While not the most traditional path, equity crowdfunding can be a great way for cannabis brands to raise capital – but only if know what you’re doing. Here to walk us through how she’s successfully crowdfunding her CBD wellness brand is co-founder and CEO of Element Apothec Davina Kaonohi.
Learn more at https://elementapothec.com
[1:05] Davina’s background in e-commerce and how she came to start Element Apothec
[5:49] How Davina took inspiration from her aunt’s homemade tinctures to formulate Element’s CBD products
[7:48] Why Davina turned to equity crowdfunding and how she’s successfully targeting investors
[11:36] Equity crowdfunding vs traditional crowdfunding
[13:38] How to create a killer marketing campaign through storytelling
[17:54] Element’s efforts to bring transparency to CBD and do away with sketchy “proprietary blends”
[24:04] Davina’s goals to grow Element’s product selection and expand the company over the next few years
[26:02] Where Davina sees the CBD skincare space heading over the next 3-5 years
Matthew Kind: 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 cannaninsider.com that's C-A-N-N-Ainsider dot com. Now here's your program.
Sinead Green: While not the most traditional path, crowdfunding can be a great alternative for cannabis brands looking to raise capital, but only if you know what you're doing. Here to walk us through how she successfully crowdfunding her new CBD wellness brand is co-founder and CEO of element Apothec Davina Kaonohi. Davina, thank you so much for joining us today.
Davina Kaonohi: Yes, thank you so much for having me. I'm really excited to have this conversation.
Sinead: Absolutely. I'm so excited to have you here and hear what you guys have in the works at Element Apothec. First off, can you give us a sense of geography where are you joining us from today?
Davina: I'm in Los Angeles, quite warm and sunny today.
Sinead: Oh, nice. Davina, thank you so much, again, for joining us and before we dive into element, I know this is a new space for you. You only really got into cannabis about a couple of years ago at this point, even though you've been using it and it's a big part of your family for a long time now. First off, I wanted to talk to you a little bit about your background, can you tell us what you were doing before element and why you decided to start the company?
Davina: Before launching Element Apothec I was doing strategic consulting for startups, mostly in the e-commerce space, and helping them set up their leadership team, their operational and strategic business goals. I just loved it because you could come in early and really help to drive the direction of the business and help them really think about big decisions that they were making in terms of the growth going forward.
I also had touched on helping a niece of mine build a social media app, which was quite a fun experience to be involved with. Then leading into Element Apothec, I think for me, it really was that I liked what I was doing, and I felt like I could make an impact, but I still hadn't figured out my why of exactly when I woke up in the morning what really drove and motivated me. Recently, doing Element Apothec has showed me that that's what it was, but I was at this turning point in my career trying to figure out what was next for me.
At the same time, my great aunt had come to me with these amazing products that she had created. I can tell the story in a little bit more about that and asked me to help build a website and I did that for her, but she still didn't really know what to do with it and basically handed over the business to me. I was really passionate about CBD and cannabis and wellness and living a clean lifestyle and alternative remedies. It just really made sense that that was the direction that I went. That led to the launch of Element Apothec.
Sinead: Wow. That's something really fascinating about your story is what you just touched on with your aunt there. You officially launched the company in December 2020. Is that correct?
Davina: Yes, right in the middle of the pandemic.
Sinead: Great timing, of course. Really, you guys you're so new, but Element really has been in the works now for about a decade if I'm not mistaken and it actually started with your aunt formulating her own tinctures. Can you tell us a little bit about that and the family collaboration aspect at Element?
Davina: We say we're a new company but we're almost a decade in the making, and because my great aunt was initially diagnosed with medical conditions and autoimmune diseases and the medications that the doctors prescribed to her she actually was allergic to some of the preservatives or many of the preservatives and those medications. Her prognosis with that wasn't good.
