Most Recent Interviews

  • Megan Stone
    Ep 331 – Insider Reveals How To Design a Cannabis Dispensary That Customers Flock To
  • Harold Han
    Ep 330 – The Startup Behind PBR’s Cannabis Drinks Is Opening the Door to New Possibilities…
  • Cyo Nystrom
    Ep 329 – Surging Interest in Cannabis Vaginal Health Products
  • Andreas Boeckl
    Ep 328 – The World’s First Cannabis Inhaler Is Disrupting the Wellness Industry
Browse All

Cannabis After Covid

7 ways the cannabis industry will change after covid-19 Read more
 

What is CBD

(Cannabidiol)? What is cbd cannabidiol See more
 

The Hottest Jobs

in the Cannabis Industry Read more
 

 

Ep 285 – Hemp is Disrupting This 654 Billion Dollar Industry…

melissa jochim high beauty

Hemp and cannabis are getting ready to disrupt one of the biggest industries in the world: beauty and skincare.

Here to tell us about it is Melissa Jochim of High Beauty, a cannabis-infused cosmetics brand that’s hitting shelves in stores across the world, including the multinational beauty chain Sephora.

Use promo code “Insider” for a discount on your purchase at https://highbeauty.com 

Key Takeaways:

  • Melissa’s background in cannabis and how she came to start High Beauty
  • An inside look at High Beauty and its mission to make canna-beauty products mainstream
  • Current perceptions surrounding cannabis in the beauty and skincare space
  • How hemp benefits the health and appearance of our skin
  • The different products High Beauty now has to offer from masks to moisturizers
  • A breakdown of the chemistry involved in creating cannabis-infused cosmetics
  • Where High Beauty is available for purchase, including Sephora and Macy’s
  • How Melissa sees the canna-beauty market evolving over the next few years
Click Here to Read Full Transcript

Matthew: Hi, I'm Matthew Kind. Every Monday, I 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 cannainsider.com. That's cannainsider.com. Now, here's your program.

There is a massive industry that has been around for centuries or longer, and hemp and cannabis are getting ready to disrupt that industry. What industry am I talking about? Beauty and skin care. Here to tell us more is Melissa Jochim of High Beauty. Melissa, welcome to "CannaInsider."

Melissa: Well, thank you. I'm excited. I love talking to you. I've had great conversations and look forward to one today.

Matthew: Great. Give us a sense of geography. Where are you at in the world today?

Melissa: Well, I'm at the High offices in Santa Rosa, California, in Northern California, just Northeast San Francisco in the wine country.

Matthew: Oh, that's a great area. Okay. And what is High Beauty on a high-level?

Melissa: You know, I think of High Beauty, and we are skin care and serious skin care, you're go-to skin care. And we're actually working with seed derivatives from the cannabis plant because they're jampacked with antioxidants and nutrients and have so many different benefits. So, that's what I would say we are, high-level.

Matthew: Okay. And can you share a little bit about your background and journey and how you got both into the beauty space and started High Beauty?

Melissa: I've been in the beauty industry for 32 years, and that's a long time. I'm 52. I grew up in the world of hair salon, a beauty salon. My mom owned a hair salon, and I swore I would never get into the beauty world. And it's crazy, I went to school, I studied chemistry and had no idea what I wanted to do with it. I thought I was actually gonna fly the space shuttle. And needless to say, that did not work out. And straight out of college, my first job was actually with Robert Tisserand, and he's the father of aromatherapy. I mean, this was before there was even a term aromatherapy, and that's where I went, "Oh, aha, this is why chemistry's in my life and why I formulate." And I'm one of those crazy people that was working with terpenes when I was 21, 22 years old and had an understanding of that level of ingredient.

And it kind of, you know, led me through my path. I actually worked for 13 years with some of the major brands that are found in the natural products world around the world. You know, I have 5,000 different formulas in markets still at this point, and brands like Avalon and Alba and Beauty Without Cruelty, and a lot of these brands were brands that were really doing things first. You know, Beauty Without Cruelty was the first to really bring to mind that, you know, products were actually tested on animals and that you look at that today, and today, that's an expectation from consumers that their products are not tested on animals, and even so far as animal ingredients aren't used in their skin care products. You know, those are just some of the key brands that kind of led me along the way.

We were the first with Avalon to actually use an organic base instead of water. Most products are made with water and, as you know, water, I mean, has great, you know, great value when you drink it, but it doesn't have a whole lot of benefit to the skin. So, we started actually working with bases that were organic aloe juice or organic lavender hydrosol. And again, that was like a first, and we worked with ingredients that were very prominent and well known in the natural world for supplements or food like CoQ10 and vitamin C. And it just...it gave me this kind of entrepreneurial spirit because my early years, those first 13 years, I really was working on 8 brands at once. And that constant, you know, that excitement like launched something, moved to the next. And, you know, that was my early history. I'll kind of stop. I'm blabbering away, telling you my whole life.

Matthew: No, no. That's great. Well, give us an idea just how big the beauty and skin care industry is?

Melissa: Oh, it's crazy. I mean, it's one of the largest, you know, growing percentage-wise annually. It's almost 2% in gross. But, you know, at this point, you know, it's a $654 billion industry globally. And I mean, you think of that and you look at some of the numbers even around cannabis and that market and the global market and how we've got this overlay of beauty and cannabis, and I mean, it's just unbelievable to think of, you know, just even capturing a portion of that market, quite large numbers to be able to tap into.

Matthew: Wow. That is enormous. Okay. So, what are the current perceptions in the beauty and skin care market around cannabis and hemp right now?

Melissa: You know, I think it is a trend that everyone's very excited about and I think there's a lot of willingness to try and experiment. I think that that's carrying over. I think that there's a lot of education that's needed. Most of the products that we see in market have really jumped on the CBD bandwagon. And I don't think people have a lot of understanding of the different ingredients that come from the cannabis plant, and CBD being just one entity, you know, one cannabinoid, and how many others there are, and even how many others ingredients there are available from other parts of the plant. So, I think a lot of education and knowledge is needed, but I see that consumers are getting more knowledgeable. There's a lot of brands educating. There's a lot of information out there, and it's just getting the consumer up to speed on what's available and why even use it? Why is it good for their skin? Why do I want this ingredient?

Matthew: Well, it sounds like you have a deep background. What did you bring over from Juice Beauty over now to High Beauty?

Melissa: You know, Juice Beauty was, you know, part of my history, when I left that the first round of brands, I really was like Juice Beauty was my next brand. I was partnered and actually the founding formulator. I was active at Juice Beauty at a very interesting time. It's when natural ingredients were becoming very prominent, like 2004. You know, Juice Beauty was one of the first brands that actually went on the natural set in Sephora. And this was, you know, back when Sephora only had 180 stores here in the U.S. And it was before its time. I mean, you know, I like to think a lot of things that I've been involved in are, you know, 18 months early. So, you know, working with Juice Beauty, Juice Beauty, I actually formulated using organic fruit juice as a base. I actually, I hold 12 patents on that chemistry.

And I think, you know, the key thing that came from Juice Beauty that's really a part of my DNA as a formulator is how can we do things naturally and organic and have them work and have...you know, be good for the customer. You know, the customer wants to use it again. You know, I think at that time Juice Beauty, when we launched it, really, people didn't have any idea if natural was gonna work for them. They were used to using, you know, cosmeceuticals and nutraceuticals and ingredients that were much more active. They didn't know how to read the back of a package and understand an ingredient listing and make their choices based on what the product had in it. I think that, you know, that's something that I've had as a part of me formulating forever, but really it's the basis of everything I do with High Beauty. Anytime I can use natural or an organic-sourced ingredient, I am, you know, beyond that, even our packaging and the sustainability that we do, our products are made with 100% solar power. You know, our forest stewardship partners, where we're not, you know, harming, we use no animal ingredients, of course. There's just so many things that really make up that, I think, I carried over from my years of work there.

Matthew: And what was the impetus to leave Juice Beauty and the opportunity you saw in High Beauty? Was there something that just made you feel like the time was ripe and ready to start then?

Melissa: You know, I was active till 2011 and actually sold my shares in that team and was no longer a shareholder in Juice Beauty, but I left really because I had an idea and I wanted to also kind of lead and be in charge of my own creation. And the brand that I actually launched upon leaving Juice Beauty didn't have a cannabis piece to it. It was Blossom Organics, which is an organic-based personal lubricant that's 510(k) filed. So, it's a medical device that actually can stand next to K-Y on shelf, but it's giving you a pH balanced natural alternative for women to use. And that product's still in market. So, that was really my next idea. There was a major white space needed there for a healthy alternative.

And I really felt that that was something that was needed in market. Beyond that, you know, I've always worked with cannabis sativa seed oil. I've always had it as an ingredient in my kitchen, even. You know, you look at hemp oil and hemp protein and hemp milk, I mean it's amazing as far as nutrient value. And I always had that in the back of my mind is, you know, these ingredients in my skin care to some extent, but never really a focus ingredient or an active ingredient where it's a go-to ingredient like, you know, women understand, customers understand vitamin C, they look for products with vitamin C or look for products with hyaluronic acid. They look for these key ingredients. And I really felt it was the time as the trend was coming into the forefront and people were a little more accepting of the ingredients that could become a go-to ingredient for healthy skin care.

Matthew: And why do you think hemp is an important ingredient for your product? I mean, what does it do that really makes it stand out compared to other active ingredients?

Melissa: You know, hemp is...I look at cannabis sativa, I'm working, as I said, with seeds. And the seed is, I mean, jampacked with nutrients. So, when you start thinking of the antioxidants, the vitamins, the minerals, the essential fatty acids alone, you know, I mean it's got your daily multi-vitamin, vitamin A through E, you know, beta carotene. It really is an ingredient when you look at cannabis sativa seed oil, that when you put it on the skin, its molecular size, it actually protects your lipid barrier of your skin cells. So, if you imagine, you know, the basal layer, which is the layer that actually our skin cells are born and they pop off, and then they're in this low level, they migrate to the surface of our skin, and literally dehydrate and fall off our face. So, when you're young, you know, you're 28 years old, 30 years old, you get a new face pretty much every month. As you age, you know, that process takes a little longer.

And, cannabis sativa seed oil is actually an ingredient that helps protect that with the barrier from that cell dehydrating. And the longer that cell is, you know, it's on your face and you can keep it happy, the better it looks. You know, it gives you a beautiful face forward. So, when I look at...it's more than just cannabis sativa seed oil, though. So, you know, I'm not just filling a bottle with hemp oil and it would be really heavy on your face. It's got a large molecular size. It's, literally, I balance it out with like a whole mix of other plant oils, everything from sunflower to argon, to coconut, to red grape. I'm mixing and balancing it so that there's different sizes of oil, so you get really, really good absorption, and it's a product that feels good and wears well.

You know, I get as much possible of my cannabis sativa seed oil in each product. Obviously, my oil is the most, our High Expectations Cannabis Facial Oil has 32% seed oil in it. And then my moisturizer only has 20% in it, so that it's a little lighter wearing. It emulsifies and it really allows me to put other ingredients, like vitamin C and CoQ10 and other key ingredients, hyaluronic acid, things that are needed for healthy skin. But when you look at like my cleanser, hemp seed oil isn't the most important ingredient. It's an aloe-based formula. So, I'm working...there's a whole mix of bioflavonoids that I work with that are in there. You know, it's a different chemistry. So, each one of my products has a different amount of the cannabis sativa oil based on what I'm trying to achieve as a benefit or end result.

Matthew: Okay. And, you know, with your chemistry background, how do you leverage that day-to-day when you're going about doing your work? It sounds like it's really helpful.

Melissa: You know, it's a part of our brand DNA of all the brands that I've been a part of just because I am the one making what goes into the bottle. And I think there's a different conversation that's had. I mean, there's a reason for every ingredient that I put in. And a lot of times, you know, brands, beauty brands are just, you know, they're made, it's not the founder that's actually making the product, they hire people in to do that. And you know, my vision, it starts with every ingredient all the way to how the bottle looks, the carton looks, to the shelf display looks, to how...you know, what we wear when we meet stores, to our name tags and crazy things like that. But it starts at that most individual little ingredient that's in the bottle. I end all my formulas, when you read my ingredient decks on the back of the box, every formula ends with lemon balm, which is melissa officinalis. So, that's my kind of signature on all of the different formulas that I do.

Matthew: Okay. What do you think the other beauty companies in the space are getting wrong about hemp and cannabis, if anything?

Melissa: You know, I wouldn't...I think that there's room for everyone, so I'll kind of start with that. And I think that what's really happened is we're seeing such a trend towards CBD that we're forgetting about all of the other key ingredients that the plant has to offer. Again, just being one cannabinoid versus, you know, the hundreds available. Beyond that, you know, acknowledging all parts of the plant, the seed, you know, you look at the seed oil, you look at the seed milk, you look at the seed proteins, they're amazing ingredients for skin care. So, I think there's been a mad dash for everybody to, you know, market a brand with CBD. And I think that, you know, I'm kind of over here, you know, jokingly like the Trojan Horse over on the other side, coming into shelf space with something that I feel is really lasting. Working with the plant that's not, you know, just a trend ingredient, but that we're really focused on the end result and we're a serious skin care, a lasting skin care brand. I mean, I'm literally, you know...it's a brand that I hope to see on shelf 20 years from now.

Matthew: Now, let's go over some of the products you have. Because you've talked about a few High Expectations, but you have some more, just give us a quick run through this. Summarize each one, if you would.

Melissa: You know, we launched in market with our two, I call it our a.m. and our p.m., and High Expectations is our Cannabis Facial Oil. And it's really unbelievable, I mean, it's all these beautiful oils, 32% cannabis sativa seed oil and vitamin E, and it absorbs... I get emails all the time where people are like, "This is the best yet, you know, formula-wise," and, you know, it really helps your skin be replenished and helps really, I would say, repair it overnight. Because, again, when you wash your face at night, that's one of your most important steps. You would end with the Cannabis Facial Oil because your acid mantle or your barrier, your protective barrier on your skin is actually rebuilding itself overnight. And this is critical. This gives you all those vitamins and nutrients I spoke of and fatty acids. You know, that's more of a night product.

