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This Stunt Man Couldn’t Find The Perfect Vaporizer So He Created His Own

seibo shen

Seibo Shen is the co-founder and CEO of VapeXHale.

A former stuntman Seibo began a crazy quest to find the best vaporizer. After trying hundreds of vaporizers he finally gave up and decided to make his own. He posted his plan online and got over a million views to his site that documented his quest to make the perfect vaporizer. The end result is the VapeXhale.

Hear about Seibo’s quest and why athletes from MMA and the NFL seek his advice on how to effectively use cannabis.

Key Takeaways:
[3:27] – What is VapeXhale?
[5:07] – Seibo’s background and starting VapeXhale
[10:01] – Seibo talks about his high-tech career
[13:30] – Seibo talks about passion in business
[17:33] – Seibo talks about his blog that started the VapeXhale journey
[18:57] – Developing VapeXhale
[26:11] – Concentrates and VapeXhale
[31:58] – Seibo talks about working with athletes
[42:01] – Tweaking cannabis for athletes
[46:55] – What sports benefit most by using cannabis
[49:29] – Seibo answers personal development questions
[1:00:40].0 – Contact details

Learn more about the VapeXHale and get a discount at:
https://www.cannainsider.com/vx

Read Full Transcript

If you’re like me, you look out into the marketplace and see an ocean of vaporizers. However, there are few that really stand out. One company that goes to a near obsessive level, producing top of line desktop vaporizers is VapeXhale. I am pleased to welcome Seibo Shen, the Co-Founder and CEO of VapeXhale, to CannaInsider today. Welcome to CannaInsider Seibo.

Seibo: Hey, thank you for having me. I’m very excited to be here.

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

Seibo: We are in San Francisco, California. That’s our headquarters, and yesterday we were in Los Vegas, doing something called the ASD Show, which is the world’s largest retail show, and it was one of the first that wasn’t a cannabis oriented show. So we were really happy to represent our company there.

Matthew: Cool. So that was like a general technology-type show.

Seibo: No, it was actually… ASD was for retail. So believe it or not, they had a little bit of everything for everyone. There was furniture, clothing, just knickknacks that you could import worldwide, but most importantly, they started doing what they call Culture Plus, which I guess was euphemism for cannabis, without saying cannabis.

Matthew: That’s funny. That’s a funny way of getting around that.

Seibo: Totally, and what was interesting was, and sorry to go on a tangent, is they had things that would be in a gas station, and then they had things that would be in the highest end head shops. So anything from (1.56 unclear) to male enhancement pills, all the way up to $20,000 Quave bongs. So, it was just really interesting to see such a wide variety of people, with varying levels of knowledge of cannabis look at all these things for the very first time and listen to us talk about why our vaporizer and our technology is head and shoulders above others.

Matthew: I like how you said male enhancement pill there. Wonder what you mean by that? Could you elaborate? I’m just kidding, but I do always ask when I’m at a gas station, I always ask the cashier, I say, you got a lot of knickknacks all over by the corner here, the counter, what sells the best? I’m just curious, because they have so much stuff. It’s like right there, it looks like for a reason. I’m just curious, and they’ll tell me. It’s just interesting to understand the patterns of what people want.

Seibo: Yeah, I mean, what’s even more interesting is I went up just to see what the sales pitch was and the first thing the guy says is, you know the male erection is a very complicated thing. I almost walked away at that point, but I listened to the rest, and it was your regular kind of sales pitch about how the ladies would be more attracted to you, more satisfied and ultimately why you would be like the hero of your own movie.

Matthew: Oh wow, they really paint a picture there. That’s good.

Seibo: Absolutely.

Matthew: Give us a really high level view of what VapeXhale is, so people can understand.

Seibo: Yeah, absolutely. So just a high level overview. We really tried to designed a vaporizer that was really optimized for not only the health aspect of vaping, which most vaporizers do, but also to put an emphasis on the user experience. And what I mean by that is the flavor, the smoothness of the vapor and the efficacy of the activation level and efficiency of transferring the cannabinoids from a solid state into a gascious state. And because our methodology or our ideology was to create a vaporizer that really promoted a really high user experience, we ended up finding out that many of our customers tended to be very aspirational people, people that were in the top one or top five percent of whatever field that they were doing, whether businessman, artist, athlete.

Through that we were able to meet a lot of high performing individuals that were utilizing cannabis to improve their life. And we’ve really kind of settled on this mantra of promoting responsible cannabis use, and trying to help people utilize cannabis in a positive way that doesn’t take away from their lives but really enhances it. And we like to call, it’s not a pro-cannabis company, but more of a pro-responsible cannabis use company. And that is all the way from how you use it to how you’re ingesting it.

Matthew: You have an interesting background. Can you tell us a little bit about your background, and then why you got so obsessively involved--I say that in a good way--in creating VapeXhale, what you saw in the marketplace and why you started.

Seibo: Yeah absolutely. So if we just kind of rewind the tape back to 1997 when I first discovered cannabis, I was 21 years old, in college. At that time I had worked a couple years as a stuntman. I had been accumulating quite a few injuries, and my roommate was a fellow stuntman who consumed cannabis every single day. And for some reason for me it wasn’t that I was anti cannabis, I just looked at my roommate who had all the promise in the world, and he seemed to really lack motivation, and I thought it was because of the cannabis.

And ultimately one day, after I had swallowed another eight ibuprofens and was complaining about my stomach, he turns to me and said, Seibo, this stuff is awesome for muscle pain. You’ve been complaining about this a long time. Just try it once and see how it works. So I finally gave in. I tried it once and it was through a water pipe. And not only did I enjoy the physical sensation, but me and my roommate we just laughed. We talked about a whole bunch of different things that were kind of outside of my normal sphere of conversation, and I really enjoyed that intellectual stimulation.

I actually began becoming a much more sympathetic and empathetic person because of it because I don’t want to say like singularly focused type of individual, but I had this idea that I would some day become a profession athlete, and everything around my life from my diet to my training was leading to become a professional athlete. Never mind the fact I was only 5’7 and 125 pounds and my sport of choice was football, but there was just a little bit of delusion in that. Once I started consuming the cannabis, not only did it dissolve the pain, but like I said, it started dissolving my ego where I started understanding hey I’m doing these things because I’m actually a small, insecure guy trying to be macho.

Before I used to just think I was just a macho guy, and I was a little guy that knew how to kick ass. But it was really a lot of that confidence was really hiding the insecurity. The cannabis, in a weird way, it revealed it to me in a way that it almost made me paranoid, but once I got over it, I started seeing there’s a lot of self-discovery that could happen with cannabis. As we’ve been looking and working with other athletes, we started seeing a very tight linkage between emotional pain and physical pain, and started experimenting with how cannabis could be utilized to not just reduce physical pain but emotional pain through conversations and basically peer groups to help people feel like they’re not isolated or for whatever reason. We work with veterans and athletes.

The idea is how do we use cannabis, not to just promote physical health, but also because there’s so many emotional benefits that you can get from it. Help people better understand how to properly utilize cannabis without abusing it, if that makes any sense.

Matthew: Sure. That makes total sense. Now did you have an epiphany at all the first time you consumed cannabis where you said hey maybe these stoners who I always looked down on they were right. They were right this whole time.

Seibo: I definitely became an instant evangelist. I went from pointing to the frying pan with the egg in it to saying that we’ve been suppressed this whole time by our government. And I’ve basically gone to the other end of the pendulum, and about that time, I think, broadband internet started coming into proliferation so I was just spending so much time on the internet. And I guess, that’s a really good segue into well, I had all these amazing benefits from cannabis, but smoking it, there was still some sort of dissonance within me to smoke something that was going to make me feel better.

