Dooma Wendschuh, Co-founder of Ebbu has ambitious plans for the cannabis industry. He wants to help you dial in the sensation or mood you want to experience and then guarantee you get that exact sensation over and over again. Ebbu does this with a proprietary distillation process. Ebbu will be launching with five signature “feelings” that include: chill, bills, giggle, create, and energy.
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Matthew: Hi, I’m Matthew Kind. Each week I’ll take you behind the scenes to interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. 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.canninsider.com/trends. That’s www.canninsider.com/trends. Now here’s your program. Ebbu has perhaps one of the biggest and most ambitious businesses in the cannabis industry. The cornerstone of how Ebbu is different is that Ebbu focuses on how cannabis makes you feel. And once you dial in how you want to feel, Ebbu can guarantee you get that identical, predictable feeling again and again. I am pleased to welcome Dooma Wendschuh, CEO of Ebbu, to CannaInsider today. Welcome Dooma.
Dooma: Thank you.
Matthew: To give a sense of geography to listeners where is Ebbu located?
Dooma: Well I think a lot of people think that luck is something that happens to you, you know, like that guy’s so lucky he won the lottery. But to me luck is something that you create actively, right, by being in the right place at the right time. And if you want to do something really big, you want to change the world, you’re going to need a lot of luck. I started my career in the film industry. So naturally I had to be in Los Angeles where I had the greatest chance of being in the right place at the right time. At some point we transitioned to video games. I moved to Montreal because Montreal is where everything is happening in the video game industry. But when I wanted to start this company in the cannabis industry it was really clear that I had to be in Denver, because Denver is the epicenter of where everything is happening. So we’re actually located just outside of Denver although I do live in the city of Denver myself and really like it here.
Matthew: I love how big you think and how ambitious the goal is with Ebbu. Can you help listeners understand the “what” exactly Ebbu is doing?
Dooma: I think the easiest way to explain it is to use a metaphor and to say that we are a distillery which is not true at all. Like we don’t make alcohol or beverages, but what we do isn’t that different. You can think of how an alcohol distillery takes an inconsistent, natural product, for example potatoes, and turns it into vodka. We take a raw product, in our case it’s cannabis, and we transform it into something new. And we do this through our proprietary distillation process. And just like with alcohol when we run these natural products through our proprietary distillation process, we are creating an entirely new product category. You don’t look at a bottle of vodka and say to yourself, there’s some potato juice. They don’t sell vodka in the vegetable section of the supermarket, and the same is true for a product made using (2.59 unclear) distillation process right. It’s not marijuana anymore. It’s been transformed. And what we specialize in at Ebbu is creating this entirely new product category of distilled cannabis products, and we sell those in a variety of different ways. On the one hand we manufacture some very basic and simple delivery mechanisms which we wholesale to dispensaries, simple stuff like a soft gel or a sublingual spray. But the real magic is actually what’s inside. It’s these formulations that we create. And we also sell those to other companies, guys who are making brownies of vapor pens so that they can provide a predictable, reliable, active ingredient to their consumers. And all we ask in return is they put a little sticker on the box which says Ebbu Inside, like when you buy a laptop and says Intel Inside. And this is the way we hope to become really the juice that powers the cannabis industry.
Matthew: Very interesting. And you mentioned a little bit about Los Angeles and Montreal. How exactly did you get into those businesses and then get into cannabis? What was the process? I mean, was there like a flash where you said this is what I must do? I mean, how do you just decide to up and do this?