You're gonna find that people can also use it morning. Some skin needs a little more of a boost, especially in the dry winter months. High Five is, you know, the other product we launched with, and our High Five is our facial moisturizer. And, like I had said, it's 20% cannabis sativa seed oil. And, I named it High Five because it's like give yourself a high five because you're giving your skin everything it needs. It literally gives you all the benefits, you know, it's going to help calm inflammation. It's going to balance your skin, it's adaptogenic, so it's going to help balance your skin. If your skin oily, it's going to give you just what you need. If it's dry, it's going to give you a little more. It's going to protect your skin with antioxidants. And, of course, it hydrates and replenishes. You know, it's your daily multi-vitamin. That's what I would say.

Matthew: Okay. Yeah.

Melissa: And then, we actually don't have a big line-up. You know, I'm a person that it's more the essential, you know, that's your a.m. and p.m., you know, moisture. And we have a cleanser, which is a foam, and it's really rich in the bioflavonoids. It's gonna remove makeup and it, you know, hydrates. You don't feel dry after you use it. Excellent if you're shaving, works for a great shave foam. And then we have our eye gel, which has been kind of amazing. We really have quite the following and buzz about it because most eye products are creams, and this is a gel. So, it's really...it's instant hydration, it's cooling, it helps, you know, de-puff. It's going to help you with those, you know, puffy under eye bags. And again, it's really rich in the seed oil and bioflavonoids. And then the last step is really those are your daily steps.

And then, on a weekly basis, as I spoke of all those cells falling off your face, it's really important to exfoliate. So, we have our peeling mask, and our peeling mask is a mask that has all of the different exfoliants. So, it has enzyme, it's got fruit acids, and it's got physical, like, little actual bamboo. So, you're going to get a really good exfoliation so that you have a nice smooth surface and it purifies the skin. And it's just your kind of your weekly upkeep. So, that's really the line-up. It's not...you know, I call them funny names, like High Priority is my cleanser because it is your highest priority next to sunscreen to wash your face every night. And our eye gel is, you know, High Eye-Q, and then High Maintenance is our peel because it really is your...it maintains...it's that weekly maintenance that you need.

Matthew: So, you know, people might still visualize hemp oil being kind of this thick oil. And you said, you balance it out with other oils to make it a little gentler because it's kind of a heavier or a larger molecule. So, is it truly then a misconception that hemp will make your skin oily or is that total...that's not true at all?

Melissa: You know, it's funny because the first thing you do is if you talk to someone that has acne or oily skin, they're going to say, "Oh no, I'm never gonna put oil on my face." And it is really, lipid loves lipid and cuts lipid. So, if you imagine you have oily skin and you try to use water to clean or to pull that oil off, the water and oil don't mix. So, if you actually wash your face with something or use something with oil in it, that's the best way to actually balance your oil production. A lot of times people will use really drying ingredients thinking that they're gonna cut the oil production in their skin, and actually all they're doing is exasperating it, causing more sebum production. So, lipids love lipid, oil loves oil and oil cuts oil.

So, it's the best way for you to actually...to balance your skin and have that adapted. It's going to adapt to what your skin's needs are. Again, hemp oil, kind of a sativa seed oil, is a large molecule. So, if you were just to use, you know, that in formula, fill a bottle with it, it's not gonna be the best way because it's got to be balanced out with other oil sizes so that they become the synergy that actually can go to different levels within the skin and balance your complexion.

Matthew: Do you think skin is a window into our health, and what does that window tell us? I mean, I think about...I've seen people become very stressed out and get hives in a matter of hours and I've seen just other ways that our skin's kind of a barometer to things going on in our health. But sometimes I feel like in our society we think of like acne or psoriasis or eczema or any kind of skin condition as kind of an effect. But, really, it's kind of a symptom of something else maybe going on elsewhere. What are your thoughts as kind of...is skin a window into our health?

Melissa: Well, definitely skin is our largest organ. It's also our first line of defense. So, it's going to be first to literally show those imbalances that happen on an internal level. You know, I am a big believer, I've actually worked with so many different people on, you know, how to get, you know, even clear skin, and it never is just skin care products. It has to do with what's happening on the inside. A lot of, you know, when I was an aesthetician, actually, a lot of the client I had were, you know, going through cancer treatment or were people with acne or key issues. And I had a very unique clientele and allowed me to like work with my formulas, but my intake form was always on their inner well-being. Like, what supplements do you take? What's your diet? How is your bowels, your digestion?

And those were the questions that led me to a much better way from nutrition on the inside and then skin care on the outside. So that, again, you reach that basal layer from both sides. You know, there's actually zones on the face where you can look at different areas or on the body where people will have acne and it leads to different, you know, parts of their body or different organs. You know, you look at the chin, and the breakouts around the chin and the jawline, and they're most often hormonal. You look at the cheeks and the nose, it's most likely food allergies or food intake or overabundance, and in certain diet, you know, different things. You know, a lot of times you look at the rest of the body too, it's imbalanced. You look at fatty acids, is someone taking fatty acids on a daily basis? Are they taking probiotics to balance digestion? Are they extremely stressed? Are there hormones? Do they need some B vitamins to balance out their hormones? There's so much more to what maintains that healthy, as you say, window. You know, really that look and feel, I think, your skin is first.

I mean, think of how many people have dark circles and a lot of it can be hereditary, but a lot of it is also intake stress. You know, there's so many different ways that you can handle things on an internal basis first. Water, exercise. So, no, I agree with you totally. The skin is a window to our inner well-being.

Matthew: Where are High Beauty products available right now?

Melissa: Oh, I know, I think my last conversation with you was we were just starting and now it's, you know, crazy. We are in the U.S., we're also all over Canada, and we're actually in Europe. So, currently we're in the U.S., we're selling at Macy's, Urban Outfitters, Anthropologie's, sephora.com and, of course, on our own website. Canada, we hit Canada by storm. I'm so excited. And the Bay, we're actually at the Hudson's Bay, we're at Indigo, we're one of the first brands to actually be chosen to go on the shopping choice. And we just got our approval for Shoppers Drug Mart. So, Canada, beginning of the year you're gonna see us quite a bit. In Europe, we've partnered with Douglas, and we've launched in Germany, and we have a rollout plan for five additional countries throughout Europe, including the UK and France and some others. So, a lot happening in the first part of the year. But for now, there's a lot of places that people can actually find High on shelf.

Matthew: Okay. And where are you in the capital-raising process?

Melissa: Oh, I laugh. You know, the capital, it seems like that's a never-ending process than we... You know, we brought in really our seed round in April of this year. It really allowed us to do the things that I needed to do beyond, you know, self-funding, and that was to build a team. We have a solid team of 10 people and really get all of the products I just spoke of. We have all of the products, domestic and international available, and some kits. And it really allowed us to get all of this distribution started in a very thoughtful way with the right merchandising and everything that we're needing. We just are going into our next raise. And it literally...I'm starting this process, it's just started in the last weeks, and we have a lot of our current investors. There's not that many of them, good friends and family around us, and we're going into our next raise in the spring to close in May.

Matthew: Okay. And for accredited investors that are listening, is there any way that you want them to reach out to you or are you full right now or...?

Melissa: No, I am always open to discussions. And the easiest way to reach me is just directly through email, melissa@highbeauty.com. And I'm easy to get, and if you have any skin care question, I'll help you with supplements, too.

Matthew: Well, I do have some personal development questions for you now, Melissa. Is there a book that's had a big impact on your life or your way of thinking that you'd like to share?

Melissa: Yeah, it's hard. I am an avid reader, and it's funny I say that because I haven't had time to read a book in the last year just because of how busy I've been. I spend most of my time writing brochures and formulas. My mind has been vamped but, you know, I think back, there's two books that probably one was really pointed in a different way and you probably can't even find the book at this point, and it's the "Mutant Message Down Under." And it was a book about a woman that went into the Australian Outback and she had a transformation and was really became one with the aborigines, you know, the people. And she actually came out and wrote a book about it, and it was very, very much something you should not do because their culture is that things are passed on verbally in stories and it's not something to be shared with the outside world. And this was really the last hold out of, you know, truly untouched culture. And that book was something that made me look at like ethics and just how you go about, you know, are you in ethic or out ethic in everything that you do.

And to have an experience like that and then to have it become something that is not in ethic, ethics is something that I kind of look at everything I do on a day in and day out basis, and just make a check and keep in line that you're in ethic from business to personal, across all aspects of your life. And, you know, the other big book I think of is Richard Bach in "The Bridge Across Forever." And I don't know if you've ever read that book, but he, literally, each choice he makes leads to a different parallel universe in his plane, he's the pilot, flies in and out of these different...from choice to choice leads to different lines and parallel thoughts. And it's another thing that makes me think daily of being mindful of all your choices and where they're gonna lead. And you know, you look back on where would a different choice have taken you, but you've chosen a path, and that choices lead to the universe being abundant. So, I think those are my two big ones.

Matthew: Great suggestions. I hadn't heard of those. Those are great.

Melissa: I don't think you can get "Mutant Message Down Under," in all honesty, I think that it was really banned. I think people really boycotted it. So, it's one of those things that, you know, the story itself is the story... Anyway, it was an interesting book but I doubt you can find it. If you do...

Matthew: I've got to read it now because it's forbidden. If it's forbidden, I must see it. What do you think the most interesting thing going on in your field besides High Beauty is right now?

Melissa: You know, I love seeing like the clinical evidence and different...just the clinical side of what cannabis can do and all the ingredients that, you know, are available, kind of catching up with the market. You know, I think that there's a lot of ingredients that flooded the market and now we're starting to see some amazing, you know, results as to what some of these ingredients and other ingredients from the plant can do. You know, also just that there's more checks and balances so that consumer safety is top of mind. You know, I think that we're seeing that actually come into fruition. It's not as much the wild, wild West in a good way, though, where it's, you know, we're not limited, but we're also paying attention to what's good for our customers.

Matthew: What is one thought you have that most people would disagree with you?

Melissa: Oh, you know, I think that people often... I'll be like, "It's going to be. If you visualize it, it's going to be." And I think that that's kind of how I've been my whole life is creative visualizer and it's like, "It's going to happen." I believe that, you know, the universe is abundant and we create our world. And a lot of times I think people are just like, "You've got to be crazy." Like, "Really, that's going to happen?" And I'm like, "No, no, it's going to happen." So, I think that's where I, most often, get people thinking I'm a little nutty.

Matthew: Now, I remember the Wayne Dyer quote, "You get what you think about, whether you want it or not." So, be careful what you think about because it's probably gonna manifest.

Melissa: No, it's true. And I wish that, you know, I could have known some of that when I was younger. As you get older, you're a little more clear on what you're wanting.

Matthew: Now, you know, I'm circling back here to your High Five...when you're talking about your product name, High Five, I was like, "Gosh, you know, I used to give a lot more high fives." If I were to look at my...you know, literally how many high fives I give throughout the ages, it probably peaked in my late teenage years to early 20s. Why do we stop giving so many high fives?

Melissa: I don't know. I think that you get a little caught up in day in, day out, and we forget to really be grateful for everything around us. I think a high five is really like, wow, like, you know, you're acknowledging something well done or something that's just amazing and great. And I think that we do need to give a lot more high fives and acknowledge the things in our lives day in, day out that are so wonderful. And maybe next time you and I meet each other, we should give each other a high five.

Matthew: Give each other a high five. Yeah, I might do a high 10.

Melissa: Yeah. Yeah, high 10. That might be actually...I'm going to use that one. That might be a product.

Matthew: Great. Well, Melissa, thanks so much for coming on the show. Really appreciate you educating us. I mean, this market is absolutely enormous and so cool to see that you're making inroads here. So, we'll watch this closely. For listeners that want to connect with you, you gave your email already, and can you also give out your website for people to find it?

Melissa: Yeah. Our website is highbeauty.com, and there's a lot of information on there, even on the science and skin and our blogs. So, definitely check it out.

Matthew: Well, great. Thanks, Melissa, for coming on the show. We really appreciate it.

Melissa: All right. Well, thank you for having me, and I will talk to you soon.

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 cannainsider.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 cannainsider.com/trends. Have a suggestion for an awesome guest on "CannaInsider"? Simply send us an email at feedback@cannainsider.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. Emotional consideration may be provided by select guests, advertisers, or companies featured in "CannaInsider."

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" episodes soon. Take care. Bye-bye.

 

Ep 284 – Building A New York Hempire

eran sherin urbanxtracts

In today’s ever-evolving hemp and cannabis space, Eran Sherin has set out on a mission to empower farmers, processors, manufacturers, and developers through a unique, New York-based hemp ecosystem known as urbanXtracts.

Learn more at https://www.urbanxtracts.com 

Key Takeaways:

  • Eran’s background in cannabis and how he came to start urbanXtracts
  • An inside look at urbanXtracts and what the company offers as a seed-to-sale hemp service provider
  • How urbanXtracts was awarded licenses to grow and process hemp in New York
  • Why Eran chooses to work with contract farmers instead of growing his own plants
  • How urbanXtracts is converting a former prison into an extraction facility where the company will help in providing jobs to residents of Warwick, NY
  • The types of products urbanXtracts provides, including raw materials, crude hemp oil, and isolates
  • Eran’s philosophy behind his company’s collaborative, WeWork-style environment
  • Where urbanXtracts currently is in the capital-raising process
  • How Eran sees the hemp market evolving over the next 3-5 years
Click Here to Read Full Transcript

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 cannainsider.com. That's C-A-N-N-Ainsider.com. Now, here's your program. Many new business models are emerging in the cannabis and hemp ecosystem. Here to tell us about his Hemp Service Provider is Eran Sherin of UrbanXtracts. Eran, welcome to "CannaInsider."

Eran: Thank you, Matt. Good to be here.

Matthew: Give us a sense of geography. Where are you in the world today?

Eran: I'm in UrbanXtracts' offices in Midtown, Manhattan. We're on the corner of 39th and 5th Avenue. It's a rainy day here today, and that's where our office is. That's where I am. We actually grow upstate, but we operate out of our facility here.

Matthew: Okay. And I'm an Edinburgh, Scotland where it's 4:00 p.m. and pretty much already fully dark. So, what is UrbanXtracts at a high level? Help us understand that.

Eran: At a high level, we're a service provider. And what that really means is whether you want to grow, process, develop, or market, we've got business models that engage you and enable you to get into the industry.

Matthew: Okay. Can you share a little bit about your background and journey and how you got into the cannabis space and started UrbanXtracts?

Eran: Sure. I've been an entrepreneur since I was a teenager, and I've had two successful technology startups in the hotel technology space. I've also been a hotel developer. I've developed two boutique hotels. And I was actually working on a concept of a new glamping resort where we wanted to integrate a farming initiative into the concept. And through researching different farming opportunities, I came across Governor Cuomo's industrial hemp program in the State of New York. And I found it very intriguing at to learn about it, and so I applied to obtain one of the licenses when they first opened it up to private businesses. And I was very fortunate to receive one of a few combined licenses, which are licenses that allow you to both grow and process.

Matthew: Okay. Interesting. And where are you from originally?

Eran: Well, I grew up all over the place. I was originally born in Israel. However, I grew up in Australia and South Africa and I got to the United States in '92. And I had a great experience of living both in Texas, and California, and Florida. But I've always found New York to be home, and I've always resonated with the city and the state now. And I feel very lucky to be living out here.

Matthew: Yeah. So, what was your experience like with the American culture when you first landed here? I mean, I always like to know like what's that like? What were you kind of not prepared for that kind of shocked you?

Eran: Look, you know, growing up in Australia, you know, America being the land of opportunity, and especially, like I said, I've been an entrepreneur at heart from the very beginning at high school. And so, I was looking forward to coming here and seeking opportunity, and I've been involved anywhere from real estate to technology and now into a new emerging industry, cannabis, which is very exciting.

Matthew: You know, it seems like, I always wanted to have like a very liberal immigration policy because immigrants build so much of our economy. It's amazing. I think about like Surrogate Brin, and Elon Musk, and all these guys, and it's crazy how immigrants build stuff. But then the second, third generation, we get a little lazy. I even think about like, you know, my ancestors came over from Ireland. They were a lot more industrious than I am. So, it's like what do you think that is, I mean, because you still have that in your head? Like, you came over and you saw opportunity. What is it that you saw that you said, "I can just jump in here and make a success of it?"

Eran: So, you know, first of all, this is one of the reasons why I resonate with New York because it's such an immigrant-driven city that allow people to come here and seek and capture their opportunity. I think, you know, one of the exciting things that I saw in this hemp/cannabis industry is that it's so early on. It's seldom that you find opportunities as an entrepreneur really that you could capture the infrastructure side of the business as opposed to, you know, on-top services of an industry.

And so, what excited me specifically about this industry and really for me, it was also a big transition being in technology, being in hospitality and migrating into a new industry and identifying with that, I think, embracing that identity. You know, I knew that I needed to do that if I wanted to be a leader and innovator in this emerging industry. So, really, you know, the opportunity I saw in New York was really building a company that can service the industry as an infrastructure.

Matthew: Okay. And I want to talk a little bit about that, what Hemp Service Provider means. Now, you just gave us a little high-level overview, but give us a little more detail on what that means. Like, if we were to walk into your facility and, you know, meet you there, just walk us around virtually what that's like.

Eran: So, as a service provider, what we want to do is really build a transparent and quality supply chain. And if we capture every aspect of that ecosystem, whether it's grow process, develop a market, and we're involved and engaged in all of those aspects of the industry, we can really create quality, create transparency, and create consistency in that supply chain, which I think is what we need to do to elevate this industry and to give it the quality that it requires to produce great products. And so, specifically, on the growth side, us as a company, we own and license exclusive strains, cultivars, that yield high amounts of different cannabinoids, whether they're CBD or other cannabinoids. And so that growth side, we enable farmers by supplying them genetics.

And we have different business models with farmers. We have some farmers that know what they're doing and they just want to buy genetics from us, which we do in the form of clones. So, we produce those genetics from other plants that we cultivate. We propagate and produce these clones. And so, farmers can either purchase those clones outright if they know what they're doing. Or certain farmers, we revenue share with them on a business model where we supply the genetics and they do their part of farming, and harvesting, and drying, and then we support them in selling.

And then we go further in certain areas and we create a proper co-operative where we share in the risk of the growing. And not only do we supply them the genetics, but we also supply them financial assistance throughout the growing season and then we share in the profits as we sell them. So, that's on the growth side. Processing, we process our own inventory that we produce with our cooperative farmers. We also toll process and revenue share with third party farmers that have produced biomass and want to increase the value of that biomass by processing with a partner like ourselves.

And, on the development side, again, we want to be a wholesale supplier. We believe that we don't need to take products all the way to shelf. We can enable brands and marketers to leverage off white-labeled products or leverage off our infrastructure to develop and formulate their own products within our processing and development center. And that's on the development side. And on the marketing, you know, at the end of the day, everything is all about sales. A successful business is about driving sales and having those distribution channels. And so, that's something that we're building and building with retail partners and distributors.

Matthew: Okay. This is kind of an interesting model and a little different. Do you feel like working with farmers in the way you do helps you kind of de-risk a bit and focus more on the big picture?

Eran: I think that's what we're ultimately trying to do, is there is tremendous risk as I'm learning more and more in farming. And, you know, so we wanted to work with farmers because, again, if we want to provide a transparent supply chain, we feel that we need to be engaged in the growing side of the business. We need to...you know, it all starts from the genetics, from the seeds, a plant coming out of the ground, us processing. At the end of the day, we get what's called a cannabinoid profile of our extract.

And so, you know, we want to manage what profiles we have so we can have the highest quality to put into our products. So we feel that we need to work with farmers. Plus, it's very important to understand that this whole hemp industry is really an agricultural initiative. This is all about farmers. This is all about the states empowering their own farmers with new cash crop opportunities and giving them an opportunity to prosper. And so, we want to be aligned with the state that's licensing us to do this.

Matthew: Okay. And how many plants total do you expect your harvest size to be or maybe kilograms, and maybe a bit better, or pounds?

Eran: So, our first year of harvest was in 2018, and we grew 36,000 plants. That covered just around 20 acres. This year, with the knowledge and experience that we had last year, we were able to scale up. This year we grew 100 acres encompassing 170,000 plants. So, that's how we've scaled up based on the experience, and knowledge, and education that we've received over the last couple of years.

Matthew: Okay. And so, I understand the State of New York put $10 million of funding in for hemp. Can you talk a little bit about where those funds are going and, you know, what you like most about it?

Eran: So first, I think it's important to... You know, there's about 30 states already that have a hemp program in place, and New York is one of the only states that's actually backed it with capital dollars to help grow and provide the infrastructure for the industry to expand. They've split the $10 million, half of it going into companies like ourselves that are building processing plants to help them with the capital support to build the infrastructure for the processing and get the equipment. And the other half is really in the knowledge and experience of growing it.

And the state engaged Cornell university to be an education hub and a resource and a data hub to gather information on what grows best, how can they best manage this industry as it grows. So, I think, you know, that commitment in New York State to the industry is very telling. And also, the other distinction with the program in New York compared to some of the other states is that it's highly regulated here, and we see that as an advantage because regulation will be across the board as this industry grows. And it allows us to really build our infrastructure with that in mind, that all, you know, the FDA regulations that are coming down the road, we're perceiving what that will be and acting accordingly today already.

Matthew: Okay. So, you have raw materials, crude, hemp oil, distillates, isolates, this is kind of interesting because you can see what's selling or where there's market interest and then just invest more in that piece as it grows. Is that part of the strategy?

Eran: Yeah. I mean, I think like any business, you see where the supply and demand is. We're growing this year our crop that's going to be dried and cared for that's going to be in a biomass format. There's demand for biomass. We're going to sell some as biomass. We're going to further downstream the rest and extract it into crude oil. There's going to be demand for crude oil. We will sell some of that, and then we'll further process that crude oil and refine it and have our distillates.

And there'll be demand for that. And, in some cases, we'll further distillate into what I would call customized oils based on customer needs, whether it's water-soluble, water...things of that nature, as well as putting it into white-labeled products and allowing brands and marketers to get into the game and leverage on what we're able to do. So, we try to de-risk throughout the whole cycle of improving the product and selling some often, and refining it, and taking it further downstream.

Matthew: You have like rework style collaborative setting. Can you talk a little bit about that and maybe some of the things you've seen grow out of it? Relationships with different farmers or different people, and what's kind of excited you about that?

Eran: So, similar to how we grow with farmers in a cooperative manner, and that helps to de-risk both ways, we wanted to do the same thing with development. Development of new products is all about innovation. And, you know, us being the infrastructure company, we want to provide the space and the opportunity for innovators to come in and leverage on the state of the processing and development center that we're building that will have the resources, and the space, and the labs to develop and formulate innovative products. And so, we don't see us doing everything, but we see us being an enabler and empowering others to leverage off the infrastructure. So, partnering with them, supporting them, and then ultimately really securing the distribution of our raw materials into various products.

Matthew: Okay. And where are you in the capital-raising process?

Eran: So, we've done a seed round and a friends and family round in the past where we're in early... In Q1 of 2020, we foresee ourselves doing our series A round. That's really when we also see ourselves opening up our processing and development center. I should note this, that we were very fortunate in the farming community that we grow in, which is in Orange County in a region called the Black Dirt Region.

The town saw what we're doing with farmers and understood that we wanted to build a processing facility, and they approached us that they have a former prison in the town that they want to repurpose into a business industrial park. And we were brought in as an anchor-tenant and that received some grants and funding from the town and county as part of an economic redevelopment project to convert this prison into an industrial park.

And so that facility is opening up in Q1, and we're very excited about that. It's a state-of-the-art facility. And once we've opened that facility, we foresee ourselves doing our series A round and really having a lot more credibility in the industry by having a facility that's built from the ground up that's very, very efficient in its cost structure, able to handle 2,000 pounds on an 8-hour shift. And we're able to scale up on a second and third shift cycle. So, we're very excited about those opportunities in Q1 coming up for us

Matthew: Well, some poetic justice in there. I mean, considering, you know, that very plant put a lot of people in cages, now that prison is being transformed for the production of the same plant. So, that's really cool. Did it take a lot of architecture and general contractor work to get the insides of the prison suitable for everything you're doing?

Eran: From a construction perspective, we were actually very surprised how solidly they built these buildings back in the 30s. Some of them were very structurally sound and actually complimented the efforts that we needed to make this into a modern state-of-the-art facility. But what's interesting is as we learned more about the history of this place, we really learned that this building was originally built, these buildings in the prison were originally built as a rehabilitation center, as a school that was actually from an organization that was backed by Eleanor Roosevelt, where, in the 1930s, kids that couldn't find themselves, maybe turned to crime, were sent up there and were given an opportunity to learn new skill set and used the barn that we're converting into a processing facility as a place to learn farming practices and so on.

And so, there was a real social justice component to this facility to start off with. And then over the years, it eventually turned into a prison, and we have the opportunity to really bring it back to its purpose by providing jobs, providing opportunities for people and bringing some of that social equity component back to it.

Matthew: Okay. How do you see the market for hemp evolving over the next three to five years, not just in New York, but just, you know, on a national level, and even on global level?

Eran: So, I think, as I said, we're at the very beginning of the cycle. And, most people are turning today into CBD cultivation because the footprint can be very small and the profits seem relatively high right now. But as the infrastructure for growing and processing this plant expands, you know, the migration into other exciting components of the plant, really on the fibre side, we're really growing. The infrastructure will be there, and there's so many industries that could really be innovated and evolved using the byproducts from the fibre, whether on the fabric side or whether in construction material on the hard side. I think that's very exciting opportunities that will emerge.

Matthew: Okay. I'd like to ask a few personal development questions, Eran, if that's okay. Is there a book that's had a big impact on your life or your way of thinking that you'd like to share?

Eran: So, I'm actually re-listening to a book I read years ago called "A New Earth" by Eckhart Tolle. I read it years ago. It's a great book. I read it years ago and now actually listening to the audio version of it. And, you know, so often with these books, you know, as you read it a second or third time, there's so many other insights. And, you know, for me that's been a very impactful book and guidance. And really, again, for me, you know, being an entrepreneur and being very passionate, you know, my business is my life in a way. So the way I create business models and the way I create a partnership with people is really the essence of the business and of who I want to be. So, having, you know, that book and being reminded now with some of those tools is being very good for me.

Matthew: And his voice kind of lulls you into a state of calmness. It's like a cross between Stephen Hawking and Yoda.

Eran: Yes. I think that's a skill that you need to learn. And once you, you know, obviously tap into that space, you now naturally kind of resonates that way.

Matthew: What do you think the most interesting thing going on in the hemp and cannabis industry is apart from what you're doing?

Eran: I think, you know, what I've noticed as I've traveled, you know, throughout the country and gone and attended various shows and expos and education, I've really got to see how people's lives are changing, how people are finding purpose, how people have been in a different industry and are now finding new identity, new passion in this industry. How people are finding jobs that they feel comfortable, that's part of their lifestyle. And so, I've really enjoyed seeing that, and also, in my business, providing those opportunities. So, that's been, for me, very, very telling about, you know, how meaningful this industry, not only from the value that the products provide, but also that this industry is really, you know, giving people purpose.

Matthew: Yeah. Here's a Peter Thiel question for you. What is one thought that you have that most people would disagree with you on?

Eran: Putting the farmers first. You know, that's something that I've always had a hard time from an investor perspective, you know, really showing them that. A lot of people look at our business model and say, "Hey, you know, you could just buy this raw material much cheaper, and you don't need to get involved that much on the growing side." Again, I've always seen this as an agricultural initiative is about the farmers.

It is about seed to market. It is about transparency, and the way to do that is really to partner and empower farmers. And I think that's being something that we've held strong and continue to do and learn from too, you know, working with farmers. I learn every day about, you know, what can work and what can't work and how we could better, you know, be a service provided to them, but putting them first as being that an important part of our evolution.

Matthew: It sounds like you get out and, you know, you see a lot of New York State. Is there any place, other than New York City, that you consider kind of like your happy place, maybe in the Hudson Valley, or upstate, or...that you consider like, "Hey, maybe the public doesn't know so much about this area of New York State, but it's really pretty and worth visiting?"

Eran: I think the Catskills has a lot of opportunity. You know, also, with my background in hospitality, the Catskills in the 30s, 40s used to be a big destination, a resort destination, especially for the summers. So, you know, with prices so high in real estate and probably everywhere other than the Catskills, I see a lot of opportunities there. And again, this industry, this hemp industry is revitalizing some of these neighborhoods and giving them opportunities to prosper and bring in innovation as far as what attracts people to come out to these places. So, I think the Catskills is underrated. It's got some opportunities still left in it.

Matthew: Yeah. It used to be super popular way back when, and they had beautiful resorts up there and everything. And you just don't hear much about that anymore.

Eran: Yeah. That's correct. But I do think that those can reinvent themselves, and I do think that this industry bringing life to some of these regions will help with that.

Matthew: Eran, as we close, can you tell listeners how to find out more about UrbanXtracts and connect with you online?

Eran: Sure. So, the best way to find out about us is really to follow us on social media. We post really good content and educational content and our progress on how we're doing, whether it's growing, processing, developing, or marketing on Instagram, and that's UrbanXtracts. That's U-R-B-A-N-X-T-R-A-C-T-S on Instagram and also on our website, urbanxtracts.com.

Matthew: That's great. Well, good luck to you and everything you're doing. I'm really excited to see the pictures of this prison project and how you're going to get it fixed up and ready for hemp.

Eran: Well, Matt, we look forward to talking to you again, and maybe the next time we'll do it face to face at the processing facility in Q1 when it opens up.

Matthew: Oh, that sounds great.

Eran: Wonderful. Thank you very much.

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 cannainsider.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 cannainsider.com/trends. Have a suggestion for an awesome guest on "CannaInsider," simply send us an email at feedback@cannainsider.com. We'd love to hear from you. Please do not take any information from "CannaInsider" or it's guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments.

Promotional consideration may be provided by select guests, advertisers, or companies featured in "CannaInsider." Lastly, the host or guests on "CannaInsider" may or may not invest in the companies 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.

Ep 283 – The “Pot Com” Bust: Almost Over or Just Getting Started?

andrew zatlin southbay research

Have we seen the last of the Pot Com bust in cannabis stocks? Or should we expect to see more downside ahead?

Here to help us answer this is Andrew Zatlin of SouthBay Research, the cannabis industry’s rising leader in unconventional investment data tracking.

Learn more at http://www.southbayresearch.com 

Key Takeaways: 

  • Andrew’s background in economic forecasting and how he came to start SouthBay Research
  • An inside look at SouthBay Research and its mission to provide best-in-class macroeconomic forecasting and actionable insights
  • Andrew’s insight on cannabis stock valuations and where we currently are in the Pot Com bust
  • The vice index and why it’s important to the cannabis industry
  • Shocking similarities between alcohol, gambling, and cannabis
  • Reasons why cannabis might start looking like Kentucky’s whiskey industry
  • The types of businesses that Andrew foresees excelling in cannabis
  • When and how cannabis brands will begin to emerge
  • Andrew’s advice on how cannabis investors and entrepreneurs can best position themselves for the years ahead
Click Here to Read Full Transcript

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 cannainsider.com. That's C-A-N-N-A insider.com. Now, here's your program.

Is the pot combust in cannabis stocks over or do we have more downside ahead? Will cannabis be left with only two huge cultivation and extraction companies similar to the whiskey industry? Here to help us answer these questions is Andrews Zatlin of South Bay Research. Andrew, welcome to CannaInsider.

Andrew: Thanks for having me, Matt. Hello, everyone.

Matthew: Give us a sense of geography. Where are you sitting right now?

Andrew: I'm in Silicon Valley, actually just North between Silicon Valley and San Francisco.

Matthew: Okay. And what is South Bay research on a high level?

Andrew: So South Bay Research actually got started a few years ago. During the recession, it was pretty evident that we had a clash between obvious feet on the street information. Everybody could see the bubble happening in the real estate market, but then you had Wall Street talking a totally different line. And what I found was that we had an opportunity to bring new information. The internet was bringing new data points, fresher data points. And I brought that to Wall Street, it was bringing main street to Wall Street. It was kind of a moneyball approach. In fact, the "Wall Street" journal has called me the money ball of economics. But it's not so much, you know, coming out with this wonderful rainman way of seeing things. It's more the way companies operate, the way Wall Street companies operate. I was able to come to them and show that they were too conventional and too mainstream in the data that they were using. The way we were measuring the economy was really just out of step with the way the economy had grown. You know, where we were buying, how we were buying, what we were buying dramatically changed and still changes. But Wall Street was using these data points and this frame of reference that was literally dated to post World War 2, and it still goes on. And so, that's the interesting thing is as always South Bay, what we're trying to do is share alternative data but not alternative data in the bizarre sense like pigeon guts and reading tea leaves, but more actionable, better data that's just not in the mainstream, defined as mainstream and conventional. And that's obviously what people wanna know, is what's really going on because the information I'm getting is either too late or out of step or somehow it's warped. It's not in step of what the real the economy is doing.

Matthew: Yeah. Yeah. And we were talking about the show, you know, kind of the corporate stodginess that exists out there and, you know, a lot of businesses just try to get, like, a slight evolutionary edge when there's so much room to make giant leap forwards if you expand the context of your thinking. And I wanna jump into that. But before we do, can you share just a little bit about your background and journey before starting South Bay Research, what you were doing?

Andrew: Oh, yeah, sure. So, I grew up very entrepreneurial and I was always fast. I'm a numbers guy, but I think numbers tell astory, which then becomes a call-to-action. I thought, originally, being an economist would be the best way to go. I'm very analytical, I see patterns, and then I would show what to do. But I was always entrepreneurial, taking that information, moving it forward. I found that being an economist tends to be more stodgy and more backroom than not. So, I ended up getting an MBA from University of California and then jumping into Silicon Valley back in the 90s, back in the heyday of the internet. Got to ride the internet for a while, made a fortune, lost a fortune, made a fortune, lost a fortune. And essentially, what I learned is that history does repeat itself. And even today we're no longer doing the hardware plays. We're not doing software and SAS, but it's the same business models emerging over, and over, and over. I mean, when you look at, for example, WeWorks [SIC]. What is WeWorks? Is this suddenly we're taking office space and subdividing it to people who can't afford to have a receptionist and other backroom infrastructure? No, that's been going on for decades, hundreds of years. There's nothing new about WeWorks, but if you rebrand it, you sell it and then you get some capital into it, it becomes bigger and better. My take as we talk about cannabis and other things is that the same business models come up because they work. But at the same time, there has to be an evolution. And what happens during those changes in those evolutions is where the money gets made. And I think it's really interesting right now, some of the transitioning that's emerging in the cannabis market.

Matthew: Now, you've kind of coined the term the pot combust. Where do you think we are with the pot stocks or the cannabis publicly traded stocks?

Andrew: You know, I think that we're not through it yet. And I think the real death nail will come when cannabis is legalized nationally in the U.S. Right now, what you had was the hot money leaving. I mean, it's just common sense. We're talking about stock prices like Tilray and others that have fallen about 50, 60% this year. And when you take a step back, you still have these out of control P to E ratios and valuations. When you have companies that are trading worth billions of dollars and they're doing maybe $10 million of sales. This is hot money. This is one-to-one with what we saw in the .com boom and bust, out-of-control valuations and just a disconnect between true demand and supply, but it's even worse. Why haven't we come down to the bottom yet? Well, partly because the number plays are few and far between and so, there's only so many places can absorb the hot money. Look, we know this is gonna be big. We know cannabis. We're in the early stages of the cannabis business, whether it's CBD or THC, early stages. And there's gonna be winners, but we just don't know which ones are gonna be winners and there are only so many players. And so, the money's gonna flow in and that's gonna lead the stock prices to go up for a time. But as we've been seeing, you know, how many apologies can companies make for not quite making their numbers? And then recently the bigger, broader macroeconomic concerns, investors are saying, "You know what? What's it gonna take for this company to really succeed" And that's before marijuana gets legalized across the room. You don't have patents on cannabis, you just don't. This isn't like a router or a switch. And so, for me, I think this is sort of like the first phase, the .com. bust. This is the .com bust where evaluations return from their lofty levels to a much more reasonable level. Again, a lot of growth.

But recognize that a lot of this initial growth we've seen over the past couple of years was, I don't wanna say novelty, but it was just spending that came from underground to above ground. It's legal now. But there's only so much spending that's gonna happen for bud consumption, for flower consumption. There's still more out there. I think the reason that we're seeing this first phase, and we're gonna wait a little bit, is we're seeing a conversion also to how people are consuming. Aand I think right now the idea that I'm smoking a joint. Okay, we've kind of saturated that market for guys who are smoking joints. But that's not where the real play is. The real play is gonna be in the derivatives, the real play is coming to be cosmetics companies that put CBD into Vicks Vapor Rub, that kind of thing where you're no longer talking about, you know, 100,000 pounds of pot, you're talking about lot higher production being demanded. And so, I think the next stage will be big business coming in, wanting to legalized. They're already here, they're just not out of the closet, so to speak. But once that happens, once big business steps in, you're gonna see that transition. So the .com bust right now it's still, you know, a lot of the growers and investors starting to realize, "Wow, so supply is kind of endless and demand is not if you're just talking about, you know, recreational marijuana, so where do we go next?" And companies like Tilray and Aurora, they don't have an answer, really. But we're still transitioning.

Matthew: Now, a lot of people listening might call cannabis a vice, other people a virtue/ But more people are looking at it more as, you know, not so much as a vice anymore, but it has medicinal qualities. You have a vice index. What is that and why is it important?

Andrew: So I started the vice index. Again, going back to my starting point of what do people really spend money on? And so, what I started with was, if you look at these conventional data points, consumer confidence, consumer sentiment, they're going out and they're talking to literally 400 people. And every month, this big data point comes out and hedge funds move trillions of dollars accordingly because 400 people said, so. I found that if you go out and you track things like gambling, cannabis consumption, you're looking at something that millions of people are indulging in every month. And so, if you can track what they're really willing to spend their money on, a vice, then you're really putting your finger on the pulse of where the real economic situation is for consumers. Are you willing to go out and spend, you know, 10, 12 bucks on a pint of beer? If so, you've got money in your pocket. If not, then well, that's interesting. If you can't even afford drinking money, that's a problem. Same with cannabis. You know, for the most part, it's a vice. It's a discretionary spend. And I found that it cuts across every demographic you could talk about, rich or black, white, Hispanic, you know, women, men, old, young, everybody smokes. And so, by tracking that, you have a legitimate way to track a broader economy.

But what happened was over time, I came to look at cannabis as this massive business opportunity. I think everyone knows it. We're not all clear, you know, big, broad brush strokes. We know that there is a lot of money being spent right now to smoke cannabis, whatever form it is. But that is just the tip of the iceberg. Remember though, this has been around for millennia and it's been around not just for recreational purposes, but also for some kind of therapeutic purposes. The problem is we haven't explored that and we haven't explored that because it's been illegal. So we don't really know what it can and can't do. I mean, you're always gonna have those crazy claims, you know, it cures brain cancer. I once spoke with Tommy Chong and this was hilarious because, you know, Tommy and I were talking and he was mentioning that he had to return to cancer and words of the great comic Chong, you know, he took, you know, oil and "I just, you know, stood right up and, you know, used it on my prostate, man." So, you know, you've got that therapeutic inclination. We don't know what it's gonna do. Tommy swears that it is curing prostate cancer. We don't know what it can and can't do. Right now, can you imagine, given how much we spend on healthcare, if you come out as a pharmaceutical company with some kind of derivative from cannabis, that does create a cure. I mean, right now my mother, 80-year-old woman, uses CBD lotion on her joints. But she's got, you know, a mild form of arthritis and she swears it works.

So you do have opportunities here, and that's where the big spend is gonna go. And it's gonna go there predominantly because it's also patentable. You do an extract, you can patent that. If you right now go out and say, "I've got the best strain of Kush," come on, give me a break. Anyone can reverse engineer that. You can't really patent that. You kind of can, but kinda can and, you know, to be honest, consumers don't care. Most wine is sold at stores like Costco and Safeway and they don't really care what brand it is. The bulk of wine comes out the door, it's middle road wine because consumers really aren't that crazy. They're not fetishized. You'll always have the fetishists. You'll always have wine stores. You'll always have cigar stores for the pure hardcore Epicurean and indulging person will have that with marijuana as well. That's not where the bulk of the business goes. And that's not where the opportunities are.

Matthew: Circling back to the vice index, what is it saying right now? Like what kind of data with alcohol and gambling and cannabis is it telling us about, you know, where we are in the market cycle?

Andrew: So, Matt, the thing about the device index is it has this wonderful leading-edge, four months in advance. So this is just, I have this 25-year-old data and it's just so strongly correlated to just general spending. And right now, that data is saying the consumer's done, that there's no more growth for the next three, four months. We're going into holiday season, so what that really means is, for the most part, everyone's already budgeted for this holiday season. But when we come to January, device index is saying, put on a seatbelt, do not expect the consumer to show up in the first quarter. And that's a problem for our economy.

Matthew: Okay. Now, you've mentioned before that the whiskey industry is largely based in Kentucky and that you think that the cannabis industry might kind of move to one or two players. Can you talk a little bit about your thesis there?

Andrew: Sure. You know, I use the alcohol prohibition repeal as a great analog for what we're seeing because time and time again, everything that we're seeing out there in the cannabis market is exactly what we saw in the alcohol market. But there are some important distinctions. At the end of the day, though, we're talking chemistry. With distilling alcohol, it's chemistry. There's no barrier to entry. It's a pure scaling situation. With cannabis, it's the same thing. Could you imagine if our tobacco farmers just started growing cannabis? Can you imagine what the price would drop to? And that's literally the future. Right now, with tobacco consumption dropping, we subsidized tobacco farmers all day long. What do you think is gonna happen when you legalize marijuana growing production? The tobacco farmers are immediately gonna start looking at this. When we talk about that kind of analog, what happens? You're talking about just economies of scale, you're talking about basic economics, you're talking about production eventually concentrates because at the end of the day, there really is no patent here. It's just pure... On one hand, if it's alcohol, it's chemistry. With cannabis, I strongly believe that the heyday of flour has come and gone and we're gonna go to distillates because the producers, they can dodge the FDA requirements that there's no fungus, there's no mites, there's none of this, none of that. The farmers today have to throw away half the crop. Well, if you just focus on doing extracts, you don't have to worry about your crop being thrown away.

For the logistics supply chain, having a liquid that's concentrated is a lot easier to deal with and it's got a longer shelf life. And then if you're obviously a producer at some level of the end product, again, the liquid's much more desirable for various reasons. One of the main things that we're gonna experience over the next couple of years, the main driving force behind the economics of cannabis, will be quality control. It's the heyday of the consumer. In the old days and even today, what you see is what you get. If I go into my dispensary, they have their versions, their strains are, you know, is this is my favorite, you know, "Is orange gorilla in?" I don't know, maybe not. Well, how about this one? And, you know, there's this too much variation. We saw this with alcohol prohibition. Bathtub gin got its name because, again, chemistry, you can make gin. It's not that hard, but the quality control part's a little bit challenging. And so, bathtub gin became cocktails because you had to flavor it because it tasted like crap.

As you go forward, what happened was once alcohol was legal again, you had companies like Seagram's, Bacardi able to come back in and sweep the market because there was this history of quality controlled production. You knew what you were getting. California state recently did a test of a bunch of products here, cannabis products, and found that most of them, not part, but most of the things being sold today is having X percent THC, Y percent CBD. Dope. And it's not small differences. It's, there is no connection between what you're told you're enjoying and what you're really enjoying. That's not allowed going forward. That simply is not gonna be allowed because the consumer now has a choice. And so, the winning companies are gonna be the ones who emerged that say, "When you buy Snoop Dogg, Snoop Dogg is gonna guarantee that this has a certain quality-controlled process and is consistent." You see that with every controlled substance, also from the pressure. Again, FDA, the tobacco has to meet certain regulations. Alcohol has to meet certain regulations and it's tested. Today, those regulations really are not enforced in the cannabis industry. And so, that's where the big opportunity is, but then you get back to who has the ability to deliver that? Who has the ability to meet the tax requirements? Every step of the way, we're going to see changes that support big business coming in. And so, I look at this industry and go, "This is a time of change type of opportunity."

Matthew: Okay. You mentioned Bacardi and Seagram's. We don't have any real brands yet in cannabis. Some are starting to get some traction, but how do you think they will merge?

Andrew: Well, couple years ago, I had pitched that I was shopping around because I think the next stage is they'll continue to be celebrity-based [Inaudible 00:18:30] Because, again, go back to the fact it's quality control. It's not just a question of how much, you know, let's go to Bacardi. And this, by the way, this was happening in era where racism was around. You had, Bacardi was for a certain social class, Seagram's was for a certain social class. But once you tackle the quality control issue, branding came in. The cost... And so, today if you go out and you buy whiskey, oftentimes, what you're buying is just, you know, you'll have someone come out and say, "Oh, we've been making this for 10 years." No, the reality is this company is nothing more than a label. They went to a distillery in Kentucky and they said, "I want a whiskey that has the following properties." And, "Okay, well, we've got that alcohol. It's been around for a few years. Here you go." It's been around for a few years, but they just created bundled into this one package. And so, you have some marketing gyrations here where it can be played to be X, Y, Z years old, but, in fact, this company's only been around for two years.

This sells. People are easily sold to. So you're can get to this area where marketing that's not gonna step in and say, "I know that you want to have a good smoke or enjoy, you know, you're recreational marijuana user. Come over here.You're gonna have a consistent level of enjoyment. And oh, by the way, your buddies will like it too." Or your buddies might be urban, they might be country, they might be rasta. You're gonna have celebrities that will step out. We saw this with perfume. Britney Spears can do a perfume. Does she know anything about perfume? No. But she's got the tab. Kim Kardashian probably will come out with something. Point being, you're gonna see, I think celebrity branding cause it's easier. You see it already with Bob Marley's family has started down this path [inaudible 00:20:27] and that's a global brand. Holy cow. You know, that's a huge opportunity. You're gonna have, I think Snoop Dogg's already moving in. You're gonna have lots of opportunity, but it's all gonna come back to once you get the quality control issue tackled, then it's branding. And you're gonna have every step in this chain segment. And each is gonna have all the golf with or do offloads. Whiskey has basically two distillers or two distillers in America that basically make most of the alcohol sweet drink. It just do. Again, because that's the inevitability of economics. You have only so many cable channels that you watch, only so many news sites that you go to. It's the same thing. After a while, economies of scale. And plus, we're human beings. We only have so much attention span. It's easier to deal with, you know, a couple of companies. There's Lyft and there's Uber, on and on and on. We're gonna probably see something like that, but from here to there, there are opportunities. I'm getting to a concentrated market. Today we're in a very fractured market and it's artificially so because state of California, you can only make and sell within California. Colorado, same thing.

Every year, I've been going up to Portland and visiting various dispensaries there, interviewing managers and finding out what works and what doesn't. And what impresses me is the amount of approach to pure business standpoint. The amount of money made by popular dispenser is incredible. I sat in one for 30 minutes and just watched non-stop traffic float in the middle of the day. And when you talk about, you know, inventory... You know, when you look at these jelly bean jars of bud and you go, "Wow, that's 10 grand worth of bud" and you've got X number of jars, there's this, you know, you got a little spoilers, but, you know, breakage, it's really, you know, the cost of operation are insignificant, There are huge barriers right now because, again, we're not national and legal. Those will go away. So right now you've got this high margin business, high turnover. I guess it's a fabulous visit to get in if you're in. And I think it's just gonna transform overnight once it goes legal. Safeway is gonna jump in. Safeway knows how to sell controlled substances. They sell alcohol and cigarettes all day long. You can even get in some Safeways, prescription medicines through the [inaudible 00:22:55] pharmacy. What makes marijuana special that it won't go to the same channel?

Matthew: So like this is giving heartburn to a lot of dispensary owners out there. They're thinking, "Oh my gosh, am I gonna go away? Do I need to evolve?" How long do you think it takes for something like that to happen where, you know, it moves kind to the biggest retailers? I mean, obviously each state's a little different.

Andrew: Overnight.

Matthew: Overnight.

Andrew: Overnight. Here's the pitch. This is exactly what's gonna happen. Let's use a Safeway as an example. Seafeway says, "Hey, state of California, there's a lot of transactions going on every day and you're taxing us. How are you taxing us? Oh, I see. So you've got some kind of special boutique way of taxing from seeds to store. That's so convoluted. You know, we've been doing this for generations. We know how to collect your tax money and we can guarantee that people aren't, you know, underage kids aren't buying this. Oh yeah, I know the dispensary's have that too. But, you know, do you wanna deal with 1,000 dispensaries or do you wanna do with one company? Let's say. It's a lot easier when you guarantee it. We can step up. We've got the security you're looking for," and on and on and on. And then they pitch it to the producers, you know, the ones who are making whatever form the cannibis takes, right? We don't know if it's gonna be liquid or whatever. They go, "Hey, you know what? I know that the dispensary or this guy over here down the street, their smoke is offering you four bucks for bud. I'm gonna offer you three bucks, but I'm gonna take 100% of your production. Okay? And I'll take next year's production." No, there's no way for a boutique dispensary to survive in an environment where the tax authorities don't wanna deal with them. The police don't wanna deal with them. The police don't like small dispensers for the same reason they don't like liquor stores. They are madness for trouble. And I'm not saying that the clientele are trouble, I'm saying these are cash businesses in a lot of ways with special canibis. There is part of extra fees. And that's not attractive. So, Safeway is a lot more manageable from... Every step of the way, dispensaries are more of a bandaid approach. I'm so sorry, a bridge approach to the ultimate destination.

You will still see some dispensers because you will still see some people who don't wanna buy the quote, you know, the Robert Mondavi job one, you will still see people who said, "You know what? I wanna buy a shot to old BenchWatch, 2009 and I'm gonna spend 150 bucks, and that's not gonna be safe. Okay, great. You're gonna exist on the margins and you're gonna do business on the margin because you have common source of your cadence. But 95% of the business is gonna be gone. That's a big, broad brush stroke. You'll have also location, location, location. If you are in Vegas, well, yeah, okay. Set up your shop inside Bellagio, you'll do great. But for the most part, you don't wanna be in logistics. If you sell Woodwork fire, what you saw in that TV shows something very simple. The money was made in originally with illegal substances on getting it from point A to point B. But once it's legal, logistical delivery, supply chain no longer really has the lion's share the money. It's random. And the big brands and the big distribution centers [inaudible [00:26:28]

Matthew: So the way you mentioned that like a Safeway might buy a whole, you know, all the production of a farmer, sounds similar to Big Tobacco. Do you think that it's gonna start to look similar to Big Tobacco?

Andrew: Oh, I guarantee no. I don't know if people know this, but Big Tobacco has obviously been circling this for almost 50 years and they have position papers stuff that they wrote back in the 70s saying, "When this goes legal, here is how we're going to enter the market." The key here is that the reason Big Tobacco hasn't been able to get in was partly legal and partly social. They go, "Ooh, marijuana bad." Once it became legal, we've know for a while that the majority of Americans don't look at marijuana as a [inaudible 00:27:15] thing anymore. Once it became legal at a state level, that's one thing. Once it becomes legal at a national level with why wouldn't you? You have a process of going to farmers, helping them grow, guaranteeing their crops. You work with big government to get the subsidies that they need. Who cares if it's corn, tobacco, or marijuana? You have the means and the capital to make a solution happen. That just means the bottom's gonna fall out for prices because once you go to scale, you know, why right now is it two or three bucks wholesale for bud? Why isn't it a dollart? It's a weed. Yeah, I know their cost of production, but guess what? When you are at scale, the cost of production's dropped rapidly. And that's what we're hearing also, by the way, with the companies like Tilray and Aurora. Wow, you know, we added a new warehouse, our prices went down. Yes. Well, you're going to have now suddenly big agricultural business come in and say, "If you do the following things, your crops won't be four times a year. Why can't they be six times a year?" Production is going to get crazy and then you've got import.

Remember, if you're talking extracts, if you're talking distalance, you don't have spoilage issues really to consider. Olivia can ship to us Japan, Siberia. This is now something that can be grown anywhere. You know, it's not necessarily dish weed, but come on, let's be honest. It doesn't have to be amazing. If you're doing distillates and you can extract the THC, it doesn't really matter. You can have higher concentrated THC strains and virgin. Ultimately, that's what we're going to see. Big Tobacco's planning on coming in, and this was revealed. This is not, you know, weird. When we closed the lawsuits with Big Tobacco. They had to share their internal memos with us, and this was literally part of the internal memo sharing, was they talked about initially they sold marijuana as a competitor and they funded a lot of the local resolutions that were anti-marijuana were funded by Big Tobacco because they said, "Oh, you can smoke tobacco, you can smoke marijuana. We got to fight marijuana." But what they eventually found was marijuana was more a gateway to smoking tobacco because people would smoke and then stand around and say, "Well, you got a cigarette?"

Matthew: Right. That's true. Yeah. Yeah. You know, when I hear you talking about this, I'm thinking, you know, if I'm in the retail in the cannabis, I might want to start to think about doing something differently, perhaps, you know, I want to be the Tiffany of cannabis or the Louis Vuitton because I have some powerful narrative like Tiffany does with the blue box where people are willing to look a lot less at the price and much more at the story.

Andrew: There are literally four places. If I had the capital, there are literally four businesses I would be looking at. What I'm describing as a total overhaul of the supply chain and also at the same time, an emergence of branding. So let's start, let's start with, okay, so I think what you're going to see is some equivalent, and we're already seeing DUI testing provides us. Colorado's police force said, "Hey, now that we're experiencing pot smokers driving, give us 10% of the tax revenue." That's a big dollar amount. Why? Well, we wanna, you know, we've got to now deal with, you know, stoners on the streets. What will emerge... Right now we don't have laws that say if you smoke this much, you need to be pulled over and ticketed. We have that with alcohol. We understand very clearly the relationship between alcohol consumption and drunk driving. We don't yet have that with cannabis. I don't think it matters. I think communities will start to say, "You know what, I need something on the books. So I need it. If you have this much THC content in your blood system, you're high [Inaudible 00:31:06] Well, how do you measure that? Well, you're going to have this new from emerging technology, how do I measure if you're high? Doesn't matter, but I got to start somewhere. So that's one of the four places I would go. Okay. Just looking at how things will become analogous to alcohol consumption. Within the world of the supply chain, the next place I would go is I would get out of dispensary business. Right now it's great because you have a [inaudible 00:31:32] almost a monopoly, there are only so many dispensaries allowed and you know what? It's you're buying and controlling access to the market for cannabis and things like that. But in the space, a large part of the reason we've been hearing deaths from [inaudible 00:31:46] not because of tobacco, because of going to China and buying basically counterfeit cannabis componentry. Basically, it's, you know, again, how do you control that testing?

So that's where I think we go next, is in the supply chain, testing is going to become more expected. So right now, if you're a dispensary, I would be looking to get out. Eventually, you'll be bought up anyway. Safeway is just gonna buy you out or regulations gonna close you down or business demand is just gonna shift. Why would I pay premium preview when I can go get some? Especially for caulking extracts and the guarantees versus the bud. But testing, I think, is going to be around forever. In California, I think there are only two testing facilities. That's not going to continue. If you are big pharma, for example, and you're going to be buying at the scale that you buy other chemicals, you need a testing facility to guarantee. So I would be looking at going into testing because that's just going to grow, and grow, and grow, so to speak. The third one is when you got high-end products, you know, "Ddo I want to invite my friends over and smoke out of a bomb that's all cheesy-looking?" No, I want my Rosewood pipe as gold indolent. Jewel is nice, but surely, we can do better. Jewel is other high-end devices, you know? I'm surprised Jewel hasn't already come up with sound, you know, "Hey, while you're smoking in place sounds for special effect and lights up." You know, I think we're going to come to a place where there's a definite need at the high-end low-end.

I think the more money isn't at the high-end for the, you know, the Gucci and the Louis Vuitton. I think it's more the big, wider equivalent disposable. You know, we have that with a buck 50, kind of e-cigarette. Sorry about, you know, have the devices. I think whoever dominates that market, you know, small-dollar. But I think Big Pen does what, 2 million? Big Pen sales a day or some ridiculous number. There's a company named Kush, which is interesting though. Kush sells supplies through dispenseries. They sell the baggies. Okay? Do you really think that when this goes big business, high-end, you know, large scale, that young brands or Coca-Cola is gonna source their packaging from Kush? Because what Kush is doing is really simple, just they buy in large volume and they parcel it out. That's all they're doing because if you're a dispensary, you can't get to China, you don't want to bother going to China to get these baggies and [inaudible 00:34:22] stuff. It's easier just to go to Kush. Eventually, I see Kush just having problems in a couple of years because, at the end of the day, they depend on dispensers. If dispensers aren't around, what happens to them? And big business doesn't need to go to the middle man, which is what Kush is.

The last and fourth one that I would love to do, and this I think is inevitable, it goes back to the origin of the stock. The origins of the stock exchange is really simple. Farmer Ted grows cotton. Farmer Ted wants to make sure that he can sell that cotton. So banker Fred, comes in and says, "Tell you what? I'll guarantee, I'll buy a per bushel and here's your price. And so, you know, no matter what happens, I guarantee this price and I'll buy this many of your bales." And that's the origin of stock exchange, guarantee pricing performance at the same time, guaranteed production and guaranteed consumption. And so, you know, I'm going to make a thousand bushels of corn. I'm now going to sell that at once or in parcels in advance to guarantee that I don't have to worry about it. You know, once I harvest the selling it and I've already got a locked-in price. So life is good. If you're here today with cannabis and you're going large scale operation production, you need the same type of thing. If you're in insurance, insurance, by the way, is the best next step as well. As we mainstream this product, insurance companies will insure your crop at what dollar point? How do I know what the value is of your crop? So you're going to have to have some kind of neutral third party. What they do today, there is a stock exchange for oranges. I'm going to insure your orange crop. I'm gonna go to someplace that says, "Oh, the value of your orange is this much. So if your production is this high, I will ensure your orange growth for this much money."

Cannabis is the same thing, it's a cash crop. You have to insure it, again. But the other advantage of ultimately some kind of derivatives options market emerging for this is again, I don't just want to ensure that I'm covered for insurance, I wanna sell my crop before I've even grown it. And that's what we're seeing. That's where the Big Tobacco analog comes in. Big Tobacco doesn't really grow. They go to individual farmers and they say, "I will buy your crop." And then they buy all this crop and they grade it and take a look at it and they do various choppings and blending so that they get a consistent quality that they're trying to get to. The same thing will happen with marijuana, is you're going to have, okay, you're a grower, you're a grower. There could be huge farms, small farms, doesn't matter. It's legal to grow. Your'e licensed to grow this stuff. But at the end of the day, you are a producer. You are producing a crop, someone else's gonna buy it from you. So now you've got to work with Big Tobacco, essentially, because they're the ones out there with the capital that can come in and say, "I'll buy it for this much." But Big Tobacco and everyone else, I'll say you still have derivatives markets, a futures market. So what's interesting is there have been a couple of attempts to create this kind of a market. And it's interesting to see where it's gone and where it hasn't gone. But I think this is the big deal because once this gets national, you'll see a Goldman Sachs or a Chicago Board come in and say, "Great, we're open for business. You can now buy and sell futures for cannabis." And there are certain rules and certain processes. So if someone's already existing with this, either in Colorado, there was a guy out there trying to do it. An example, if you were doing on a stock exchange, you had to buy a seed on the stock exchange. Let's say the cannabis market, 5,000 bucks. And that just gave you the right to come in. Now, there are certain qualifications and certifications that go with that. Meaning, it's like getting into the club, you know, you're expected to wear a tie and, you know, you pay your bill every month and, you know, on and on and on, we'll kick you out. And the quality of what you produce has to be verified and if you say it's great A and not a grade, okay, but if we find that it's grade B then [inaudible [00:38:34]. On, and on, and on.

So someone out in Colorado did this and made a few million dollars selling seeds on the cannabis exchange that he was creating, just that much money. Because everyone knows that the next stage will be once this is a cash crop, it has to have its own, you know, exchange and whoever creates that successfully, sell off the Chicago board exchange. So that's where I would go right now. I would do it in California. Forget Colorado, forget that buying board seat. That would be, in my mind, stupid because, you know, you don't have to. There are only so many producers legally right now. You just have to convinced them that they're... You get to explain to them the business of selling futures and you have to go to buyers and convince them like the dispensers and say, you know, "You want to get in on this and here's why." But again, you're talking about a semi-fractured market, but it's not that horrible. You're only talking hundreds, you're not talking tens of thousands for producers.

Matthew: This is great stuff, Andrew. You know, I brought you on because you really kind of think broadly about these things. Now, not everything's gonna happen exactly as we project them in the future, but a lot of this will probably shake out and we don't know when. But I find that it's good to start thinking early about what's possible and what's coming around the corner because, you know, the cannabis industry is no different than any industry where people, you know, we're kind of in an echo chamber. We're all kind of confirming our own biases and we're rarely looking at a much, much bigger picture. So you do that in a lot of other industries. I'm glad you could share that lens on cannabis. Well, Andrew, a few personal development questions before we close. Is there a book that's had a big impact on your life or your way of thinking that you'd like to share?

Andrew: Can I say two books?

Matthew: Sure.

Andrew: There I am again, just having to be different. One of them is "Moneyball," Michael Lewis. What a great book. I love it because it's a fun read, but also for recognizing a couple of important things. One is it's even the experts aren't always right and that there's always an opportunity for a new perspective and a fresh pair of eyes to bring another level of performance wherever you go. I found that really refreshing and it kind of supports where I go, which is I really think that I've oftentimes have a different perspective and that I'm bringing something to the table that can actually add value and help people do better for themselves. The second book, though, I love because it also opened up my eyes, but in a different way. If "Moneyball" opened up my eyes to understanding that the status quo isn't always right, there's another book and it's kind of obscured. It's called "The Great Game" and it's written by a former, a writer for the economist named Peter Hawker and it's this wonderful look at how Russia and Britain went into India and tried to conquer countries like Afghanistan. And what it showed me in my worldview is that we can get sidetracked by day-to-day issues, but behind the scenes, there's a bigger, usually a bigger thing playing out. It's just how we see it and encounter it. We don't always connect the dots. So for me, "The Great Game" was interesting because it pretty much says everything we're experiencing today, the U.S. in the Middle East, Iran assending, Russia coming in Turkey. This is a repeat of everything that's been going on for 200 years. There's the same players, the same objectives, everything one-to-one. And that's what I mean, is it's the old, you know, [inaudible 00:42:11] history doesn't repeat itself, but it does run kind of a thing. Actually, he didn't say that. But you know, the idea is when you look at business, when you look at opportunities, they may have a slightly different look and feel, but ultimately, it's coming from the same place and that sometimes you have to kind of get to the 30,000-foot level to understand why things are happening the way they are. "The Great Game," it's also like "Moneyball," it's got a lot of back and forth, spy crap, things like that. Really great book.

Matthew: I've heard of "Moneyball" but not the second one. That's excellent.

Andrew: It's obscure. I mean, hey, anything written by a guy who used to write for the economist is gonna be a little bit obscure. But this one's really interesting because, again, it's a historical look at why did India matter and why was Russia just galloping across and consuming countries until they got to basically Georgia and started to slow down? Why has Persia always mattered in this attempt to get to India and Afghanistan? You know, you start to realize that the place names that we read in today's mainstream press are the same place names that... And they called it "The Great Game." You know, Rudyard Kipling. It's the same thing going on, and on, and on, Russia trying to seize that space, you know, Western powers trying to seize that space and then the locals trying to survive as they're caught in this tug-of-war.

Matthew: Andrew, what's the most interesting thing going on in your field besides what you do day-to-day?

Andrew: In the field of economics, and I think what's happening as a revolution in data, and you could see this and you know, AI, you see this in a lot of different places, but fundamentally, a lot of people are starting to realize that there's a lot of great data out there. You know, what is Facebook? At the end of the day, Facebook is a data-harvesting machine that sells to marketing people. That's what they do. Data matters. But what matters more is asking the right questions. For the past few years in my field, the idea was as like taking Scrabble pieces, I, you know, I get all these Scrabble pieces together, throw them into a computer, by gosh, I'm going to get information out it. And that's kind of what the quant, what you hear quant funds doing. But the idea is computers can come in and pretty much we're gonna be at Skynet level of capability, you know. The reality is no. You can't just take Scrabble pieces, throw them up in the air, or have a computer sift through them and know what you're doing. We still come back to people have to ask the right questions. The machines don't know how to ask the questions. They know how to, if you define things for them, follow the rules. But actually being able to step back and say, you know, what should I be paying attention to here? That's, you know, that's hard. You know, so, for example, let's say I know that FedEx is based in a certain, you know, maybe they've got a hub and I know that, therefore, if I wanna know how FedEx is doing, there are different ways to triangulate on how their business is doing. I could look at how many trucks are moving or how many planes were moving. Or I could look at how much oil is being consumed. Or I could look at how many people are sitting down and getting a cup of coffee or are the warehouses... You know, when I was in Silicon Valley back in the heyday of the 90s, you could track whether a company was doing well or not by whether the warehouse hours were extended because if you've got overtime going on, baby, that must mean business is booming.

Different ways to get to that data, which you can't just grab the data and have it mean something. So what's happening is we're having sort of a zig to the zag. Past few years was grab data, didn't matter what the data was, our computers would figure it out. Now we're kind of swinging back in my field and saying, "Well, wait a second, actually you need to have, you can't just be a data scientist and assume that I can program a computer and it will find value." It'll find some value. But at the end of the day, you have to have the intelligence. You have to have the question people are in the background saying, "What if?

Matthew: I'm gonna ask you a Peter Teal question there, another California resident, what is one thought that most people would disagree with you on, that you hold?.

Andrew: The one thought that people would disagree with me on, I am an eternal optimist. I think that while I'm analytical and I catch gaps, I catch things that are moving up in town. What people tend to think of analysis is that it's criticism. You know, it's that old concept that when you're analyzing something, you're tearing it apart. And where I want people to shift their mindset is to say, analysis isn't that. It's looking at the way things are and imagining the way things could be, breaking down. You're looking at the cannabis market, comparing it to the alcohol repeal market and saying, "What's the same? What's different?" And so, where is it gonna go and trying to dream about where it can go and what form it's gonna take both today, tomorrow, and years in the future. I think where people would disagree with me on is when you talk about analysis is that it's inherently negative, tearing things apart. And I think that they missed that last part, which is in order to build them up. And I think they're not mistaken in a sense that most analysts aren't doers and they do just sort of point to problems or issues. And so, it's valid to come at an analyst and say, "I can only take what you're saying with a grain of salt." I want people to think differently.

Matthew: Yeah. And one thing that you're kind of pointing out is also a way a lot of businesses could die. And internet marketer, Noah Kagan's, he keeps a kill list and it's basically all the different ways that his business could just die. And that sounds depressing and scary for a lot of people, but then he goes on to mitigate those risks proactively. And what you're saying or have said in this interview may make some people in industry uncomfortable, but if they're the type of person that says, "Well, you know, where is Andrew right?" You know, "I disagree with him, but where might he be right?" And then they get ahead of it. Boy, man, you're really positioning yourself for success, so appreciate that perspective. Andrew, as we close, how can listeners connect with you, find you online and get more of your content?

Andrew: Unfortunately, my content is restricted to institutional investors. But feel free to email me at ac@southbayresearch.com.

Matthew: Great. Well, thanks so much for coming on the show and educating us, Andrew. We really appreciate it.

Andrew: Thanks, Matt. Thanks for having me on.

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 cannaninsider.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 cannaninsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback@cannainsider.com. We'd love to hear from you. Please do not take any information from CannaInsider or its guest as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments.

Promotional consideration may be provided by select guests, advertisers, or companies featured in CannaInsider.

Lastly, the host or guests on CannaInsider may or may not invest in the companies' 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.

Ep 282 – Breakthrough In Photosynthesis Tech Helping Hemp/Cannabis

han chen zeakal

With hemp in growing demand, scientists are hard at work determining ways to increase plant yield. Here to tell us about it is Han Chen from ZeaKal, a plant science company revolutionizing hemp cultivation.

Learn more at https://www.zeakal.com 

Key Takeaways:

  • Han’s background in cannabis and how he came to start ZeaKal
  • An inside look at ZeaKal and its mission to vastly improve cannabis crop efficiency
  • Problems in hemp cultivation that ZeaKal is working to solve
  • How hemp cultivation compares to other crops like corn and soy
  • Secondary metabolites and why they’re important to hemp
  • Hemp’s potential to produce a more sustainable plant oil
  • ZeaKal’s dynamic with other industry players in the hemp ecosystem
  • How drones are proving useful for data collection in hemp cultivation
  • Where Han sees his research and the hemp industry as a whole progressing over the next 3-5 years
Click Here to Read Full Transcript

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 cannainsider.com. That's cannainsider.com. Now, here's your program.

Scientists are hard at work, increasing the yields from hemp plants. Here to tell us about it is Han Chen from ZeaKal. Han, welcome to CannaInsider.

Han: Thank you, Matt. It's an absolute privilege and honor to be on here with you.

Matthew: Give us a sense of geography. Where are you in the world today?

Han: Well, I'm sitting here in sunny San Diego, California, and fall has finally reached us.

Matthew: Okay. And what is ZeaKal, on a high level?

Han: So, ZeaKal, we're a plant traits company, and essentially what we're trying to do is improve plant photosynthesis. So, for those who don't know what photosynthesis is plants really enjoy soaking up sunlight and chewing up carbon. And after they do that, they make that carbon and energy from the sun into food, fuels, energy. In the case of cannabis, secondary metabolites like THC and CBD. What we try to do is allow our plants to soak up more sunlight, chew up more carbon, so that we can increase yields and also compositional profiles for these very important global crops.

Matthew: Okay. And can you share a little bit about your background, and journey, and how you got into the cannabis space, and then became part of ZeaKal?

Han: Right. So as ZeaKal, we're actually outsiders to the cannabis space. We're more just in the traditional agricultural side and, obviously, cannabis as a plant. We felt like our technology had huge applications for the sector. But if you rewind about 10 years, our history really starts in New Zealand. We are a spinout and joint venture of one of New Zealand's largest research institutes known as AgResearch.

At that time, the goal was, "How could we improve a very important pastoral crop in New Zealand called perennial ryegrass?" And what we were trying to do was to increase its energy content by increasing the amount of oil that's in perennial ryegrass. And through that project, when our grasses came back not only with higher energy and higher oil content, but they were anywhere between 24% to 50% larger, faster rates of growth, more yield, improved root-biomass architecture, we said, "Well, this is really unexpected and fascinating." And when we went back and we looked at how the technology was working in the plant, we discovered that, in addition to the improved energy profile, we were also improving the plants' photosynthesis.

And that was when ZeaKal really started as a commercial company in 2013, and we raised our first round of venture financing. Our primary focus at that time was to expand the technology into the major row crops, such as soybeans, corn, rice. And with the recent boom in cannabis investment, we saw a tremendous application of the PhotoSeed technology in this space. And we were fortunate enough that, in our last round of financing, that our lead strategic investor was Canopy Rivers. And Canopy Rivers really brought us into this space as a partner, and we're currently developing the PhotoSeed technology and hemp with them.

Matthew: Okay. And what is the problem or inefficiency in hemp that you're trying to solve? You mentioned the increasing photosynthesis. I mean, how do you accomplish these things and an increase of efficiency?

Han: Right. So I'll probably answer that question in two parts. You know, photosynthesis, in general, has really been an area that we haven't cracked. So if you look across crops, the major food crops, the major fiber crops, they look very different than what they're undomesticated cousins would look like in the wild. You know, the tomato that you see today is gonna be very different than the tomato that was uncultivated. And that's through just generations, millennia of breeding. And breeding has really helped improve yields and agronomic qualities.

But if you actually look at the plant's profile, even with the most productive of crops today, their photosynthesis actually isn't very different than their undomesticated wild cousins. And so this presents a huge technological opportunity to improve yields in an unprecedented way, in a way that can't be done through traditional breeding. So you take hemp then, for instance, it's a crop that's been largely undomesticated. It hasn't had the generations of breeding that some of the other crops have. So from a genetic profile and maturity standpoint, it's still relatively nascent and at the beginnings of crop domestication. I think when you look at the industry leaders, that's very much what they're focused on in terms of their genetics, and their strategy, and their breeding.

So while hemp is behind, though, it has one advantage, which is it's being domesticated in what I'll call the golden age of biology. You know, the toolsets that we've aggregated now, especially over the past 10 to 15 years, have really accelerated breeding, and hemp will really benefit from that. So what might have taken decades in the past, we can now compress to a few short years. And then if you overlay on top of that the PhotoSeed's technology, which can change photosynthesis and also change hemp's composition to produce new co-products, such as oil, you're really gonna accelerate the domestication of this crop in a very meaningful way, in a very short period of time.

Matthew: So is hemp kind of jumping to the front of the line in many ways because there's a lot of profit to be made in farming hemp?

Han: I think so. If I look at where hemp is even today, and what we're seeing in terms of the uses of hemp, and the productivity, and the profit margins, it's already quite exciting as a crop. And this is with very little or no research into the production of hemp. We really haven't figured out, as I mentioned earlier, the genetics or even the agronomics, how we grow, and harvest, and really standardize this. So I think that the opportunities for hemp are gonna be very, very significant.

And I think the one advantage of hemp, as well as if you look beyond the CBD market, which is what the primary end market is for growing hemp, it's really a platform crop, if you will, for enabling what I'll call a photosynthetic economy, meaning that it has applications for renewable energy, has applications for more sustainable textiles, it has applications in energy storage and even construction material. And these markets are far larger than what the current medicinal and recreational markets are for hemp. And so we're quite excited as we domesticate it, that this can really become a crop that can be on millions of acres, and not just thousands of acres where it is today.

Matthew: So you're working in seven different labs. What kind of work is being done there? Any highlights you can give us?

Han: Yeah, so we like to kinda call these different labs our gene-to-field capabilities. So they do everything from the design of the PhotoSeed genetics, optimizing it for the crops that we're working in, and then being able to develop these genetics into these crops, and then testing them in the field. And, at ZeaKal, we've always had a very unique business model, which is we really believe in the public-private partnership. You know, we have our roots with our co-founders in New Zealand, from basic science that was being developed by the New Zealand government. We were able to take that research and commercialize it with them.

And because of the success of that model, we've continued to try to replicate that in our growth strategies. So we always find the best public research organizations or universities that have skill sets, expertise, and resources in those certain crops. And we partner with them to develop our products in their labs. And what that does is allows us to put our people into existing infrastructure and also access existing expertise and capabilities, which, really, from an investment and R&D standpoint, keeps our costs low while accessing world-class capabilities.

Matthew: Okay. Now, you mentioned working with soy, corn, and now hemp. Does hemp present any kind of unique challenges that those other plants don't, and maybe any unique opportunities too?

Han: It does. Hemp, because it's been a relatively undomesticated crop, it also means that a lot of the toolsets that we've developed for corn and soy, for instance, just haven't been developed in hemp. And so, at ZeaKal, we're, in some ways, recreating some of this from scratch. It's a great launch point in terms of what's been done in other species. But every time you go into a new crop, there's always something unique and something tricky about it that requires time to figure out and optimize. So that's one of the unique challenges that we've faced with hemp.

But at the same time, though, hemp has a much faster product development cycle than other crops like soybeans and corn, between six to nine months. We can really be testing the efficacy of our technology versus...you know, soy could be as much as three or four years. And so those accelerated timelines, just because of the nature of the crop, make it a lot more attractive for us. And also because hemp is really being domesticated right now in the U.S., and that's the market we're focused on, it's not so much for international export. It also allows us to really shorten our time to market and focus on a single market, whereas a lot of times with the global commodities, you're touching so many endpoints that the at the time to market, the regulatory challenges, can be a lot more significant, which can extend timelines significantly as well.

Matthew: Can you talk a little bit about what secondary metabolites are, and what's important to know about them in terms of hemp?

Han: Right. So, secondary metabolites, they're a broad group of organic compounds. They're not necessarily essential to the plant's survival, but they do offer properties that are very unique. Plants use them as a form of defense a lot of times, but for humans we often use these secondary metabolites for their therapeutic purposes. You know, they include terpenoids, flavonoids, in the case of cannabis and hemp these so-called cannabinoids. And, within the cannabinoids, hemp produces a very unique one called CBD. And I think the audience probably knows that there's just a huge boom in the CBD market right now for therapeutic purposes. And it's really being integrated now into a number of specialty foods and beverages.

And so this is a very fast-growing market. And with the legalization of hemp in the U.S., I think we'll see an adoption increase at a very significant rate as well. From our standpoint, the reason why it's important is because the production of these so-called cannabinoids and CBD is very energy-intensive. The plant has to go through a very long and difficult process to make these cannabinoids. And so, what we try and do is provide more energy, if you will, converting more of that sunlight and CO2 into energy in order to provide a stronger source for the plant to produce more of these. And so, for the farmer and the producer, what that means is that we want to be able to densify the amount of these secondary metabolized produce on a per-acre basis.

Matthew: Okay. Now, plant oils is a big business. I think about soybean oil, canola oil, avocado oil is becoming more popular now, and macadamia. What about hemp oil? What are some applications for hemp oil that we may not be considering? I mean, you talked a little bit about CBD, but what are some other applications of the oil you think might jump to the forefront?

Han: So hemp oil from hemp seed, right now, is a growing commodity product, and a lot of people like it for its fatty acid profile and its health benefits. At ZeaKal, we also, with our PhotoSeed technology, we're thinking about expanding oil production into different tissue types. So you mentioned soybeans, you mentioned canola, hemp seed, for instance. And while these plants are great at producing oil, the seed is actually a very small part of the total biomass being produced. So the analogy I like to make is, "Imagine that you're a real estate developer, and you build this beautiful high rise, but you only sell the penthouse and you leave every other unit empty." I mean, that's essentially, in some ways, how we're producing plant oils right now. We only harvest the seed, and the rest of the plant isn't really being used for anything.

So with our PhotoSeed technology, the way that we increase photosynthesis is that we actually produce oil in every single cell of the plant, including in the green tissue. So all of a sudden, you look at a very productive plant like hemp, which has very high yields from biomass standpoint, and we start converting more of that biomass into oil, and all of a sudden, on a per-acre basis, your oil production's going to greatly exceed oil seed crops. And so, for farmers, what it does is it's really creating a co-product and allowing more of that plant to be used, and we're converting more of that plant's value into a high-value product like plant oils. And we can start even tailoring some of the oil profiles so that you can start creating some very healthy oils like Omega-3s, or long-chain fatty acids, oleic acids.

And if you think about it for industrial purposes, plant oils are a great feedstock for producing jet fuel, for producing biodiesel. A lot of the green chemistries that we use come from plant oils, but they're just simply too expensive if we're trying to source some from food-grade oils from the traditional oil seeds. So hemp could become a great source of industrial plant oils that could be used for the chemicals and the fuels industries without competing with food.

Matthew: Now, I'm sure you're focused largely on outdoor growing, but I know there's a lot of startups in indoor growing space, probably most notably Kimbal Musk, Elon Musk's brother in Boulder. He funds a lot of different startups in that space, but I haven't seen any kind of really take off yet. Is there anything exciting in the indoor kind of crop area that excites you?

Han: No, absolutely. And I think indoor agriculture has several advantages. I mean, I look at the growth of whether it's hydroponics, vertical farming, indoor agriculture in general. And what they can control there is light regiments, nutrient regiments, and really optimize environmental conditions for optimum yield. And our PhotoSeed technology, to be honest, would produce even higher and better results if you are tailoring all of those environmental factors to work with the genetics. So we're quite excited about the indoor growth opportunity as well.

However, if you start thinking about some of the applications beyond the higher-value products, and then you start thinking about, "Well, how can we take a very high yielding biomass crop like hemp...?", especially with its environmental benefits of carbon sequestration, carbon-neutral, even carbon-negative impact, and its benefits on soil health, etc. That's one of the reasons why we're quite excited about making sure that, in addition to the value that we can create in the indoor cultivation, the environmental sustainability benefits are also going to translate into broad acreages as well.

Matthew: Okay. Now, talk a little about soil remediation, if you will. I know hemp is known for kind of sucking the nutrients out of soil, but sometimes you see some farmers let their field take a break, or maybe plant alfalfa or another plant that can kind of add nutrients back into the soil. Is hemp one of those plants where, every season or two, you should like take a break and let it recover? I mean, how do you make the soil recapture nutrients so the plant can be grown optimally?

Han: You know, that's a great question, and I think there's not enough data at this point to really understand how hemp will be part of a large rotation program with other crops. I think that's something that, as we continue to domesticate hemp and it starts getting established across broader acreages, is something that we'll know more of. In terms of the health of hemp, it actually uses less inputs than a lot of other crops. I think farmers will be able to save significant input costs in terms of using hemp, even compared with other crops like corn or soy. And I think hemp, because of all of its other kind of co-productizations, will give farmers kind of an opportunity to access other markets rather than focusing on a single one.

And so, if I'm looking at the overall strategy, hemp is so great at carbon sequestration overall. And because of the low input costs, its environmental footprint, like I said, it could be neutral to negative. And I think as farmers are looking maybe towards looking at agriculture as a source of creating positive climate impact and also as a source of carbon sequestration...especially if, you know, farmers in the future can get paid for the benefits of taking more CO2 out of the air and put into renewable products like hemp, then I think we're gonna see hemp be part of that larger rotation, definitely with a better environmental benefit. But it's impact on the soil, we'll still need to do more studies and measurements around.

Matthew: You talk with a lot of other industry players in the hemp ecosystem and agriculture ecosystem. What are they talking about? What are their care-abouts and how do you work with them?

Han: So we touch a lot of different companies, from the genetics and seeds players, down to the ingredients companies, over to biofuels, and now into the cannabis and hemp space. And what really appeals to each of them is different in terms of the focus, but I think there's a universal message across the board, which is, "We think yield is important, because the more yield that we get per acre is critical." We don't have any more farmland. In fact, that's shrinking on a year by year basis, the amount of arable land that we have. So anything that we can do through agricultural intensification to produce more with less is absolutely critical.

In a lot of the developed countries like the U.S. and Canada, set yield is not enough though. You know, what we're also now looking at is also nutrition and also the environmental sustainability. So on a per-acre basis, we want to make sure that we're not just producing calories, but that we're producing higher value calories, primarily in the form of oil and proteins, and then making sure that we're doing so while minimizing our environmental footprint.

So, for us right now at ZeaKal, we're very excited at the fact that we can offer farmers yield, we can offer the consumers more nutritious products. For example, in our soybeans, not only are we giving higher seed yield, but the seed has a higher protein content in the meal, and we're also producing more healthy oils in our soy product, and we're all doing this through just sequestering more CO2 out of the air without the need for additional chemicals or fertilizers. So that's all really exciting and has a really strong consumer message.

But as far as hemp goes though, I think, across the board, whether it's the leading hemp companies and leading cannabis companies like Canopy, or Aurora, or it's the large Ag-biotech companies, or its processors, the ABCDs, everyone is looking at hemp. You know, they think that it could be the next big new crop that's being domesticated right now, and they see so many different end markets for it that kind of fit well with their capabilities, whether it's genetics, or processing, or distribution. You know, it's just something that everyone is keeping their eye on, far beyond what just the major companies are focused right now in terms of CBD and THC production.

Matthew: Do you ever see any kind of players, growers, big Ag companies use drones to kind of collect data from their fields, or satellites? Do you have anything you could talk about there in terms of how they do that and how that helps them?

Han: Yeah. So drone technology and satellite technology fall under a broad category of what I'll call imaging or digital agriculture. So if you look at agriculture in the past, it's been really about large acreage. You know, you plant homogeneous crops, and you apply fertilizer or chemistry and a pretty homogeneous rate across your field, and at the end of the season you harvest. And I think where the industry is heading towards right now, especially as we have better interconnectivity, we have better imaging technology, everything is now WIFI-enabled...we're taking in so much data, and more importantly we're interpreting that data in a meaningful way.

It's that we're now gonna be treating every acre of land, maybe even every square foot of land, in a very different way, in a very prescriptive way, so that a farmer walking through his field, he's going to know which areas are the most productive. He's going to know which areas need more attention, and he's gonna be able to calculate a return on investment based on the differences that he has in his field. And farmers who have farmed for 20, 30 years, they kind of know it intuitively in terms of that land, and what areas are gonna be more productive and what's not, and that's just from decades of experience.

But what digitization with imagery being part of that is it allows it to be standardized, it allows us to quantify what he's always known, and to allow him to make better prescriptive decisions with that toolset so that he knows exactly the rate of fertilizer he needs to supply so that in the future, maybe rather than spraying chemicals broadly, he can do spot treatments where necessary. And over time that data is gonna become a very important profile for him to understand how the productivity is changing over the seasons, and it's really gonna help evaluate what strategies and techniques are working.

And if you look at the broader demographics of agriculture right now, the average age of most farmers is over 65. And, in the U.S., less than 2% of our population is farming. So with the aging population, such a small demographic, the next generation of farmers, they're going to be farming a very different way. They're going to be able to rely on these toolsets, and hopefully these toolsets will offer them historic memory, if you will, a dataset that allows them to kind of have a higher jumping-off point in order to continue that productivity, what they're inheriting from their fathers or grandfathers.

Matthew: Okay. You know, I was reading something, a publication from NASA, recently, and they talked about the solar output, and the solar cycles, and energy that's produced by the sun, and how we're kind of approaching this Maunder Minimum where solar output looks to be going into a valley. Do you know anything about that, and maybe its implications for agriculture in general?