They gave her a couple of years to live and most of that would probably be bedridden, not with a good quality of life. A sister of mine-- I have two sisters-- is a grower and had some high CBD ratio plants and so she gave her some flour and said, "Hey, there's this great recipe. It's almost like a Rick Simpson oil you can make that and I've seen it help people that have used that before," and then gave her her first plants to start growing. She set up a little grow cabinet in her living room for her. She started creating tinctures. She started putting the oil that she was making in lotions and bath soaks and everything bomb. She didn't really realize that it would help her as much as it did. It did end up making a huge difference in her life to the fact that she was able to get out of bed, she started using her extra time to learn about essential oils and other plant-based remedies.
People also took note of her health continuing to increase and the lifestyle that she was now leading that she wasn't expected to and would come and say, "Hey, can you make me this? Can you make me that?" Over these 8, almost I guess like 10 years now she's created over 40 custom formulations because people would come and say I have this, I have that, can you make me this and every ingredient was never used for a scent or for a texture it was used to basically serve a very specific purpose of being able to help whatever the person might be-- To support whatever they might be experiencing.
Sinead: Wow, that's just such an amazing story. I know you from there, you took her formulations and you've got a medical advisory team now, but you took them to a formulist and had them take a look at the best ratios and all of that. Can you tell us a little bit about the next steps you took from her formulations, the OG formulations, and how you really dialed them into what is now Element Apothec?
Davina: The next step that happened after my great aunt came to me and she basically said, "I want my products to go from the kitchen to the world," and so that's my mission. With that said, I also understood that we were asking people to put products in and on their bodies and I wanted to make sure even though she had the experience and had been creating these products that from the medical science perspective, that they really were safe, that the ratios were right, that we really were going to have highly effective products.
We brought on our Chief Medical Advisor who's an integrative medical doctor and triple certified gastrointestinal doctor, who specializes in gut health and microbiome brought in Dr. Swathi Varanasi, she came on as a co-founder and Chief Scientific Officer who's an integrative pharmacist and a cannabis medical provider. We really looked at the products that we were creating and then we added on our integrative dermatologist and said, okay, let's look at these ratios that have been created, the ingredients that are here.
We want to make sure that they're as safe and effective as possible. We also looked to some of the other minor cannabinoids because there's just becoming so much incredible research on the values of incorporating those in higher levels than just your typical full spectrum or broad-spectrum oil. From that, that was the final formulations that we ended up launching with Element Apothec.
Sinead: Absolutely. Very cool. Just thinking about the timeline here, you dialed in on the formulations. Obviously, the next step there is you think about how am I going to fund this business so that's where you turn to crowdfunding, which I find so cool because we aren't seeing a lot of CBD companies do that just yet. It is it's a great alternative but it is tricky and it requires, as you know, some killer marketing and it's no walk in the park. Can you tell us just a little bit about that whole process and your logic behind it?
Davina: Yes, so in launching the brand we didn't want to just be a home-based business, which is fine and I think amazing if that's the path that you took, but we wanted to go big with the brand and really get our products into as many people's hands as possible. With that, there's a lot of money that's involved to make that happen, the cost of the manufacturing and the packaging and all of your marketing and thinking about what would be the best way to raise that money and also a very competitive space because we did have conversations with some investors early on.
Although they were interested, they wanted to see a little bit more traction before they were willing to write the checks that we felt that we needed. We looked at alternative options of what could get us the money we need right now to launch the brand, start getting some early traction, build the company up in terms of the value proposition and then be able to go back out later and raise additional money. We looked at the ideas and ways that people were doing that and equity crowdfunding came up.
There's two types of crowdfunding. There's crowdfunding where you can sell a product or pre-sell a product and people in exchange give you money for that or there's equity crowdfunding, which is what we did, where people are actually owning a piece of the company in exchange for their investment, and we had some perks or people got some free products and stuff for different levels. It seemed like a really viable option and not only were you getting the attention of micro investors, but at the same time, you were also building awareness of your products and your brand, so you're getting this, it's like a double opportunity almost with it.
We had friends and family that were interested as well and participating and wanted to help. We thought, what a great way for them to get involved, invest a little bit of money into the company, and own a piece of the company, and join us along our journey as we build this brand. We looked at different platforms or some-- We ended up working with Wefunder with their start engine and Republic and we felt really fortunate, especially in the competitive space that we were selected to be one of the companies that they worked with. Yes, it's just been an amazing, crazy roller coaster ride of fundraising, but it's been quite exciting as well.
Sinead: Yes. Wow. Okay. I alluded to this earlier, you just reached this huge milestone, you're currently sitting at just over $100,000, and you've got a goal of $500,000. Is that correct?
Davina: Yes. We are now about 119. We've had some investments come in since we last talked, which has been great. The Wefunder campaign will be ending, but we'll be continuing to fundraise through just a traditional convertible note now that we've been able to hit these milestones, the interest of other investors has piqued and some other opportunities that we've had. Yes, so we'll continue along this fundraising journey for a while, I imagine.
Sinead: Absolutely. Yes. I do want to dive into equity crowdfunding a little bit more here because most of our listeners are probably more familiar with platforms like Kickstarter, where you-- For the project to go through, it has to be fully funded, so this is a very different format where you've got this goal, but it seems like you're able to work with the funds and it's a lot-- In some ways, a lot more flexible. Can you tell us a little bit about how that works and what you are using the capital for and what you plan to use it for as you reach that big 500,000 number there?
Davina: Yes. The way that equity crowdfunding works, like I mentioned, which is different is that you're actually giving equity in exchange for the investment just as you would if you were raising Series A and raising $5 million, but it's on a much smaller scale. Each of the platforms do have specific requirements like on Wefunder to get funded to actually be able to hit the first milestone is a 50K mark. They do have some opportunities for some companies to come in at a lower level recently, but when we started with them, that was you had to hit at least 50K, and then once you hit 50K, you can start taking your first withdrawals from that which helped us to fund our initial inventory run, our marketing, all of our packaging.
As we continue to grow and expand and look to raise more money, we're looking at launching additional product lines, deep investing into marketing, bringing on a sales team, just expanding all of the things that we're doing now as well with education and focused on building a community and establishing more of a presence online. That's really what we'll continue to use the money that we currently have raised and use the additional money as it comes in from other investments.
Sinead: Okay, that makes total sense. Very interesting. Going off of that, I wanted to talk to you about the marketing side, you guys obviously have got amazing products, but even amazing products don't sell themselves, especially when it comes to crowdfunding. What did you do to really develop your marketing campaign there and what advice would you have when it comes to really hitting that nail on the head with marketing and really finding your target audience?
Davina: Yes. It's interesting with crowdfunding, especially in the cannabis CBD space, because a lot of times companies depend on Facebook and Instagram advertising to get a big kick on their marketing strategy. Unfortunately, we had some troubles with that, and Facebook and Instagram would deny our ads even when they would go to Wefunder or to other landing pages, so we had to get really creative. We'd looked to do-- We did some ads on programmatic which were open to us.
We've focused heavily on building our email list so we could focus on reaching out to people that way. I did a lot on LinkedIn of just personally connecting with people and I'm spending-- I'd dedicate an hour, two hours every day just to outreach and sharing our campaign and letting people know what we were doing. It just involved a little bit more than maybe what a traditional company raising on an equity crowdfunding platform might have to do, but at the same time, as we were making all those connections and conversations, we also were building brand awareness and getting people interested in the products, so I don't know, it was a great-- I think, overall great experience, but yes, the marketing and thinking about it, because you'd look at these equity crowdfunding platforms, and you'll see companies raising a lot of money, you're like, "Oh, it's easy, we'll just launch on there, and everybody's going to start investing all their money in our company." Then you realize that's not the case.
There's marketing firms that are specifically set up just to help with managing that and posting on, like I said, on social media channels. Going into it for us was like, "Okay, this is going to take some work, and it's going to take a little bit more work than we thought." They do have their own investor networks, and a lot of these platforms will share when you first launch and different milestones that you hit, so you do have access to other people that you might not otherwise have had, but definitely, it depends a lot on the company itself to provide that marketing to get the word out there about your campaign.
Sinead: Absolutely. Okay. Yes, that makes sense. I feel like at this point too, like you said, there are so many obstacles when it comes to digital marketing and advertising in the CBD world, and hopefully, we'll see some changes there in the next few years, but I feel like CBD brands, they just have to make more of an effort with their storytelling than I think in other industries. Would you agree with that?
Davina: Yes. The story really is everything that we are as a brand, and why we're so passionate about even the way that we continue to operate. It was very intentional from the beginning that that is our core, and that's something that we can't ever forget. We were very purposeful of making sure that we're not just another CBD brand, we're not just hopping on the CBD bandwagon, or looking at a catalog and picking products, which is great, and I think it gives people quick access into the industry. For us, we wanted to show who we were and what we stood for and doing that through the story I think helps people recognize that, "Okay, there's something a little bit different about this brand and how they started and their medical team and the passion that we put behind having clean, safe products," and I'm passionate about the ocean and the environment, and so we built sustainability into it. All of the things that we do I think really is because of this story, and so we'll continue to market and lean into that as we expand also.
Sinead: That's great. Something that, like you said, that really differentiates you, that element from so many other CBD brands out there right now, it's just that dedication to transparency and to your quality. You really are trying to lead the charge away from additives, and as you've mentioned, preservatives, not hiding behind proprietary blends, as I've seen on your website. I see that messaging across the CBD world all the time. It's amazing how often I see that word 'proprietary'. Can you tell us a little bit about how the CBD world and even the skincare world falls short on transparency in the ingredients that we're currently using?
Davina: Yes. To talk about first, why because I think that's also why we're so against it is, a lot of companies, a lot of the ingredients that people use are not great. We even in hunting for manufacturers had a difficult time finding manufacturers that were willing to work with us to test products and create products that have shelf life stability without using some really well-known preservative that we just aren't comfortable using in our products, and so they can hide behind proprietary ingredients. Also if you have under a certain percentage, you don't even have to list that ingredient on your label, which is just horrifying to me that that happens.
The reason for that is because I think if it's in such low quantity, it's not going to really have an impact on you, but you have to think about how much ingredients we put on our bodies and in our bodies every single day, and the accumulation of those benefits over time, there's no way that that's good for us. In thinking about the products that we created and why when my great aunt first started, she needed those products to be clean, safe, and preservative-free, and also ourselves being conscious consumers, I always look at the ingredients. I'm the one who tells friends like, "Hey, do you realize what you're putting in your hair on your lips," or, "You should really check out that company and make sure that the products are safe," and so for us, we felt like people deserve to know everything that's in the product.
They deserve to know at a higher level why we use these ingredients. We partnered with a company called clear for me, they're actually behind Ultra's clean beauty movement that powers our ingredient list and database. People can see what the ingredient is studied for and researched and why companies might use it because we felt like people really deserve to know this information and we don't need to hide behind any proprietary ingredients or any mislabeling because they should know exactly what they're putting in and on their body and be able to make informed decisions about the products that they buy.
Sinead: Absolutely. Yes. Something I've read recently which is so shocking is the number of ingredients and chemicals in the US that we use that are banned in most other countries. I think there are something like 1,400 different ingredients that we use here in the US.
Sinead: Yes, like Canada and the EU just absolutely forbid these ingredients.
Davina: Yes. It's something we're so passionate about. Of course, we have to hold ourselves accountable, but we have something called our never, ever promise which is our commitment that we will never use any of those band ingredients in any of the products we create and that's abiding by European, Canadian, Japanese standards because again our health and wellness matters. If we're putting things in our body that are banned other places, we might want to think about why we're actually using them here.
Sinead: Yes. I would agree. I certainly don't want to put something on my body that is banned in most other countries. Gosh, it's really crazy and something you mentioned earlier was how difficult it was to find a manufacturer that would work with you to find alternative preservatives and work with you on sourcing really high ingredients. If I'm not mistaken that alone took you almost a year to find a manufacturer that would do that. Is that right?
Davina: Yes. It took us a while to go through that process. We would start going down a path with somebody and then they kept trying to push us to their products that they already had and we're like, "No, that's not what we want. Onto the next manufacturer," and through that process, because especially if you're working with someone and you're testing out the products and working on the formulations, it's weeks of time that you're spending with each person of going through that. We did spend a lot of time doing that, but I am happy that we did that because, again, we didn't want to sacrifice or take the easy path. One manufacturer came to us and said, "If you don't use this preservative, then we're just not going to work with you. It's too much work."
We're like okay. That was after several weeks of conversations with them. You do the work and you put in whether it's for manufacturing or focus on your packaging of finding packaging that's going to be sustainable for you or ingredient sourcing. That was another thing with a lot of the manufacturers, is they have their established relationships with ingredient providers who are very specific about using eco cert and organic ingredients, really clean products. Obviously, that also takes work for them to go out and find these suppliers that have these specific ingredients that we were using.
Some of them also said, no, it's too much work. We don't want to do that, but that's okay. More power to them and we're fortunate to find one and we're actually in conversations with a couple more as we're looking to expand some of our product lines as well. I think there's a little bit of a shift happening where people understand that conscious consumerism is really becoming valuable and companies are looking for really good manufacturers to partner with.
Sinead: Absolutely. Yes. It's so great to see companies like yours helping to spur on that conscious consumerism in the CBD space. That's amazing. You mentioned some expansion goals. Can you share a little bit about that with us or is it still under wraps?
Davina: There's a couple things. We have a new tincture we're launching just in a couple weeks, which I'm excited to share that is called Be Well. We believe that everyone deserves to be well and it's amazing. It has CBD, CBG, and CBN at pretty high ratios. As well as turmeric, and, lemon and lime, it's just a great nightly tincture to take. I love it. Every night I take it, I sleep so well and wake up feeling great in the morning. There's some other expansion opportunities. We have had some people come to us because of the medical advisor and expertise that we have with formula products that are looking to add CBD. We have a cosmetic formulator and a macho company which is really cool. We'll be working with them to help them create products that'll be powered by Element Apothec.
That's pretty exciting and then in terms of other expansion, we're just also really focused on education. It's a huge part of Dr. Swathes mission and so we're launching an education platform which is a CBD health and wellness certificate for all of our customers and our brand strategic partners to just have more information about CBD and cannabis and our EndoCannabinoid system and understanding better products and how to buy them and what to look for. It's amazing all of the things that are ahead for us.
Sinead: Yes. I'm so excited to see what you guys have in store over the next few years and speaking of, where the cannabis industry as a whole is heading. Like you just said, I feel like that estimation just continues to grow year after year. Where do you see cannabis skincare specifically heading and where do you see maybe consumer preferences and the different products there heading over the next three to five years?
Davina: Yes. There was just a report that came out with incredible numbers in terms of the growth for CBD beauty and skincare products. I think as people start to understand the benefits and looking at CBD or CBD as ingredients, we're a body care wellness company. We're not just a CBD company and as that changes in people look to the benefits of having CBD or CBG or CBN as an ingredient in the product especially when you look at skincare, it has amazing anti-inflammatory benefits and anti-aging. So many of the things that people are concerned with with skin and some of the medical skin conditions that it can support, that people will be looking to have the best product that works and the best product that works may have the ingredients of CBD, CBG, other cannabinoids in it.
I definitely see a lot of growth and it's just really bringing the awareness again, the education of why would I want that ingredient in my product? How is that gonna help me for skincare because I think a lot of people still think about ingesting it and are skeptical to put the product. We were at an event in Chicago and we were giving out samples of the lotion and letting people try it and one woman's like, "Does it have that stuff in there?" I'm like, "What's that stuff?" She goes, "That THC or CBD stuff," and I said, "Yes, let me tell you about it. It's an amazing ingredient," and she was like, "No, I don't want to learn. I don't want to understand it," but another woman asked about it and she goes. "I'm afraid, is it going to do anything to my skin?"
I said, "No, actually it's going to benefit it, and here's how it's going to benefit. The values for it's amazing for nourishing and supporting, providing relief and has a skin regenerative properties," and she goes, "Okay, I'll try it," but I put it on her hand, she was still really nervous about it. You could tell, she kept looking at her hands, like something is going to happen, but she came back an hour later and she ended up buying our lotion. She said that her hands just felt so great. She couldn't stop thinking about maybe why this ingredient made the lotion feel better than other ingredients that she had been using. As we all work together to educate, I think the skin care's really going to be an incredible opportunity for people to get in and build products around that.
Sinead: Definitely. Yes. I really couldn't agree more. I feel like skincare is going to be such a great bridge for the CBD and cannabis industry. Just make it more accessible and normalize it and really broaden the public interest around it. That's great. Davina, I want to wrap up with a few, fun personal development questions because I know CBD is a big part of your life, but it's not the only part. I'd love to ask you few questions. First one, is there a book that's had a big impact on your life or way of thinking that you could share with listeners?
Davina: Yes. I'm a huge fan of Brene Brown and I constantly go back and reread like Daring Greatly I think I must have read like 20 times whilst I'm here, listened to it because I think the idea of being vulnerable and putting yourself out there, there's daring to lead. I just think it's something that's much more needed for everyone to drop their shells, to look at their past and to accept it and to live life with courage and vulnerability. That's something I am really thoughtful about. Another book that I recently read is called Give and Take. It's the idea, something we talked about about even partnering with competitors but the idea in the business world of being a giving person or giving company instead of trying to hold all of your IP or proprietary stuff or not sharing and how those returns come back to you in multiples. It's something that I think about all the time as we're building the business, but personally, I'm a huge Brene Brown fan.
Sinead: Interesting. I'll have to check that out and add it. I ask this question every interview and I've got quite a reading list going here so I'm going to have to add that to it. That's awesome. Next question, what is your favorite music at the moment? Do you have a band or maybe even just a whole music genre that you're really into at the moment?
Davina: You know, it's funny because I always go back to Hawaiian music. I love alternative music and classic rock but I love Hawaiian music. I think it just takes me back to my days visiting my dad when we were young in Hawaii. It's what inspires me when I need inspiration and what calms me down when things are stressful. There's a particular artist called Keali'l Reichel. I used to also do Polynesian dancing when I was younger [unintelligible [00:31:33] It brings back so many emotions and memories that I tend to go back to that all the time.
Sinead: I definitely get that. I've never been to Hawaii but I'm dying to go. It looks just so beautiful over there. It's definitely been on my bucket list for a long time so definitely hope to get over there in the near future. That's great. Davina, wrapping up. One question I have for you, I know Element is still very new and you really only launched last December, but you've been working towards this for some time now. I wondered if you could go back and give yourself one piece of advice when you were first starting Element Apothec, what would you tell yourself?
Davina: I think just to start sooner. There's goods and bad, but we were so focused on coming out of the gate with everything so polished and done. We were a pending B corp and then got [unintelligible [00:32:31] certification, we wanted this, we wanted everyone to really trust and believe us, which I think we could have done along the journey with people. Maybe launched quicker with one or two products and just started that process. That's where I go back and think all the time because we launched, we kind of missed the holiday season. We were like, "We should have just launched with the first couple products," and we could have gone along this journey as it happened instead of trying to have everything so fine-tuned before. Maybe that would be probably what I would think.
Also, understanding of just having patience about how long it takes to actually build a CPG business because we thought we were going to launch these products and we're so different than so many other companies out there and we know these have helped hundreds of people. My aunt's sold these products, so we're going to sell like thousands in day one. Well, it takes a lot more time to build brand awareness and to get people used to your products, especially in a competitive space. Also, just having a little bit more awareness of the amount of time and money that it would take to actually launch the brand and being able to better plan that from the beginning is definitely something for anybody new that's getting into this space or launching a business I would definitely think about.
Sinead: That's great. That's some really great actionable advice for our listeners who are just up and getting going and maybe experiencing a few of the same challenges you experienced. Thank you so much for that. Davina, thank you so much for coming on. This has been such a fascinating interview. Really, I've so enjoyed talking to you and can't wait to see what you do at Element Apothec over the next few years.
Davina: Thank you so much. I enjoyed the conversation. It was great talking to you. I just love being able to tell our story. It's just amazing when you have that opportunity, so thank you.
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