Dooma: You know, it was a pretty crazy series of events that led me here, but I’m really happy that they all turned out the way they did. I started, I went to the University of Princeton. I then went to film school in the University of Southern California Peter Stark Producing Program and started a film production company. We were not successful at all. We sort of failed at making motion pictures, although we did create a reasonably successful advertising agency which is still around today. At some point in the early 2000 we had the opportunity to get involved in the video game industry, and we pivoted and actually became extremely successful making games. At the peak or sort of around the time that I left the company, we had offices in Los Angeles and Montreal and we were involved in some of the biggest video game franchises in the world. And it was going very well. I had been doing a lot of sort of angel investing. Because of my background and because of this experience where we started one business and then pivoted into another, I always had philosophy that it doesn’t make sense to invest in a concept or to invest in the stock market, but rather to invest in people, people who I know who are really smart and who can pivot and who can adapt to the changes that are going to be thrown at you inevitably as an entrepreneur.
So as I mentioned most of my investments have been sort of angel type investments, you know, product placements. And I had this idea that I should look for a similar opportunity in the cannabis industry because there was a “Green Rush” and everybody was investing in cannabis. So I called up my good friend John Cooper who I’ve known for 12 years, and we decided, you know, he’s also a serial entrepreneur. We decided we would look for opportunities to invest in cannabis together. And what we found was just kind of disappointing. There were a lot of people who were trying to get us to invest in dispensaries or grow operations, and that doesn’t make any sense to me. If you look at the sports stadiums across the country, they’re not named after farmers, collectives or bars. They’re named after brands. And so when we looked at the brands what we found was even more disheartening that you could go to a dispensary and you can buy the same cannabis infused beverage three or four weeks in a row and every single time it would taste exactly the same, but the psychoactive response could be all over the map. And the same was true with the vapor pens. You know they always look cool in your hands, but you just had no idea how they were going to make you feel. And I think we all know can cannabis consumers don’t make their purchasing decisions based on the form factor of the can or the sugary flavoring of the edibles. They make their purchasing decisions based on perceived psychoactive response, you know, how the product is going to make them feel. And, you know, as hard as we looked we couldn’t find anyone who was trying to solve what I thought was the most fundamental problem in the industry. And after banging my head against it for a period of time, I realized listen, this is a problem that needs to be solved and I think I know how to solve it. And so much to my mom’s dismay, I just sold my stake in the game company that I helped create. It was a big decision, and moved out to Denver. Came out here March 1st of this year and Ebbu actually started up in January of 2014 and it’s been a wild ride every since. So that’s sort of how we got to where we are.
Matthew: That’s a great story. And sometimes it feels like I’m interviewing people only from Colorado or Seattle, but it’s not because that… it’s because everybody’s moving here. This is the epicenter of it. That’s why. It’s not because I’m choosing to, but that’s a great point you made. So let’s say I’m a vapor pen company, and I come to Ebbu and I say, Dooma we want to release a half dozen different psychoactive experience pens or cartridges and we want them to be consistent so every time a user can experience the same thing and then of course then buy our pens and cartridges again. How do you go down this road with them? How do you start that whole relationship?
Dooma: This is sort of one of the main ways that we intend to bring our product to market, and as I mentioned before we call this Ebbu Inside model, you know, much like a laptop would have Intel Inside on the boxes. These companies come to us because they are not able to deliver what the consumer most wants. They can deliver, in many case, just an extraordinary product. And I couldn’t say enough positive things about the edibles manufacturers and the vapor pen manufacturers in this industry. They are creating in some cases gourmet products that are on the top level of what you would see in a non-psychoactive version of their product, and they’re able to generate a lot of sales by making something that tastes great or that is very appealing to consumers for one reason or another. But the main reason that consumers buy cannabis is for that perceived psychoactive response. And what we can deliver at Ebbu is a predictable and reliable psychoactive response. And those two words are core to what Ebbu is about.
Predictable means that before you first try it you know how it’s going to make you feel. And I don’t know if you recall, but I certainly recall the first time I tried alcohol. And I had no metric by which to gauge what this idea of being drunk or being buzzed was going to be like because there was nothing in my previous experience that I could compare it to. The different psychoactive responses that Ebbu can guarantee are relatable. They’re predictable. So you may have never, you know, tried cannabis before or a cannabis distilled product, but you know what it’s like to have an energetic feeling because you’ve probably tried caffeine or something else that gives you that energetic feeling. You know what it’s like to have a relaxed feeling because you’ve probably drank a can of (10.32 unclear) that made you feel very relaxed. And our products are labeled in such a way that it’s very clear to the consumer before they first try it how it is going to make them feel. And that’s essential. And then the nature of the product is that it is 100 percent predictable so every time you get that same response. And the relationship that we have with the manufacturers of cannabis infused products who want to use us as a provider of their API, their active pharmaceutical ingredient is very simple and that we sell them a jar of our formulation. They can use that to make their products, and we require that they use sensible dosing. Meaning, one unit is one dose. We would never sell our product to someone who is making a brownie that was supposed to be cut up into 16 pieces and 1/16th was a dose because that’s crazy. Nobody eats 1/16th of a brownie especially if there’s a lot of sugar in it and it tastes good and you want to keep eating more. So we do require sensible dosing. And we are able to monitor for that by purchasing their products at the dispensary and testing it to make sure that the dosing is as it should be. And then we require that they put the Ebbu Inside sticker on the box, and that’s pretty much it. It’s a pretty simple relationship. It’s something that we hope we’re going to be able to grow into many other states and regions as our business grows.
Matthew: You mentioned that it’s good to think about Ebbu in terms of a distillery because that’s kind of a relatable concept most people can understand, but how is the chemistry behind Ebbu work? How do you come up with, one of your formulations is called Bliss, so how do you arrive at what the psychoactive experience should be for Bliss?
Dooma: You’re asking two questions right. I guess the chemistry question is analogous to the… let’s make the analogy we’re building a house. The chemistry is like the general contractor. It’s how you actually get the house built. And then the other portion is for the psychopharmacology which you can think of as the architect or the blueprints. So there’s not a whole lot of really in-depth chemistry that goes into figuring out what combinations of different components would need to create a specific ceiling, but there is a lot of chemistry in the execution. And the execution is best thought of as, you know, distillation that’s a metaphor I like to use. I’ll just give an example of sort of how it works. Because I think it’s easier to understand using a metaphor. Say you go to the grocery store, and you buy a bunch of apples, and you can imagine that they’re all from the same strains. So they’re all Granny Smith we’ll say. Now invariably these apples are going to be inconsistent. One might be sour, one might by mille, another might be crisp, but when it’s just something you eat you’re not going to let it ruin your day. You’re going to make a mental note that one apple isn’t that great, and you’re probably just going to go ahead and finish them all. But as we’ve all seen with that Maureen Dowd New York Times piece, when it’s a psychoactive this natural variability can be much more pronounced. You know what if we took all these apples instead and we turned them into hard apple cider through a distillation process. Every bottle would have the exact same taste, texture, smell and most importantly the psychoactive effect would be the same. And that’s the magic of distillation.
So we are able through this process to do what distilled alcohol products do to create something that is 100 percent consistent every single time. And as I mentioned before we can do something that alcohol products can’t do which is to create products are also 100 percent predictable. And that is all of the chemistry side of the equation. Now the other side of the equation is like I said the architect who creates the blueprint, the psychopharmacology. And Ebbu has an industry leading chemistry team for sure with three of the best sort permatographers that I know of in the industry. But we also have and are continuing to build what I think is probably the most established and reputable psychopharmacology team in the industry. And we approach our psychopharmacology from two different angles. We have a cellular psychopharmacology department which is analyzing the reactions at different cannabinoids which have with the receptors in people’s brains and throughout their bodies. And also clinical psychopharmacology team which is doing studies on the human beings to understand how cannabis both treats ailments and also creates specific psychoactive states. These two different departments working in combination are able to create this blueprint that we can then turn over to the chemistry team and they can create the products.
Matthew: Wow that’s so crazy. So the idea is to get this concept of bliss or optimal bliss for the widest spectrum of people possible where they would say yes I feel blissed out, you know, to standard deviations or whatever that might be. So do you get the plants yourself or do they come from the customers you sell the extracts to or the distilled products to?