So I stumbled across something that was called a vaporizer. It was essentially a heat gun that you bought at Home Depot with some glass components that allowed you to channel the heat from the heat gun into some shredded herb and vaporize it. And instantly I felt like I was on to something and from 1997 to 2010, 13 years, I probably bought easily 125 vaporizers, just out of curiosity and that being my hobby. And finally after 2010, my wife looked at me and was like, you know what, instead of working on high tech, I think you should design one of these. You obviously have a lot of passion for it. What was interesting was it was something that I had been thinking about for quite some time and once my wife, verbalized it, it was all that I needed to kind of get off and just start sprinting towards creating this vaporizer.

Matthew: What were you doing in the high tech arena there in the Bay Area?

Seibo: Yeah, so really interesting story, and I’ll keep it short, is I worked in high tech. I was mainly in sales and business development roles. I had also worked for five companies as employee ten or earlier, and just really learned about not only how to sell software, but how to grow and scale companies. And after I saw that five times, I decided I think it’s time where I feel confident to run my own company, despite being a sociology major.

Matthew: Yeah, so I was just going to ask you, you’re a sociology major. You worked in sales and business development at tech companies, and then getting involved in developing vaporizers is quite different. Requires, I guess, some mechanical engineering, definitely electrical engineering. I mean, how do you cross that bridge? Is it just you’re so interested and passionate that you just delved in and just learned whatever you need to, to make it happen?

Seibo: You know, that’s definitely one part of the equation, and the great thing about living today is the internet is such an awesome resource for information. And I watched YouTube videos. I read a bunch of blogs, and ultimately what I ended up doing was I noticed that things like Twitter, Facebook, social media was becoming very prevalent and people were utilizing it as a way to either disseminate a lot of information quickly or to get a lot of feedback quickly.

So I started a blog called ‘The World’s Greatest Vaporizer’. And it was just a blog saying, I want to create the world’s greatest vaporizer. I’m a sociology major, although I work in high tech and I’m Asian. I am not an engineer. I need help. And within the first year we had over a million views, probably over 50 different actual engineers were contributing to all these ideas and essentially I just collated the ideas and brought them to a mechanical engineer who had a little bit of expertise in electrical, and he put together the first prototype for us that we took to Cannabis Cup, and we ended up winning.

Once we won Cannabis Cup, I was able to raise some money and really bring this thing to market. But the truth of the matter is a lot of the information that I did not know, I don’t want to sound like a hippy, but I just reached out to the universe of the internet, asked the question, and like I said, before the first year ended we had over a million views on that website. I like to think that’s why the vaporizer turned out the way it did, and it was because it wasn’t designed by one person or one team. It was designed by over 2,000 people that were actively participating in this thread, and I just had the wherewithal or the stamina to read through all of it and just kind of collate and pick out the best information and put that into the VapeXhale EVO.

Matthew: I’m sure a lot of people listening think that the destination of having a successful business is where it’s at, that’s where all the juice and energy comes from, but I have a feeling when you were going through this process of iteration and on this quest to create VapeXhale, you were probably in a real deep flow state, trying things over and over, thinking about them all the time. It’s like having a great book you can’t wait to pick up again. Was it just that sensation of ah, I feel like I’m on to something here?

Seibo: Oh man, the way you just described it, I had goose bumps because ever since I was little, I mean, I know that I have at least average native intelligence. I actually thought I was like a gifted individual when I was younger, regardless of the fact that I haven’t accomplished anything. I was just like I’m special. And as I became a 20 year old, as I graduated college and just started working, I really started like falling into this rut of okay, wait, I’m not special. Everything that I said wouldn’t happen to me. I will never be like my dad. I’m just like my dad, and I started seeing all these things where I was like, you know, actually I think I’m just a normal guy.

Ultimately once, my wife told me I could make vaporizers, another part of my brain just activated. It was almost like being in college again. Everything was exciting and new, and it really kind of taught me. I thought I knew what it meant to be passionate about something, but what I realized was all of my previous passions in life was just something that I was really interested in. And you are absolutely right. I mean without this passion for vaporization, there were at least, I can count, probably 20 times where I was ready to quit. Throw in the towel and just say I’m going to go back to my day job. I mean, I was making a quarter million a year working 40 hours a week.

I wasn’t stressed out. By that time I had figured out the code of how to just, I don’t want to say coast by, because I was in a sales position, but I figured out a formula that worked for me where I wouldn’t be stressed out at the end of each quarter trying to make my number. Without that passion, I definitely would have given up because it was much easier. I mean, I still make less now than I did before, but I’m much happier, but without that passion and that kind of fortitude, I definitely would have thrown in the towel many times. When I stumble upon other entrepreneurs or there’s other entrepreneurs that want to hear my story, I tell them it’s really important just to go all in on whatever you’re doing because if you don’t go all in, and you feel like there’s some sort of excuse, then there will always be that excuse in the back of your mind, especially if you fail.

So for example, for the first three years of this company I still worked my day job and I was justifying that I had a family and I had to feed the kids and blah, blah, blah. But in reality I was really just holding the company back because, you know, 40 hours of my work week was going towards my day job, and whatever I could contribute to VapeXhale would be what I could contribute. And ultimately when I decoupled from my day job, I mean, in the first six months we made more traction than the first two and a half years. And it really did kind of just cemented my brain that it’s really important to find what you’re passionate about, and then when you find it to really kind of attack it all in so that you don’t give yourself any type of excuse for your success or for your failure, and that’s the great thing.

It’s become very binary. Now I know this success happened because of my effort. This disappointment happened because my lack of effort. When I work for someone else I used to make all these excuses like, oh well my manager just made a bad call and because we were following his orders, this didn’t go through. Now I just realize that was a lot of just excuse making. And what I love about being an entrepreneur is the amount of accountability you have to have over yourself, and now I’ve been able to transfer that into my personal life as well and have much more engaging and rich relationships with my wife, my kids and my friends.

Matthew: That is great. That is a form of lifestyle design. It sounds wonderful.

Seibo: Thank you.

Matthew: Let’s jump into some of the specifics of you started this website, ‘The World’s Best Vaporizer’, first I’m just curious, how did you get traffic? How did people find out about it?

Seibo: So we actually linked it to a popular website. Maybe popular is a bit of a stretch, but it was a very popular underground website called ‘Fuck Combustion’. When I’m describing this to investors and they’re like what’s the name of the website. I’m super embarrassed to say the name of the website. As you can imagine, you know, they are anti-combustion people and really love vaporizers. So they had actually really good traffic despite that it was such a niche thing back in 1997, but yeah just through that we were able to kind of pick up and utilize their platform to get more eyeballs on what we were doing.

Matthew: Yeah that site is still around today. It’s definitely like the Fight Club of vaporization. I mean, these are committed folks there. So that’s cool. Okay so, you start this in a really public way and you get all these people coming to your website. I love the honesty that probably attracted a lot of people that can help you. What were the kind of things that jumped out to you early on, on how you wanted to make VapeXhale different or the problems you wanted to make sure you avoided that other vaporizers had in common?

Seibo: Yeah, so there were a few challenges that we wanted to address. As I said, I have been vaping since 1997 and became a huge evangelist of it. I’ve been really trying to get, you know, most of my friends, we’re all over 35 now, to convert to vaporization. And I had very little success, and what they told me was vaping isn’t as potent as smoking. Vaping doesn’t taste the same as smoking. Vaping also, like when you’re filling a water pipe, vaping is like drinking skim milk, if you’ve been drinking whole milk your whole life. It’s kind of the same, but it’s not the same.

So I went into this really trying to attack the user experience. I really wanted to address all those issues that people had about potency, about flavor, about the actual visuals of the vapor as well. So one of the things that I really ask the people was is there a way that we could improve the efficiency of the sublimation process of turning the THC crystal from a solid to a gas. And different things were talked about like increasing air turbulence within the air path, creating a vacuum to lower the boiling point of the repository of the flower.

So we took a bunch of these hypotheses. Another one was like doing Venturia Effect [ph], which is forcing a larger volume of air into a smaller chamber, and that also kind of tricks the boiling point of the cannabis or whatever is in that repository. So we did a combination of all those things to improve the opacity of the vapor. Once we did that we realized oh my goodness, this vapor is so thick right now that it’s making it difficult compared to other vaporizers to inhale because of the concentration of the vapor. So we ended up creating these hydra-tubes or moisture conditioned mouthpieces that sit right on top of the vaporizer that allow you to, or not allows you, that actually smoothes out and moisture conditions the vapor so that it’s much cooler and doesn’t dry out your throat, that way you can continue to medicate at the level that you want to without any throat irritation to get in the way.

I understand that. Some people listening might be like wow you guys need to consume that much cannabis to get to that medication level. And surprisingly the answer is yes. I mean, I’ve worked with a lot of NFL players and for me I may only need a tenth of a gram to get to the medication level that I need, but these guys that are over 300 pounds, I mean, I watched one of them take five dabs the very first time he ever dabbed, and he could handle it. And what we’ve come to understand is the more pain that you have in your body, I believe, there is some correlation between how much cannabinoids you can actually ingest as it bonds to all your CB1 and CB2 receptors to deal with the pain.

It’s a bit of a hypothesis right now, but like I said, we’re always trying to kind of think, you know, one step, two step, three steps ahead of what everyone else is doing because this is such a fascinating plant that I think just applying air to heat and then taking that heated air and applying it to the flower or the oil, yes, that is the basic nature of vaporization, but there’s so much more that you can do to ensure that the flavor tastes better, the potency is intact, and that it’s super smooth for the end user. I love Apple, and I understand some Android phone, you know, functionality-wise do have some more features, but the one thing about Apple products, what I do love is that, the design aspect is so great that something as complex as your iPhone, even Generation 1, it didn’t come with a large instruction set.

That’s when I started realizing the user experience is super duper important. How the person feels when they’re utilizing it. So we wanted to make sure that when someone used our vaporizer, because it is a plug in model and it’s not a portable, that they would just get so much of a better user experience. The way I like to describe it to people is like if you like to watch sports on your smartphone, think of that as using a portable vape, and when you get home do you ever watch sports on your smartphone. No, you turn on the HDTV. So we like to say our experience is more like an HDTV. It’s not better than a portable. It’s compatible. It’s actually, I don’t want to use the word synergistic, but they work together. It’s not binary one or the other, and that’s what we’re really trying to improve on. How do we keep making the user experience better for the user.

We are coming out with a lineup of portables, and I’m sorry to drone on and on about this question, but I think that this last part is going to make a lot of sense is when we started designing the VapeXhale EVO, initially, this was back in 2010, there were already several portables on the market that worked fine, but what we realized is with all technologies, things get smaller, cheaper and more affordable. And if you created a portable from the start, you would have that intellectual property of how it works, but the next generation would be smaller, longer battery life and probably a little bit cheaper. So we’ve seen that with the Pax1, Pax2, Pax3 or with the Firefly1, Firefly2. I mean, they’re essentially like the same device, but with extended battery life and smaller.

So for us we really wanted to understand the science behind mixing air with heat and applying it to flower and oil, and now that we’ve mastered that, now we can create portables that are leveraging this intellectual property and technology and really make portables that are head and shoulders above what the competition is offering, and we believe that just like our home unit has been widely anointed the best desktop unit, when our portables come out we’re going to see a similar quantum leap in performance for portables as well.

Matthew: Okay, so you’re working on portables right now?

Seibo: Yeah, we’ve been working on them for the last three years. So we just wanted to make sure that when we came out with a portable it would very much be like when Apple decided to make the iPhone. Something that was just so much different than the status quo that people would have no choice but to at least investigate what this new portable is like, but once they use it we’re very, very confident that this new technology will be one that really kind of changes the landscape of how people view portable performance and what to expect out of a portable.

Matthew: Now what do you tell people in terms of how to think about concentrates and combustion for the VapeXhale? I mean, do you have a concentrates extension and then you have a flower extension? How does that work?

Seibo: Good question. So you are right. It is one device that has two repositories. One for flower, one for oil and where I believe we really hit a homerun with the oil is that if you look at most of the oil consumption devices, whether it’s a vape pen, or a dab rig with a ceramic or titanium (26.31 unclear) you are essentially putting the oil right on top of the heat source. So you’ll either heat the titanium (26.38 unclear) or in the case of a vape pen, put the oil right on top of the nichrome wire heater. In both instances I like to say that’s more like frying your concentrate, and we’ve come up with the world’s first convection or hot air based way to deal with concentrates.

Previously I don’t think anyone had explored the concept of using hot air with concentrates because oils get viscous. Once it becomes viscous, it gets running and it can get dirty and sticky all over the place, but we knew that when flower vaporizers went from conduction to convection there was so many efficiency gained. So we really spend a lot of time to try to figure out a way to do “hot air” dabs, and as you can imagine, when you are using hot air versus frying your concentrate you use a whole lot less. It tastes a whole lot less smoky, and you feel a lot better because the vapor to smoke ratio is much higher in a convection based placed platform than conduction. And for anyone that is exploring concentrates that is graduating from the vape pen crowd, I really urge you guys to explore what we’re doing here because the convection based methodology, like I said, I believe that our device is just the very first version of this next generation of hot air based convection concentrates delivery tools because the efficiency gains just by themselves, let’s forget about the health claims.

Due to the hot air extraction, our customers are telling us they’re using about a third of the amount to achieve the same medication effects. So because of this we’ve created an ROI calculator on our website that allows you to enter in how many grams you consume a week and how much you paid per gram, and on average our $450 device pays for itself in 2.7 months. Sorry for this long-winded answer to your question about concentrates, but I do believe that in order for concentrates to be socially accepted, we have to get away from dabbing on a hot surface. And the whole reason why we created this hot air convection based concentrates consumption methodology is because I had some other parents from my school come over. They saw my dab rig, and that was the last time we ever had play dates with their kids.

They said that looked like a crack device. They didn’t know what I was doing. I could say it was for cannabis, but that didn’t look like any cannabis they had ever seen. And I just realized, after I started doing surveys, I have not met anyone that is outside of the industry over the age of 30 that has a wife that allows them to have a torch and nail or electric nail in the house. The only people that I found are people in the industry. So I saw this as a huge issue, and honestly, I mean, my wife was like you got to get rid of this dab rig. So I really started working over drive. I love dabbing. I need to figure out a way, and that’s when we came up with that concept for the VapeXhale. So part of the ingenuity was due to necessity as much as my entrepreneurial spirits.

Matthew: Yeah, there’s some truth around that. It’s like one thing if you’re in your twenties and you’re single and you pull out a dab rig, it’s another thing, like you were saying, it’s like parents come over for a play date and they see that thing and they’re like, what is Seibo into. Yeah, it’s a little crazy. I know what you mean. I’m glad you’re taking care of that problem though.

Seibo: Yeah, and you know kind of the next phase of what we’re really trying to work on here is how to help people come out of the green closet, because there’s many people like you, me, high performers that are cannabis enthusiasts and many times, obvious, the image that they portray of us is one of lacking motivation, sitting on the sofa, getting really good at role playing games on the video game console, but the fact of the matter is cannabis users are just kind of like you’re normal demographic of the country. It’s high achievers, low achievers, everyone in between, but I really wanted to highlight that there seems like there is a very high, an inordinately high percentage “successful” people that consume cannabis.

And I just want to really help them have consumption devices that are congruent with where they are in life. Just like, I loved Denny’s in college, but I don’t love Denny’s anymore. I like food that’s better. And I wanted to create consumption devices that were congruent with people’s palates as they grew in sophistication and wanted different ways of consuming their cannabis.

Matthew: That’s a good time to segue to you talked about high performing athletes just a little bit ago. Now you’ve said you’ve worked with some high performing athletes. When did you first discover that… what was their initial reaction when you started working with some of these guys and a light bulb went off, some of these athletes? What was happening there? How did they find you, and how did they come to start this initially, consuming cannabis for health reasons and recovery?

Seibo: Yeah so, interestingly enough, if you look at the price tag of our vaporizer, it’s $450, so obviously those that purchase it either really, really love marijuana or have expendable cash. And early on, every time an athlete would get busted in the news for cannabis, I would just Google them and learn more about them, and then just one day I started just checking our database to see if that name existed. And I was like, whoa we’ve got some NBA players, some NFL players that’s customers. Who are these people?

And obviously I’m just thinking, a huge kind of sports nut so I started emailing them, just introducing myself and saying hey, I’m the founder of this company. Thank you for buying this. I know that you can’t talk about this publically, but I’m just curious, why did you buy the device? How are you using the device? And about 80 percent of them were saying, not only were they using the device for recovery, but they were actually consuming before practice, before games. Some of these guys are UFC fighters. Some of them were consuming before they were punching and kicking each other in the head. And I had always consumed cannabis more on the recovery side.

Sometimes I would train on cannabis, but it just wasn’t for me at the time, but as I spoke with all these high level athletes, I really started thinking, well my first thought was okay these are just a bunch of young guys that like to get high all the time. No big deal. I’m not judging, but as I started speaking with them more, I started realizing, wow, these guys are actually performing better than when they are… we call it activated. I don’t say medicated. I call it activated, and essentially they are doing, kind of by accident or on purpose is, and you brought up this word earlier, flow state, is they are encouraging flow state while they’re training.

For some people they just need more focus. For me, when I’m doing Jujitsu, someone could be choking me out and I’ll still be thinking, oh, I need to return an email to Matt because I’m going to be late tomorrow. You really should be present when you’re doing these things. I asked these guys, can I come train with you guys? Can you guys show me what you do? And a lot of it was very non-structured. They just get high and start doing stuff, and then I started noticing, like hey guys when we take one dab and you guys do this, you guys seem to be a lot more focused, less horsing around. Let’s just stick with one dab instead of two dabs.

So I started being the numbers guy for these guys and started plotting and taking down the data like how much they were consuming, how they were performing and ultimately we started coming up with this template, and I wanted to see… Okay, so we were able to help high performing athletes perform better, and a lot of people were like well, they’re 19, 20, 21 of course you work with them, there’s going to get better. They’re at that age where they’re just supposed to get better. So at the age of 38, I decided hey I want to start competing with the Jujitsu teams.

So I started training, utilizing the techniques that we were talking about and really getting into flow state while I’m grappling. And I started competing, like I said, with the team. I’m undefeated. We all compete in an activated state. Six weeks ago we took home 10 of 14 gold medals. I have all the videos to prove this. We also have a documentary that shows us consuming right before the event. And most of these events in martial arts, they don’t have any specific rules. It’s more about steroids and things like that, but even if you don’t have the performance enhancement, the CBD, all the anti-inflammatory properties, they’re so good for your body anyway.

So we know that 100 percent of the athletes could benefit from utilizing cannabis for recovery, and about 70-75 percent of the athletes we’ve been able to successfully teach how to utilize the EVO to help them dose and titrate their cannabis, and then to compete at a higher level, whether it’s gymnastics, boxing, ballet, dancing, all of the above.

Matthew: So you mentioned a template there. I mean, we don’t obviously have time to go into a whole template, but you mentioned one dab, not two. Is there any other kind of quick bullet points you could mention as kind of optimization techniques?

Seibo: Yeah, absolutely. We have two different things. We have a CPA and CPF, not a certified public accountant, but a cannabis performance assessment and cannabis performance facilitation program. So during the cannabis performance assessment we get a base line of how you are when you’re sober. How fast you can run, how dexterous and coordinated you are. Jumping jacks, cartwheels, we have you do movements that are kind of challenging and difficult and kind of get a base line of where your physical abilities are without cannabis.

Then we start administering various amounts of cannabis and redo these tests and kind of see does it make you looser, does it make you more self-conscious and almost paranoid. And a lot of people physiologically react differently, and what we found is cannabis seems to invoke a state of homeostasis. So when you’re really amped up it can kind of calm you down. When you’re really tired it can kind of perk you up. So what we realized it because of this we needed to get the whole team to be on the same consciousness level initially.

So we started doing these breathing exercise called Breathifier, which is taken from Kundalini Yoga that is about five minutes of rapid breathing in and out of your nostrils. And by the end of five minutes, your brain, your blood is super oxygenated. You’re a little bit light headed from hyperventilating, but you’re very sharp and aware. Then when we administer the cannabis it allows you to… it’s like you don’t want to be so aware where you’re tense. You don’t want to be so loose where your reflexes are slow. So it’s kind of like this really delicate balance that we’re trying to achieve, and yes sometimes we miss the mark, but like I said, we’ve been pretty good at getting 70-75 percent of the people to be able to just relax and perform better.

And one of the things that is really simple to show someone is, okay can you touch your toes. Okay if you can’t touch your toes, are you close to touching your toes. A lot of people that are close to touching their toes, once we administer a little bit of cannabis, they can touch their toes, and then we let them know. We’re like look, you’re holding a lot of tightness in your lower back and your hamstrings. You’re probably not aware of that normally, but now that you’ve consumed some cannabis, pay special attention to your lower back and hamstrings and feel how tight they are. Many times once someone’s aware that they’re tight in a certain area, then they can start stretching it out more, working it out more and really kind of make the necessary changes.

Many times, believe it or not a lot of these athletes who are sensitive to their body, I think because they’ve been so conditioned to deal with pain, they don’t know what is pain versus what is an injury. We really kind of utilize cannabis to help them be objective with the way they’re feeling and to help them , like I said, not only improve performance but improve healing so that they can train more, which then improves performance. So it’s a really kind of awesome circle of life that we lead them through, and like I said, the reason I can speak about this so confidently is I’ve done it myself. I’ve gone through the program and, not to keep patting myself on the back, but I’ve competed four times now. The first time I competed sober. I went for about six minutes, I lost. The next three matches I competed in an activated state. The combined three matches was 1 minute and 52 seconds.

I just ended up destroying these people because I was able to not think about the text messages, the emails, my kids, my wife and just let my body go into flow state and do everything that we’ve been drilling for repetition, and it just comes out. And I like to tell people, for me, Jujitsu, I like to call it kinetic chess. And most people when they play chess they have maybe, set up traps one or two moves ahead and that’s kind of how my Jujitsu game is like when I’m in my normal state of mind. When I’m activated, my decisiontry and flow chart of moves it just exponentially increases and I’m able to see things that aren’t normally there. Like oh, there’s a pawn that I could take. I’ll take that. Oh, I’ll take that rook.

It’s really hard to explain, but once we help people achieve it, and they feel it for the first time, it’s easy for them to become believers. We actually had one really big skeptic. He was an ex-water polo player from Stanford. He actually wrote a scathing article about cannabis and athletics, and someone put him in touch with me, and after just two days, I helped him run a personal best for an eight mile run. And now he’s a huge proponent of this, and now we just got to back this up with more data so that it just doesn’t sound like a bunch of guys in a gym just doing whatever they want and maybe they win some tournaments here and there, but really get the imperical data so that we can speak about this intelligently and really kind of show the naysayers that this isn’t people just getting high. This is about increasing physical performance, and more importantly, the cannabinoids a neuro protectant. So if you’re in a high impact sport, your guy should be taking this anyways to protect their brain.

Matthew: You mentioned about anecdotally about 70-80 percent of people that are doing this CPA or CFA are getting the desired results, but for the people that aren’t is there any kind of insight you can provide around that, the 20-30 percent? How can you try to stay out of that 20-30 percent and stay in the 80 percent that are getting the desired outcomes?

Seibo: Wow, what a loaded question, but I’ll do my best to answer this one. Okay so, this is more a little bit of bro science and arm chair quarterback for me. Number one is I do believe that a very small percentage of people’s biochemistry just does not allow them to enjoy cannabis in this way where I could improve their athletic performance. But the remaining 20 percent or so people or 19.5 percent or so people I 100 percent believe it’s a psychology issue. Having worked with athletes, entrepreneurs, artists and just listening to them talk about what makes them tick and really looking at the high performers versus the middle of the pack and the low performers, you know, I kind of self-believe is a huge important factor.

If you look at any of these athletes, you ask them who is the best athlete, they’ll most like say themselves. The number 200 ranked fighter, if you ask him could he beat the world champion, he will say yes. Many times it’s not rooted in logic, but there is this really strong self-belief. One of the things that we really try to encourage is objective accountability. And there is no magic to what we’re doing. The magic to what we’re doing it just being objective and being accountable. So being objective is did this help me or not. If it’s not helping me, let’s stop doing this.

Being accountable is if I lost, was it because the coaches didn’t train me well, or was it because I didn’t put in the effort. There are just tons of people always making excuses for this, that and the other, and ultimately most of the people that can’t take advantage of the cannabis, they will always give me a million and one reasons why it won’t work, and very few reasons why it will work. And ultimately I’m like well, if you’ve conditioned your mind to think it won’t work, then it won’t work. One study I always draw upon is a few years ago, they had a bunch of famous sommeliers drink wine and try to tell the people where they thought it was from and what the quality of the wine was.

They took the expensive wine, put it in the cheap wine bottles and the cheap wine and put it in expensive wine bottles. As you can guess the sommeliers were just wrong about everything. They were super embarrassed and they asked for a second test. During the second test, they actually put some sensors on their brain, and they saw that when the sommeliers were about to drink an expensive bottle of wine their pleasure receptors started going into overdrive. So this kind of showed that the anticipation and belief that something will be good actually stimulates some sort of neurochemical change in your mind.

Ultimately I am a believer that with the proper mindset, anyone could almost do anything. Obviously there are limitations. Like Shaq will always dunk on me. It doesn’t matter how much I believe I could dunk on Shaq, that will not happen. A lot of these things about self-belief and performance, and that’s why I do believe the sports psychology or psychology in general is so interesting because as I’ve grown older, I’m 40 years old now, one of the things that I’ve really come to discover is most of the things that were getting in my way or that I thought were getting my way was just a mental issue that I thought all these people were judging me. No, no one was even looking at you Seibo. That was all in your head. Just little things like that.

We’ve kind of taken those experiences and really tried to distill it down. Like what I said, to distill it down we call it objective accountability, because we believe that if you could distill something down to those two things and be objective and accountable for yourself, then you can start making the improvements that you need to make, either in your athletic career, business career or personal life.

Matthew: Yeah. Great points there. I think one thing that would be helpful too is if there was some test that would show us how we metabolize cannabis. Are you a fast metabolizer or slow metabolizer? If there was some objective way that we could start to hone in on that, that would really help. If that exists out there someone, let me know. Just email me at feedback(at)cannainsider(dot)com, but I think that would be a super helpful way. Is there a particular sport that… I mean, it sounds like you’re into the Jujitsu world. So perhaps you see the most in Jujitsu, but is it football, mixed martial arts? Is there one or two sports that comes out as having the most cannabis users that benefit from optimizing or recovery with cannabis?

Seibo: Yeah very good question. So you name those two sports, football and mixed martial arts. Kind of more broadly I would say anything that has high physical impact, either to the body or to the brain. Obviously the cannabinoids have shown neuroprotective qualities. Where the numerous research studies that have shown this, I had always thought that is why, despite being a very disciplined person, I just always wanted to smoke weed, especially when I was boxing. And my hypothesis is that my body was kind of like pushing me towards doing something that was good for it even though in my mind I was like, don’t smoke anymore weed. Only once a month.

When I was first introduced to week I was super scared about being addicted so I kind of gave myself these weird limitations. And more recently, Reggie (47.50 unclear), who is the chief scientist at Steep Hill, we had a discussion and he was telling me that in these preliminary studies they have shown another cannabinoid, CBG, to not only be a neuroprotectant, but showed neuroregenerative properties, and I know that’s a huge claim. So this was just some initial research that they saw. The impact is something potentially being neuroregenerative, it’s huge, and that’s why I do believe a lot of athletes that are in these high impact sports where there’s CTE or traumatic head injuries, a highly disproportionate percentage of them use cannabis.

At least for myself is that when I take CBD before exercising that also increases my capability to recover quicker. I used to just take it after practice, but now I’ve been taking it before practice as well and just noticing that, you know, it’s almost like the tin man who gets his joints lubricated. I just feel like, wow, I ingested this. I have an extra 15 degrees of extra stretching in my shoulders and different areas, and it’s really remarkable. Like I said, the main thing is we want to capture this empirical data so that we could speak from a place of data versus just anecdotal stories.

Matthew: Seibo, I like to transition to a couple personal development questions to let listeners get to know you a little bit better personally, although I feel like I know you personally after this interview already, but let’s jump into those questions. Is there a book that has had a big impact on your life or way of thinking that you would like to share?

Seibo: There’s a couple good books. One of them is the 48 Laws of Power. It discusses office politics, but I look at it as a book more about human nature. And the reason why I love this book is that even though it discusses office politics and talks about how people would be trying to get over on you to get ahead, it really just talks about human nature. For example, if you and a coworker are up for a promotion, and you’re a single person, but he has a wife and three kids, even though he might be a nice person that likes you, because this will benefit his family so much, he may go above and beyond to compete against you where you might think this guy is betraying my trust.

In reality, all he’s trying to do is make a better life for his family. It kind of really put office politics into context because I had always thought people were colluding with each other like let’s “F” this guy by all of us get together and make his life hell so he quits, but it’s usually nothing like that. It’s everyone is super busy, everyone protects their best self-interests, and they operate that way. So once I got to that, I started realizing these things that people do, despite some of them being negative towards me, they’re hardly every personal for personal reasons. So there’s no reason for me to take offense to them. So that’s really helped me kind of deal with all the different personality types I have to deal with while running this company.

Now the second book that I really, really like is The Four Agreements by Don Miguel Ruiz. This is almost like the exact opposite of The 48 Laws of Power. This is a book about how you need to love yourself, how if you never love yourself, you can’t really give yourself the full version of yourself to other people. It was like a self-improvement book without being a self-improvement book, if that makes any sense. And it was only a 70 minute read. It’s pretty big font, but it was so impactful. I mean, when I was reading it, I don’t ever cry, tears were just coming down my eyes because I was just thinking man, I’ve been leading this weird Type A, alpha male existence for what? For what, to impress other people.

The Four Agreements really started shining a light. If you really work on yourself and you make yourself the best version of yourself, they you can really start impacting the world in a positive way, because you’re doing it with some sort of clarity, with some pureness and it’s not just… For example, when I was younger I saw Bill Gates, and I was like, I want to be like Bill Gates, but I wasn’t too sure exactly why I wanted to be like Bill Gates. I just knew he was super rich and famous. Through reading this book it really helped with a lot of self-discovery. Okay, this is what Seibo likes for these reasons. This is what Seibo thought he like because of these false reasons, and it goes back to being objective and accountable. I think these are just little lessons that I’ve learned from each of these books.

I really encourage your listeners to pick these books up because they’re short reads, probably just a couple hours each, but have really benefitted me as far as reducing my stress levels, The 48 Laws of Power. And then The Four Agreements, to be able to love myself. I know it may sound weird, but I kind of just really disliked the version of myself when I was younger, and I think that’s why I was always striving to be the best because I was not satisfied with what I was. After reading that book I realized, what I am is very special already. Let’s just foster the best version of Seibo. Not Seibo trying to be like Steve Jobs, not Seibo trying to be like Bill Gates, but Seibo just being Seibo.

What I found is once I started doing that, I don’t know, it’s just like the universe just started giving me stuff. The right people enter my life. The business transactions start happening better. There’s a lot of transparency in what I say. People don’t feel like I’m saying one thing and doing another. It’s just a wonderful feeling to live in a life that way because I had always been so concerned about image, especially being an entrepreneur now. I had learned about The Four Agreements before being an entrepreneur, and then I found being an entrepreneur, brought me back to that whole phase of my life again where I gave a fuck about what other people thought of me and place such a big emphasis. And that was causing me to make some really bad business decisions and I had to reread The Four Agreements, and rebuild that confidence. Like, Seibo, you know what you’re doing. You don’t need to impress these people.

These people are telling you all this stuff because they have limited data points to make their decisions. So, just believe in yourself. Be yourself again, and once I started doing that, the company started rocking and rolling again.

Matthew: Yeah, great suggestions there. Now is there a tool, web-based or otherwise, that you consider indispensible to your day-to-day productivity, other than VapeXhale?

Seibo: I was going to say, my VapeXhale, but I think most people will talk about some sort of productivity tool or something that really helps with efficiency, but for me, not to sound hokey dokey, but I use a meditation app called Brain.FM. It has four settings like nap, sleep, energize and meditate. And they range anywhere from 10 minutes to 30 minutes. And typically in the morning that’s the first thing I do, like a 10 to 20 minute meditation. At lunch I will do the same, and then right before bed I do the same. And I do believe that the practice of having that, it really just allows me to recharge my batteries.

I eat healthy, I exercise, and I do a lot of the physical things that someone would think would keep you healthy, but I really found being able to exercise the brain or just not think about anything other than that guided meditation that you’re listening to has been instrumental in helping me feel rested. If I do that routine and only get a few hours of sleep, I feel 100 percent. If I don’t do the routine and get six or seven hours of sleep, for some reason it just seems like the level of sleep is not the same unless I have that practice. So I really highly recommend anyone, especially living in this crazy day and age where just expressing a political opinion, 20 people jump down your throat, that you really need to spend time by yourself and kind of have that self-development time for yourself so that you don’t just get caught up in the business of this world and get taken away.

What I’ve found is by doing that, I started getting some of my own consciousness back. And I mean that when I’m very busy I almost feel like I’m on auto pilot. I’m just this autonomous robot that does sales calls, that does meetings, that gets on an airplane. It’s just like very formulaic. And by doing this, it’s like oh okay, that’s what Seibo does during the day. He does love it, but Seibo still needs some hippy smoking time, and just meditating and just thinking about anything I want to think about or nothing at all, and really just watching myself evolved from an objective point of view. Now that my wife has joined me, I mean, our relationship is so much better than before.

I mean, we’ve always had a great relationship, but now that we practice this together it’s like we have a deeper connection. So there’s so many benefits, I think, from having a practice like that where it’s individual. It could be with other people, and ultimately I believe if you know yourself and treat yourself and love yourself very much, then your purpose on this Earth becomes much more clear to you.

Matthew: Normally I only ask two personal development questions, but I got a third one for you. Is there any public figure, actor, politician, anybody, if you could pick only one person that looks like they probably don’t consume cannabis and you would like them to take a huge rip off of VapeXhale, who would that be?

Seibo: This is such a great question. So this individual has never publically spoken about it. I do have a hunch he may consume cannabis, but it was be the astrophysicist, Neil deGrasse Tyson.

Matthew: Yeah that’s true.

Seibo: He’s the guy that really got me into science. I was basically a sociology major. But the way Neil deGrasse Tyson could break down complicated topics and talk about so simply that a layman could understand, he really blew my mind. I had read so many books on quantum physics, and after reading ten pages, I’m like, what did read. None of that stuck in my head. And when Neil deGrasse Tyson would explain it, it was just like oh okay. He would use normal things like this is a shoe. Just imagine the shoe was the universe and the shoe laces are the energy that’s expanding and contracting in the universe.

Just these weird analogies, and I was like, man, if I could ever sit this guy down and enjoy one with him, how awesome would that be. We would have probably… I could ask him all of my alien questions and then he could use his astrophysicist background to tell me, yes, that’s plausible or that’s completely idiotic Seibo.

Matthew: Gosh, he would be a good choice. I hadn’t thought about him. I watch the NetFlix series, Cosmos, where he was the narrator and walks you through everything, and he does do a great job of explaining very difficult concepts very easily. Visually stunning show too. I don’t know if you’ve had a chance to see that, but it’s incredible.

Seibo: Oh, it’s one of my favorite shows. I mean, I remember seeing the original with Carl Sagan when I was younger. To be honest, there were times when I was watching that show non-activated, and the universe itself is just so fascinating I felt like it was getting me high. I was like whoa, just getting goose bumps, just hearing him explain these concepts. Fact is definitely more strange than fiction, especially if you watch Cosmos, it will just, like you said, blow your mind with just the way the universe works.

Matthew: Well Seibo, this was a great interview. In closing, can you tell listeners how they can find out more about VapeXhale and follow you?

Seibo: Yeah absolutely. The best place is our website, www.vapexhale.com or the word “vape” and then the word “exhale” after it. The company that we work with the athletes for is CannaAthlete, and you can find that at www.getcannaathlete.com. And our social channels are just VapeXhale and CannaAthlete, and if you guys are ever interested, I answer every single email. My email is seibo@vapexhale.com. I love hearing people’s feedbacks. Like I said, I answer every single email. I want to know what you guys think about what we’re doing with cannabis and athletics, what you guys would like to see in future products, and I really like to be engaged with our customers as well because like I said, the first model was created by the people for the people, and want to really continue that tradition because cannabis technology is moving really quickly and we want to make sure that we produce products that are really hitting the requirements of not just the patients, but also the rec users, as well as anyone aspiring to be the best versions of themselves.

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

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The Five Disruptive Trends Shaping The Cannabis Industry Now

Running Cannabis Operations in Multiple States with Pete Kadens

pete kadens

Pete Kadens is the co-founder and CEO of GTIGrows.com. Pete and his team run cannabis grows and dispensaries in multiple states.

Pete goes over the challenges and opportunities in each market and his unique way of identifying the markets where he wants to establish a presence.

Learn More:
http://www.gtigrows.com

Key Takeaways:
[1:00] – Pete’s background and starting GTI Grows
[2:36] – Pete talks about the solar company he sold
[4:21] – States that GTI Grows has a presence
[7:41] – Pete compares and contrasts the markets GTI Grows is in
[12:52] – Decision-making process around picking geographies
[15:53] – Pete talks about obstacles GTI Grows has faced
[19:07] – GTI Grows’ methodology on choosing strains
[22:22] – Pete talks about extraction and in infused products
[25:00] – Pete talks about team building
[31:01] – Compliance challenges
[33:49] – Pete uses his solar background to incorporate energy efficiency
[36:33] – Pete gives an idea to entrepreneurs to solve one of his problems
[38:35] – Pete talks about his partner’s skill sets
[41:47] – Pete talks about the next three to five years in the industry
[45:53] – Pete answers some personal development questions
[49:18] – Contact details for GTI Grows

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

Read Full Transcript

As cannabis Prohibition ends in state after state, some entrepreneurs are tackling multiple markets at the same time. Pete Kadens, CEO of GTI Grows, is one of those entrepreneurs, and I’m pleased to welcome to today. Pete, Welcome to CannaInsider.

Pete: Matt, thank you for having me.

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

Pete: I am in a very snowy Chicago, Illinois where we have a foot and a half of snow on the ground here.

Matthew: It’s the new North Pole.

Pete: Yes it is.

Matthew: Tell us, what is GTI Grows? What does that mean? What do you do, and how did you get started in this crazy industry?

Pete. So GTI is an organization that operates cannabis cultivation processing and dispensary licenses around the country in several states. I got into the business, I’ve been an entrepreneur for the last 15 years. Even before I was an entrepreneur, starting when I was a little kid, I had an anthropological fascination with poverty and homelessness. It’s something that I dealt with and tried to figure out my entire life. Why would someone be poor? Why would someone be homeless? In that study, that anthropological fascination took me to a place where I started learning a lot more about the War on Drugs and started reading everything I could about the War on Drugs.

As I met homeless people and impoverished folks, what I found out is that poverty wasn’t just some permutation of addiction or a mental illness. It was in fact this other bucket, which was largely minority populations who were incarcerated for non-violent drug related crimes. So when an opportunity came up three years ago, when I was running a solar energy company, to invest in the marijuana space, I took advantage of it. And at that point, frankly, not because I wanted to enrich myself, but because I just believed in the cause. So that’s how I first got in, as a passive investor when I was running another company, and then I fell so much in love with it that I decided to leave that company and go do this full-time.

Matthew: Tell us a little bit about your solar company. That sounds interesting.

Pete: In 2008, I started a solar energy company that installed solar panels on the rooftops of companies like Target, Walgreens and Kohl’s, and basically scaled that company over a period of 7 years to a company that operated in 17 states around the country. Had a lot of fun doing it, but I got to tell what, the cannabis industry is a lot more fun. So it had a great run, and I will tell you this, I learned a lot about provincial regulatory frameworks. And that knowledge of how to play the law in different markets, because they’re all different in the solar space given the incentives and such, was fundamentally really, really import to being successful in the cannabis business.

Matthew: Do you feel like this solar adoption has maybe hit a new place? I mean, is it really getting in more to the hockey stick exponential growth curve now?

Pete: It definitely is, the cost of solar has come down dramatically. With that said, there are fundamentally still a couple of huge challenges and frankly not the least of which is the new administration and their views on renewables which I think will probably slow down the progress of solar for the next couple of years because solar still does need a little bit of incentive in most markets to work. Yeah, I mean, the cost curve is, over the time I was in the space, costs came down 75 percent, and frankly I expect that same cost curve to hit the cannabis industry in the near future here too.

Matthew: Good, if you’re prepared for that and still plan to be profitable, you’re one of the few. So tell me, what states are you operating in right now?

Pete: We operate in Nevada, Massachusetts and Maryland. And then we have an affiliate business that I was one of the first passive investors in, in Illinois as well. So really four states around the country, but I run the business that operates, licenses in Nevada, Massachusetts, Maryland and applying in Pennsylvania and Ohio here soon as well.

Matthew: I used to call my home state of Illinois the “Poster child for a dysfunctional cannabis market,” but it seems like even the politicians there are starting to make some changes that have made it a little bit better. Would you agree with that at all or do you think it’s still dysfunctional?

Pete: It’s starting. The law here was passed under Governor Quinn, who was a strong advocate for medical cannabis. Shortly after the law passed and after the applications came out, Governor Quinn was upset by Governor Reiner, who was not as big of a fan. You’re right, it is progressing. We started with 3,000 or 4,000 patients a year and a half, 2 years ago. Now we’re up to 15,0000 or 16,000. It’s still a smaller market than even comparably a market like Nevada, which has a lot fewer people in terms of total population, but yeah it’s growing. The advances it in largely have made have been in the expanding condition list.

Really there are 41 conditions, in which most are very severe, the cancers, the Parkinson’s, the epilepsies. Recently they added PTSD, which really advances the market. Still not on the list, and notably, is chronic or intractable pain, and that, as you know Matt, in many markets a real key element of the patient condition set.

Matthew: Are they requiring the fingerprinting, background check and prostate exam? I’m just kidding about the prostate exam, but the other stuff I’m not kidding.

Pete: They have made some of the components of accessing cannabis easier in terms of getting your patient card. So yes on the full background check. The fingerprint thing is a little bit diluted now, and it is easier for doctors to recommend. This is a fundamentally, really important change, and this is a change I expect to sweep the country. It used to be that physicians had to recommend a patient specifically for cannabis. They had to say, John is my patient and I recommend medical cannabis for him. They’ve changed that now, this is I think a very important change, to where a physician only has to certify that that patient has a condition that is eligible for cannabis. So the physician can say, yes indeed this person has epilepsy, and epilepsy is qualified condition. That indemnifies the physician, makes them feel a little removed from the recommendation of medical cannabis and thus removed from the liability of it. So that is also advancing the market in a big way. I think that’s fundamentally the most important change that happened here in Illinois recently.

Matthew: That’s good, a much lower bar. That’s definitely progress. Can you compare and contrast Nevada, Massachusetts and Maryland, their regulatory frameworks? What you like, dislike, the opportunities and challenges and both so people can get a sense.

Pete: Sure. This business is so hyper provincial. I mean, that’s why it makes it so difficult. Every market, every operating or legal market has its own fiefdom of laws. And in fact that’s one of my recommendations, for later I think you’re going to ask me, what do I recommend for the industry, is if there is any way for us to collaborate as states and standardize laws, that would really make things a lot easier for us operators in the space.

Maryland is a very restrictive state, 15 grow licenses, 15 processing licenses and there are 102 dispensary licenses, but that’s a small number of licenses for a population of roughly 7 million people, just under 7 million people. I think that’s a good thing personally. I’ m in favor of cap licenses and a rigorous application process. The laws there do not include edibles, which does take out a big chunk of the product offering, that especially some patients are looking for. I think their position there is we want to sit back and study the edible market and see how it evolves and see how standards around dosage counts and labeling evolve before we get in too deep into that space, and I understand that.

The Maryland market has had some real challenges. Unfortunately my company is involved in one of those legal challenges where the cannabis commission there has made some pretty serious mistakes. Unfortunately I would say, that up to this point, Maryland has been the most poorly run market that we operating in, in terms of how the regulations have been introduced and how they have been managed.

Nevada is a little bit more of a free-flowing market, and Nevada interestingly, is the opposite of almost every other market in the country. Most markets in the country are like Maryland where there’s a smaller number of cultivation licenses and a much larger number of retail establishments, and Nevada is exactly the opposite, 180 cultivation licenses and 60 dispensary licenses. That makes the Nevada market really interesting in terms of being a retailer. The one interesting thing about Nevada of course too is that there are only two real markets, which would be North Nevada, Reno, Carson City area and Southern Nevada, which is basically just Las Vegas. So because of that there’s nothing in between.

The third thing about Nevada, I always mention that’s kind of interesting, is many folks who live in Nevada are folks who have a firearm license. And because of the federal prohibition on accessing a controlled substance, if you also have a firearm license, many folks in Nevada are not able to access medical cannabis because they are not willing or able or interested in giving up their weapons license. So that has cast a shadow over the market, and I think that’s a very interesting dilemma that we’re going to have to face here in the coming years.

Then these two markets in particular, Nevada and Maryland, are interesting in that they are two states that recognize reciprocity. So if you have a medical cannabis license in another state that’s recognized by a physician and by the state, you can go to a dispensary in Nevada or go to a dispensary in Maryland and access medical cannabis. So that’s a nuance of those two markets that happens to be very interesting. And as you know, Nevada has voted in favor of legalizing recreational cannabis, which we think will be implement later in 2017.

In Maryland, I’m sorry Massachusetts is also a state that voted in favor of legalizing recreational cannabis which will be in 2018. It looks like July of 2018. Massachusetts was an interesting process. It’s a rolling process. There’s no real cap, no real stated cap on licenses, although the regulators talk about a cap from time to time. There’s about 85 organizations that have qualified to provide both medical and recreational cannabis to the state, to Massachusetts. The interesting thing there now is even after three years of being up and running, there are only nine organizations up and running and selling cannabis in Massachusetts, including only one west of Worcester. So there’s about a million people who live west of Worcester which is kind of the dividing line of Massachusetts, and only one operator is open in that market.

So it’s an interesting market headed for full legalization. Definitely has some challenges. I will tell you that the process of getting through the Massachusetts Regulatory Framework is a three-step process and it is very time consuming, meaning a year to a year and a half plus, and extraordinarily expensive to get through. So I apologize for being long-winded, but I wanted to lay the landscape for all those markets.

Matthew: Yes and Wister is pronounced Worcester for the rest of the country, right?

Pete: Right, exactly, except in Massachusetts where it is Worcester.

Matthew: Okay, and how do you go about deciding which city in a market to go with, in let’s say in Nevada or Massachusetts or so forth, what’s your strategy there?

Pete: This is something that GTI has been really focused on. We’re very surgical with our approach to where we locate. We mine a lot of data. We’re studying everything from demographics to household income to traffic patterns. And importantly, we’re studying where other people are going. While we are focused on the impact we make in our communities, as well as, the number of employees we can bring in and the benefit to patients, we’re also focused on shareholder value. And we believe we can derive more shareholder value by being in markets that are less competitive.

So we look at a major metropolitan area where people are clamoring, other operators are clamoring to be in, say Boston or Las Vegas, and we go elsewhere. We go to (13.45 unclear) markets where there aren’t as many operator servicing of those folks but there is as much interest and there is as much demand. We believe that’s the best way to preserve margins and to avoid significant margin oppression in a commoditized industry, an increasing commoditized industry.

In addition, from a cultivation perspective, we have a couple key factors that we look at that help us determine where we’re going to operate. And those key factors are things like we want relatively high minority density in the markets where we have a cultivation facility. We want relatively high unemployment. In other words, we look for areas that have been economically depressed for two reasons. One is we like to give back. I talked earlier about my anthropological fascination with poverty. That’s not just something that I have. That’s me and all of my partners share that, and we like to be a part of revitalizing communities. That’s a fundamentally important thing to us as people.

Number two, those are markets where the mayors and the city council members, they want us there. We are not a burden to them. They don’t see us as a nuisance. We’re not a not in my backyard type of business. Our 50 jobs or 75 jobs are critical to the development of their urban corridor and to revitalizing their city. And so when you have a community who stands up for you in the face of drama or in the face of people not liking what you do that’s where we like to go. We want to be supported by the community and we want to be in a communities where we can make a big difference, and frankly in communities where we can drive shareholder return.

Matthew: What about operating GTI Grows has been a bigger obstacle than you imagined initially? You mentioned you came from the solar industry. It sounded like there was a lot of regulatory headaches there, compliance headaches perhaps, but what about this industry has been a bigger obstacle for you than you initially thought that hey I’ll be able to surmount this, no problem.

Pete: Yeah that’s a good question. I tell people this all the time that this business is two times harder and three times more expensive than you could ever have imagined. And primarily because the mundane in any other business is incredibly challenging in this business. I just totally underestimated that, for example. In almost any other business I have operated, I’ve had directors and officers insurance, which is a standard insurance. It’s one of the more expensive lines of coverage because of the risk associated with shareholder lawsuits and other lawsuits, but it’s an important coverage to have so that the directors and board members of the organization aren’t naked.

In this business you’re hard-pressed to find anyone who will buy the policy that is of substance. And what I mean by that is I’ve been to 20 different insurance markets with 20 different brokers and people who I know and trust, who I’ve worked with, who have gotten me great deals even in challenging situations in the past. And they’ll go and they’ll get a directors and officers policy, and I’ll go immediate to the exclusions of the policy and the first line in exclusions is, “If you’re breaking any federal law, this policy is null and void.”

So they want me to pay $45,000 in premiums to protect my fellow directors and officers and yet they’re saying that my policy is null and void, effectively because of a federal breach, effectively the policy isn’t worth the paper it’s written on. In any other business, that’s just par for the course. That’s easy. The banking thing is a challenge. I mean, we have banking relationships, but it’s not easy. I mean, in my prior life I spent less than 1 percent of my time focusing on banking. We had people banging on our doors to try and get our deposits and get our lending business.

In this space, I’m spending 10-15 percent of my time, as the CEO of the company, focusing on accessing banking relationships and securing depository relationships. It seems like a waste of time to me, but unfortunately it’s a necessity. So I would say the most surprising thing and the biggest obstacle is that I’m spending, and the other executives are spending, a lot of time on things that should be easy and that aren’t revenue generating, but in this business they’re hard. And in effectively that impacts the bottom line. That impacts the top line. That can impact employee morale, and so you’ve got to work really, really hard to overcome those obstacles.

Matthew: Gosh sometimes is wish the politicians could see what the consequences are of the behaviors, the unintended consequences. I know most of them are trying to look out for their citizens or maybe they’re not. Maybe I’m in la-la land. Maybe they’re totally corrupt, but I wish they could see either way what happens. I mean, how you’re spending your time and how you could be spending your time. It’s crazy. Let’s transition to some more granular details. How do you decide which strains are the proper strains to grow and how do you come up with that? What’s your methodology around that?

Pete: We like to say that data is everything. So for example, just to kind of isolate hey we want to grow an OG Kush or we want to grow Golden Goat because it’s got a high THC, it’s not good enough. It seems fun, but really that’s not good enough to really be successful. Market data is everything. You have to match incidents rates in a market to the medicine that help alleviate those conditions. For example, in certain markets certain forms of cancer have a higher incidents rate. