we do well on election day we will be waking up in a very different world on the next day and so I invite you to participate with me and others in making sure that on election night you’ve got something really at stake where if we win you feel like I was part of that and if we lose that you feel a loss from that. Make sure there’s something at stake for you in it other than just armchair politics.

Matthew: Well said. Troy what’s the best way to connect with ArcView online and social media wise?

Troy: So that’s best then there’s or ArcView Group in Twitter I’m #Tdazzl without an E and then if you’re looking to make a donation one place would be and you can do if you’d like to let them know that you kind of heard about it here. But however you give and whoever you give too please do it soon.

Matthew: Thanks so much Troy for coming on CannaInsider today and thanks so much for being an early activist and pioneer to make this happen. I think you really need to be recognized for that because as you’ve mentioned before a lot of think it’s inevitable now that cannabis prohibition will end but it was the people like you and Steve Deangelo that were doing it way back when and really, really driving and pushing this change and it couldn’t have happened with you. So thank you so much.

Troy: Yeah. My pleasure and thank you for acknowledging that and there’s still a lot more work to do and a lot more room in the history books.

Matthew: Good point.

Troy: You’ll be in it too.

Matthew: Thanks Troy.

Troy: Thanks for having me.

If you enjoyed the show today please consider leaving us a review on iTunes, Stitcher, or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on CannaInsider simply send us an email at feedback(at)cannainsider(dot)com. We’d love to hear from you.

Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Lastly the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions.

Final disclosure to see if you’re still paying attention. This little whistle jingle you’re listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye bye.

Troy Dayton is the co-founder of The Arcview Group. The Arcview Group is best known as an angel investing forum where cannabis entrepreneurs and investors meet to get deals done. To date Arcview’s 500+ investor members have invested over 70 Million dollars in cannabis-focused companies.

Troy and Matthew discuss the most interesting aspects of the cannabis investing space as well what prospective entrepreneurs and investors need to know right now in order to be successful.

Troy was recently named  one of the 7 Most Powerful People in America’s Marijuana Industry by Fortune Magazine.

Key Takeaways:
1:42 – Troy talks about his background in activism
3:13 – What is the ArcView Group
8:10 – Troy talks about the Best Pitch prize
11:08 – How are entrepreneurs prepared for pitching to investors
13:54 – What types of companies are investors investing in
16:33 – Certain types of businesses & market segments that appeal to ArcView
19:12 – Who is a good candidate to become an ArcView investor
21:22 – What’s it like at an ArcView event
24:03 – Troy talks about how new members are oriented into ArcView
27:23 – The Breeze Online Cannabis Investing Platform
30:42 – Troy talks about the growth in the Marijuana market
39:23 – Troy’s book recommendation
43:28 – Information on the next ArcView event

Learn more about Troy and the Arcview Group at:

Important:  You can use coupon code: CI100 to get $100 off the most compelling industry research in the cannabis industry, visit,

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The Five Disruptive Trends Shaping The Cannabis Industry Now

The Top Stories in Cannabis Trending Right Now with Alex Halperin

alex halperin of weed week

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Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

Today we’re going to discuss the latest and most important stories in the cannabis industry. To help us on this journey I’ve invited Alex Halperin to the show. Alex is a freelance business and cannabis reporter based in Denver. Alex’s work has been published in the New Yorker, Mother Jones, Fast Company, Fortune, Al Jezeera, Business Insider and Rolling Stone. Alex has launched Weed Week, a newsletter that captures and distills the week’s most important cannabis news in a brief and digestible format. Alex, welcome to CannaInsider.

Alex: Thank you so much for having me.

Matthew: Alex before we get started can you tell us a little bit about yourself, your background and how you got involved in the cannabis industry and writing about the cannabis industry?

Alex: Sure. So my background is mainly in journalism. I’ve worked for Dow Jones and Business Week and so on, and as a freelance reporter for a bunch of different places. I was working as a freelancer in 2014 and I had written one story about the industry for Fast Company, and then they were nice enough to send me to the big conference in Las Vegas in November and I was coming from New York and I was just blown away by what a big deal it seemed like it was going to be. I thought wow, and I instantly was fascinated by there’s so many different avenues and issues involved. Everything from culture to the shadow economy that’s grown up around the industry that sort of mimics the real economy and some of the people involved. And I thought wow this is the business story of the decade. So I moved out to Denver in March 2015, a little more than a year ago and since then I’ve been writing about the industry for various publications and that’s what brought me here.

Matthew: Got it. And what’s Weed Week?

Alex: Weed Week is a weekly newsletter that I started last summer and what it tries to do is in the industry there are so many different aspects. There are legal aspects. There about business aspects, political. Political especially since it’s happening in 50 different states at once as well as in Washington. Culture, health, both the benefits of cannabis as well as potential dangers of it. So I wanted to put together a newsletter primarily for people in the industry or people who are interested in the industry that would really capture everything that’s going on in the industry in a digestible form and with links to articles so that readers can find out more about the stories that particularly interest them or apply to their business. Subscriptions are free and confidential and you can subscribe at

Matthew: Great. Well I know your Weed Week newsletter for the week comes out tomorrow. Is there any stories we can go over now with listeners?

Alex: Sure. It was a pretty interesting week and I think pretty illustrative of how cannabis news is everywhere. So one interesting story comes from Rhode Island where a Catholic bishop who is opposed to legalization feared that it would turn people into zombies. Rhode Island is a Catholic state and it’s also a state that’s seen as one likely to legalize soon so it carries some weight. What I think is interesting about this story is it sort of shows that while there are compelling arguments for opponents of cannabis to make, a lot of them come from different fields. Some for Watch Out for the Children, some for health aspects, some have an aesthetic distaste for it. The bishop seems to share all three, but what’s interesting is there is still a fair amount of opposition in this country, but it’s really not a unified movement.

The groups that oppose it generally have very little money and very little traction. So whatever valid arguments they might want to make often get buried or don’t get the attention they need. Oftentimes also, and this is certainly the case with the bishop, the opponents aren’t really up to date on what’s going on in the industry so regardless of the validity of their concerns the optics aren’t necessarily very effective to promote their agenda.

Matthew: I’ve got the story up in front of me right now. It actually almost feels like it could have been in the Onion or something, but it’s from the Cannabist and it says Rhode Island’s Roman Catholic Bishop Thomas Toban, that’s his name, he’s worried people will become “zombie like”, completely stoned, filling public places. Now this is something that’s really strange. When I talk to people that have not visited a recreational state where recreational cannabis is legal they have this image in their mind of oceans of people stoned out of their mind hanging out together. Every day, like they’re just going to arrive in Colorado and just going to be oceans of people all stoned, staring at the not stoned person as they arrive. It’s really funny.

Alex: Yeah, no absolutely.

Matthew: And the article ends it says, “The bishop was disturbed by a recent report of a woman smoking pot in the back of a cathedral during a morning service.” So maybe that’s what got his hair up. Who knows. He does say one interesting thing in this article and I’m glad you have this in here. One thing I thought that was a valid point is the technology has the young people so engaged. They’re head’s down and they’re not even living a real life. They’re so consumed by the digital world. And recently going to San Francisco, I mean you see it everywhere in every big city in the world now, but some cities adoption is just higher than others. And in walking around San Francisco I was really like wow we’re kind of merging with these machines that are supposed to be serving us. They’ve totally captured our attention. A lot of us can’t go five minutes without getting a little fix, like a little update of what’s going on. That point, I thought that was a pretty good point he made about that. The technology probably could be more of a threat than the cannabis in that way but I did feel like he did deserve some recognition for that one point.

Alex: Sure absolutely.

Matthew: How about any other stories in Weed Week this week?

Alex: A fun, not a fun story but sort of an interesting story was that in Colorado it turns out, at least in one county near Denver, probably fair to say in other areas of Colorado as well, there’s been a big uptick in dogs getting sick because they ate marijuana or ate some cannabis or ate some edibles or something like that. It says it’s rarely fatal but there’s a tradition I guess blowing smoke in a dog’s face and watching him sort of stumble around a little bit. If you put some gummy bears in front of a dog, it’s going to eat them all and it could get very sick. So it’s an issue and sort of an unexpected one but an issue.

Matthew: Yeah especially since dogs have no throttle. Like oh I’ll just eat this whole thing, whatever it is. I wonder though if it’s one of these situations that you can’t hear the dogs that don’t bark. I don’t know if you’ve ever heard of that expression, but when cannabis was illegal in Colorado it’s like people would probably be scared to report that because if my dog ate pot, that means I had pot. You know what I mean.

Alex: Yeah sure. I mean that’s actually you thought of as an explanation for the increase in humans visiting the emergency room as well. They’re not as scared as they would be in an illegal state.

Matthew: Yeah that’s a good point. Please keep an eye out for your dogs. Keep it locked up because no one wants to see a dog have a bad trip.

Alex: Yeah. Dogs and kids, keep it away from them.

Matthew: Yes. Okay anything else in Weed Week this week?

Alex: There’s an interesting story in the Atlantic, I think the headline is a little overdone, but it says “The Failed Promise of Legal Pot”. It’s an article about economics and it talks about why the black market is still in business, although in greatly diminished terms than it used to be in states like Washington and Colorado. The reason for is pretty simple, price. People who have sort of street dealers often pay less for it. And there are different ways that states can try and break the black market. Both Washington and Colorado it says taxes but not very much. And as a result there’s still a gray area between the profit margins that legal businesses want and the profit margins that illegal dealers are willing to accept. And there were similar issues coming out of prohibition. Sort of a compliment to this piece was a piece in Buzz Feed which talked about a report from Colorado that came out a little while ago where it says that arrests, since legalization, arrests of black and Latino youth have actually increased. It plays to the racial disparities that have always accompanied illegal drug markets in this country and remain probably one of the most compelling arguments for legalization.

Matthew: Yeah. That is a tough dilemma. I think states are always loathed to, they’re like hey this is a golden goose. We don’t want to get rid of our tax revenue, but they can increase the base by cannibalizing the black market if they lower the taxes enough. Also the arbitrage opportunity with the medical cannabis because there’s no tax. It’s a tax free sale for medical marijuana in some places. So if you can avoid that tax you automatically have a double digit percentage cheaper cannabis than the rec cannabis so there’s an arbitrage opportunity there where you can go make a little spread if you’re a street dealer. So that’s definitely something. Gosh it seems like it’s a problem of both opportunity and there’s a lack of opportunity and then there’s an incentive for profit. Those are kind of the two driving forces. At least from my outside perspective. It’s hard to tell for sure, but it’s like how do you balance those.

Alex: Sure. One interesting thing about this article is that it did some reporting in Seattle and it hung out with a small time dealer who is also a dishwasher. And while it made clear that this isn’t the case for everyone, this sort of swinging a few bags of weed. It’s really not a very glamorous life although some people may think it is or aspire to it. He was doing this, he started doing it when his mom lost her job.

Matthew: Yeah, The Failed Promise of Legal Pot. You know I think about there’s this perception like when cannabis becomes legal everything isn’t perfect than the detractors say. There you go, especially in the beginning there’s kind of this balancing act, the working things out I feel like it’s kind of tipping over a Coke machine. You go back and forth a few times before you get it right.

Alex: Sure, no, exactly. There was also a chart I’ll bring up in the newsletter this week just on industry profitability. Since so many of the companies are private it’s really hard to get an idea of how much companies are making. It’s not necessarily a huge surprise but companies seem to be doing pretty well. And it’s the companies that report themselves to be the highest rate percent of being very profitable, ancillary services firms. Whereas dispensaries tend to be less profitable, but pretty much across the market companies seem to be doing pretty well.

Matthew: Yeah it’s interesting that everybody has this perception that once you get into the cannabis industry you’re just printing money, but the ancillary businesses do the best. I wonder if it’s because they have a lower risk, lower startup cost perhaps, not always but sometimes, and then the regulatory burden is way less because they’re not dealing with a controlled substance.

Alex: Exactly. I could say technically Weed Week is an ancillary services firm and I’m probably not profitable yet.

Matthew: So any other surprises on that chart where you felt like; so there’s ancillary services, cultivators, who else? What other categories?

Alex: Wholesale cultivators do pretty well because it sounds like they can basically be cash flow positive as soon as they start harvesting. I was a little surprised, I believe this data is all self reported so it’s hard to say what very profitable and modestly profitable is, but I was sort of surprised that infused product manufacturers seem to be doing better than dispensaries because if you’re making products you need all sorts of expensive equipment and there are pretty strict regulations. Of course there are regulations for dispensaries as well but it doesn’t necessarily involve the sort of machinery and fixed costs that manufacturers have to deal with.

Matthew: That’s true, but at the same time that is a little counter intuitive, but now that I hear you talk about it I’m thinking okay if you’re processing, you’re buying some cannabis wholesale, you’re infusing it with some fat of some kind like a butter or an oil and then you’re making something and then you’re selling it to a dispensary. So you don’t need a staff, a retail staff and you don’t need this big grow operation. So I guess that makes sense in some ways.

Alex: Yeah, no definitely.

Matthew: Well any other stories for Weed Week or is that a wrap?

Alex: Usually in the newsletter I get through about 20 stories in 1,000 words or so, but just one more I’ll bring up was a piece in the Guardian and it was picked up by Fortune as well about the so called ex-pots and these are people moving to Colorado from other countries essentially for medical reasons, for the same reasons that kids have; some American families have done the same thing when they have sick children. I think it’s a cool dynamic and it illustrates how the weird asymmetries in this industry lead to unexpected changes. I think that’s what makes this such a great story and why I’ve enjoyed covering it so much.

Matthew: Yeah that is an interesting trend with this cannabis refugee type situation. I interviewed a family from Australia that moved to Canada to support their two kids that had a degenerative lung disease and the only thing that could help them was cannabis oil but when they consumed the right amount they essentially became symptom free. The mom was saying I haven’t seen my kids like this in years and they were worried about going back to Australia, but it sounds like they’re coming around in Australia which is great but it’s like sometimes you can’t wait for that to happen and you’ve got to do something. It does frustrate me a little bit because it raises the question are we truly free people. If you can’t do what you need to get a plant that makes a massive difference in the quality of your life from a medical perspective, are we truly free. I don’t know. That’s a good question. I feel frustrated that we even have to ask that from like these gatekeepers. It’s a crazy thing.

Alex: That’s a big, big question.

Matthew: You’re right. One of the things I love about Weed Week is how brief, digestible and distilled it is. You really break things down into great bullet points and I do read it every week and I recommend it to a lot of friends. I forward it to friends and so forth. So you’re doing a great job with it. Two more questions before we wrap. Personal development type questions, Alex. Is there a book that has had a really big impact on your life where you look over the arc of time and you say looking back this really had a big impact in my life and I would really recommend it to CannaInsider listeners?

Alex: Well it’s not really a cannabis book, well it’s not a cannabis book but forms to some extent my journalistic sensibility which is Friday Night Lights which was subsequently made into a movie and then a TV show as well. It’s about a year in the life of a football team at a high school in West Texas and the reporting is so immersive. It’s about football but it also uses football as an entry point to discuss so many of the other issues of life in this rather desolate city in West Texas. It talked about race issues and class issues and sort of the ambition an all of these important things, and football serves as sort of a unifying node for the author, Buzz Bissinger the great journalist, to explore so many other things. That’s sort of how I think about cannabis. I kind of think in some ways the least interesting thing that happens to the football team is what happens on the field. And to some extent, to least interesting thing that happens with cannabis is what happens after somebody takes it. I mean from my view I think the most interesting thing is all the crazy dynamics that have surround the emergence of this legal industry.

Matthew: Yeah. Great points. I went to a football game in Texas. Being a northerner I went to one once, a high school football game about 20 years ago and I was absolutely floored at the scale and size and the athleticism of these kids because it almost seemed like a college or pro game. I mean it was a huge stadium, there was so much energy and enthusiasm I just couldn’t believe this was a high school game. I don’t know if anybody has had that experience going to the south for a football game but it’s really quite a spectacle. Pivoting to the next question, is there a tool web based or otherwise that you use daily or weekly and feel like it’s really indispensible to your life that you would recommend to CannaInsider listeners?

Alex: Actually the tool that’s indispensible for me to put together Weed Week is an app called Pocket and it’s just a way to save stories that I come across on social media and then at the end of the week I can go through the list of stories and put together the newsletter from them, but it’s just a great way to save things you want to read if you don’t have time right now to read them and you can also save videos or whatever else.

Matthew: Wow, I haven’t heard anybody else talk about Pocket but I use it daily. It’s this little icon that goes on your browser. If you see a story, you click on the Pocket, it saves into your Pocket account but also you have an app on your phone so when you’re out and about you can read it if you didn’t have time when you came across a story. But then there’s this other app that works with Pocket called Audiofy that I use and will take all of your Pocket stories and read them to you in this computerized voice while you’re walking around or doing whatever if you can’t read. I love Pocket, I love Audiofy so I’m glad you mentioned that.

Alex: Cool. Well Audiofy I will have to check that out.

Matthew: Yes it’s really cool. Well Alex as we close tell us one more time how listeners can find Weed Week.

Alex: Thanks so much for listening. You can get a free and confidential subscription at and the newsletter comes out on Saturday mornings.

Matthew: Alex thanks so much for being on CannaInsider and good luck with Weed Week.

Alex: Thanks so much for having me. It was a lot of fun.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider(dot)com. We would love to hear from you.

Key Takeaways:

1:21 – Alex’s background
2:49 – What’s Weed Week
4:19 – Weed Week’s top stories of thew week
21:15 – Alex’s book recommendation
23:48 – Alex’s indispensable tool recommendation
25:09 – Where to find Weed Week

Matthew Kind and Alex Halperin sit down to discuss the top cannabis-related news stories that are trending right now. Topics include; Which kind of cannabis businesses are most profitable, why dogs are eating more pot, A Catholic Bishop coming out against pot, and why the black market isn’t disappearing entirely in states where cannabis is legal.

About Alex Halperin:
Alex Halperin’s work has been published in the, Mother Jones, Fast Company, Fortune, Al-Jazeera, Business Insider and Rolling Stone. Alex has launched Week Week a newsletter that captures and distills the week’s most important cannabis news in a brief and digestible format. You can follow Alex’s work at:

Important Update:
What are the five trends that will disrupt the cannabis market in the next five years?Find out with your free guide at:

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The Five Disruptive Trends Shaping The Cannabis Industry Now

How to Avoid Pathogens in your Cannabis

cannabis pathogens eric lachance PathogenDx

Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

Cannabis testing is becoming a big business and for good reason. As companies compete to have the best, safest and cleanest cannabis they are searching for testing protocols that will help. That is why I’ve asked Eric Lachance of Pathogen DX onto CannaInsider today to help us understand the latest in cannabis testing. Eric, welcome to CannaInsider.

Eric: Thank you for having me.

Matthew: Eric, to give us a sense of geography can you tell us where you are in the world today?

Eric: Yeah we’re in Phoenix, Arizona. Our corporate headquarters is in the Scottsdale area, and our lab is down in Tuscan.

Matthew: Okay. And what’s your background? How did you find yourself in this business?

Eric: Actually my background I served in the military for 20 years and involved in a lot of research and development. And the cannabis business frankly is an exciting, new area into research and development which is why when I met my team, the CEO Milan Patel and Chief Scientist Mike Hogan, it was just a path to continue what I have a lot of passion for.

Matthew: Okay. What is Pathogen DX do exactly?

Eric: So Pathogen DX has developed a test, a DNA based test for tracking or finding pathogens that are inside of the cannabis product whether it’s the flower, the edibles or the oil. We’re based on a human diagnostic testing. We were spin off from a company that has a lot of years of NIH grand funding work.

Matthew: When you say DNA based, can you just familiarize us with exactly what that means?

Eric: Yes so let’s just think about this terms of the CSI which we’re all familiar with on TV. In CSI you use DNA to find who the bad guy is. In this case we do the same thing since fungi, mold, bacteria are all living organisms they have DNA. And so we find that DNA inside the test when we’re conducting the test. Much like you see in any forensic lab.

Matthew: And who are clients? Labs or individuals or who are your clients?

Eric: Right now our primary client is the labs because each state has requirements for testing cannabis for pathogens and other things and so they have a third party requirement which is the lab which is who we sell our test to.

Matthew: Okay, can you give us a snapshot of the lab requirement and the biggest markets in the United States?

Eric: Yes, sure, absolutely. So you know the testing market in 2020 is supposed to be about $850 million market and of that probably about a third of that if not more is pathogen testing. Each state requires, not each state, a majority of the states require testing for molds, yeast, mildews on your cannabis product. Now each state is a little bit different, but in general they all test for (4.05 unclear) mode, e-coli and salmonella.

Matthew: Okay, and what’s an acceptable amount? I mean is there a minimum threshold. I mean because this probably occurs in nature pretty often and it’s not always a cause of concern is that right?