Dooma: I suppose it doesn’t really matter. We have a wholesale model. So to the extent that something who, you know, in Colorado a lot of the people who are customers of ours who have dispensaries are also cultivators. So they do both. Our wholesale models means that we would purchase raw cannabis from whomever we can buy it from, and in some cases that is also going to be the same company that we might sell our products to, but it’s a separate transaction. There’s a trend in the industry right now for someone to give you a bunch of trim or a bunch of cannabis for you to process it, and then sell them back the processed material at a sort of discounted rate. So there’s not a lot of cash that changes hands.
Our process wouldn’t work in that way because we are dependent on a diversity of genetic material in order to make our products. So it’s highly unlikely that any grower in the state of Colorado would have a wide enough diversity of plant material for us to manufacture the products that we would need and then sell those products back to them in the sort of standard model that exists in the industry. So what we must do instead is aggregate plant material from a variety of different sources, you know, several different dispensaries who are also cultivators, and the few people who are cultivating but who are not dispensing. And from this aggregation, get the genetic material that we need or the dense diversity that we need to make our products and then create the products and then wholesale it back to those dispensaries. So in our standard process it’s a two step. We’ll buy the material, we’ll process it and then the second step is that we sell it back maybe to the people we bought it from or maybe someone else.
Matthew: Now circling back to what you were saying about how sports stadiums are typically named after some brand like the Staple Center, the United Center, things like that. In my mind, and I don’t know if you agree or not, but at some point there is going to be glut. The supply is going to outstrip demand in Colorado but also elsewhere. How will this affect Ebbu’s model or will it not?
Dooma: I can’t wait for that day. I mean you have to think about what Ebbu is. I’ll use another metaphor here. We don’t want to be the bar that serves beer, and if you know me, you know I have absolutely no skills that would qualify I think to be the farmer growing the barley or the hops. Our goal is to be the Heineken or the (18.21 unclear). We’re designed to do one thing and to do that thing very well, and that thing is to build a global brand. We don’t need to know how to grow crops. And I’m certainly the worst person to go out there and plant and grow anything. We don’t need to master bud tending, right. We need to stick to what we’re good at, and that’s our approach. So as the market adjusts and the supply increases to meet the demand, the cost of cannabis will go down, and it will become easier and easier for us to make our product.
Matthew: Okay so let’s say I am an infused products company and we’re considering making a THC soda, and I’ve heard of Ebbu and it sounds like a really cool company, but I’m looking at my profit margins and I want to ensure that I have a significant profit margin when I sell this soda. How can one of your customers or potential customers start to think about profit margin when they work with Ebbu?
Dooma: What you’re picking up on is various (19.29 unclear). In fact the process that we go through to distill cannabis is much, much more expensive than a simple extraction, right. The guys who are just doing extraction, whether it’s hydrocarbon or CO20 whatever process they’re using, are always going to be cheaper than what we’re doing. But the crazy thing is that because of the economics in this industry right now, for a period of time our products can still be a lot cheaper even though it costs more to manufacture. Our products can be cheaper as a API. You suggest extraction, and I’ll explain how that works. It’s going to take a little bit of thinking to get through this.