Han: Yes. So it's interesting that you mention that, because we've been talking about climate change, and CO2, and greenhouse gases kind of causes global warming, and now it's talking about these solar cycles that could lead to a period of cooling as well. And regardless of what the reasons are, what we're really seeing right now is what I'll call climatic volatility. And so if, for example, we go through a period of solar cooling, and all of a sudden we can't grow corn anymore in Iowa, and Iowa shifts down to Missouri, and Missouri shifts down to Arkansas, we're going to need to have new varieties that are being grown. At the same time, if CO2 continues to rise, it's not just the impact of droughts, and hurricanes, and floods. We see rising CO2 levels change levels of insect predation, for instance, and that's going to need to require new tools to combat that.

So I think agriculture is obviously very, very complicated, and you're always dealing with the environment, and every growing season is gonna be different. And so what we have to start doing is to start looking at ways that we can climate-proof our crops. So if we need to have crops that have higher salt tolerance, if we start losing more and more agricultural lands to salinization, we need to be able to grow crops in soils of higher salt levels. If the daylight starts changing, if all of a sudden Iowa becomes a lot colder and our harvest window decreases, we need to find ways to grow crops that might have shorter growing cycles but with the same yields. Or we need to find crops to have better root architecture so they can find nutrients and water in deeper areas and be more drought resistant.

So I think we look at all of these factors. You know, we can't predict all of them, but what we do know is the climate volatility leads to yield volatility, which then leads to economic volatility. And so, if we're gonna be able to smooth out our production, especially since we have a growing pressure to produce more food in the next 30 years, then we really have to find ways to reduce that variability, and biology is gonna be a huge part of that.

Matthew: Okay. What are your plans to generate revenue?

Han: So in the biotech space, or the genetic space for agriculture, the traditional model has kind of been the so-called "Intel Inside," where the seed has been the hardware and the technology has been the software, and you'll typically charge a licensing fee based on the value of that technology. And that's a model that's been pioneered by all the large companies, Bayer, Corteva, Syngenta. So that's a model that we're looking at as well, as we develop the technology with our major partners who will one day be our customers. We want to become that software that enables a productivity gain on top of the great work and the other products that are being stacked into that seed. So that seed represents billions in investment and is full of genetic code that gives amazing properties. And what PhotoSeed tries to do is try to enhance all of those properties by providing more energy to the plant, higher yield.

And then the other part of the business model could be that as we grow is that we want our own distribution, we want our own hardware, so we might start acquiring germplasm or seed assets, if you will, and then delivering that product, our genetics, and the seed together to farmers and growers. And that's a decision that we need to evaluate as the these markets continue to develop and our technology continues to mature, because there could be very different strategies depending on which crop and how big of a footprint that crop is. You know, we might find in some cases that our customers are all over the globe, and that our customers are largely consolidated, and it may make more sense to do the licensing model. In other cases where the market is still fragmented and we're kind of building that market, it may make sense to own those seed assets. So as our technology matures and develops, and as these markets continue to evolve, we'll kind of make that decision when the time comes.

Matthew: Okay. And where is ZeaKal in the capital-raising process?

Han: So we just closed our Series C financing earlier this year. It was a $15 million round led by Canopy Rivers for $10 million. And then our current investors also finished the round off with their pro-rata shares. So that $15 million funds us for the next five years, and I think it kind of puts us at a very unique junction at that point. As we talked about earlier, at the end of this funding round, we would've brought several products kind of into commercialization. And, at that point, we're really going to analyze, "Is it better for us to partner in license, or to maybe raise further financing and build some of those fiscal infrastructure and capabilities to deliver our product to market?"

And, right now, the primary focus of the company... We're well-capitalized, but we're also very interested in ongoing strategic partnerships and investment where it makes sense, especially that helps us develop our technology across a broader range of crops, as PhotoSeed really works across any plants species. And so we're very open to looking at those collaborations and discussions.

Matthew: Han, I want to shift to a few personal development questions to help listeners get a better sense of who you are. Is there a book that's had a big impact on your life or your way of thinking that you'd like to share?

Han: You know, that's a great question. I want to take a little bit of a different answer than maybe a lot of what your other interviewees may say. I grew up a lot with comic books, and I grew up a lot with Japanese manga. And one of the ones that I grew up with that seems to have continued to influence my life, even adulthood, especially as an entrepreneur, is the anime and the manga, "One Piece."

It's a story about a young boy who goes on a journey, he wanted to become the king of the pirates, and it talks about his journey through this. And what I found really interesting is that, as an entrepreneur, some of those lessons I have from my childhood still really hold true and has become a source of inspiration. Because, for me, personally, the entrepreneur is really like the hero's journey where you kind of start off with this dream and you try to see this much, much bigger world than the world that you knew. And through this process it's all about building great friendships, building your team, and your team is on this journey with you. And you all have different reasons for why the company and the entrepreneur journey becomes personal, but you somehow come together, and you try to make this work, and you overcome these challenges.

And I've always enjoyed One Piece because it was always kind of the anti-hero, the heroes are the pirates who are trying to run away from the Marines and the World Government, if you will, and they're kind of looked at as these outcasts. And it's really funny to me, because the entrepreneur is kind of like that as well. We're kind of fighting against the tide, if you will. You know, I think when we start our companies, everyone tells us that it can't be done. You know, there's always 1,000 reasons why can't be done. And that was something that I experienced a lot of. I can't tell you how many times I've been rejected, either from a partnership or an investor.

Photosynthesis, you know, what we've been working on, there's been about $10 billion of investment in this area, and it really hasn't been cracked yet. And the fact that we've been able to make such great progress and crack a lot of what couldn't be done, I mean, it was kind of like a one-in-a-million shot. And so, just keeping that focus, that perseverance, and that's a lot of the lessons I took from my childhood, and it's really those two things have really been the cornerstone of why I think it's gotten me through a lot of the tough parts of this entrepreneurial journey with its ups and downs.

Matthew: Interesting answer. I haven't heard that before. What is the most interesting thing going on in your field right now, other than what you're doing?

Han: You know, there's so many great technologies going on right now. As I mentioned earlier, it's really the golden age of biology, the toolsets that we have today that allows us to make very precise changes. You know, as we start understanding the genome of plants, and how they function, and all that data now being compiled and annotated for us to look at how we can improve the functionality of plants, that knowledge wasn't there even 10 years ago. And I think PhotoSeed and ZeaKal are just at the forefront of that. But when I look at what people are doing now in biologicals, soil remediation, through healthier biomes, when I look at what people are doing with RNAi technologies with gene editing, it's all very, very exciting. So I don't think in any way that ZeaKal is the only unique story here, but there's a lot that we're all kind of working towards and very excited about.

Matthew: Okay. I'm gonna ask you a Peter Thiel question. What is one thought you have that most people would disagree with you on?

Han: You know, I think, at the end of the day, what ZeaKal works in is...we work in trade technologies. And, unfortunately, right now, there is a huge consumer kind of, I would say, misinformation, and a lot of consumers right now are very kind of anti-GM or GMOs, and this a very broad topic, and one that I think has gotten a lot of attention, and one that's being revisited right now. And we think that traits and biotech, and for lack of a better word, GMO, is going to become a very necessary part of the world, and for us to feed our future, and in order to provide the climate-proofing that I talked about earlier. And a lot of people, I think, will push back on that. You know, a lot of people still believe that GMOs are an unnecessary technology, that they're unwanted technology. A lot of this is based on entrenched money interests, a lot of this based on misinformation.

And so, I think when we started this, everyone else has said to us, "Oh. Gosh. This is all too hard. Why would you kind of pick this area?" But I think, as a team, we were very committed to this journey and we were very committed to this technology, because we knew that it was based in strong science, that we were building a safe product with an application that can really help combat climate volatility and climate change, while delivering better nutrition to everyone. And I think, hopefully, as this technology comes to market, and we can have a rational conversation around it, and people start looking at the benefits and what's actually being measured, the quantifiable benefits of the tech, that they'll take a very different approach to it and they'll see that this is not just like what a lot of other products are, which is, "Oh you're putting more chemicals into the environment," "Oh, you're putting more toxins into the environment."

You know, I think they would kind of step back and say, "Wow, this is the first product where I can see a benefit for me. I'm getting better nutrition, I'm getting healthier foods, and I'm doing this in a way that is helping protect the environment and helping to safeguard the world for the next generation, and that my purchasing decision is going to make a positive societal environmental impact." And I think ZeaKal and PhotoSeed have the opportunity to do that, you know? But most people, when we started this journey, they were just very concerned about it. You know, they disagreed me that this wasn't the right strategy. And I kinda said to them, I said, "This technology, if it works, I think we have an opportunity to win over consumers. Let's not let current consumer sentiment and misinformation hinder us from starting on this journey and commercializing what I think is going to be an incredible game-changing technology for the world."

Matthew: Yeah. I think there's a lot of room here. I mean, there is definitely... I'm pro-science, and I think there's a huge amount that can be done, and we're gonna need to have happen for the world's growing population. At the same time, I think there's kind of a cynicism with the public when they see like a cola manufacturer use corn oil or a partially hydrogenated oil, or a cookie manufacturer use that, and then you go over to Europe and they're using sugar. And some people are having like an inflammation response, and it's not just really well understood, like, sometimes how the ingredients impact us. I think that if there's these biotech companies that do the right thing, make excellent advances in technology, and also show that they're looking out for how the response can be measured in the body, it is welcome. There's a lot of room for it.

Because I just look at how different regions of the world, different geographies allow for kind of cheaper ingredients to be substituted in and how those effects are, at best, unknown. But other times, they are known, like there's an obesity epidemic in the U.S. And a lot of that, I think, has to do with finished products, making poor choices in terms of partially hydrogenated oils, and also some food scientists just leveraging technology to make food kind of addictive, where it's like, "Once I open a sleeve of such and such, like you feel compelled to finish it." So I think if there's like a sweet spot in there where there's biotech meets kind of like, "That's optimum growing," and then one that's like optimum pro-human, I think that would be the future, hopefully.

Han: Matt, those are all such excellent points. And I think what you're kind of revealing right now is the complexity of the issues, and really the complexity of our food supply chain. Because I totally agree with you, is that there's been a lot of irresponsible decisions made by industry, and unfortunately that's eroded public trust a lot of times. But I guess the optimist in me also believes that a lot of our industry leaders are making those mistakes in the past, just because we didn't know any better, are now also taking the lead on trying to fix those mistakes, and trying to provide the next generation of products.

I think as a society, what we need to do is we need to start moving away from this idea that there's a clear line in the sand and everything falls under one camp or the other. You know, it just seems to me that a lot of people say, "Well, if you believe in climate change, you have to be anti-GMO," and the two are really unrelated. In fact, I would argue quite the opposite. If we are going to fight climate change, we really need to put every single toolset at our availability, and to be able to use those tools to grow crops in a more sustainable way.

And to your earlier point, also, about in the U.S. we have obesity issues, you have diabetes issues. And if we look at global food production, there's really a tale of two cities, if you will. You know, in the U.S, we fought off starvation, we fought off famine, we fought off hunger, because there was a concerted effort between government, industry, NGOs to say, "How do we uplift the production of food in order to to meet this demand?" And if you look back at the pioneers that did this, Dr. Norman Borlaug... I was just at the World Food Prize, which was an event that was created by him. But Dr. Borlaug saved probably billions of people from death, from malnourishment, and we've made that kind of social contract to get past that.

And as a nation now, I think we need to focus more on nutrition rather than calories. But that's a very different story if you go to parts of Southeast Asia, Latin America, Africa, where it's very much still about calories, and they don't have the luxury often of substituting one protein for the other. And in cases like that, the issue is, "As we spread our misinformation about the value of these technologies and we prevent them from being adapted, we're essentially denying solutions that could be critical for the security of these other countries." And I just don't think that, as first-world nations that are trying to lead the world into more prosperity, that we can deny that moral right to them.

And so, our supply chain, our food chain, our consumers have to understand that there's different points of development for different countries, and that we have to make sure that we're making technologies available to meet those needs, and that we need every single toolset here. You know, we have 30 years, 30 growing seasons, to increase food production globally by 70%. That 70%, in terms of that gain, represents every single productivity increase from every single innovation in agriculture for the past 10,000 years. We have 30 growing seasons to make that happen.

So that's the need, that's the urgency that we all face. And so, as we kind of look at what needs to be done, we have to take a hard look at the science, and we have to start taking a hard look at what we need to do to meet this demand. Otherwise, the truth is, is that we're gonna see a lot of people starve, we're gonna see a lot of countries become destabilized, or who will have more issues with terrorism, or have large refugee migrations, and this is going to add a huge burden to every single country in the world. And we're already seeing the effects of that right now in terms of our current geopolitical climate, and all of that really stems from food insecurity.

Matthew: Yeah, I would agree with that, and also agree with you that you do have to make empathetic choices to help people get the calories they need so they can survive. No doubt. And I also think that, back to that Maunder Minimum point, it's going to be interesting to watch as this volatility increases, and what happens if South America experiences some crop destruction, and the impact on the Northern Hemisphere, and vice versa. So interesting times lay ahead. I'll let you get back to the hard work of the next 30 growing seasons, because we need guys like you in the lab to solve that problem. It's not going to be me. So I'm glad you're around.

Han: Well, we'll do our best, and we're only a part of the solution. But the message of hope right now is there's a lot of entrepreneurs out there like ZeaKal, and there's a lot of great industry leaders. You know, I look at the work that Aurora, Canopy, that they're doing right now. I mean, it's beyond the cannabis industry and the hemp industry. I think everyone's working right now to really change agriculture to bring in the next generation of crops that will allow us to produce the food, feed, fibers, and fuels for the next century.

Matthew: Great. Well, Han, thanks so much for coming on the show and educating us. How can listeners follow your work and connect with you online?

Han: Well, any a listener can find me on LinkedIn, so please follow us there. We're also on Twitter, so you can kind of see a lot of times we're at various conferences and upcoming events. So please follow us on social media. And if anyone wants to reach out, you can write to us at info@zeakal.com.

Matthew: And can you spell ZeaKal for us?

Han: Sure. Z-E-A-K-A-L.

Matthew: Han, thanks again for coming on the show. We really appreciate it.

Han: Thank you, Matt. It was my pleasure. 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 cannainsider.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 cannaninsider.com/trends.

Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback@cannainsider.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. Promotional consideration may be provided by select guests, advertisers, or companies featured in CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies 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.