Eric: That’s correct. So there’s a threshold for e-coli and salmonella which is 1CFU. So if you can pick up one colony for (4.32 unclear) of e-coli and salmonella, then it is fail. On total yeast and mold, total of aerobic bacteria and others there’s a level that’s 10 to 4th if I remember correctly CFUs and that’s really to allow for that natural occurring fungi/mold in the environment.

Matthew: So CFUs is that in layman’s term kind of the ability to create more of whatever the pathogen is so it’s something to look out for.

Eric: Right so each colony, so if you think back in the day of the Petri dish when you put your material on a Petri dish, when it grows it grows in little colonies and you count the colonies and that’s the measure, the unit of measure of Colony Forming Unit.

Matthew: Okay. And when you grow say organically versus conventionally, do you see more pathogens or is there any correlation there?

Eric: You would expect to see organic grow more pathogens such as pseudomonas and xanthomonas but those are healthy pathogens out there and that’s the one thing about our test that allows us to do is decipher between the healthy and the unhealthy pathogens. So we test, when we go out and do our testing we provide the labs to do the testing they can differentiate between the good and the bad pathogens.

Matthew: Okay. So apart from DNA what is the key differentiator for Pathogen DX as a testing medium than compared to other testing companies would you say?

Eric: Honestly that’s truly where we provide a lot of value. You can complete our test in six hours. So in other words from start, from receipt of the sample, running through the process six hours later you will have results back unlike the two current methods of Petri dish which can take on around 48 hours to 96 hours or real-time PCR which takes 48 hours approximately. You can get our test back, our test in one day.

Matthew: Is it all done online or when you say you get your results back how is it typically delivered?

Eric: So the process is the grower or the distributor will take his product to the lab, the sample. The lab, from the start that they receive that sample and they start doing the test they will then run through our process and we use our software as a SASS model which is online. So you run it through the scanner, scanner shoots up to our software as a service and then it provides back the report giving what CFUs were found in that sample.

Matthew: So let’s say we find some colony forming units in a sample do we have to throw everything away or is there a mitigation plan or does it vary state by state?

Eric: It varies state-by-state. Some states are far more stringent where you could lose your entire harvest. Other states are you can take that and turn it into oils and other states if you just mitigate that mold with a spray or a fungicide, you can do that as well. The challenge with doing that, with just doing the spray is you can’t be sure you got it. So that truly is a challenge because remember you’re only doing a sample and if you find it in that sample, that means your whole product has got that e-coli or salmonella. The best way honestly, which we find a lot of growers are doing today or wanting to do today I should say, is test their product throughout the life cycle, through that 12 week life cycle of the plant prior to harvest. And by catching it early enough then you can get rid of the fungus early in the process prior to harvesting your flower.

Matthew: So you’re saying that if you can test early on in the grow cycle and see something that may not be visible at all but it comes back positive in a test, it’s much easier to manage and solve that particular pathogen problem early on.

Eric: Exactly. That’s exactly, and where we’re going to is, because remember pathogens also hurt your yield in your crop. So by being able to test throughout the cycle you can reduce any loss of yield thereby returning a higher value per plant.

Matthew: You mentioned that sometimes if your test comes back and there’s a pathogen in there the plant might be acceptable for oil but maybe not for dry flower. Why is that? Is there some way that it’s salvageable and there’s no harm passed on once a conversion to oil is made.

Eric: Yes and now we’re really going a little bit farther past my knowledge. I can tell you that one of the things we have seen is that if you take and inhale a flower, smoke it, put it in your lungs and it’s an aspergillus for example, you can cause yourself to have lung damage and so you really don’t want to do that. The oil process allows you to kill a majority of all of that fungus. The challenge is you still have that DNA in there and it can’t be guaranteed that it’s completely safe. Much like you would have if you think about Blue Bell or Chipotle or any of those things like that where they actually cook the food and yet when they cook the food they don’t kill everything, and people still get sick.

Matthew: Yeah. Gosh I have no idea if this is true but I’ve heard there’s some speculation about sabotage in Chipotle, again total hearsay and opinion, but who knows there. I mean there’s some pretty powerful forces that don’t want the GMO movement to thrive and some speculate that that’s how that happened, but again total speculation. Don’t know if any of that is true. Certainly it could be a form of effective corporate sabotage because it’s certainly taken the wind out of Chipotle’s sales when they get salmonella problems all throughout the country which stinks because it does have a huge impact on psychology which I guess is a lesson for growers and cultivators to take away is that it’s such a huge hit to your reputation when you know the public gets wind of the fact that you have salmonella or e-coli that’s at a dangerous level and has caused harm. So I guess that’s a takeaway there.

Eric: Exactly and just think about it this way. The cannabis community is a very tight community and it really cares for its clients, but the problem is outside the cannabis community there’s the world of naysayers that do not believe in the value of the product. So if you have a tragedy happen where some young or some man or woman who has cancer who is taking cannabis because it alieves five separate distinct symptoms as a result of chemotherapy and they pass away due to an e-coli poisoning, could you imagine the impact across the industry because now we’ve just added ammunition to those naysayers and this industry cannot afford that because it has such huge value to its client base.

Matthew: Which is crazy because you think of all the people that die of alcohol issues every day but that doesn’t get highlighted or you think about the slow death of the way the modern diet is and it really doesn’t get that much attention. It’s starting to get more attention now, but you’re right it would be a devastating blow to have that happen. You mentioned that growers are kind of using this as a tool or considering using it as a tool in the 12 weeks or so from when they start to when they harvest. Is there any other motivations that you see for the testing other than just trying to catch things early?

Eric: In reality when I talk to growers it’s been because they want to make sure that they provide the best quality product for the client, the best medicine possible. And one thing I absolutely love about this industry is everybody loves to make a profit, but nobody as I’ve met in this industry takes profit over responsibility to the client. That to me is what truly what makes this industry so special which is why we see growers wanting to talk to us about either doing some sort of testing their plants early. We’ve even had growers come and talk to us about testing, environmental testing because the way our test works it doesn’t have to be a plant, it can be a tape hole off of your HVAC system, your ventilation system. It could be pulling water out of your water distribution system inside your grow. It could be taking soil samples and us doing testing on soil samples.

All of those things all provide great benefits to the growers. Our test luckily, not luckily, it has the ability to test for pathogens no matter what the medium. The medium being a flower, the medium being soil, the medium being water. It does not matter. We can test for those pathogens because we’re a DNA based test.

Matthew: Okay. Where do you see the evolution of testing going in the next few years. I mean it sounds like you have a pretty sophisticated testing protocol here that goes beyond what most people have probably heard, but as everybody see, you know, technology changes so rapidly. How do you see it evolving over the next few years?

Eric: I see testing becoming far more important not only in the cannabis business but frankly because of Chipotle and the food and agricultural business and the water business. And who knew this, the Dial Soap business because people realize that introduction of these harmful pathogens into your body can cause massive amounts of value loss whether it’s a young kid getting and dad or mom having to stay home from work or it’s god forbid somebody passes away. Those kinds of things are making testing becoming a value contractor but a value add to the clients that we’re supporting.

Matthew: Yeah there’s a liability issue there for sure.

Eric: Absolutely and even the liability piece is not even as prevalent now. It’s I need to keep my team, my clients happy because of not the law suit per se but the loss, as you so correctly put, the loss of value to Chipotle because of a pathogen event.

Matthew: What’s the ballpark figure on cost. I mean I’m sure it varies state by state and there’s variables involved. But I mean for people listening they don’t have a ballpark idea. Is there anything you could tell us?

Eric: Yes so for our test we charge, we sell to the labs and the growers it ranges depending on which state because of the number of pathogens that get tested but it ranges between $20 and $30 and also if there’s a larger volume people get kind of a scale discount but that’s truly all it costs. Competitors charge, our competition charges about $5 to $7 per pathogen. Our test is below depending on the number but is around $4 a test per pathogen.

Matthew: What about the requirements in terms of what’s a sufficient sample size? If you have a harvest that’s 100 pounds let’s say for easy numbers, what percentage has to be tested?

Eric: That’s a great questions and it’s actually by state and there’s still a lot out there. I think if I remember correctly Colorado requires a sample for every five pounds and it might be multiple samples for five pounds. Of the top of my head I can’t remember, but it’s usually one or two samples per five pounds. When we look at the sample is for us we need one gram. Yeah so our labs need one gram to do all the pathogen testing using our product.

Matthew: Well Eric I have a personal question for you before we close. Is there a book that has had a big impact on your life as you look back that you would suggest listeners take a look at?

Eric: Absolutely. So you will have to excuse my military background, but one of the things I’m big on is a book called a Passion for Leadership. It’s by Robert Gates, and he really talks about how to institute change across large organizations whether it’s universities or the Army, the military or other such size organizations and making sure to really establish collaboration amongst your subordinates and your teams so you get really outside and progressive thinking on solving problems which is something we have had amazing, which really has led to me in this industry because this industry is so collaborative. I have had nothing but great response from growers, they’re collaborating with us, providing product or (19.30 unclear) who really are helping us with free labor and free support that’s just been uncanny. Again, (19.41 unclear) is an ability to collaborate.

Matthew: Now in your mind do you have a mental model of what leadership is in terms of how you work with a team? Like one or two things, little pearl of wisdom in terms of how you think about relating with people in a way that moves the ball forward and aligns everybody with a common goal.

Eric: Absolutely. So for me it’s first having everybody understand what the mission is or the vision for that group is and then for me as a leader what I like to think about is everybody in that group has value. From the janitor on up, everybody has value in this team and I will relate it to a story I had back when I was a young lieutenant in the Army when we had a very big problem and a young soldier gave me a suggestion and I dismissed his suggestion because of his rank. My lesson learned was, and his suggestion was spot on. It was exactly right, and I thought about it that night and I came back I realized and I pulled him up in front of all of his peers and said hey, you made this suggestion yesterday. I apologize to you and I was the one in charge. I apologize to you for discounting what you said and discounting your opinion. Great job we’re going to implement what you did. That to me is kind of the basis of all leadership is that you recognize value across all of your people because without them you’re just one person standing in the middle of a dorm.

Matthew: Yeah I hear humility in that story, recognition, good ideas can come from anywhere and it’s so true. Everybody has different life experiences and backgrounds and they look at things in different ways and they could have a different lens on a problem that can lead to a breakthrough.

Eric: Absolutely, absolutely.

Matthew: Well Eric as we close, can you tell listeners how to find you online?

Eric: Absolutely. You can go to And so you’ll find all of our information there at our website. And if you would like to contact us we have a contact link there as well.

Matthew: Are you looking for investors at all?

Eric: We are. We currently have a round open right now and we’ve raised about $575,000 and we’re looking to get another $500,000.

Matthew: Okay and so if investors want to reach out to you, I’m assuming accredited investors, they can just do it through your website.

Eric: That’s correct or email myself. My email is on the website but it’s

Matthew: Great. Well Eric thanks so much for coming on CannaInsider and briefing us on testing we really appreciate it.

If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider(dot)com. We would love to hear from you.

Eric Lachance of PathogenDx discusses pathogens in cannabis, how to test for it and mitigate it.

Key Takeaways
1:22 – Eric’s background
1:54 – What is Pathogen DX
2:32 – Eric explains what DNA based means
3:31 – Lab requirements and the biggest markets in the United States
4:23 – Minimum testing thresholds for substances found
5:36 – Correlation between growing organically and conventionally
7:43 – What if CFUs are found
9:52 – Using the plant for oil if a pathogen is found
13:32 – Eric talks about motivations for the testing
15:17 – Eric talks about the testing technology evolving
17:41 – Testing amounts
18:28 – Eric’s book recommendation
21:49 – Pathogen DX contact information

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Important Update:
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The Five Disruptive Trends Shaping The Cannabis Industry Now

Comparing CO and WA Dispensary Sales Metrics

roy bingham

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Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

Every good sailor knows that when you’re charting a course from New York to England if your bearings are off even the slightest bit you could end up in France or Spain. One slight adjustment on your trajectory could have a massive impact. The same idea of knowing where you are and where you are going can be applied to early and cannabis businesses. One slight miscalculation on the type of product you offer to cannabis consumers could spell success or failure. That is why I’ve invited Roy Bingham, Founder and CEO of BDS Analytics back on CannaInsider. Roy is going to share with us some insights he’s discovered from the point of sale data at dispensaries in both mature and emerging cannabis markets in the United States. Welcome back to CannaInsider Roy.

Roy: Thank you very much. It’s really a pleasure to be here Matthew.

Matthew: Roy to give us a sense of geography can you tell us where you are in the world today?

Roy: Yeah. Today I’m in Boulder, Colorado. If you’d asked me two days ago I would have been in Rhode Island.

Matthew: Okay and Roy you’ve been on CannaInsider in the past but for new listeners that are just joining us can you give us a little background on your career and why you got into the cannabis industry?

Roy: Yeah I’d be pleased too. So I grew up in the UK and worked in the banking field in the 80s and 90s and then I came to the United States and went to Harvard Business School in 1993. Worked for McKinsey the big consulting firm and then formed my own consulting in mergers and acquisitions advisory firm called Health Business Partners and we focused on the health and wellness industry especially anything that you could buy in a Whole Foods Market for example. One of the things that we did at Health Business Partners was we invested in a company called Spins. This is way back. This is about eighteen years ago and Spins became the dominant provider of data analytics to the health food industry. They worked with Whole Foods Market, dozens of independent retailers, and retail chains in order to gather data about which products and brands were selling, which categories of products you should carry in your store. So that was my introduction to the modern world of data analytics.

Later in my career I became head of sales and marketing at a digestive care company where we did dietary supplements like probiotics and fish oil and I became a major consumer of Spins data at that time. In fact the year I joined the company it launched thirty-six new products of which five were successful and of course that was basically throwing an awful lot of stuff at the wool without a lot of data to determine which we should focus on. Seven years later when I left the company we had incorporated data into our entire product development process and we launched six new products in that year of which five were very successful, ten times as successful as those previously.

So we grew that business from 40 million dollars to 100 million dollars and a major part of that success was our use of data analytics in order to figure out which market categories to pursue and which characteristics of the products and what the competitive environment would be. So that got me into data analytics and about three years ago I paid some attention to the cannabis industry and with Mark Nottoli who is one of the Co-Founders of Canopy Boulder and I actually reintroduced him to Patrick Ray the other, one of the other Co-Founders of Canopy Boulder and they raised the fund and started the Canopy Boulder Accelerator and low and behold they called me fairly soon after they had the capital lined up and they said would you like to start a Spins like business for the cannabis industry.

Which was of course very intriguing because of the growth of the industry and my background in the health and wellness space had quite a lot in common with the growing cannabis industry and then the other big thing that Canopy Boulder did for me is they introduced me to my co-founder who enabled us to get a tremendously rapid start on this business. My Co-Founder is Liz Stahura who was the Head of Sales or Head of Business Development at Leisure Trends which does what BDS Analytics now does for the cannabis industry for the biking and outdoor industry. So we’re basically converging our expertise through the natural products industry with Spins and the biking and outdoor industry with Leisure Trends to create BDS Analytics.

Matthew: Wow. Yes I’ve definitely heard of Spins and BDS is doing something similar here so it’s point of sale data at dispensaries.

Roy: Yes.

Matthew: And when you compare Spins to BDS I mean these are similar offerings but in different spaces, one’s in cannabis and one’s in kind of a more Whole Foods environment. How would you compare and contrast the two?

Roy: Yeah well going back sort of eighteen years ago to the emergence of what is now the natural foods industry it was really a lot of independent stores rather like the independent dispensaries that we see today. Emerging small chains of stores and in fact when we started working with Whole Foods Market they had eighteen stores and so they were emerging majors already and who knows who may already have seen the Whole Foods of the cannabis industry being created in Colorado or Washington or California or Oregon perhaps. So there are similarities in terms of the maturity stage of the retail side of the industry.

I think the other thing is that in terms of similarities is that this is a business that is consumer driven and has inconsistent supply. If you remember back if you were around eighteen years ago natural and organic foods for example were patchy in supply. They started off with people literally bringing grocery products straight from the organic farms into those health food stores. Then gradually developed packaged goods concepts that looked pretty much like someone threw something in a cardboard box with very little branding and labeling and that sort of where we have been until very recently in the cannabis industry as well.

We did see and through Spins the very rapid emergence of new products, new categories, new brands, and we’re seeing that of course in cannabis as well and companies differentiating themselves by their positioning with regard to topics like organic, better grown, social responsibility, etc. Now there are of course a lot of differences between the health food industry and the cannabis industry. Of course we have different state by state regulation here in cannabis which means for us for example we have to have state by state data collection and state by state data organization which we didn’t have to do in the natural foods industry and then of course we’ve got the distinct markets of the medical and adult use market and again we have to categorize and organize and collect our data separately for those two markets as well and to be fair the natural products industry didn’t have the tax and banking issues that companies in the cannabis industry face. But of course we’re seeing in cannabis even faster growth than we saw in natural foods so many differences and similarities.

Matthew: And tell us a little bit about your clients and who you serve because on one side you have paying customers that want access to your research at BDS and then you also have your dispensaries too. How do you, do the dispensaries provide the data for free and they get something in return? Is that how it works?

Roy: Yeah. The dispensaries are really our partners and they have a free or very low cost service from us. So they sign an agreement with us which says they will provide data and in return they get the full service, the service that to a brand or grower would be worth tens of thousands of dollars. The dispensaries get as part of that agreement which means that they can analyze not only their own sales patterns organized by categories, sub-categories, brands, etc. but they can also compare their own performance to the market and therefore make decisions about how to change. The big thing for us with dispensaries is actionable data. Nobody wants analysis, paralysis, and getting lost in piles of information. You want to be able to make three quick decisions that day about different categories to feature more of or different brands or items to bring into your store or maybe to phase out of your store.

So that’s where we are with the dispensaries and then our paying clients are the brands, the growers, the MIPs, and they can be either mature businesses that are already the market leaders or the fast growing or companies choosing to enter the space who are trying to figure out how to differentiate themselves, which products to develop, which marketing campaigns, what pricing strategies, and they can use our data to figure that out. What we see with brands, growers, and MIPs is many of them recently the larger ones or the innovators have brought in management who’ve worked with data in other industries so they’re used to working with data in food, drug, mass from companies like IRI, Neilson, or in the health foods business with Spins or Leisure Trends for example.

And then they came into this industry and there was very little data. They’re usually very relieved to discover that we exist and that we have this data already because it means they’re not making decisions by gut feel. Then of course we also have those brands, growers, and MIPs that are run by entrepreneurs who haven’t had that same experience with data in the past but they realize that data is the key to developing a successful business.

Matthew: And when you say it’s the key why do you think that? I mean what’s the mistake people make if they don’t have the data and insight they have if they do?

Roy: Yes. Well I think the first thing I always think about if you’re developing a new line of products is is the category a large enough category that suppose you get 5, 10, 15, 20% of that category you achieve your business goals. The second one is is that category growing rapidly enough that once you’ve been established in that category you can be assured of success if you maintain your market share and the third one is how competitive is that category and that is a matter of understanding who the other players are in that category, what their pricing structure is, and how that compares and what your value proposition will be for the consumers and your retail customers.

So otherwise if you’re just developing products by gut feel without access to that data sometimes you’ll get it right because people’s gut feel can be highly developed but sometimes you’ll develop a product for a tiny niche that isn’t going to grow and put the same amount of investment into that as if you’d entered a big and successful and fast growing category.

Matthew: Right. So I hear what you’re saying there. A deep market is important but if it’s just so competitive that’s something to look at but maybe a deep market that’s still got room to grow where if you just bite off 10% you’re really doing well. So I can see what you mean. Roy last time you were on the show about a year ago data was just starting to trickle in and now it’s been close to a year and you have more data and more information. Is there any insights or aha moments you’ve had since the data has started to come in?

Roy: Oh my goodness yeah. We’ve had hundreds of aha moments. It’s very exciting. We’ve now received from our dispensary partners in Colorado millions of transactions and the first thing we have to do with that is normalize all the data because it comes in with all kinds of different description. There are no standardized SKU codes etc. So we normalize it which means we figure out which description applies to which product. We categorize all that data into 80 categories and subcategories because at that point it starts to make some sense and at the very high level, the highest level categories if you like a flower, edibles, and concentrates. So the first thing we learned is that in 2015 and I don’t think anybody knew this until we did it. Based on revenue flower was 63% of sales in Colorado, edibles were 12% of sales, and concentrates 20% of sales.

Matthew: Wow.

Roy: And I think that is quite different from what a lot of people expected I think edibles or less than quite a lot of people expected.

Matthew: Yeah for sure.

Roy: So that’s the first level of fascinating facts and I could go on and on about what we’ve learned within those categories as well. If you’d like me to I could talk a little bit about the different genus types within the flower category and we can see we’ve divided them between sativa, indica, and hybrid. Hybrid is the largest category. Sativa and indica in Colorado are very similar and then we also have more than 3,000 different strains in our database and in Q4 of last year Durban Poison took Blue Dream to become the number one strain in Colorado.

Matthew: Wow.

Roy: The top ten strains in Colorado represent about 20% of overall flower sales and as I said Durban Poison is number one, second is Blue Dream, third is Sour Diesel, etc. so fascinating insight there. Then within the concentrates and extracts which is the fastest growing category in 2015 we dive into which are the most important categories there. In Colorado Shatter was 28% of that category. I have to say Shatter in every interview by the way. People like it when I say Shatter apparently.

Matthew: I do too. I’m in that camp.

Roy: I can’t figure it out myself. Then prefilled cartridges were the fastest growing and they are now 23% of the concentrates category with wax and butter following close behind. Then when we look at that third category edibles which represent 12% of revenues people are always very interested in the breakdown there and candy represents 44% and chocolates are the second category at 19% while infused foods are 12% and beverages were 6% last year. So that’s an idea of the kind of middle level data and then we can break candy down into hard candy and gummies for example and then of course we get to look at the brands and individual items as well and subscribers to our service will be able to see the growth for those detail as well.

Matthew: Wow that is amazing. So I would not have guessed that popularity of strains and I would have not guessed either that candies do so well. I mean I do see like the gummy bear, infused gummy bears those seem to sell really well but I would not have guessed the candies. That’s very interesting but I guess that they’re so discrete that a lot of people like that. So that’s some good information there and I can see why that’s really powerful for your clients. Do you see any clients using the data better than others because if you have this service here and you provide this wealth of actionable data as you were mentioning it should be actionable but then some people use it let’s say optimally and some people don’t. How do you feel about that? How can you use the data in an optimal way?

Roy: Thank you, you nailed it. So we put a tremendous amount of work into making the data as user friendly as possible but it still takes a significant amount of time and you have to be statistically oriented, a bit of a nerd in order to start to get excited about the data. Now most management teams these days have a few wonks like me who are fascinated with data but some do not. We therefore deliver our information through a portal that our clients can log into and it starts off pretty high level. So they can just go in and they can look at overall growth trends by market. Then they can look at the categories and then focus in on the categories of interest and among dispensaries I talked to a dispensary (19:34 unclear) client the other day and they said well we’re not starting to use it consistently to help us with crunching decisions and they said that they had adjusted their flower prices based upon the information about the market overall and they say that they were a little out of line and he commented that they had seen a 35% increase in revenue when they adjusted their flower prices. This was just a couple of weeks ago.

Matthew: Wow.

Roy: So it’s very exciting to us to hear from a dispensary, very sophisticated dispensary chain that’s making actual decisions based on the data and then brands and growers we were just meeting with a new client a couple of days ago and they’re in the process of deciding which categories of products to launch next. They are in ingestible and concentrates and extracts markets. So they were very interested in the size of those subcategories in the competitive environment as we discussed and the growth characteristics and based upon this data they now are developing new products to attack three or four of those particular market opportunities that they like and that was a team that had used data extensively in other industries before coming to the cannabis industry as I mentioned before. So they were thrilled not to be making decisions based on gut feelings and in that case there is one person within the company who is a power user if you like who’s received considerable training and is just very excited about spending perhaps 20% of her time focusing on this data in order to educate the rest of the management team and in order to develop new products and marketing strategies.

Matthew: So if you have an edibles company or you have a candy or a drink or something and you’re having a hard time breaking into a dispensary is it pretty common place to say hey let’s look at the BDS data and see what your competitors are doing?

Roy: Yeah that’s probably the primary initial use of our data. So our clients can produce a chart which shows using GreenEdge our database and they can show how they rank either by overall sales or by growth in sales or both and that usually if they drill into a category or subcategory or even a sub-subcategory they can come up with one in which they’re performing well and then they take that with them as part of their initial pitch. It’s very often the very first or second slide that you show to a dispensary. It says look at us. You don’t have to just take our word for it here’s GreenEdge data to confirm that we are an important player in this market and that our products do very well and that you should feature them in the stores and the good news there is because many of the chains and dispensaries are also providing data to BDS Analytics they are familiar with it. They know that its independent third party data based on actual points of sale transactions and not something that the vendor has cooked up.

Matthew: Yeah. This is so helpful, such great information. Now you can follow the data and the insights you get from GreenEdge. It doesn’t guarantee success but it gives you a lot of competitive advantage. You still need a good brand, you still need a good product so do you see some companies execute on the same market category as another but just do a lot better. For example let’s say they have a small drink or shot or a hard lemonade or something infused with cannabis and you see one company execute on that really well and another company doesn’t and essentially they’re going after the same market category but when it came down to execution, focus, branding, and messaging one does a much better job.

Roy: Oh yes I mean of course the strategic decisions are really important but what you do on an execution day after day after day determines whether or not your strategy is successful and you get a feel for that. Obviously there are some companies that philosophically are much stronger when it comes to growing and producing and that’s off in the background of the founders of the companies and there are others that are much more sales and marketing oriented and have a particular strength in that area. So obviously if you’re a sales and marketing expert you still have to make a great product. If you’re a great producer, grower, product developer you still have to have competence in sales and marketing in order to succeed and you have to go out and execute day after day after day.

Now of course what’s going on here is such rapid growth so the rising tide really is currently lifting all boats and even if you’re not executing brilliantly you should still be growing at the moment at 20, 30, 40% a year but the people who are doing everything really well are growing at more than 100% a year at the present time.

Matthew: Yeah and I’ve definitely heard of popular edibles and drinks being sold out at dispensaries for weeks or even months at a time. So you can see that happening so good insights there.

Roy: Yes. Well to get the right product, position it well, target the consumer well, and have the right advertising and pricing strategy and you will succeed in this market for the present time.

Matthew: Right.

Roy: Some day one or two or three years from now it’s going to be a lot more competitive and you might get all of those things right but if you don’t have the right financial or other resources you may still not quite breakthrough.

Matthew: When you say that you’re starting to see cannabis companies have someone that’s like yourself, like a wonk that is studying and digesting data and trying to make insights with it does this tend to be the larger companies and what’s their title? What do they typically call themselves? Who’s the person in the organization that’s doing this?

Roy: Well the industry doesn’t really have large companies yet let’s face it. A large company would have 200 employees for the cannabis industry. And in other industries that would be 20,000 employees.

Matthew: Right, right.

Roy: So you have people who are wearing multiple hats. So sometimes the wonk, the data oriented person is the CEO. Sometimes it’s the Chief Marketing Officer. Sometimes it’s the Head of Manufacturing or Production. Sometimes it’s a more (26:56 unclear) person in the marketing organization who is really into data and wants to educate the rest of their team about market trends. So we’re seeing all of the above really but often the greatest interest is shown by the people at the very top of the organization who have been making decisions based on their own instinct, intuition, and bits of data that they can pick up along the way and now they’re suddenly very reassured that they can validate their instincts. It’s not like we take away and make the decisions for them with this data. They can validate their own instincts about which types of products to pursue or which marketing campaigns to develop.

Matthew: Outside of Colorado are there any other states that you’ve started to get data on at dispensaries?

Roy: Oh yes, yes. We have very extensive data on the Washington market now and we’re developing our dispensary panel in Oregon and will have comprehensive data on the Oregon market within about two months of now and then we’re receiving a lot of inbound inquiries from Arizona, Nevada, California, Maryland, Massachusetts and so we will gradually be expanding into those states. The first step for us of course is to partner with sufficient dispensaries in order that our data is accurate and that’s a process that can take anything from a few weeks to several months depending upon how big the market opportunity is.

Matthew: Right and can you mention how many dispensaries you need to get kind of the critical mass because you don’t need them all but you need a significant data set. So can you talk about that a little bit?

Roy: Yes. Well it has some similarities to the presidential polling. You do not need to have 100% of the poll to know who’s going to be the next president and in fact those polls are usually based on a very tiny, tiny percentage of potential voters you know .01% statistically can apparently be accurate. Now in the markets that we’re focused on back in the health food store industry and the biking and outdoor we were looking for more than 10% of the data so more than 10% of the sales in that market and in cannabis because it’s growing so rapidly we’re looking at higher levels in that as our goals perhaps 15 to 20% but also provided that the data is sufficiently diverse. If for example in Colorado is all concentrated in one city like Denver that would not give us an accurate enough panel of what’s going on in the entire state and similarly if it was all focused on a limited number of chains of stores then the data would be skewed as well. So we incorporate different geographical locations as well as individual stores, small, medium, and large chains of stores in order to get to the diverse panel that we need for accuracy.

Matthew: And what are some of the data insights you’re starting to get out of Washington?

Roy: Yeah Washington has been fascinating. It’s a smaller market than Colorado about 240 million in the adult use market in 2015 but it of course got going six months after Colorado and in fact in a way it was nine to twelve months behind because of supply shortages initially. That said the Washington market last year grew faster than the Colorado market and when you look at the population and the growth trends there may come a point in the next twelve months, twelve to twenty-four months where Washington is actually a bigger market than Colorado even though Colorado was 996 million last year.

Matthew: Wow.

Roy: So that’s the first insight is about the scale of the market. Another one the people in the Washington market will be familiar with is the price trend both on flower and actually on almost all the products. Prices were very high when the adult use market started in July of 2014 and have declined very strongly down to levels that are comparable or in fact even a little lower than Colorado over the last eighteen months and at the same time of course unit sales grew dramatically. If you look at September 2014 to September 2015 unit sales were up 18 fold, 18 times increase in unit sales. Another insight that we’ve learned again going back to the master category level I talked about before is flower in 2015 was 69% of total Washington dispensary sales with concentrates being 15% and ingestibles being 10%.

Unlike Colorado Blue Dream remained the number one strain with Cherry OG and Dutch Treat numbers two and three and so this is just an example of some of the insight. We also have some very interesting comparisons. I expect people might be interested in what else is different.

Matthew: Yes.

Roy: Between Washington and Colorado in terms of those category sales. So as I mentioned flower is 69% in Washington. As I said earlier it’s 63% in Colorado. The biggest difference is actually that concentrates and extracts in Washington at about 15% whereas in Colorado they were 20% and we think that’s an indication of the more maturity the nine to twelve month head start in a way that Colorado received on adult use sales versus Washington and then ingestibles are a little bit lower in Washington at 10% versus the 12% in Colorado and then within flower it’s very interesting to see that sativa is more popular in Colorado than it is in Washington. Indica is about the same and hybrids are a little bit lower in Colorado than Washington so maybe that’s something to do with people in Colorado looking for that energizing effect and in Washington it’s more about chilling on the couch. Who know as to why that’s the case?

Matthew: Right.

Roy: And in fact what we found there’s very little correlation between the top strains in Washington and the top strains in Colorado. Blue Dream is up there at or near the very top of the list but apart from that there is very little overlap the two markets are clearly differently in terms of strain popularity and then when we look within the concentrates and extracts area there are substantial differences. Prefilled cartridges are much more important in Washington. They’re at 36% of that category, only 23% in Colorado and 19% is wax in Colorado that’s only 13% in Washington. So important and subtle differences there. There’s a category in Colorado called butter which is about 10% of sales in Colorado and it’s almost nonexistent in Washington.

So key differences there and then when we look at the other the third master category the edibles as I mentioned Colorado has 44% in candy but Washington is only 27%. Washington doesn’t allow gummies so that might be one of the reasons. Infused foods in Washington are much bigger there’s 23% so that’s your brownies, baked goods, etc. whereas in Colorado it’s only 12% and another big difference is that tinctures are much bigger in Washington at 18% of that category. There are only 6% of the category in Colorado. So some significant differences emerging from the data and of course the brands are almost totally different and we’re now beginning to see the emergence of brands who’ve made partnerships in both states and are moving into national branding campaigns and so some of those are beginning to show up in both Colorado and Washington and we expect significant growth from some of those brands because of the products that they have and the resources that they’re bringing to there and so eventually one would expect to see more similarities within the brands and item levels between the states.

Matthew: Very interesting especially the butter category not existing at all in Washington. That’s a pretty big difference.

Roy: Yeah. Of course it might be partly terminology because there’s a sort of spectrum of these products. It might be that just the term butter is not popular in Washington or it’s just that that particular product category has not caught on with the consumers or with the dispensaries but it certainly sounds like a bit of an opportunity doesn’t it if you’re a producer or a dispensary in Washington. Maybe you could target creating that category and maybe that could be your focus.

Matthew: Yes I agree. Well Roy.

Roy: I also think on the tinctures that we talked about the fact that it’s much more popular in Washington than in Colorado that sounds like an opportunity as well and I know there are some regulatory differences in Colorado which may make it a little harder to get into the tinctures business but once you’re in it it sounds like a significant consumer demander.

Matthew: It’s really interesting to see because in my mind I’m thinking well Washington is maybe a little bit behind Colorado but now it’s really coming into its own and the preference is there is somewhat of a regional difference and it’s interesting to hear and see why. I mean tinctures, butter I imagine as we get into more topicals and things like that they’ll be differences as well based on geography and just different tastes in different regions. So that is fascinating. I love this stuff. I could talk about it all day especially if you’re considering launching a cannabis product. I mean this is a massive area of focus and getting the branding right but also developing samples and getting feedback from the demographic you are going after.

Roy: Yes. Well I could certainly talk about it all day because that’s a year’s development and over a million dollars to get to the point where I could be giving this sort of information to you and the much more detailed information on the brands and items to our clients and so I’m of course completely pumped about being able to share this at this point.

Matthew: Yeah it takes money to get to this point and you’ve raised money. Are you still raising money or is the round closed or where are you at right now for investors that are interested?

Roy: Yeah we closed that funding round last summer actually and we’re now evaluating our needs going forward and our expansion plans and might consider another round in the future.

Matthew: If there’s anybody that’s listening that wants to be on a list or be a candidate to be an investor is there a way that they should reach out to you or to BDS in general?

Roy: Yeah actually for everyone who’s listening if you go to our website written just the way it sounds that’s you’ll see that there are a number of places where you can submit your email and your interest or feel free to email me and I’ll be pleased to strike up a dialogue and that’s for anyone who’s a dispensary partner or client, a potential investor, or media people are fascinated by the data in the industry as well. We spend quite a bit of time with them.

Matthew: How about if they just want to hear you say the word shatter. Can they email you with that or call you with it and get that?

Roy: Well it’s hard to answer a question like that with an email. Apparently it doesn’t quite work when I type shatter. I actually have to say it.

Matthew: Well turning to a more personal question Roy something new I’m trying is is there a book when you look back over your life that has had a big impact that you would suggest readers take a look at? Can you tell us a little bit about that if there is one?

Roy: (40:43 unclear) question. Yeah actually two or three come to mind. I hope I don’t ramble too much but when I was at Harvard Business School one of my professors that had the most impact on me was a guy called Clayton Christensen and Clayton then wrote a book called “The Innovator’s Dilemma.” It’s quite old it came out in 1997 and it was based upon case studies that we did in his class and it’s absolutely fascinating about how disruptive technologies change industries and how very often it’s not the embedded major players in the industry that recognize the value of the disruption. They are actually the ones who get disrupted.

Matthew: Right, right.

Roy: And he has some fascinating examples from technology but also from healthcare for example. Another book I’d like to recommend and this is kind of pure selfishness really is a book called “Philanthrocapitalism.” It’s by two guys called Matthew Bishop and Mike Green. Matthew Bishop is a Senior Editor at “The Economist” for a very long time and he is my oldest and lifelong friend and they wrote a fantastic book called “Philanthrocapitalism” about how the very rich can change the world through applying their cash and their capitalist experiences into the world of philanthropy and then of course let’s not neglect the classics. I’ve recently had the opportunity because my sons are 12 and 14 and there was a phase before they were in video games that they used to actually read. Of course that’s gone now sadly and so books like “Robinson Crusoe,” “Swiss Family Robinson,” and “Gulliver’s Travels” and one of my favorites if you want to know anything about patience “The Count of Monte Cristo.”

Matthew: Oh yeah great one and revenge right.

Roy: Just a few suggestions. Learn, get smart, and be patient that’s part of the message of “The Count of Monte Cristo.”

Matthew: Great book recommendations there Roy. Going back to “The Innovator’s Dilemma” we really live in kind of a golden era of this. I mean we see the taxi cab industry get totally decimated by Uber. In fact I was listening yesterday to I can’t remember what city it was but they said a taxi medallion just a few years back used to cost like 800,000 dollars on average in whatever city this was and now it’s worth about 60,000 because Uber has just totally destroyed that market and there’s also a lot of other things going on in the auto industry like the Tesla III that’s just coming out now and they have all the hardware embedded into this Tesla III that would allow self driving.

So we’re really, to have a self driving car would really just change our whole economy because it’s not so important where you necessarily live anymore if your car can be summoned to you which there’s a summoning feature that Tesla is working on. You could summon a car to you and then you can sleep or read or do work as the car drives you home and then it also goes on to someone else after you. So it’s not the cost component at the same time.

Roy: Yes.

Matthew: So there’s all these…

Roy: So you don’t actually need the product which is a car. You actually need the service which is transportation.

Matthew: Exactly.

Roy: What a radical change that has when you think about it in terms of having all your money locked up in an expensive vehicles versus paying for it on a per use basis.

Matthew: Yes. So what an exciting time we live in. Thank you for those book suggestions and thank you for coming on CannaInsider and sharing a wealth of information it’s so exciting to hear what’s going on in Colorado and Washington. Well I have to have you back on as you have other states to come into GreenEdge.

Roy: Yeah absolutely. We’ll be pleased to talk about Oregon in a couple more months, Nevada, Arizona, California later this year.

Matthew: And give your website one more time if you would Roy.

Roy: Yes it’s and of course the service we talked about so much is GreenEdge.

Matthew: GreenEdge great. Well thanks for coming on CannaInsider Roy. We really appreciate it.

Roy: Thank you it’s my absolute pleasure. You’re doing a terrific job with CannaInsider. I’m a very enthusiastic listener.

Matthew: Thanks Roy. If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five major trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider(dot)com. We would love to hear from you.

Roy Bingham, founder of BDS Analytics shares the data
on what is selling in Washington State dispensaries, and compares
what consumers are purchasing in WA and how it is different from CO
dispensary sales.

About BDS Analytics
BDS Analytics is the indispensable source for
cannabis industry data and insight. By capturing millions of
transactions from dispensary POS systems they provide actionable
insights based on accurate information enabling dispensaries,
brands, and growers to sustain their success.

Learn more at:

Key Takeaways:
1:50 – Roy’s Background
6:04 – Roy compares and contrasts Spins and BDS
9:22 – Roy talks about how BDS serves its clients
12:10 – Mistakes made if owners don’t have insights and data
13:59 – Insights since the data has started mounting up
18:38 – Using the data in an optimal way
26:23 – Who in the organization analyzes the data
27:52 – Data in other states
30:28 – Insights coming from Washington
39:06 – Investing information
40:45 – Roy’s book recommendation
45:01 – Roy’s contact information

Important Update:
What are the five trends that will disrupt the cannabis market in the next five
years? Find out with your free guide at:

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The Five Disruptive Trends Shaping The Cannabis Industry Now

Choose your Cannabis Mood with LucidMood

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Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

Imagine being able to pick your moods just as easily as you pick an item off a restaurant menu. Sound hard to believe? Our next guest Charles Jones from Choose believes his new product Lucid Mood can do just that. Charles welcome to CannaInsider.

Charles: Thank you Matt. I’ve enjoyed your podcasts and I’m delighted to be a guest on your show.

Matthew: Great. Charles to give listeners a sense of geography can you tell us where you are in the world today?

Charles: Beautiful Boulder, Colorado.

Matthew: Yes and tell us a little bit about your background. How did you get into this business? What was the motivation?

Charles: Wow a long story. In college I wrote a paper on what I’d later call “Humanities Adaptive Deficit Disorder” that seemingly universal human tendency to persistent behaviors that aren’t serving us. When a moment of self reflection would have us do otherwise. Do you remember that far sight cartoon where you have the gifted kid who’s pushing with all his weight against a door and the door says pull?

Matthew: Yes.

Charles: Well this was something that had fascinated and troubled me through much of my childhood and I was convinced that this problem was cultural rather than genetic in origin and I started root cause analysis into that. Needless to say no one was hiring folks that were studying such things so when I graduated from college I got a job in the technology industry developing software for PC’s and was there for ten or twelve years until I saw an opportunity to form a Went out raised 3.7 million dollars in venture capital and had a wild ride with that. Finally culminating in the company going bust shortly after the bubble burst.

It was then that I kind of shifted track into becoming an organization development consultant and leading off sites for senior level executives and stuff like that. In pairvo with both these careers I continued looking into our adaptive deficit disorder and in 2004 I struck gold and I came up with a theory about why we persisted in beliefs and behaviors that didn’t serve us and over the course of the next eight years or so I refined this theory and a colleague and I then founded an institute to bring these insights into the corporate leadership development market.

Matthew: So what is the hypothesis? What was the idea where you struck gold having to do with the adaptive deficit disorder? Can you give us an overview there?

Charles: Sure, sure. When we misinterpret the source of our emotions as what is or is not happening in the external world that’s when we get into trouble. Rather than say understand your emotions to be assessments of whether you are or are not on track to fulfill your own needs.

Matthew: Okay and how does this manifest typically? Do you have any examples?

Charles: Sure, sure. Let’s say you’re at work and you’re feeling very frustrated and you’re attributing your frustration to the fact that a co-worker is not cooperating with you. That will lead you to think of all sorts of ways to coerce your co-worker or you might spiral down into some negativity about what kind of idiot your co-worker is and something like that and if instead of projecting the source of your frustration out there in the world you were to own the fact that the reason you’re frustrated is you’re trying to achieve a goal and you’re not on track to achieve that goal then you start moving into problem solving mode instead of blaming mode and so in our courses we teach people how to recognize when they have misattributed the cause of their emotion to something outside themselves and shift their inquiry into their emotion into hey what need am I not on track to fulfill and how do I get back on track.

Matthew: Now you mentioned that’s a cultural issue historically. How do different cultures; how does this manifest differently in different cultures? I mean Americans probably deal with it one way that maybe you can see more readily and then do other cultures attack this in a different way?

Charles: I think virtually all cultures alive today fall into this adaptive deficit disorder. Certainly different cultures have different emotions that they focus on. Typically if you find a culture where a given emotion is forbidden; in some way it’s shameful to for instance experience anger. That really points to a culture where say anger is deeply misunderstood. Anger might be understood as a call from your subconscious to enact violence on someone else when in fact anger is a call from your subconscious letting you know hey you think you have a right here and you’re not on track to assert it. So if you look at some of the for instance great nonviolent leaders of the world like Martin Luther King, Jr and Mahatma Gandhi. These were very angry men and yet they were nonviolent because they were crystal clear that their anger was simply prodding them to find a way to assert what they believed to be their rights.

Matthew: Yeah this is something we don’t talk about much in modern culture. I mean we talk around in our day to day lives and we’re not quite sure. We think we’re in control of our own operating system to an extent but there’s all these external stimuli and then perhaps our primitive brain or amicula that generates fear causes us to do things when we would rather be using our prefrontal cortex and more of our executive decision and rational mind to help us. We kind of have this brain that’s somewhat an old artifact of our earlier mammalian ancestors and then we have this add on the prefrontal cortex which helps us to adapt in a more conscious way. How do we reconcile these two things together to try to live a more harmonious life would you say?

Charles: Well I’d say the theory that you just described the brain theory is one that’s been used often to explain our apparently irrational choices and whatnot but I don’t subscribe to it. I don’t think the problem is because we have a “primitive brain.” I think actually our brain is exquisitely tuned. Has been selected over 2.2 million years of hominid evolution to be enormously adaptive and it’s what’s allowed human beings to survive and thrive in virtually any climate and sort of situations. So my contention is actually we are inherently adaptive and what gets in the way of us being adaptive and behaving in these seemingly irrational ways is not because our subconscious is misbehaving but because we don’t understand how to interpret the messages coming from our subconscious and when we do then this allows us to in essence work in partnership with our subconscious to continually refine our behavior and improve our performance and lead lives that inherently more fulfilling for ourselves and those around us.

Matthew: That’s a great point there about aligning your subconscious and your conscious. What? We can set a goal with our conscious mind if I want to achieve X but if our subconscious mind is not aligned properly with our conscious goals what happens?

Charles: Oh well I think that’s just the root cause of disengagement. Which is a huge problem and corporations today and the percentage of employees that are really actively engaged and passionate about what they’re doing tends to be fairly low and in our personal life if we are forcing ourselves to do things that our subconscious believes is not going to lead to fulfillment our subconscious drags it’s feet. We end up procrastinating or giving up at the slightest difficulty and I think you should listen to your subconscious because it processes information hundreds of thousands of times faster than our conscious mind does.

Some estimates hold that our subconscious processes about 11 million pieces of information per second and our subconscious is limited to 40 or 50 no additional zeroes there; 40 or 50 pieces of information per second. So when we’re operating at our best we’re not using our conscious mind to fight against our subconscious. We’re using our conscious mind to interpret the messages that are coming from our subconscious. The painful and pleasurable emotions that are telling us whether we are or are not on track to fulfill our goals and our other needs and to support our subconscious in finding changes that we can make in our own beliefs and tactics. At the end of the day the only thing you really can have any control over is your own beliefs and tactics which in turn lead, determine how effective and successful and fulfilled you’re going to be.

Matthew: So there’s a tremendous payoff to making sure that your subconscious and conscious mind are aligned to the direction you want to go instead of just saying I’m going to fight my subconscious here because it’s typically a losing battle.

Charles: One author I’m fond of an analogy he uses is you’ve got an elephant and it’s rider and the conscious mind is this little tiny rider on top of the elephant and the elephant is representative of the subconscious and sure with carrot and stick you can get the elephant to perhaps do your bidding for a short period of time but it’s exhausting for the rider and he’s always at risk of being tossed off of the elephant. So it’s much better to have a partnership type relationship with your subconscious.

Matthew: I agree. So you’re an authority on emotional intelligence and you’re now leading a cannabis startup with a product that promises to change your mood. Is there a connection here between your earlier hypothesis and now what you’re doing as a cannabis startup?

Charles: I’m sure there is. I think it has less to do with this new understanding of the relationship between the conscious and subconscious mind and the theory of emotion that goes with it and more; it’s more similar in that what led me to the development of this new understanding of emotion was a lifelong practice of watching my thoughts and feelings and being very attuned to how things are influencing my thoughts and feelings and when I applied this to cannabis; I’ve been an off and on user of cannabis for the last 35 years. I would find that certain strains affect me one way, other strains affect me a different way and going kind of way beyond the well indicas tend to lock me to the couch and sativas tend to have me become very energetic and creative.

I really found myself trying to dial in okay if I need to be productive and get stuff done I’m going to reach for some Durban Poison. If I want to be in a more creative frame of mind let me try some Sour Diesel etc, etc, etc and the more tuned in I got to how these different strains were influencing my mood in different ways the more frustrated I became at having to kind of take a packaged deal. Okay the Sour Diesel definitely helps with my creativity but a little too dreamy to get certain kinds of things done. I wish I could just dial in one effect at a time and by this time it was well known that terpenes in conjunction with THC are responsible for giving your high a particular mood or a particular in the case of a strain cacophony of moods and so the idea appeared.

Hey what if we were to extract out the individual terpenes from the marijuana plant that are responsible for these shifts in moods and productize them as single moods. A single terpene or maybe a small blend of terpenes that produces exactly the mood that you want to experience and give users; myself being the first one the ability to pick and choose the exact mood or collection of moods that I wanted to enhance a particular activity. Hey that would be really cool.

Matthew: Yeah. That would be really cool. Did you have early success with experimenting with this where you said hey this is not only something I want but it’s something that’s very possible?

Charles: Yes, yes. So after kind of living in the legal cannabis recreational world of Colorado for a year or so and thinking about and digging into the research around terpenes it was an intriguing idea for me but it wasn’t really compelling yet and part of the reason it wasn’t compelling is the other complaint if you will that I had with cannabis is that it impaired my memory. I sometimes became; my mind sometimes became racy or even anxious and so kind of the base high itself wasn’t always one that I enjoyed or it wasn’t one that lent itself to many of the activities that I really wanted to dial in the mood for and experience. So one day I stumbled across some research about how CBD another cannabinoid in the plant besides THC. How CBD could mitigate some of the more deleterious effects of THC.

It was at this point that I started to get super excited and that was almost exactly a year ago. It was March of 2015. So I pulled together a team and we took a few weeks to find all the materials that we would need to test this idea and then we had our first tasting party where we each did what we ended up calling a base, a 50/50 mixture of THC and CBD and as we were hoping about ten minutes later we realized wow we are really high, we’re really functional, feeling very sociable, feeling really good. More like we didn’t really feel stoned we just felt really, really good and we’re all kind of looking at each other in the room excitedly and sure enough the high we were experiencing had no real mood to it. It was kind of a mood neutral high and then our chemist gave us; there were six of us. Gave us all a terpene but didn’t tell us what terpene he gave us and unbeknownst to us he gave three of us one terpene and three of us another terpene and just sat back and watched.

Dave Georges my primary co-founder in the firm he noticed that he and two of the other people had actually gotten off their chairs, they were lying on the carpet, their head propped up, all quiet watching the other three of us chatting up a storm and as soon as he pointed it out we all looked at each other and like oh my God I think this is going to work and we have been on a tear ever since then to productize this and brand it and get it to market.

Matthew: That’s fascinating. So the first experiment was, the base was a 50/50 CBD/THC and can you just give listeners a general sense to what happens when you start to increase the CBD level, make it a higher ratio in a cannabis product. What that experience is? I’ve heard a lot of people describe it as simply reducing paranoia or anxiousness but do you describe it any other way as well?

Charles: Yes. So we were expecting exactly that. We were expecting that the memory impairment would go away and that happened. We were expecting that the risk of becoming paranoid or anxious would happen. That there would be less kind of a tendency towards social withdrawal but what we found was actually it went even further than that. That people actually become more sociable on that ratio of CBD and THC. Like we’ve been having things we call tasting parties ever since the fall of last year and fifteen, twenty people will come. They’re kind of like informal focus groups and people will try the product and the many, many people remark that the energy in the room so to speak it feels more like a cocktail party than a marijuana party.

No one’s sitting in a corner quiet. Everyone’s up and chatting with each other and moving around. The CBD also makes for a very bright high. Kind of look around colors are brighter. It’s a very bright, uplifting, very functional, very sociable high and it’s just great in a social setting and it’s great when you want to get something done.

Matthew: So let’s talk about some of the other varieties of Lucid Mood and what kind of emotions or mood they can evoke. Can you tell us a little about the others?

Charles: Sure. Well what I just described we call the base and then once people are high on the base they can add one or more moods and the most popular ones are contentment and I can tell who in the room has vaped contentment because they pretty much have a shit eating grin on their face. So if you’re familiar with that aspect of marijuana that’s coming from the terpene that’s in contentment. Another very popular one is called relaxation and within thirty seconds of vaping it there’s just this kind of wave of releasing muscular tension in your body and people typically sit down at this point. There’s just too much effort to stand up.

That’s very nice. I have not really been much of a fan in indicas for most of my cannabis consuming career but I really enjoy doing a relaxation mood. We call those moods during a relaxation mood in the evening to just really relax. Another one that’s quite popular is called motivation and this is for when you want to get something done. When you want to hike up the flat irons and cut a few minutes off your hike and Dave one of the co-founders is a big skier and he just loves going skiing on a mixture of the base plus motivation. He finds that he can just carve his way down the mountain without his legs becoming rubbery in any way and put in a full morning of skiing on that and we have other moods that are in the pipeline and will be coming out pretty much on a sort of mood a month sort of basis.

Matthew: And how about as the mood wears off. Is that just a slow abatement of what the mood felt like initially just happening, a lessening and lessening until it finally just goes away or how does that work?

Charles: Well it depends in part in terms of how much of the base that someone does but the sort of sweet spot for doing a base lasts an hour and a half or so. Plus or minus a little bit of time there and moods take effect right away. Once you’re high it’s literally a matter of seconds before the moods begin to kick in and depending on people’s metabolism you’ll feel that pretty strongly for 45 minutes or so and what’s neat about separating the cannabinoids and putting those into what we call the base and the terpenes and putting those into what we call moods is that you could come home, you could decide you really want to relax after a tense day at work and do a base, do a relaxation and maybe 20 minutes later your spouse comes by and nags you and reminds you that you promised to clean out the garage and the last thing you want to do is get up off the couch.

Well at that moment if she’s smart she’ll bring you the vaporizer along with a motivation. Give that to you and 30 seconds after you’ve vaped the motivation you’re not only willing to get off the coach you pretty much have to get off the couch and get something done and so you head for the garage. You clean it out and maybe an adjacent room or two while you’re at it it’s kind of a thing. But what’s neat about the product is you can change your mood on a dime without having to take any more of the cannabinoids; without having to take in any more of the THC. So the combination allows the user; gives the user kind of complete control over their high and that was our goal.

Matthew: Is it a difficult process to isolate the terpenes that evoke these moods? I mean without giving away anything proprietary how do you do that?

Charles: We’ve developed a proprietary approach to that. I think it’s our secret sauce if you will is we’ve taken a very different kind of approach to doing that kind of research and generating hypotheses about what terpenes and flavonoids produce what kinds of moods and then we have a process by which we validate those hypotheses. So that’s a core part of our R&D if you will for this product.

Matthew: Yeah. This product reminds me a little bit of the drug Soma in the book “Brave New World.” Do you remember that?

Charles: I don’t.

Matthew: It does well it’s kind of it does. It’s kind of like a scientifically created drug that creates different moods for people but it’s much more benevolent than a lot of the drugs that are on the black market so it’s kind of a scientific version of a naturally occurring drug. It’s a pretty interesting parallel.

Charles: Okay.

Matthew: So how often do people agree with the mood that’s on the particular box? Contentment does everybody who takes it at a tasting party pretty much say yeah this is consistent with what my idea is of contentment versus relaxation or is there certain metabolisms where it’s just like hey contentment is affecting her and him a little different than the 80% of the rest of the folks in our tasting party?

Charles: We’ve tested about 350 people and we’ve been stunned by how consistently a given mood will stimulate a mood that that person would recognize as being consistent with the name we’ve given it. So it’s high. What’s more common is that someone will do it and will say well I didn’t experience a shift in mood and these tend to be the same kind of people where they don’t really necessarily make big differences between indicas and sativas. I mean pot is pot. Their goal is to get high but for those people that you might think of as like kind of cannabis connoisseurs and they’ve got six different strains at home and they’ll tell you okay this is the strain I use to fall asleep at night. This is the strain I use for sex. This is the strain I use for a nice evening in on the couch with my sweetie.

Whatever it is those people that have already identified different strains for different activities they tend to within seconds be reporting oh my goodness I’m now feeling this way having done the mood. People that are less self aware or less practiced in observing how different strains effect them those folks upon doing it the first or even second time it’s not that they disagree with the name that we’ve given it it’s just that they’re not really experiencing much of the effect and we found that many of these people will actually start to become better observers of not only how our product is affecting their mood but the next time they smoke a strain to become more aware oh yeah I can feel that contented feeling within what I just did. I’m feeling a bunch of other things because any given strain has tens of terpenes that are coming together in an entourage effect to affect your mood but they become more self aware from using the product and that tends to make our product very popular with bud tenders and other kinds of connoisseurs of the various moods that you can get into through the use of cannabis.

Matthew: Okay and it’s consumed via a vape pen? Is that correct?

Charles: Any flower vaporizer so we have little hemp pucks that can be placed into a Pax or a Volcano or an Atmos Jump or an Arizer. Any vaporizer whether it’s a table top or a portable that you could put flower into and vape you can put our little hemp pucks and vap them. Those hemp pucks are then infused with the active ingredients. The cannabinoids in the case of the base and the terpenes and flavonoids in case of the moods.

Matthew: Okay and what’s the trajectory in terms of where and when your product “Lucid Mood” will be available?

Charles: Well the moods are available now.

Matthew: Okay.

Charles: So people can come to our website and purchase the moods and because the moods don’t contain any THC the moods are just blends of terpenes and flavonoids they can actually be sold via the internet to people in any state. So people can come to our website and they can put in an order for the moods and then if they’re in a state where the lucid mood base isn’t being sold. If they are in a state where that’s being sold and right now that is only Colorado they can go pick up a base and then layer one or more moods on top of it or if they live outside of Colorado then they can instead of a base they can use whatever flower, extract, or anything else that they use and then vape one of our moods on top of that and although it won’t be quite as clean and clear as if you had used the lucid mood base if you put a lucid mood on top of whatever strain you’ve been able to find you experience a big shift in the direction of the promised moods.

So we had someone at a tasting party that arrived and they were very jittery and their mind was racing and they told us that just before they arrived to our tasting party they had done a very strong sativa and they were starting to feel rather paranoid and so we gave them a relaxation mood and within seconds it just overrode their existing mood. They completely calmed down. They were very grateful to us and they said how do I buy a package of these relaxation moods.

Matthew: That’s great. Well this is certainly an interesting innovation you have going on here Charles and I’m excited to see it expand across the United States and see more people give it a try. I think this is one of the innovations that will allow the cannabis industry to really make inroads and take market share away from alcohol because you really don’t have a hangover. With alcohol you’re consuming ethanol which is essentially a poison. Which I don’t have anything against alcohol it’s just this could be one of the points of departure where recreational and medicinal drugs really gain a foothold over the alcohol industry. So I’m really excited to see what happens.

I have a couple questions for you unrelated to cannabis that I would just like to get your answers on. It’s something a little different I’m trying and that is what is one book you could recommend to readers that had a big impact on your life?

Charles: I recently read a book called “Start With Why” by Simon Sinek. Simon also has a TED Talk by the same name “Start With Why” and it’s all about how to inspire a loyal following from both your customers in the marketplace as well as the people that work for you and Simon’s ideas have really influenced everything from our mission statement as a company to the look and feel of the brand. So that’s the book that comes to mind in terms of something I’ve recently read that’s really made a big difference in the business itself.

Matthew: That’s great. Now if you could go back and talk to the eighteen year old version of Charles what advice would you give to yourself?

Charles: Oh eighteen year old version of me I’d say something like lighten up kid. Measure your success in terms of how much fun you’re having. Because if you’re not having fun it’s either because you’re doing something that your subconscious doesn’t find meaningful to relate back to our previous conversation or because you’re doing things that you’re not particularly brilliant at or you don’t like the people that you’re working with and I think life is way too short not to really enjoy the ride.

Matthew: Great closing words Charles. Now can you tell listeners how to find “Lucid Mood” online?

Charles: Sure, sure. People can come to our website

Matthew: Great. Well Charles thanks so much for coming on CannaInsider today and educating us. We really appreciate it.

Charles: Oh thank you Matt. I really enjoyed it.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at) We would love to hear from you.

Charles Jones is the founder and CEO of Chooze. His new product LucidMood promises to allow users to choose the  mood they want to evoke from cannabis using customized terpene profiles. Moods include: relaxation, contentment, body buzz and motivation.

Charles feels we are at unique point in history where we can craft the exact feeling we want from cannabis with no tradeoffs.


Key Takeaways:
1:14 – Charles talks about how he to in to the cannabis space
3:43 – What is adaptive deficit disorder
7:54 – Charles talks about living a more harmonious life
12:39 – Creating a product that helps moods
15:50 – Charles discusses the experimental stage
21:19 – Other varieties of Lucid Mood
26:08 – Isolating terpenes to invoke moods
27:51 – People’s reactions to the different moods
31:22 – When will the moods come to market
34:44 – Charles’s book recommendations
36:25 – Contact details for Lucid Mood

Important Update:
What are the five trends that will disrupt the cannabis market in the next five year? Find out with your free guide at:

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The Five Disruptive Trends Shaping The Cannabis Industry Now

Insight for Cannabis Entrepreneurs & Investors with Leslie Bocskor

Leslie Bocskor

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Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

As the cannabis market continues to grow many new entrepreneurs and investors are gravitating to the industry but lack the context and framework to understand how to succeed in this space. That is why I’ve asked Leslie Bocskor, The President of Electrum Partners back to help us get the key insights and context that many newcomers need to prosper. Leslie welcome back to CannaInsider.

Leslie: It’s a pleasure to be here as always. Thank you very much for having me on the show again.

Matthew: To give us a sense of geography can you tell us where you are in the world today?

Leslie: Today I’m in Las Vegas, Nevada enjoying a beautiful, sunny, warm, and dry day.

Matthew: Good. Now you were on the show in 2014 but for new listeners can you give us a little bit of an overview and background about yourself and why you got into the cannabis industry?

Leslie: Sure. I’ve always been sympathetic to cannabis and the plight of cannabis prohibition. Going back to when I first encountered “The Emperor Wears No Clothes” by Jack Herer in the 80s and when I moved down to Las Vegas, Nevada from New York I discovered that medical marijuana was obviously not just what they do in California with granola and yoga and it was a more substantial industry than I had previously thought. We ended up getting very involved in the policy side of it and helping Nevada establish a robust and well regarded regulatory framework that serves the interests of the citizens of the state, the consumers of the product, the patients in medical marijuana and is a very business friendly environment.

That led me to forming Electrum Partners that got involved in the licensing advising people in the industry. We ended up being very deeply involved in the licensing process and advising people in their strategy in the state and outside. I also ended up contemplating and have begun setting up a fund that is going to be investing in the industry and also we have been very involved in strategy with a number of different companies. We look for the best of breed and the businesses that have the best teams and employ best practices in various verticals within the industry and we’ve been creating an eco system within our relationships of those businesses and that’s currently where we are today.

Matthew: How has the cannabis market evolved in Nevada over the last twelve or eighteen months?

Leslie: Now it is starting to really hit the what would I call the aggressive ramp up. We’re now seeing new dispensaries open every week or every couple of weeks. I think we’ve got to be at around twelve to fifteen of them in southern Nevada currently and we will probably be at about forty to forty-five within the next two to three months. They are doing business. The reciprocity aspect of it has really been fantastic. We’re told by some of the dispensaries that some seventy to eighty percent of their business comes from out of state patients.

Matthew: Wow.

Leslie: And we’re now also in the middle of our Ballot Initiative Campaign where we’re going to be voting on adult use in the ballot box this November which we are working aggressively to see pass and so to sum up the industry has started to really take on some momentum right now. Cultivations are coming online. Product diversity is starting to exist in the dispensaries and the dispensaries are starting to do a substantial amount of business. It’s really an exciting time here in Nevada.

Matthew: The reciprocity you mentioned. How big a factor is California in that reciprocity? Is it nearly all or what would you guess?

Leslie: I would say it’s a very big factor in it. I’m told that on any Friday or Saturday night one third of the people in Clark County are from southern California and so with over one million medical marijuana cardholders in Nevada; I’m sorry California it is no surprise that a lot of the patients that are coming to the dispensaries are from California. That being said I know there are people that have come here from Michigan, from Washington, from Colorado, from Oregon, from Holland, from Israel, and from other jurisdictions, Canada that are using their medical marijuana recommendations when they’re in Nevada because every one of them is recognized.

Matthew: How likely do you think recreational use will pass? Is that a high probability you think or where we at on that?

Leslie: So it’s a great question Matt and I think that we’re at a very key point and I am trying to do what I can to inspire everybody that can make a difference. Getting out every vote, getting every person registered to vote. It is critical. It’s currently polling at sixty percent. That’s incredibly good.

Matthew: Good.

Leslie: The other side of that is the poll that released that data was arranged by Sheldon Adelson and I’m told that Sheldon Adelson is already raising money and getting people committed to fight the ballot initiative and so obviously being one of the wealthiest people in the world and being here in Las Vegas and this being his backyard and being the person who contributed five million dollars to the campaign against medical marijuana in Florida two years ago that was also a contribution to help Governor Rick Scott elected. We believe that it’s a fight and we really need to be prepared for a fight and so we are cautiously optimistic and really rolling up our sleeves to get involved in the battle that is coming.

Matthew: How have you seen the type of investor and entrepreneur that’s coming into the cannabis space change or evolve since you got in?

Leslie: Matt since I got involved in 2012 things have changed very dramatically and incrementally and consistently. Every ArcView meeting that I go to we’re seeing the level of sophistication, the level of due diligence, the quality of the teams and the diversity of the teams that are being assembled, the granularity in terms of detail for business model, the intellectual property protections, the planning for the future, looking out to the future has all been improving constantly from ArcView meeting to ArcView meeting and every other type of conference that I’ve been too. So the answer is we’re seeing the changes take place primarily at this point in the form of two major areas.

One the level of preparation, due diligence, and detail going into the businesses plans. The entrepreneurs plans has increased fairly dramatically and two the diversity and depth of the bench. The breadth and depth of the bench that the different projects have in terms of their team members has been increasing fairly dramatically. Whereas when I first came into the industry people like myself and others who came out of other industries with levels of previous success were much more limited. It was much more of an industry specific type of group at that time. Meaning everybody who was involved was really cannabis industry professionals. Now we’re seeing people come out of science, medicine, coming out of marketing, come out of the creative side of it, distribution, logistics.

I was recently speaking with a group that specialized in logistics that came out of United Parcel Service and other shipping companies and now they’re looking at how their particular areas of experience, knowledge, and relationships would be applicable in the cannabis industry. So the answer to your question is we’re seeing a marked change and the biggest single changes are once again the detail and the level that people are putting into their preparation for their businesses and the breadth and depth of the team members that they have to execute those businesses.

Matthew: That’s great to hear. It really is. So there are some markets in the U.S. that are not totally functional. Illinois pops into mind right away. What do you think about these markets that have legalized medical and they just don’t give their participants the tools they need to succeed? Is that a trend we’re seeing or how do you feel about that in general?

Leslie: That is a trend. That is a positive trend because we want to put it in context of when that happened. So Illinois is really a legacy of four years ago. New Jersey is really a legacy of four to five years ago. New York is really a legacy of two years ago. Connecticut is a legacy of three to four years ago. Minnesota three to four years ago. Those are some of the markets that are most restrictive. Florida is something that has been going on for two to three years now in terms of these very restricted markets. What we’re seeing is a mirror of what happened in Nevada, Oregon, Colorado, Washington, and Alaska where markets get established.

So let’s look at Nevada as an example. Nevada first passed medical marijuana in 2001 and it was a very limited program. It wasn’t until 2013 that SB347 went through the legislature and expanded the market into being what is now regarded as the most well regulated market in the world with the best regulatory framework. That took time for that to happen. Colorado first established medical marijuana and then it went into adult use and there’s been a lot of maturity there, same thing in Oregon and Washington and Alaska and now look at Florida. Florida is likely going to pass a ballot initiative for an expansion of the existing very limited CBD only primarily; five licenses given out. A framework and so there’s going to be an expansion there.

So I say that all of those markets like Illinois and the others that are very restrictive and off to a slow start it’s a good step in the right direction and we need to keep in mind it’s only a step in the right direction. It’s not an end goal but it’s just one of the stops along the way to getting where we want to get too which is adult use where it’s well regulated. Where the medical marijuana market is well regulated, where it’s available to all the people that need it for compassionate use in all of the different conditions from PTSD to Seizure Syndromes, to Cancer patients, to the people with chronic pain, and more and so we see these expansions happen in fits and starts and we can get lost in the weeds when we look at what happens in Illinois not realizing that it’s really just part of a much larger arc of the evolution of the drop of prohibition on cannabis in that jurisdiction. Did that make sense?

Matthew: That makes total sense. It’s a stepping stone.

Leslie: Yeah.

Matthew: So don’t be discouraged. I like that.

Leslie: Yes.

Matthew: So you mentioned that Nevada is very business friendly and I agree. Do you see business owners, entrepreneurs, investors just checking out of California? Today as we speak the governor of California just signed into law a higher minimum wage but that’s just one of the more let’s say one more thing that just adds friction for businesses in California. Do you see any sort of exodus at all into a market like Nevada from California or not so much?

Leslie: We have seen hundreds of millions of dollars of investment in the Nevada market a lot of that which came from California or was California/Colorado businesses. I would not say I’ve seen an exodus in California. I would say that the California market is going to experience a tremendous evolution as we see the opportunities there equaling nothing else we’ve seen yet in the industry and that’s going to be as the regulatory framework that was passed into law last year and signed into law by Jerry Brown becomes implemented we are going to see California turn into the largest legal cannabis market in the world and the opportunity for investment and for establishing businesses in that market will be extraordinary.

So in fact I think that California is at a plateau right now where there have been many California businesses investing into other markets and now they’re starting to get ready and look at their local market which is mirrored by the news announcement from Harbor Side today that they’re cancelling all of their national expansion to focus exclusively on the California market and that is going to be something we’ll see more of as well let me speak to the fifteen dollar minimum wage. I believe that if people start to look at the employment opportunities that a cannabis industry brings the fifteen dollar minimum wage would be less of a conversation at least in that context. In the context of looking at the cannabis industry as an employment opportunity because it’s easy for people in the cannabis industry to look at a fifteen dollar minimum wage because it turns out that many businesses in cannabis spend more than that on their employees are paid better than that.

There is a major player in California that I won’t use their name because this is old data but I was told that one of the biggest dispensaries in California a few years ago by the operator they told me that their average hourly pay across their entire spectrum was over forty dollars an hour.

Matthew: Wow.

Leslie: And so we now are looking at a way to get people employed that need gainful employment. The cannabis industry presents the best opportunity the United States has to offer in a growing industry that can pay well and provide real; can provide real opportunity to them and that is what we’re seeing now. So this is just sort of an add on to your comment about the fifteen dollar minimum wage. I don’t think that it’s going to be much of an issue for the cannabis industry because the cannabis industry pays that generally speaking and more.

Matthew: Right, right. I meant more as a general comment on business and economy. I mean I keep on reading that the fast food restaurants and such are doing to do more automation and creating robots and things like this. So it actually has the reverse effect in many cases that the well intention politicians would like to see of hey let’s give people more of a working wage but the drivers and the incentives change for the businesses that actually make those decisions.

Leslie: That’s a very big conversation and we could go really deep on that.

Matthew: It is.

Leslie: And I think that it also is very much dependent upon the geography and the individual economy on a localized basis. For example a fifteen dollar minimum wage makes a lot more sense in New York than it does in even Las Vegas and so Las Vegas it’s easier to have a very high standard of living making less money in Las Vegas than you might in New York or San Francisco where fifteen dollar minimum wage would make a lot of sense. That being said I happen to think that the recent interview of Asher Edelman on CNBC talking about the velocity of money and economic policy speaks to issues like this in a very long view and I believe that ultimately raising the minimum wage for many people or raising the earning potential of people on the lower end of the employment spectrum creates much more disposable or much more consumer demand.

The people that are on the lower end of the spectrum tend to spend 100 to a 110 percent of the money they earn versus the people in the higher end of the spectrum that only tend to spend 5 or 8 percent of the money they bring in. So the more money we see going to people at that end the higher, the more money we’re going to see going into the economy.

Matthew: Great points and there’s certainly more than one variable to be looked at here. It’s a very dynamic situation and regional as well so. You’re known for asking hard questions of entrepreneurs and having acumen for the due diligence process. For entrepreneurs and even investors listening that want to get prepared to present themselves what should they do? What answers should they be ready to have right on hand and what paperwork should they have? They show that they’re prepared. They show that they’ve thought through what your care abouts might be and they have intelligent answers.

Leslie: So Matt I’m actually writing a book that’s going to be getting published very soon that deals with these specific issues.

Matthew: Oh good.

Leslie: I’m trying to provide something to investors and entrepreneurs that can assist them in making their proposition more effective. I want entrepreneurs to be able to get a leg up on getting their businesses up and running and succeeding. Knowing what the key issues they have to hit are. Investors knowing what the key issues they need to hit are to be able to be more successful as an investor and so for an entrepreneur the things that I think need to be focused on are a little bit of what I mentioned earlier and the first thing I’d say is team. You want to make sure you assemble an absolutely stellar team. The best you can bring together.

You want people that have had previous success in areas that are related to the enterprise you’re currently executing. So if you are going to be in retail you would like to have people that have had previous retail experience even if it’s not specifically in cannabis. They want to have success. You want to if you’re going to be raising money from investors you want to be able to show that you have taken in capital before and gotten to liquidity for investors and yourself previously. You want other team members to have that experience as well. You want to make sure that the breath of your team is ample and the depth of experience of the team members are ample. I often say I’d rather bet on an A team with a C project than a B team with an A project because I believe team makes 90 percent of the difference.

Then you want to make sure that other 10 percent or whatever it might be that a value proposition is solid and it is extremely well documented. You want to be able to look at the assumptions that you’re basing your value proposition on. You want to be able to parse them out separately and look at each individual assumption and you want to make sure that none of them go unnoticed. Every assumption for what your business is based on needs to be documented, segregated, and supported with research and information that’s available from other credible sources to show that it’s not just your instincts but there’s data supporting your assumptions and so you want your value proposition to be very well articulated with a lot of supporting documentation in an appendix if you have a business plan to show that you’ve done your research and you have checked to make sure that your assumptions make sense and here are the people and here are the research reports that support it.

You want to make sure that you have taken a good look at the competition in the market and that you understand there is competition. What the competition has that they offer and what you’re going to do to be able to answer their competitive approach and to be able to succeed and prevail regardless of it. You want to have knowledge of the competition and you want to have something that gives you a secret sauce and defensibility, intellectual property, market, etc. or first to market whatever it might be. You want to then make sure you’re understanding of the overall market opportunity. Once again parsing out all the assumptions and the data about the market and showing that you’ve done the research that gives you that knowledge.

And then last you want to make sure that you’re taking a look from exit backwards. What is your ultimate end goal? Are you building a business that is going to be so profitable that it’s going to be giving distributions to all of the participants, all of the shareholders in it? Are you going to be building something that one day will be a perfect acquisition candidate or are you building something that one day will look to the public markets for liquidity? You’ve got to be focused on where you’re going to get with this and what the end result is going to be because no investor is going to want to get involved unless they know where they’re going to go. They want to make sure that there is going to be an end game where they’re going to see their capital back, they’re going to see appreciation, they’re going to see eventual liquidity and return. So those are the five major points that I like to hit on from the entrepreneurs perspective.

From the investors perspective it’s about evaluating those things and then also making sure that the research you can do is deep. I would recommend that if you’re contemplating making a substantial investment in any business in the cannabis space you should be interviewing the operators if it’s a substantial investment. You should be asking to speak to their vendors. The people that sell to them whatever it might be. Provide services whether it’s attorney, accountants, or actual the seller of goods. Speak to their vendors and see what the relationship is like. Talk to their customers and their clients. Talk to the people that actually do business with them. Get hands on. Roll your sleeves up and get that knowledge because those little bits of information that you’re going to get can make the difference between pulling the trigger and making the investment or deciding not too and they can make the difference between success and losing your capital.

And so the five points that I hit as well from an investors perspective I’d say roll your sleeves up get in there, do the due diligence, become knowledgeable, and make sure you’re spending the time to really give yourself the edge. I encourage investors to look to professional investors to see what they do and try to emulate that the best that you can. If you can’t do it by yourself put together small networks of people where you can have different group members evaluate the different aspects of the investment and you can invest as a team.

Matthew: How do you feel about valuations in general since you’ve gotten into the industry? How have you seen valuations change and for entrepreneurs out there who are trying to come up with evaluation for their company? Any suggestions there?

Leslie: Research, research, research. You want to make sure that you’re going out there and you’re looking for comparables. It’s just like selling a home. If you want to sell your house you look at the neighborhood, you look at the nearby neighborhoods, you look at neighborhoods that are similar to yours and you look at what the comparable transactions have been and what people are looking to get out of their properties at this particular time; once again comparable transactions that have closed. The same thing here you have to look for business that are similar to yours both in the cannabis industry and outside of the cannabis industry. Look to the public markets for evaluations and you can start to get some idea of what a reasonable evaluation might be.

Keeping in mind that evaluations are also extremely fluid and the market will bear what the market will bear. That being said I would say that evaluations overall right now are very negotiable. There is a lot of opportunity to invest in the industry and there’s a lot of capital looking to invest in the industry. The velocity of it has not been so high that the evaluations are unreasonable. I think that if you look around you can still see incredible opportunities to get in at early stages with things that you can see substantial, substantial returns on in fairly short periods of time.

Why is that Matt? The reason for that is that the legal cannabis industry presents a unique opportunity we have never seen in the world of finance and investing before and that is taking a market that has been a grey or black market but enormous in size. According to RanCorp study of 2010 it was 42 billion dollars a year just for the illegal rec market; the adult use market in the United States. To give context if you were to look at the NFL, NHL, Major League Baseball, and NBA that same year they were under 35 billion a year combined. So the illegal adult use market was bigger than all essential major league sports in the United States combined.

So when you take a market that’s that enormous and you start migrating it to a regulated market as well you’re taking market where the prices have been kept very high because of it being a black market. The risks involved in the black market are incarceration, arrest, asset seizure, and more and so people have to keep the prices very high in the black market to accommodate all of those risks. Well when it migrates from a black market to a regulated market the prices don’t come down immediately especially in the United States where the federal legality makes each state be rampant to be like its own market and what I mean by that and this all goes back to the same point and when you look at somewhere like Oregon and Washington the wholesale prices can be very different in each one even though they’re right next to each other because there’s no Interstate Commerce.

That tends to create an environment where the migration allows for businesses to become profitable very quickly and the evaluations that happen because of that tend to expand very quickly. So you can get in at early stage businesses where the evaluations are low and you can see them explode within a year or two because of the large margins that allow for profitability to happen very quickly. One fact that I’ll reference according to the MJ Business Daily fact book from a year ago 80+ percent of businesses started in the legal cannabis industry were break even or profitable within the first year. That’s never existed in any other industry in the history of the world on this scale and so evaluation shifts are very fast when you see that type of rapid profitability. So you can get good evaluations at the early stage and you can see substantial evaluation shifts very quickly.

Matthew: Looking at the whole cannabis eco system is there any particular business type or category that gets you most excited right now?

Leslie: Hemp.

Matthew: Hemp.

Leslie: I am very interested in industrial hemp. I think that hemp is the less exciting cousin of cannabis and so the hemp industry I believe is going to encompass hemp paper, hemp textiles, hemp plastics, biofuel, food products, and industrial chemicals, construction materials, and more and it will be massive in size. It will provide real relief to industries that are currently toxic pulp paper mills; mills cutting down old growth timber to product paper. Cotton farming which uses 25 percent more water I’m told than hemp and in the processing of the cotton is substantially more toxic in terms of what it produces in runoff to our environment. So I believe hemp is going to be one of the most exciting and most rapidly growing areas of the cannabis and related markets.

Matthew: Great point. Yeah hemp is not as sexy of a headline as cannabis so I’m glad you mentioned that. Where do you see the legal cannabis market in the next three to five years?

Leslie: I am hopeful that by 2021 we will see federal prohibition dropped and we will see the market approaching its ultimate zenith in the U.S. so probably about 200 billion dollars a year nationally in revenue and that’s including adult use, medical use, pharmaceutical products being developed on it, nutraceutical and supplement products being developed on it, industrial hemp, the ancillary markets both for B to B and B to C, and veterinary and so I think over the next three to five years we’re going to see the growth to all of those different areas being created

This year we have California, Nevada, Arizona, Massachusetts, hopefully Maine all with adult use initiatives. We have Vermont likely to legislatively be the first state to pass adult use. We have a number of other states that may have ballot initiatives or legislative initiatives to establish adult use markets. We have Ohio and Florida with ballot initiatives. Florida already certified for medical marijuana, Ohio getting these signatures right now for medical marijuana. We may see legislative action in Pennsylvania for medical marijuana and so that’s going to be a major series of steps over the next nine months that are going to result at the end of 2016 having a very different market than we do currently today.

There will then be a period of a back and fill as we sort of take those expansions and people start working those expansions and the next level of states to look at expansions of medical marijuana, establishment of adult use, and legislative and ballot initiative mechanisms to achieve them and so I see this sort of major year in 2016. 2017 will be a year of market establishment and expansion. 2018 we’ll see some other probably attempts and then in 2020 four years out we’re probably going to see another ten states with ballot initiatives for adult use or medical as well and so I see major activity in the next few years and the investing activity that’s going to be taking place as a result is going to eclipse everything we’ve seen up until this point combined after we see this year’s election.

It’s just going to be enormous the amount of money that’s going to be coming into the market to invest in it, the opportunities in it, the establishment of these markets, and what it’s going to mean for our economy because it’s touching so many different areas not just adult use but as I said pharmaceuticals, industrial hemp, nutraceuticals, and then the ancillary markets. So I see a couple of major things along the way that ultimately result in what we hope will be the drop of federal prohibition on the national basis 2021, 2022 by a descheduling of cannabis and having it be treated the way we treat tobacco and alcohol.

Matthew: Let’s pivot to a more personal and personal development type question Leslie. Looking back over your life is there a book or two that stands out that you would recommend to listeners?

Leslie: Unexpected question Matt but great question. A couple of personal favorites. There is a book called “Seeking Wisdom” from Darwin to Munger. That’s an extraordinary book. The author interviewed Charlie Munger who has been Warren Buffett’s right hand man for a long time and that is a book I would recommend. I would also recommend some books by and about (33:37 unclear) who was largely responsible for bringing yoga to the west in the early part of the twentieth century. I would recommend “Jonathan Livingston Seagull” by Richard Bach and I’m a science fiction fan myself so books by Isaac Asimov and others are always very interesting to me.

Matthew: Wonderful. Thanks for those suggestions. Leslie how can listeners learn more about Electrum Partners and find you online?

Leslie: Well one of the things that I think is probably useful to many of them that are useful in the cannabis industry is to find me on Twitter. Leslie Bocskor on Twitter. L-e-s-l-i-e-B-o-c-s-k-n-e-r. I probably review an average of about between myself and my team we probably look at a couple hundred articles a day that are about the cannabis industry and about cannabis in general. From those couple of hundred we try to distill down to the fifty that we think or thirty that we think are most relevant and then from that thirty to fifty we try and find the fifteen or twenty that are the ones that you have to read and then those will go out on my Twitter feed. I would say that the website is definitely worth looking into and we’re going to be looking at a launch of a new site taking the existing site and going to Electrum Parners 3.0 in terms of the website within the near future.

And then you can often find me at ArcView and I’m happy to speak to anybody and I look forward to meeting people at the various conferences as well as the NCIA National Conference in Oakland in June. The primary way though is through our website and through Twitter.

Matthew: Leslie thank you so much for coming on CannaInsider today. We really appreciate it.

Leslie: Matt is was really my pleasure. I always enjoy the interviews with you. You do a great job pulling out great data from the people that you interview.

Matthew: : If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five major trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider(dot)com. We would love to hear from you.

Leslie Bocskor is the President at Electrum Partners and founding chairman of the Nevada Cannabis Industry Association. Leslie gives us context about the rapidly changing landscape of challenges and opportunities facing cannabis entrepreneurs and investors.

Important Update:
What are the five trends that will disrupt the cannabis market in the next five years? Find out with your free guide at:

Key Takeaways:
1:28 – Leslie’s Background
3:08 – Evolving cannabis market in Nevada
5:31 – Well recreational use pass
6:53 – How the investors have changed since he got in the industry
9:48 – Leslie discusses Illinois’ emerging medical marijuana market
12:58 – Friction in the California small business market
18:15 – Leslie gives advice to entrepreneurs pitching to investors
24:07 – Leslie talks about how valuations have changed
28:14 – Leslie’s take on the hemp industry
29:41 – The legal cannabis market in three to five years
33:02 – Leslie’s favorite personal development books
34:11 – Contact information for Electrum Partners

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The Five Disruptive Trends Shaping The Cannabis Industry Now

The Opportunities and Burdens in California’s New Cannabis Regulations

Khurshid Khoja

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Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

By itself California is the eighth largest economy in the world. However there are other reasons besides its size that people in the cannabis eco system need to watch what is happening in California very closely. California has a huge influencing impact on other states and countries around the world. So in a sense California can be seen as the future of cannabis in a microcosm. Other reasons to look at California closely is that the state has a strong tradition of investing in and adopting technology rapidly as well as a strong tradition of agriculture. All of these reasons mean that California will most likely be the very clear vanguard pushing the cannabis limits of what is adopted by governments and businesses around the world for years to come. To help us sort through what is happening with cannabis in California is Khurshid Khoja the principle and founder of Greenbridge Corporate Counsel. A business law firm representing clients in California, Washington, and Hawaii. Welcome to CannaInsider Khurshid.

Khurshid: Well thank you. I appreciate the opportunity to be on Matt. Happy to join many of my clients who’ve been on your show before and excited about the opportunity to speak with you.

Matthew: Well to give us a sense of geography can you tell us where you are in the world today?

Khurshid: Sure. So today I’m speaking to you from sunny Sacramento and the capital of the largest state cannabis market in the country and specifically today I’m at the California Cannabis Industry Association’s Policy Conference where I’ll be speaking later today.

Matthew: Okay great and before we dive into what’s happening in California specifically can you give us some more background on yourself and how you got into this cannabis business and into the start of Greenbridge?

Khurshid: Sure. So I’m the principle and founder of Greenbridge Corporate Counsel. A business law firm representing clients in California, Washington, and Hawaii from a cross sectors in the legal cannabis industry so we represent nonprofit advocacy organizations, medical marijuana collectives, consulting firms, publishing companies, consumer electronic manufacturers, infused product producers, software companies, trade associations, and a host of others including as I mentioned several guests that have been on your show before. At Greenbridge we focus on transactional and business law matters and answer questions that relate broadly to who can participate in lawful cannabis industry and under what circumstances.

Matthew: Khurshid can you give us a little color around your background in the industry and how you got started and then how it’s evolved to where you are now?

Khurshid: Sure. So I started my cannabis industry practice at the San Francisco office of a large multi-national law firm as a corporate lawyer with transactional practice that was focused on renewable energy. In 2011 I was actually terminated while hosting the very first ArcView Pitch Conference at my office. The cited reason was insubordination to firm management for my persistent efforts to try to build a cannabis industry practice inside the firm, but it was clear to me that hosting ArcView was the last straw and that I’d really pushed the envelope past the breaking point.

But I was willing to push the envelope here to get my former employer to embrace a cannabis industry practice. To me it was a very risky act of civil disobedience against the federal drug war for me to leverage my expertise as a business lawyer to help seed and protect legal cannabis businesses and one that I would’ve preferred to do so behind the professional cover of a big law firm and without a massive pay cut, but that wasn’t to be and there weren’t any other takers from among the larger law firms. So I set up shop as Greenbridge Corporate Counsel with what was left of my severance payment from that firm.

Matthew: Well that’s a great origin story from the ashes of a termination rises Greenbridge.

Khurshid: Absolutely and it’s given me a lot of opportunity and a lot of freedom as well to serve in the industry and in the movement. So early on I had the opportunity to serve as the first general counsel of the ArcView Group helping CEO and founder Troy Dayton establish the ArcView Investor Network. I also co-founded and served as the pro bono general counsel to the Emerald Grower’s Association. Since then I’ve been able to grow Greenbridge to eight lawyers and we represent clients in three states now. Currently I’m serving as the general counsel of the California Cannabis Industry Association in addition to being on its board and I’m also a board member and pro bono counsel to the National Cannabis Association and Students for Sensible Drug Policy.

The other interesting thing that I’ve been able to do since moving to Sacramento is I’ve also become a registered state lobbyist for both the ArcView Group and I’ve also joined as part of CCIA’s lobbying team in Sacramento. So that’s given me a lot of insight into how the sausage is made if you will and how we can affect change in the industry through legislative action.

Matthew: I’m curious now that you know how the sausage is made is it different than what your perception of how it is made at the state level legislature.

Khurshid: Absolutely. I mean it’s given me.. when I think about the differences between the MRSA and the AUMA the so-called Parker Initiative that is going to make the ballot in November. I think about the effect of the various stakeholders in the legislature right. So you’ve got labor, you’ve got the cities and counties, you’ve got law enforcement, you’ve got the cannabis industry, and a number of other stakeholders who are all involved in negotiating and passing the MRSA, and as a result there are a lot of things in the MRSA that industry is not wild about. I mentioned the mandatory distribution system.

Those types of features however are absent from the AUMA because here we didn’t have to deal with the various stakeholders who hold sway in the state capitol. You’re just dealing with the voters, and so you’ve got different priorities and as a result I think the AUMA ended up being a much stronger ballot initiative. And to me the adult use system is going to be far preferable to operate in California as opposed to the medical system which is hampered by different restrictions on ownership and vertical integration and again those are all part and parcel of that sausage making process where you’ve got so many cooks in the kitchen saying I want to add this, I want to add that and you don’t always get your way as a stakeholder in industry. And with ballot initiative you’re dealing with the voters you’ve got a completely different set of options. It’s a different universe of choices.

Matthew: To give us a really high level overview of what’s happening in California can you summarize the Medical Marijuana Regulation and Safety Act? When that took place and became law and what’s most important about it?

Khurshid: Sure. So the Medical Marijuana Regulation and Safety Act was signed into law last year making California a Cole Memo compliant regulated state medical marijuana market. So previous to the passage of, we call it the MRSA for short, previous to the passage of the MRSA we had a patchwork in California of local jurisdictions that were regulating cannabis at the county and city level but there was no comprehensive state regulation or state licensing of businesses in California. And so the passage of the MRSA was a big landmark not only for California but also for the industry movement as a whole given the size of this market and its position as a leader in the industry.

So the first state licenses will be issued in California in 2018 after the six regulating agencies have adopted rules implementing the act. There will be 17 different types of licenses for cultivators, manufacturers, retailers, testing labs, distributors, and transporters. Also I’d say a dual licensing system meaning that the state will not grant licenses to any businesses that don’t already have a local permit license or other authorization sorry to operate in that local jurisdiction.

Matthew: Now when you say Cole Memo compliant can you just give a little overview of what the Cole Memo is so listeners can understand what that means?

Khurshid: Sure. So the Cole Memo is guidance provided by the U.S. Department of Justice back in August 2013 and what the Cole Memo does is basically it’s a policy statement. It’s not a statement of law but a policy statement from the executive agency, executive branch of the government saying these are the conditions under which we are going to allow these various state experiments that are going on with legalization of medical and adult use cannabis. These are the conditions under which we are going to let that experiment move forward and not interfere by trying to enforce the Controlled Substances Act against compliant actors who are trying to follow their state and local law on that subject.

Matthew: And when you’re phone rings from clients in California and they’re trying to interpret and pivot and comply with the Medical Marijuana Regulation and Safety Act as much as possible are there any questions or concerns that come up over and over again?

Khurshid: Sure. So there are a number of issues that clients raise over and over again. The chief question is of course how do I get myself ready? How do I get my business ready for MRSA compliance? How do I get my business situated so that I can get a license under the state act when those licenses are available. And so that kind of opens up a whole myriad of other questions and they’re affected by things like the ownership rules that are set forth in the MRSA as well as local licensing as well. A lot of the most impactful legislation is being deliberated by California’s counties and cities because again MRSA has a dual licensing system. So while the act doesn’t impose strict numerical limits on most of the license classes authorized under MRSA these localities will De facto determine how many state licensees will ultimately be in the system by admitting or denying legitimate access to new and existing businesses.

So after an initial rush to ban many of the jurisdictions have taken a closer look at establishing local licensing and permitting schemes which are complimentary to the states scheme under the act. So a lot of the questions that I get are where should we be located that is optimal for our business and the answer is still in flux because a lot of jurisdictions have heretofore not had any kind of comprehensive regulatory scheme or a licensing scheme for these businesses. Some jurisdictions have licensed cultivation, others have limited licensing for retail outlets for dispensaries, but very few and certainly prior to the passage of MRSA very few had any rules on say manufacturing right. We know that the Vape pen market, the market for concentrates and extracts is huge and yet we have no guidance essentially at the local level on what’s permissible, what’s not, how to get the license, how to operate in compliance. And so these types of questions are being posed over and over again by various clients who want to be well situated to gain not only local licensure but also be eligible to gain state licenses when the time comes.

Matthew: Okay and now what about investors? Investors in California and out of state is there any changes or what’s it like there for people that are outside of California that want to invest in the California cannabis business?

Khurshid: Well fortunately under MRSA there isn’t a residency requirement. Under the ballot initiative that is hopefully going to be on our ballot in November the AUMA (Adult Use of Marijuana Act) that does have residency requirements but the MRSA does not so for the time being opportunities to invest in California are still open to folks who are not residents or who live outside the state. That said I mentioned the ownership rules and those are fairly complex because the ownership rules also tie into restrictions on vertical integration and what happens essentially is that you are allowed to be an applicant or an owner of a certain number of licenses.

There are various restrictions in the MRSA on what combination of licenses you can hold. And if you violate those provisions, then you are not going to be able to hold all the licenses that you want, and you may also potentially complicate the lives of other partners that you have in that venture because they may not be able to get the licenses that they need, the combination of licenses that they need. So the definition of owner in the MRSA will ultimately determine who will have the opportunity to participate in this new market. So access to investment opportunities, access to operating and expansion capital as well as the ability to employ human and financial capital across industry sectors and the ability to get your products to market. These are all going to be dependent on that question of who is an owner?

So the way MRSA currently defines an owner is problematic because it presumes an ownership interest in the licensee even where a party may only have an ownership interest in property being used by the licensee in its facility or its operations. And so this is serious implications for anyone wishing to apply for multiple state licenses along different points of the supply chain as the ability to operate a vertically integrated enterprise is again heavily restricted. It also complicates an investor’s life because diversification is very difficult to achieve in that context.

Matthew: Great points. Now you mentioned that there are seventeen different licensing opportunities. With so many categories and with new categories do you see opportunities for new types of businesses that didn’t exist in the California cannabis market before?

Khurshid: Sure. So for the first time anywhere in California there are distribution licenses and transport licenses in addition to all of the other points along the supply chain those are separately licensed classes of activity, classes of commercial cannabis activity. And so we are seeing folks interested in distribution licenses to help producers get their products to the retail market. Not everyone is quite thrilled to see these new licenses because again with the restrictions on vertical integration you can’t hold a distributor’s license and have a dispensary license or have a cultivator’s license or manufacturer’s license for that matter. So you’re basically dealing with a mandatory distribution system but other owners from along the; other licensees from along the supply chain are not actually allowed to have any kind of interest in that distributors license.

So while there are opportunities and certainly there are operators who would welcome having a distributor handle distribution of their products that they can focus on what they do best. Not everyone is wild about the mandatory nature of the distribution system in California.

Matthew: Just because it allows them less options is there a concern of fiefdoms being created or cartels or something?

Khurshid: Yeah there’s concern about smaller producers not being able to have their products reach the market because they don’t have the kind of leverage when they’re dealing with a very large distributor that is dealing with dozens and dozens of producers and so there is a concern about will my products actually be acceptable? Will I have to modify my products or my business itself in order to get to market because of the leverage that the distributors are going to have? There’s also concerns among the testing labs where again what happens if the testing labs reject too much of the product that the distributors are trying to distribute? Will there be some backlash there? Is it going to be harder for the labs to operate and for them to guarantee the integrity of products reaching the market if they’re dealing with a few very large distributors and those are the only outlets for their services and the only ways to get products to the retail market?

Matthew: Can you explain what BMMR is or BMMR what that acronym means and why people in the California cannabis community should be interested in it?

Khurshid: Sure. So BMMR, B-M-M-R is the Bureau of Medical Marijuana Regulation which was created by the MRSA under the Department of Consumer Affairs to oversee general administration and enforcement of MRSA through multiple; well they are the lead agency. However there are number of other agencies, state agencies that are going to be taking a prominent role and problem getting regulations to implement the act. So BMMR is the agency that is going to oversee all of this but ultimately there are going to be six plus agencies that are involved in the implementation of the MRSA. That being said the success of BMMR is going to require interagency cooperation of all these agencies all of which are new to regulating cannabis.

None of the regulating agencies have actually formally begun the rule making process. These agencies have been in the process of meeting with stakeholders so BMMR is still kind of in formation if you will. I just heard from the new head of BMMR, Lori Ajax at our conference this morning and they are quickly staffing up. They have three permanent staff right now. Again they’ve just started and they’re going to be looking for legal counsel to help them with the rule making that’s coming up and as I mentioned there are six plus agencies including Department of Food and Ag, Public Health, Consumer Affairs, Pesticide Regulation, Fish and Wildlife, and the State Water Resources Control Board.

Matthew: Wow. That’s a lot of government.

Khurshid: Yeah it’s alphabet soup.

Matthew: Yeah. Are there any deadlines that listeners should be aware of or anything coming up on the horizon that’s important that they should make note of?

Khurshid: Absolutely. So I mentioned the rule making proceedings that have not begun yet but they do have to be concluded within one year. And so the agencies have and BMMR specifically has said we want to be in a position to be able to grant licenses by January 1st, 2018 which means that they’re going to have to get the rule making proceedings done well before then. The rule making timeline is a year long. So the rule makings have to be concluded within a year and we can expect that these proceedings will probably begin no later than the end of this year, although some agencies like DFA the Department of Food and Ag anticipate being done by summer of 2017 and others are a little bit less saying when but the Bureau is committed to making sure that all of this is done by the time January 1st, 2018 rolls around. That’s the date when they can start granting state licenses.

Matthew: We see established cannabis businesses in California such as MedWest get raided and continuing raids going on. How is this possible that a legal cannabis business gets raided? In this case I think was a local jurisdiction in southern California partially funded with federal funds from Homeland Security. Can you tell us a little bit about your thoughts around that? Why raids continue and where we’re at in this process?

Khurshid: So the MedWest raid was very unfortunate. I’m good friends with James Sladdock and others at MedWest and really sad to hear about that raid. What I know of it is that while there was some federal funding likely involved in the agencies that were participating in the raid it wasn’t actually a federal raid. It was a local police action taken by the city on the grounds that MedWest was not complying with zoning requirements and so that seems to be the impotence for that raid and so we know from earlier in the year there was; we had the Robocker Farm renewed and that is a provision in the Federal Budget Act that says that federal officials are not allowed to spend any federal money on enforcing the Controlled Substances Act in states that have legalized medical or adult use cannabis and so they have been barred from participating in those raids. Federal officials have been barred by federal courts from participating in those raids and so what we’re seeing now is local action and some local level carnage that may not be over yet.

There are a number of folks, businesses who are trying their damnest to comply with state law and be good actors but a lot of these folks are still operating in a irregulatory void at the local level and there has to be more evolution of these local ordinances on licensing before that is going to come to an end. By and large though I think we’ve seen local jurisdictions that have recognized the fact that they’ve got thriving businesses in their jurisdiction and they don’t want to make them criminals. They want to bring them above ground and they do want to collect that tax revenue. That being said there are dozens and dozens of jurisdictions that have actually banned activity as well. And so if there is any commercial cannabis activity in those jurisdictions certainly there you’re going to see more enforcement actions against these businesses as time progresses but again at the local level not so much the federal.

Matthew: Civil asset forfeiture seems to be a tool in the toolbelts put authorities in these raids. Can you talk a little bit about how that was used if you know anything about it?

Khurshid: Well I know that in the MedWest raid it’s actually not a federal asset forfeiture action. There is a state corollary to that so there are state asset forfeiture laws that apply and I believe that’s what’s being used here in the MedWest case. I don’t know enough about it to really comment on the substance of the allegations that the city has brought but presumably if they have invoked the state asset forfeiture proceedings then they are alleging that there has been some unlawful action and that is largely due to the fact that in these jurisdictions local businesses cannot rely upon the affirmative defenses that are currently available to them under California Medical Marijuana laws and so where they can’t rely on these affirmative defenses in these jurisdictions that have been unfriendly they are going to be subject to prosecution under the criminal cannabis laws that apply to everybody else outside the patient community and so that is going to be the underlying premise of any state forfeiture action. Again I hope that they are able to resolve and settle this matter with the city before it gets to that point but it’s very scary for any business owner to be facing that.

Matthew: Right and what I understood from the video that James Sladdock and MedWest put out is that his financial assets not just his but his wife and his children’s were all frozen immediately. So you’re essentially barred from having any resources to creating your own defense. It’s kind of like saying hey to a boxer hey get in the ring with me but I’ve created a technicality where you can’t even get in the ring and begin to fight because I make up the rules.

Khurshid: Yeah.

Matthew: I mean it seems like such a backward Draconian system we have here. Is this pretty common that assets are frozen in such a way that you can’t even defend yourself?

Khurshid:: I’ve heard that over and over again from other operators who’ve had to face this type of a proceeding that they freeze all the assets including your family assets and yeah it’s very difficult for you to fight back. I look at the asset forfeiture laws generally as a license for law enforcement to steal. And so given that the law is set up that way I’m not surprised to hear that they would try to hobble anyone from fighting back. It takes a long, long time to fight back and to actually reclaim your property and your business. So asset forfeiture that I would like to see as an area of reform not only in California but at the federal level as well. Like I said I think it’s a license to steal and it doesn’t conform with our constitutional privileges that we have under the U.S. Constitution in my opinion.

Matthew: Agreed. Well moving outside of California what issues are top of mind for you right now at the national level?

Khurshid: Sure so banking access is one area that really needs massive improvement. We don’t have; although we do have guidance from the Department of Treasury and FinCEN the Financial Crimes Enforcement Network both executive federal agencies. They’ve provided guidance on how businesses and banks can work together. How banks can actually offer their services to state lawful cannabis businesses the number of banks actually doing so is still very small. You don’t see a lot of big national publicly traded banks for example wanting to jump into this consumer base. They are very hesitant because right now as it stands the guidance that they’ve been given really imposes a lot of additional duties on the banks that really are not appropriate for the banks to carry out; more appropriate for law enforcement and the state to carry out and so you don’t see a lot of takers among the banks and that’s going to have to change if we are going to actually have a mature industry and one that is able to grow and hopefully grow at some point federally nationwide as well. Until that happens we’re not going to be able to scale those operations and not going to be able to protect public safety in the process as well.

When we don’t have banking access there’s a lot of cash flowing and even the simple matter of going to pay your taxes can be a pretty stressful experience if you’ve got a hundred thousand dollars in your backpack and you’re walking in without any kind of guard and so that’s a problem and so states have tried to solve this issue. In California there is a lot of interest in trying to start a state bank. I’m not so sure that that is going to be a workable alternative. First of all it takes a lot of capital, a lot of time, and a lot of effort to actually set up a financial institution like that and even if you were successful in doing so the FDIC is the regulator of last resort for banks that aren’t part of a Federal Reserve System which is what a state chartered bank would be and the FDIC itself has not shown itself to be very enlightened. They’ve denied deposit insurance to other banking institutions who were attempting to comply with FinCEN and Treasury guidelines and tried to join in the Fed system.

So I’m not so sure that the FDIC is going to welcome the advent of state chartered banks who are specializing in cannabis accounts. I think what we really need is to have a federal solution and we really need to impress upon our decision makers and Congress and any executive agencies that we need to address this situation and we need to do it on public safety grounds and so what we need is to have our state and local tax authorities talk to them about what this problem is doing on their end and how important this is for it to be resolved. The writing is on the wall. The genie is not going back into the bottle so if Congress does not address this situation they are letting a public safety issue escalate and get worse.

Matthew: And it really doesn’t need to be this way. We could look at Canada and they really have totally untangled this knot. It’s illegal to do any kind of banking around cannabis in Canada from what I understand and there’s just not any of these issues.

Khurshid: Yeah.

Matthew: And I realize we’re a different country but it’s not that hard to envision when our neighbors to the north already have a totally functional system so it’s just like hey can we have that? It’s not like we’re trying to sell them on a unicorn from another plain or something.

Khurshid: Yeah, yeah. What every operator in this industry wants is just to be treated like any other business. We want to pay our taxes. We want to follow the law. We want to create jobs and we want a fair and reasonable profit as well and so those are not unreasonable things to want if you are trying to play by the rules. Canada not only has banking but they’ve got publicly traded cannabis companies on their exchanges and what we’ve got is markedly different. Most of our companies that are publicly traded are on the pink sheets and the OTC and investors don’t get the benefit of the investor protections that they do in Canada where this is all federally legal and legitimate for them to list their stocks on the national exchanges and invite investment.

Matthew: What about pesticides at a national level? What do you think can be done there?

Khurshid: So that’s another very interesting issue. We keep seeing headlines about massive recalls in Colorado and elsewhere due to the presence of certain pesticides that are not authorized for use on cannabis and this all stems from the fact that the EPA has been largely silent on this issue. They did issue some guidance several months back to Colorado about which pesticides would be permissible potentially but they’re not taking a stance and that’s because cannabis is not defined as an agricultural crop under federal law and under federal law all pesticides have to have the parameters of their use listed on the label and anything that is used differently from what’s prescribed on the label is called off label use and that is implicitly unlawful and so the problem is that there are no pesticides really that say that this is for use on cannabis right.

There may be some pesticides that say on the label that they are generally safe to use on food crops or generally safe to use on different types of agricultural crops and those may be okay to use arguably but there are a number of pesticides that cultivators use to keep their crop safe that are not listed but are presumed to be safe but there’s no guidance from the federal government on that and so they continue to be unlawful to use and so it creates quite quandary when these recalls happen because they’re not based on federal law they’re based on a sort of state law principles that are hobbled together from EPA guidance and from what limited power the states have to regulate pesticides.

Matthew: Khurshid before we close I’d like to ask a question about a book that’s been pivotal or transformative in your life. Is there any book that you look back over the arc of time in your life and you think hey this was really a transformational book for me that really gave me new insight or different lens to view my life?

Khurshid: Sure. So when I first started my cannabis industry practice I had read “The New Jim Crow” by Michelle Alexander who is a law professor and I think currently at the ACLU and “The New Jim Crow” is a book about how the drug war essentially has created a huge prison industrial complex and massive rights of incarceration especially of people of color. When I started off; cannabis isn’t my first activist foray and so when I kind of started my career if you will as an activist I started in high school with the Anti-Apartheid Movement; the International Anti-Apartheid Movement and reading “The New Jim Crow” kind of brought things full circle for me as an activist. One of the facts that she cited was that the U.S. incarcerates a higher proportion of its black population than Apartheid era South Africa did during the height of opposition to Apartheid when they were fighting armed insurgents.

They were locking away fewer black people than we were and to me that really hit home and made me decide that this is what I’m going to do. I don’t have a choice. This is what I have to do and I’ve seen the drug war through a civil rights lens ever since and it’s definitely been transformative not only for me but for several other activists and entrepreneurs who I know were personally touched by that book. So I can’t recommend Michelle Alexander’s book enough.

Matthew: That’s an excellent suggestion. One piece of news that came out this week was about how the Richard Nixon administration used a lot of the war on drugs as a way to target minorities and protestors that were essentially giving him a hard time. What’s a reason we can come up with to go after these people the public will stomach.

Khurshid: Yeah.

Matthew: So there’s a lot of consequences we don’t; unattended consequences of legislation we don’t see sometimes and the human faces behind them so thanks again for that suggestion.

Khurshid: Sure.

Matthew: In closing how can listeners learn more about Greenbridge and the services you offer?

Khurshid: So we’ve got a website. It’s Our bios are up there as well as our firms mission statement. We are a firm with a mission. Our mission is to help end prohibition and we’re going to do that by building a regulated taxpaying above ground economy and so we encourage folks to check out our website. Check out our mission statement and certainly contact us if they need any help.

Matthew: Khurshid thanks so much for coming on CannaInsider today. I really appreciate it.

Khurshid: Sure my pleasure, thank you Matt.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five major trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider(dot)com. We would love to hear from you.

Cannabis attorney Khurshid Khoja discusses both the opportunities and burdens in California’s new cannabis regulations.

Khurshid Khoja is the Principal and founder of Greenbridge Corporate Counsel, a business law firm representing clientele across sectors in the legal cannabis industry: non-profit advocacy organizations, medical marijuana collectives, consulting firms, publishing companies, consumer electronics manufacturers, infused products producers, agricultural equipment manufacturers, software companies, trade associations, and others.

Khurshid brings a wealth of experience from representing and consulting with companies in the legal cannabis industry. In addition to pioneering the Cannabis & Hemp Industry practice at Greenbridge, Khurshid was a Founding Board Member of both the California Cannabis Industry Association (CCIA) and the Illinois Cannabis Industry Association (ILCIA). He continues to serve on the CCIA Board and as its pro bono General Counsel, and was recently elected to the National Cannabis Industry Association (NCIA) Board.

Key Takeaways:
2:27 – Why Khurshid starting Greenbridge
6:17 – Khurshid’s take on legislative actions
8:22 – What is the Medical Marijuana Regulation and Safety Act
10:05 – Khurshid explains the Cole Memo
11:10 – Khurshid talks about common questions and concerns from clients
14:01 – Out of state investors that want to invest in the CA cannabis market
16:44 – Opportunities for new types of business
20:01 – Khurshid talks about BMMR
22:04 – Licensing deadlines
23:41 – Why do raids continue
30:15 – Khurshid talks about his top of mind issues
35:40 – Pesticide regulation
40:52 – Contact details for Greenbridge Law

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vermont cannabis legalization

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Matthew: Hi, I’m Matthew Kind. Every Monday and look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www(dot)canninsider(dot)com/consulting. Now here's your program.

To give us an update on cannabis legalization in Vermont I’ve invited Eli Harrington, Editor and Co-Founder of Heady Vermont on CannaInsider today. Welcome Eli.

Eli: Thank you very much Matt. Great to talk to you today.

Matthew: Eli to give listeners a sense of geography can you tell us where in the world you are today?

Eli: I am in Burlington in the great state of Vermont on the shores of Lake Champlain.

Matthew: Oh great. Yes you know Burlington is very similar to Boulder in many ways where I live. The pedestrian walk I discovered is designed by the same person.

Eli: Right. Yeah, yeah I think your Pearl Street is our Church Street.

Matthew: Yes and I think very similar.

Eli: Yeah exactly. Well I’ve heard that too and the Vermont/Colorado comparison gets made a lot as far as us being a sort of smaller, weirder cousins.

Matthew: Right.

Eli: I’ve yet to go to Boulder so I’ll look forward to finding out for myself.

Matthew: Well tell us about your background. How did you get involved in the cannabis scene in Vermont?

Eli: Well for me personally it started out with I call him the “Godfather” and he’s a really close family friend. My uncle was dying of lung cancer when I was I think eleven or twelve and he was just in rough shape with the chemo and at the same time our family friend Mark Tucci had started his MS treatments and so Mark was really one of the original patients who helped my uncle out a lot and at a young age I came to understand cannabis as being a medicine. I went to college at Brandeis which is a very liberal place and very known for social justice.

I had experiences being around the plant myself but it was really when I saw this group and then saw the first event they had this past summer in July. I said if these people who are business people who have started Magic Hat Brewery, founded Jogbra, writers, Vermont secessionist’s, really just interesting eclectic group of people who are also very conventionally successful in this Vermont way and so I was really intrigued to see more about what that meant and at least participate however I could and understanding if this serious group of people are going to try to make it happen and the politics might line up this year this seems like a chance to get involved.

Matthew: So you’re saying there is a group of people in Vermont that want to secede from the United States kind of like Texas and do they have any traction at all? Do they feel like it’s possible?

Eli: I mean this is a; you should look it up The Second Vermont Republic is what they’re called. It’s a small group but one of their members Rob Williams is a writer and he’s part of the cannabis collaborative group; a really interesting guy. I think Bernie has probably brought a lot more attention to the Vermont Secession movement. I won’t speak for them. I love the ideas as an 8th generation Vermonter. I think it’s really cool to explore and think more about public policy but yeah don’t look for anybody in Vermont to take over any federal facilities any time soon or anything like that.

Matthew: It’s an interesting concept though. I mean just looking at the size of our country. It’s just Alaska, Hawaii, people in California being managed all the way from D.C. I mean just from a practical point of view is our country just too big and too diverse to be managed centrally? It’s something to think about.

Eli: Well it’s funny and cannabis really is one of those issues that shows there are a lot of I think social issues that show where those divisions can happen and Vermont is some place; Vermont was an independent republic for 14 years before it joined the U.S. and Ethan Allen kind of was a militia. The whole concept of Vermont was really a rugged individual taking self directed action with a small group of people who didn’t want that foreign control.

Matthew: Yeah.

Eli: So it’s funny. We’ve kind of come full circle in a lot of the mantra which now has almost run its course calling it the Vermont Way right which is such a cliché but it’s one that appeals to our sense of pride. It’s interesting to see how all of these paths intersect and what can we do here in Vermont that’s markedly different from other states? Having a small state, having a lot of access to our representatives through the legislative process it’s interesting to give people context. In Vermont we don’t have ballot initiatives. It’s forbidden from our constitution so we can’t just have a group of people get together or a couple groups of people get together, collect some money, and do a campaign. Part of the reason that it’s coming through the legislative process is that that’s really the best option we have. So it’s interesting because we are such a small place that we can be almost a political laboratory in different ways if you look at the GMO labeling laws.

Matthew: Yeah, yeah I’ve noticed that so that’s one of the reasons I wanted to have you on the show is that even though Vermont only has a population of like 600,000 range it has kind of an out size presence in terms of what it does and kind of being on the bow wave of change and I thought it was great how Vermont says hey we want to label GMO’s; just hey what’s wrong with just knowing if there’s GMO’s in our food and did the food industry kind of sued Vermont on this. Is that right?

Eli: Yeah, yeah. There is a whole back and forth and a lot of threats and I know when Monsanto sends you legal letters those are serious threats. So it took a lot of concerted effort and I really give the politicians at the local level; these discussions started a long time ago and it kind of speaks to the culture in Vermont as far as people being very conscious and also very involved. That we’ve gotten to the process of having our congressional delegates standing up and helping to make this happen and really hopefully it changes consciousness at the national level too.

So there are still 50 states with two senators each and ours do a great job Senator Leahy and Bernie Sanders. It’s quite the dream team but it really started from a long, long time ago and I think it is interesting. Like I said it’s kind of being this political laboratory and we’re pragmatic people. What’s wrong with knowing what’s in your food? What’s wrong with having a label that says if there are GMO’s? You can still choose to buy it or not buy it.

Matthew: Yeah. That’s when you really see the power of corporations come out and they want to suppress just having a simple labels thing if something is GMO or not. It’s a little scary. It also kind of dovetails on the topic of the DARK Act. Are you familiar with that?

Eli: No, no.

Matthew: The DARK Act was a bill at the federal level. I think it’s still floating around congress that would make it federally illegal to put on any food if any part of the food has a genetically modified organism in it.

Eli: Wow.

Matthew: And it’s shocking to see the number of representatives that would vote to literally keep us in the dark. I’ve come a long way around on this topic because I know this is a cannabis related show but at first I was.

Eli: No this is relative.

Matthew: Yeah.

Eli: And its important people caring about I think cannabis has had a big part too. You look at all the pesticide recalls. People are just generally more conscious about what’s going on and also about sort of what happens when they’re not directly involved as activists. The system as it is; the status quo does not favor the individual who might or might not be being harmed from a genetically modified organism that we don’t understand yet. And who can’t make that choice. It’s very (08:48 unclear).

Matthew: Eli for people unfamiliar with Vermont’s legalization status and efforts can you kind of frame where Vermont is right now especially relative to other states?

Eli: Yeah sure thing. So Vermont has had a very small medical program that started about a dozen years ago. It’s still very limited as far as the conditions. Chronic pain is one but mostly AIDS, Cancer, MS. So there are less than 3,000 patients in the state and only four dispensaries. There are caregivers allowed but it’s a one to one caregiver to patient relationship. So there is no recreational market or personal use market so the only people who are legally consuming cannabis in Vermont are the 3,000 registered patients.

Matthew: Okay.

Eli: Yeah so there’s a lot of room to grow here. The legislature is currently considering a bill that will allow for personal use starting in 2018.

Matthew: Okay.

Eli: That will not allow for edibles. Right now edibles and concentrates are only allowed for patients who are registered and the dispensaries that serve them. So this bill in 2018 right now would not allow for personal cultivation so there’s no home grow. It would allow for a limited number of cultivation licenses at different tiers. So under 2,500 square feet, under 5,000, and under 10,000 and I think over 25,000. Again so we’re looking at a very small scale for what would be allowed and that would be starting in 2018 so personal use for X amount of retail locations probably not more than 14 throughout the state and a limited number of cultivation licenses starting January 2018.

Matthew: Okay. I was going to ask you why is there so few patients? Is it just because the list of qualifying conditions is so tight or what’s the reason that there’s only a few thousand people?

Eli: Yeah I mean I think that’s a big part of it. The application process isn’t that onerous but you have to have a six month relationship with a physician and that most likely means that it’s your primary care physician right or a specialist.

Matthew: And then the physician prescribes it for you or what’s the connection between a physician and getting a card or the (11:17 unclear).

Eli: So the physician has to basically approve it in order for your application to be approved.

Matthew: Interesting, okay.

Eli: So you do need a physician and not just any physician. You can’t walk into any office of somebody who you know might be favorable. It really has to be a relationship of six plus months and even the qualifying list of conditions.

Matthew: Yeah let’s go through a couple of those. What are the qualifying lists? Is it pretty onerous in terms of its not many things that can get a wide swath people in the door?

Eli: Yeah that’s exactly it and I’ll give you an example but American’s for Safe Access gave Vermont I believe a D for our grade yeah and so the eligible conditions Cancer, HIV-AIDS, MS, Wasting Syndrome, severe pain, severe nausea, and seizures.

Matthew: Mm-hmm (affirmative). See your patent though is that sounds pretty general it’s not.

Eli: Right. That can be, that can be. Generally speaking though I think it’s been people have been hesitant to go through. One you do have to register with the state as a patient when you do it. Also I think within the medical community I’m not a doctor and there are a lot of physician’s here who have done a lot of great work in the cannabis world and brought a lot of education forward.

But I think it’s still the kind of thing that has been hard for people to want to make that ask and because the group has been small here in Vermont and the program has been conservative. Vermont marijuana is not really in the news unless it’s a bust except for this year to this level of detail which is too bad because there have been a lot of efforts to reform the medical and open up the conditions more and more which are being affected now that everybody’s having conversation. So I think everybody understands that medical will be reformed as part of this process and it’s a question of how. I think a lot of people would rather see more dispensaries, more caregivers, more patients, and try to break in.

Matthew: Tell us more about the caregiver model there and how that works as some people might not be familiar with what caregivers are and in Vermont specifically what the caregiver relationship is.

Eli: Yeah so in Vermont it’s a one to one relationship so one patient may assign one caregiver. Basically if you qualify as a patient you’ve got your application in, you pay your I think it’s fifty dollars for your annual fee, and then you get your card in the mail. You have three options. You can grow your own and the limit is seven mature plants and two immature. You can register for a dispensary and I say a dispensary because you can change it but it’s difficult otherwise you are locked into one dispensary. So you choose a dispensary and there are only four of them in the state and they’re all about an hour a part okay.

Matthew: Okay.

Eli: So there’s a map that I’d be happy to share and people can see on the Vermont; the state government medical marijuana page that shows the number of patients in each county. So those are your; you have those two options grow for yourself, choose a dispensary, or you can designate a caregiver. So a caregiver can grow your designation, your seven plants and two immature plants in a single indoor facility. The caregiver must also apply for a card and they have to be twenty-one years old and free of drug convictions.

Matthew: Okay.

Eli: So again it’s a very restrictive system and the caregiver area is a place that could probably grow more here in Vermont but it all starts with allowing more patients. I think streamlining the process a little bit more. Things like PTSD which people understand more and more. Even the qualifications for chronic pain and one thing that’s really, really significant that I can’t forget to mention the UVM College of Medicine is hosting the first medical marijuana class at the medical school level which is happening right now this semester. So I think that the medical community there’s some interesting medical research going on here. The Vermont Patient’s Alliance have some physicians involved who are doing some really cool research and I know that’s a big part of interest for us here in Vermont.

Our scale being what it is we’re not going to have the kind of volume and production that places out west are. I mean what’s the future of cannabis here in Vermont? I think it’s a lot of research and development. At least we hope there’s a high quality of life and it’s a place that young people and scientists are drawn to naturally and researchers.

Matthew: I need some infused maple syrup.

Eli: Oh my God I mean the food; unfortunately the edibles were the first thing to be compromised in the legislation.

Matthew: Yeah tell us about state of edibles because a lot of people listening are interested in edibles and infused products and concentrates so Vermont is (16:40 unclear).

Eli: Yeah I think everybody’s interested in those; everybody’s there.

Matthew: Those are forbidden in Vermont currently?

Eli: So right now the dispensaries are able to produce edibles for their patients.

Matthew: Okay.

Eli: There had been loopholes where patients could be making their own concentrates. Although I think we’ll see some of those be closed unfortunately the police have busted a few. They’ve called them clandestine labs. They’ve been really small, amateur, BHO operations. It’s weird. They only come out during the legislative sessions. Crazy.

Matthew: But you can’t; so you’re saying that only the dispensaries, these three or four dispensaries can make their own edibles, concentrates, and infused products and only for their patients is that right?

Eli: Well right and patients can produce their own if they’re growing for themselves.

Matthew: Okay.

Eli: But again there’s not a lot of that happening.

Matthew: People are just like hey I just want to get flower. Let’s cover that base before we get into anything more exotic.

Eli: Well and you know I don’t know what the dispensaries sort of sales look like. I would imagine edibles are extremely popular there and concentrates they’re really you can’t go in unless you have a; they’re very small low-key operations that really operate kind of more on demand for patients than in any kind of retail context.

Matthew: Do they grow there at the dispensary or how does that typically work? I mean is there sometimes you see a dispensary with its own grow facility attached to it. Is that typically how it’s done in Vermont or is it different?

Eli: No I’m not familiar with the specifics of each one but I know the one here in Burlington does not have; their cultivation is not here in Burlington.

Matthew: Okay.

Eli: And these places are all super discrete. Unless you know where they are, unless you’re a patient there’s no signage, there’s no walk-ins, there’s not even; usually it’s called by appointment.

Matthew: Okay.

Eli: For everything. So it’s really small low-key operation and to get back to the question of the edibles and the concentrates it’s really, really unfortunate that that was kind of the first political compromise that was put forward where edibles are something that will be right now in the proposed legislation even when flower is allowed to go on sale in 2018 edibles would not be. I think what everybody is thinking is that as there’s more comfort and familiarity with edibles that if there’s a personal use market there will be a personal use edible market probably pretty quickly. I think the market forces demand that there are edibles and it’s really just a question of let’s not even bother addressing that right now on the personal use side because there’s so much sort of set up in education. We’re really taking a lot of steps forward quickly here in as far as thinking about personal use and what the dispensaries and the home grow and the caregiver system has been.

Matthew: Right. That’s all medical. We’re talking about all medical marijuana and getting a card and so forth but what about in terms of recreational? You mentioned in 2018 is there a possibility for full recreational use coming out in the months or weeks ahead? Is there any talk about that?

Eli: Doubtful. We’ll see what the wrangling looks like in the house. That seems like kind of a no brainer right that once we pass a legalization that people shouldn’t be getting citations.

Matthew: Right. Is it decriminalized?

Eli: It is decriminalized in Vermont. So right now it’s a small civil fine.

Matthew: Oh good.

Eli: One or two hundred bucks which is nice and opponents have said look you have decriminalization already. The States Attorney here in Chittenden County will probably be our next Attorney General has said we have decriminalization that’s enough but really we know that there’s a huge demand from Vermonter’s already. We know that 80,000 people this is from the RAND Corp study that was commissioned last year; we know that 80,000 Vermonter’s are partaking illegally. They might all only be risking fines but they’re all technically criminals.

Matthew: Right.

Eli: And especially if you’re somebody who’s a parent or who is really worried about that and doesn’t want to access the underground and doesn’t want to have to be breaking the law or trying to seek out a drug dealer. It’s a huge concern. So the decriminalization really is not enough and even there are a lot of provisions in this law that leave a lot to be sort of demanded as far as the criminal penalties even as far as the home grow.

Matthew: Okay.

Eli: I mean frankly as someone who’s covered this recently for the last six months and been paying close attention the amount of enforcement has not gone down. There was a story that made kind of national news about a little kid talking about his stepdad being a magical farmer and this led to police finding a home grow operation. You can’t defend if the police walk in and there’s a bowl smoking in the living room in the same room as the kid nobody can defend that but it’s one of these campy stories that people kind of laugh at. There are real consequences here and again on the criminal reform part there’s a lot this legislation doesn’t address but one of the main things that is being proposed is having a control board.

Ideally not one that’s regulated by the Department of Public Safety. I think having the police be in charge of the medical program has not been a win for patients and potential patients. So I think that what I’ve at least thought and advocated for is that if we can start with a control board that’s got some transparency, that’s got some accountability, that’s got some expertise that’s not to biased or self interested that’s a start and that’s something where we understand that the political will is there. From our most recent poll 55% of Vermonter’s according to Vermont Public Radio support reform and that number has been pretty steady for the last three or four years.

So the political will is there. How clunky it is at the beginning and how it looks on paper and how it unfolds if you look at it on paper right now what the bill is, what it allows for, and sort of how it lays out with even nothing happening until 2018 there are a lot of people who aren’t satisfied with that.

Matthew: Yeah. 2018 is a long time to wait.

Eli: It is a long time and I mean looking at the regional politics right like New England is a small place. There are 100 million plus people within a one day drive of Vermont and there is a lot of I think enthusiasm to be the first personal use market in New England and serve all of these people and in Vermont it makes sense. You come here to drink our amazing craft beer. We’re called Heady Vermont. Everybody’s probably heard of Heady Topper. We’re not affiliated; we’re fans but people come here to drink our beer and ski and look at the leaves and stare at the trees anyways right. So I think in New England there are definitely some people who are thinking of it as a race to be the first market.

Matthew: Yeah.

Eli: There’s going to be a huge one and people will definitely drive from Boston to here or from Boston to Portland, Maine or maybe to Montreal.

Matthew: Yeah.

Eli: That might happen before anything here. So that’s been a big part of the conversation too is well if Massachusetts does this we’re going to be affected so we should be proactive and think about our own context here in Vermont and I think that’s something that’s really been a net positive for people all over the northeast and people all over the country. I mean look at the Supreme Court ruling coming out of Colorado thinking about what neighboring states how they can and can affect your cannabis policy.

Matthew: Yeah that was just thrown up I think what yesterday?

Eli: Yeah, yeah exactly.

Matthew: Yeah so the other states Nebraska and; was it Nebraska? Well two states that complained.

Eli: Yeah it was Nebraska and Oklahoma.

Matthew: Yeah they complained about Colorado saying hey this is affecting us. We have to have more police presence and so forth but the Supreme Court threw that out so that’s pretty cool.

Eli: Yeah it’s amazing and I think here in New England it’s even that much more relevant because everything is so much closer together. I mean 3 ½ hours for you guys out there is nothing. That’s like a commute to work for some people. For me I’m in Boston in downtown at the Celtics.

Matthew: Yeah.

Eli: Or I’m at Fenway so with that much mobility I think that New England as a region is going to come along very quickly and it’s really worth people paying attention to how it unfolds because there’s cronyism everywhere, there’s protectionism everywhere, there are people who have interests in keeping the status quo in every different state. So whatever your end game is whether you’re somebody who wants to be in the business, whether you’re a patient, whether you’re just somebody who cares about public policy and your politicians and how they act. It’s really worth paying attention to how this shakes out especially as we learn more and more about the financial consequences.

Matthew: Sure.

Eli: I mean the numbers that are coming out of the news of how big the market is I don’t think there is surprise to people who have seen it operating or are paying attention but those are big numbers and I think that’s also driving a lot of the mainstream discussion and be naive to think it’s not.

Matthew: Yeah.

Eli: So I say that I want Vermont to be first not because of the money and not because I think we’re the smartest, crunchiest people to do this but because I think everything is a process and there’s so much infrastructure to build here in New England as far as the education, as far as the political structures, as far as the everything, the regulation, testing, all of this stuff. So I think it’s great that the conversation is happening more and more and frankly I’m sitting here looking at a Bernie Sander’s poster in my living room and that’s one great thing that now I say Vermont and people at least say Bernie Sanders. Ben and Jerry’s and maple syrup are cool too.

Matthew: And fish right?

Eli: Yeah, yeah and fish exactly.

Matthew: Yeah.

Eli: So between all these things how could we not.

Matthew: Well this has been very enlightening Eli. There’s not a lot of huge news coming out but it’s good to get an understanding. I think for business owners it’s probably potentially too early to do anything but start a dispensary.

Eli: Well there’s a lot of other activity here and one thing that we’d really be remised not to mention is Vermont has really, really loose hemp laws.

Matthew: Yeah let’s talk about it. What’s going on with the hemp?

Eli: Yeah well there’s a lot of really interesting stuff going on with hemp here. We have like Kentucky very loose state laws. Our Hemp Program is monitored by the Department of Agriculture and basically at the state level anyone who submits an application fee with I think it’s twenty-five dollars to the Department of Agriculture and shares the details about where they’re growing and how much they’re growing is allowed to grow hemp here by Vermont State Law.

Matthew: That’s interesting.

Eli: So there have been people who have been growing hemp here in the past on really a small scale. Again with everything in Vermont the scale is small and people really kind of have to realize that even when it comes to our agriculture. So there have been people. I was just talking earlier with JT Bedard who’s the founder of the Vermont Hemp Company. They’re doing research with the University of Vermont which is really neat. He’s actually got some hemp seed in a beer up here. It’s called Saisanja. It’s made by Stone Corral up here. So there’s some cool activity there and because of the CBD laws at the federal level there is an opportunity that I think more people are looking at for getting involved in hemp here in Vermont and probably even involved in CBD specific extractions.

Matthew: Yeah. Well the CBD front looks a little uncertain. It sounds like the FDA is starting to step in and trying to put the cabash on CBD’s probably to protect the drug lobby.

Eli: Right but it’s one of these things. It’s such a nuance this year right and when you have physicians talking about we believe that these CBD specific strains that are really, really valuable and then we have physicians who say that a lot of the stuff marketed to that market actually needs to have either the entourage or the ensemble effect however you want to call it. So yeah it’s really one of these issues that as somebody who covers it and tries to interpret this to a larger audience and try to inform people and engage them explaining the CBD paradigm is really tough and seeing how it’s going to shape out.

One thing that’s cool up here there’s hemp being grown for; one thing these guys are looking at is the hemp for soil remediation and trying to help prevent agricultural runoff into our lake which is a huge issue with a lot of agricultural states. So I think long term industrial hemp is where it’s at and I think it’s really, really exciting. So I’m really proud that Vermont has those kinds of hemp laws and that we have kind of the energy that’s moving forward on that front whether it gets directed towards a CBD therapeutic/medical market, whether it gets directed towards seeds for beer or other things, or whether its fibers and building materials. I think that’s really, really a great effect of this and similarly whatever happens with the political process people being more aware of the challenge of patients. And in the medical program and I think that if hemp and medical and patients and farmers and researchers in those fields benefit from this process ultimately we’ll find our way along.

Matthew: Well Eli in closing can you tell listeners how they can find you online and follow the progress of Vermont’s cannabis legalization?

Eli: Yeah absolutely. So our website is called So it’s I have a personal blog called Vermontijuana and just do some stuff on social media with that but generally speaking yeah at Heady Vermont we’re really being inspired by outfits like The Cannabist. Some of the other more mainstream blogs. I mean obviously the (32:40 unclear) High Times. I’ve been in touch with people from the Emerald and all over the country. Really seeing when people try to bring a journalism experience really I’m not, you’re recording this, being inspired by publications like that and blogs like these I think has really helped the amount of awareness.

Even I saw High Times being reposted on Mashable today. All of these publications and all these activists and all these journalists who have brought more attention really inspired us and hopefully we can follow their sort of lead and get people engaged more here in Vermont and in New England generally but yeah Heady Vermont we’re locals. Monica Donivan is our publisher, my co-founder a really talented photographer and publisher. She’s been great. So we’re going to keep working with this. We are looking for contributing writers. We want to host expertise from across the country. We have medical hemp in business sections in addition to the New England one’s and then eventually we’re going to hopefully get into events. I mean we really want to; my tag line has been #elevatethestate.

So that’s really the ideas that by sharing more information, by getting more people involved we can eventually start hosting more events really just bringing the level of knowledge, education, and engagement up. So I love to have people reach out to us. You can reach me at and find us online easily on Facebook or Twitter.

Matthew: Well Eli thanks so much for coming CannaInsider today. We really appreciate it.

Eli: Matt thank you very much. Like I said before I’ve been listening to the podcast for a long time and it’s really been a huge source of education for me and also inspired me to really get on the stick and get out there myself so thank you very much and I look forward to talking to you again in the future.

Matthew: Thanks Eli.

Eli: Alright cheers from Vermont.

Matthew: : If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five major trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider(dot)com. We would love to hear from you.

Eli Harrington of gives an update on legalization in Vermont.

Key Takeaways:
1:39 – Eli talks about how he got involved in the cannabis industry
4:13 – Eli talks about social issues in our country
6:20 – Eli discusses the food industry suing Vermont
9:00 – Vermont’s legalization status
11:48 – Eli talks about what conditions a medical marijuana user has to have
13:47 – What is the caregiver relationship in Vermont
18:19 – Eli talks about how the grow facilities work in Vermont
20:15 – Possible recreational use for Vermont
28:27 – Eli talks about Vermont’s hemp industry
32:13 – Eli’s contact details

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Handling Cash and Outsourcing Cannabis Employees

stephen sullivan ms mary staffing

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Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Are you looking for a fulfilling and lucrative career in the cannabis industry? Visit www(dot)cannainsider(dot)com/careers. That’s www(dot)cannainsider(dot)com/careers. Now here’s your program.

If you’re looking to break in to the cannabis industry or you’re an employer struggling with finding the right people to help your business grow, you’re really going to enjoy today’s interview with Stephen Sullivan of Ms. Mary Staffing. Welcome to CannaInsider Stephen.

Stephen: Thanks for having me Matt.

Matthew: Stephen before we jump in can you tell us what Ms. Mary Staffing is and how you serve clients?

Stephen: Sure. So we are a full service HR agency. We do payroll processing, recruitment, HR consulting and we’re serving the cannabis industry.

Matthew: And what were you doing before Ms. Mary Staffing? How did you get into this business?

Stephen: Well I was working staffing and engineering in IT. Then I wanted to bring the typical staffing model to the cannabis industry.

Matthew: Okay. Now many people listening may not understand that the cannabis businesses that touch the plant have a very difficult time paying employees and doing a lot of the things that normal businesses take for granted. Can you tell us about the cash issues dispensaries face and how you help your clients overcome those cash issues?

Stephen: Yeah it’s definitely difficult to run a business without a bank account, especially when you’re talking about payroll. So what we’ve done is we’ve implemented a PEO model that co-employment model where we step in and we hire dispensaries or cultivation facilities’ employees and we become liable for employment taxes, worker’s compensation and the client just pays us and we are able to accept cash. We work with a number of transportation companies like Blue Line Protection Group, NPS International. We’ve worked with both of those companies.

Matthew: Now Stephen, the PEO concept might be a little bit foreign to a lot of people listening, but it has a tremendous value for certain industries. First what does that acronym PEO mean?

Stephen: It’s Professional Employer Organization.

Matthew: Okay and so how does a Professional Employer Organization partner with an employer and how does that help them?

Stephen: So we step in and we go into what’s called a co-employment agreement with the dispensaries to where their employees now become our employees and we handle benefit administration, unemployment claims, we basically become the business owner’s HR department.

Matthew: This is really valuable for people listening. The problem is here is that most dispensaries don’t have a bank account. All they have is cash. So when they enter into an agreement with a PEO company like Stephen’s then Stephen can then accept that cash and pay the employees of the dispensary in direct deposit and he can also go to the state and federal level and pay those taxes on the dispensary’s behalf. And also this avoids the cash penalty. Now what is the cash penalty Stephen?

Stephen: Well the cash penalty is a 10% fee that the IRS charges if you pay your employment taxes in cash.

Matthew: So what other ways do PEOs help businesses besides just payroll?

Stephen: Well we become the full HR department for the business owner. So we do benefit administration, recruitment, making sure that the business owner is compliant with employment law, we also have employee handbooks. Basically anything HR related we can handle for the business owner.

Matthew: What are the type of things that you’re doing in compliance from an HR level because there’s weird little things I know in the HR world like if you don’t have a poster up or if you’re not doing things right, there’s like all these little pitfalls that you don’t know about that can kind of jump up and slap you. Can you tell us about one or two of those?

Stephen: Well you mentioned a couple ones. So when we first start working with a client we do what we call a free audit where we go in and we make sure that the business owner has those posters and has their employee handbooks and everything in order. Employment laws are constantly changing so that’s something that business owners have to stay on top of.

Matthew: What kind of staffing, what kind of positions do you help with staffing? Typical or what are your most popular?

Stephen: Our most popular, as you can imagine, are bud tenders, retail managers, trimmers, growers and everything in between kind of your harvest or your assistant growers.

Matthew: Now I’m really interested in attrition because there’s a lot of people trying to get into the cannabis industry, but from your point of view when you come on or what you hear back from employers when they let someone go, what are the typical reasons that someone leaves the cannabis industry or the positions that you see that kind of fall into the biggest bucket so we can understand why people leave.

Stephen: Well if you’re talking about employees quitting, usually it’s to move to a different… I see a lot of transitions between businesses within the cannabis industry. People come in and they get skills at a particular dispensary and then they move to another one.

Matthew: Okay. Is there anything where it’s involuntary where they’re leaving and you see…

Stephen: I have seen some cases where they were let go. Some employees were caught stealing product or stealing cash. I have seen cases of that.

Matthew: Yes. Pretty common I hear with trimming is kind of rampant with theft because you’re sitting around and you have huge amounts of cannabis and it’s something that happens when you have that valuable of commodity. Now I know this is a strange question, but do employers require drug tests and if so, what kind of drug tests?

Stephen: We’ve actually never had a request from any of our clients to do drug tests. We have the capability, just have never had anybody ask to do so.

Matthew: Yeah, that would be a funny kind of Candid Camera if we said we want to see if you test positive for cannabis and just watch their reaction. Now can you give us some examples of intermediate or executive positions that you’re starting to see more employers ask for?

Stephen: Intermediate I would say kind of your assistant retail manager, even some managers I would place in that category. Executive positions more of your facility managers, of course partners within the business. Maybe a consultant partner as well.

Matthew: Okay, now let’s say you just took on a new client and they’re a pretty average client in that they don’t have everything just perfect yet. What are the mistakes you see that most dispensaries have in common or maybe not mistakes but things they can do better?

Stephen: Employee handbooks are definitely something that we notice a lot with our clients, with new clients, that they don’t have proper handbooks. A lot of times, as you mentioned earlier, the posters that they’re supposed to have up aren’t up which is why we offer a free audit to any of our new PEO clients.

Matthew: Now from when you started this business to where we are now and where do you think we’re going in the next couple of years, how have the staffing and employer related needs evolved and how are they evolving?

Stephen: Well it’s constantly, rapidly evolving especially with regulations that business owners have to stay on top of as well as employment laws that are constantly changing and then now the new healthcare, Affordable Healthcare Act which requires employers to stay on top of benefits for their employees which can be a challenge for small business owners.

Matthew: Yeah and there’s some kind of magic number where if you’re over a certain employee count, the Affordable Healthcare Act behaves one way and if you’re under it, it behaves another way. What’s that number? Do you know?

Stephen: Fifty, fifty employees.

Matthew: Okay so after 50 what happens?

Stephen: You are required to offer health benefits to your employees, full time and part time.

Matthew: So I imagine that there’s going to be a lot of employers that magically start changing behaviors at the 49 number, somewhere around there, unintended consequences. Okay. Now what about employees from non-cannabis industries transition to the cannabis industry? How is that done successfully because there’s a lot of people listening that are not in the cannabis industry but they want to be in it. So how can they make that transition?

Stephen: I would say look at your past experience and your skills and really figure out what you want to do in this industry. If you have good customer service or retail experience, you’re most likely going to be better going the retail, bud tender route. If you kind of have a green thumb, maybe cultivation. It really depends on what you enjoy doing.

Matthew: So I want to circle back to this PEO concept for people, and again it stands for Professional Employent Organization. Is that right?

Stephen: Yes, Professional Employer Organization.

Matthew: Because it’s kind of a new concept still but it’s very very powerful in that if you’re an employer, you just write one check to Ms. Mary Staffing or whoever your PEO is and they take care of everything and it’s a great way of outsourcing the stuff you’re not great at. And in terms of cost is there any kind of ballpark figure of what this costs a dispensary owner for your services?

Stephen: It depends on how many employees and how frequently payroll is. We base it off of that and then it’s a percentage of gross payroll.

Matthew: Okay got it. So if you do a monthly payroll, it’s cheaper than if you do it every couple weeks?

Stephen: Right yeah, if you do it compared to a weekly.

Matthew: Now is there any other tips or information that you think would be valuable for people trying to get into the cannabis industry to make sure they stand out in one way or another?

Stephen: Well there’s several resources out there now. If you don’t have knowledge of strains, definitely tap into those resources to learn about the actual product before you try to get into this industry. That’s something that I see a lot. People don’t know much about marijuana but they want to jump into this industry.

Matthew: Okay. Very cool. Now Stephen if people want to learn more about Ms. Mary Staffing, how can they do that and tell us what state you’re in as well.

Stephen: Well we’re in Colorado, Washington State and Oregon at the moment and we’re rolling things out in Nevada here within the next month or two.

Matthew: Stephen is there anything strange in Washington’s law where it would prevent an employer from working with a PEO?

Stephen: Yeah the way Washington State has their marijuana laws set up it makes it very difficult for PEOs to operate, even staffing agencies to operate. So we just work under what’s called a direct placement staffing model.

Matthew: What does that mean exactly, direct placement?

Stephen: We still help with the recruitment, but instead of paying payroll through us we just charge a percentage of the annual salary as say a one time direct placement fee. Kind of like paying a consultant.

Matthew: Got it, that makes sense. Now Stephen can you give out your website for listeners?

Stephen: Sure it is

Matthew: Okay great. Well Stephen thanks so much for being on CannaInsider today. We really appreciate it.

Stephen: Yeah thanks for having me.

Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guest to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five major trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on CannaInsider, simply send us an email at feedback(at)cannainsider(dot)com. We would love to hear from you.

Stephen Sullivan of Ms Mary Staffing (a cannabis staffing company) explains why it is often a way better deal to outsource your staff to his company. He also talks about how your cannabis company can legally handle cash.

Key Takeaways:
0:57 – What is Ms. Mary Staffing
1:42 – Stephen talks about the cash issues dispensaries face
2:39 – Stephen explains how a Prof. Employer Organization helps employers
4:51 – Stephen talks about the staffing aspect of Ms. Mary Staffing
5:28 – Why do people leave the cannabis industry
6:55 – Stephen talks about intermediate and executive positions
7:29 – What can dispensaries do better from an employer perspective
9:15 – How can someone make the transition into the cannabis industry
11:11 – Contact details for Ms. Mary Staffing

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