Right now it’s very expensive to grow cannabis at a quality level that’s acceptable for making a high end oil like they might use in this soda. You want a good quality oil so you need to start with good quality material. But our focus isn’t on the quality and the way in which the plants were grown. Our focus is on getting the diversity, genetic diversity that we need to make our products. So as long as we’re getting that diversity, we don’t need quality grown indoor cannabis where they’re selling $3,200 a pound retail or $600 a pound on the high end for trim which is sort of expensive. We can take in outdoor grown cannabis. We can take in cannabis that maybe wasn’t grown to the same standards and that allows us to have a much less expensive source material. So while our process is more expensive for sure, in the short term we actually make up for that with a less expensive starting source material. And this capability is not going to be around forever, but in the short term if you’re going to make your own cannabis extract and use that to put in your soda, we could match or beat that price. Now upcoming years the supply of cannabis will increase to meet or keep the demand, but by then our process, because it’s more expensive, will cost more than a simple extraction. But hopefully by the value of our brand will carry the product. You know you can buy a bottle of vodka for $7.00, then you could buy that same sized bottle of Grey Goose instead for about $40. You know some of the difference in cost is attributable to the marketing cost, but a portion of that is that there’s an artismo [ph] process that’s used to make Grey Goose, and that’s what makes it taste better than the $7.00 vodka. Consumers are willing to pay more for something that tastes better. They’re also willing to pay more because they know that that bottle of Grey Goose is going to be consistent and predictable. And so as the cannabis becomes more of a commodity and the prices normalize and the advantage that we right now have because we can use inferior, quality source material dissipates. By that point we will have established a brand that consumers will prefer the sensation of instilled cannabis products like Ebbu’s over the sensation of a simple extract, and they will be willing to pay that difference.
Matthew: In Colorado and Washington it’s amazing to see how fast people’s perceptions of cannabis are changing. You know we might see a soccer mom choose a THC infused drink over a glass of wine, and that’s when you kind of, you know, you can really see people’s ideas of what cannabis is and the stigma going away. How do you see Ebbu accelerating in this?
Dooma: Well the change you describe is happening, but in my opinion it’s not happening fast enough. And the industry needs to shift in a very fundamental way for cannabis to really take hold with the soccer moms and the mainstream consumers. Ebbu was founded on this very simple vision, and it’s this dream that someday when you walk in to your favorite restaurant and the waiter comes around and instead of saying, can I get you something to drink, here’s she’s going to say, may I offer you something to make your evening more enjoyable and there’s going to be a distilled cannabis product on the menu alongside all the distilled alcohol products. But cannabis to realize its potential it does need to change. The kind of restaurant you and I could go to, they’re not going to pull out a grinder and roll you a joint. They’re not going to bring around a dapping rig and a blow torch to your table. For cannabis to achieve mainstream acceptance we need a product which is reliable and predictable. We need a brand we can trust and Ebbu is going to be that brand. We’re designed to be the first truly acceptable, high end mainstream cannabis based consumer product. And as more and more products come online of that nature, we will see cannabis achieve a more mainstream acceptance. People will not be afraid to try cannabis if we can put it into terms that they’re familiar with.
Matthew: As I mentioned before what you’re doing here with Ebbu is really ambitious and you kind of have this vision before the markets really mature. So in the next few years as the market becomes mature you’re going to be the really the only game in town doing this. So with that technology vision where do you see the cannabis business in 3 to 5 years? How will things be different than they are now? I feel like it’s moving fast, but a lot of people are doing the same things. You’re clearly doing something different here. Are we going to see more huge players come in and just do something revolutionary like you’re doing here?
Dooma: Well I think to answer your question of where the industry is going to be in three years, we have to take a long, hard look at where the industry is right now and be very critical. You know I think in every single way we are at the very dawn of this industry. It’s not like the Dawn of Man scene in Stanley Cooper’s 2001 where the apes gather around the (25.19 unclear) and they learn how to use a bone as a tool. Right now where we are, we are those apes, and cannabis is the bone. If you’re going to make a comparison to alcohol, the alcohol industry is so advanced that they’ve moved on from that bone centuries ago and they’re using sophisticated tools like smart phones and satellite guidance. They’re just light years ahead of us. We are so far back in the stone ages. Just to give a visual image of how far behind the alcohol industry we are, and how far behind are all the other psychoactives that are available legally. You know, the perception right now is that this industry, the cannabis, is about selling drugs to white guys with dreadlocks and lots of tattoos. That’s not what this is about. I mean sort of it is, but like really that’s just the tiniest micron fixed liver on the surface of the vast opportunity. You know we have to realize that we are at an epic moment in history. This is a huge paradigm shift from a world where there are three legal recreational psychoactives to this new world where there’s now a fourth, and this fourth is healthier and safer than the others. You know, it unleashes creativity in musicians and artist and has proven medical benefits. And when you think about how important is that, you know, think about the role that psychoactives play in our society. Alcohol brings people together. Find me a first date that didn’t go better when there’s a little bit of alcohol responsibly involved. People use Champaign to celebrate. It’s the icon of a celebration is a glass of Champaign. Find me business that hasn’t benefitted from that boost of productivity from a morning cup of coffee. And even nicotine is so engrained in our culture that just showing someone in a movie or a television show who is smoking a cigar tells us who that person is. You get it just like that. And when you think about it for hundreds of years alcohol has had this monopoly right as the only legal recreational psychoactive for social and leisure activities. And this has allowed Anheuser Busch to be the largest advertiser in the Super Bowl for five years running. And I use that statistic a lot because when you think about it, it’s kind of crazy right. If they are able to advertise more than General Motors or Ford or people that make airplanes, right. It’s crazy. I think what we’re going to see in the next three years is we’re going to see cannabis challenge that monopoly that alcohol has held for hundreds of years. And I hope that a large part of that is going to be due to the work that we’re doing here at Ebbu. And I want to take it a step further and say that if you look even further ahead than three years because it takes a long time for change to happen, but I think a hundred years in the future distilled cannabis products like what we make at Ebbu will have replaced alcohol as the dominant recreational psychoactive in our society. Alcohol is never going to go away, but it won’t be number one anymore. And I believe that’s going to happen because when you do the comparison cannabis is so much healthier. It’s so much better for you. It’s less addictive. It doesn’t impair your driving in the same way. It doesn’t make you belligerent. It doesn’t give you the same types of cancer that can come from alcohol use. It literally wins in every single category. And people eventually are going to realize that this is their choice and that’s what they’re going to choose.
Matthew: Great summary, yet when I hear you talk about Ebbu I think about a book most of us read in grammar school called Brave New World by Aldous Huxley. And in that book there’s a drug called Soma and Soma has really all the things that most people want with none of the negatives. And it seems like we’re getting closer to that goal. And Ebbu is accelerating that. Are there still opportunities for investors to invest in Ebbu?
Dooma: You know right now there’s not. We did a seed funding round that closed in May, and we raised $2 million from outside investors. In early January we’ll be opening a series A round where we will be raising $9 million. We’re going to raise that entire amount from accredited investors, mostly individual investors. So if there are sort of accredited investors who are interested in coming on board in our next round, obviously would be interested in speaking with them. And the way our business plan is laid out is that it’s not… this may be our last funding round although it’s really hard to predict that in the future.
Matthew: In closing, how can listeners learn more about Ebbu?
Dooma: I think, we’re very much in stealth mode. So while I’m happy to do these interviews from time to time and give people a general idea about what Ebbu is. We haven’t put up a website. We haven’t done a lot of the sort of social media and such it would give people the opportunity to have a well rounded understanding of how Ebbu works and who we really are. So given that we’re a startup and we’re still gearing up, I think the best way to learn more if you’re interested is to visit our website. There is a sign up on the website. You can sign up. Well get your email. You can tell us what you’re interested in leaning more about and then someone from the team will reply. I think the middle of 2015 we’ll be going a lot wider. We’ll be putting a lot more information on the web, but for now it’s just not available because again we’re trying to keep things close to the vest until the product is ready to roll out.
Matthew: And can you just spell the URL for the people who are listening?
Dooma: Absolutely, it is www.ebbu.com. So it’s www.ebbu.com.
Matthew: Well thanks so much to Dooma Wendschuh, CEO of Ebbu or Ebbu for coming on CannaInsider today. We really appreciate it Dooma.
Dooma: It’s been my pleasure, and really appreciate you taking the interest and hope that we can continue this conversation.
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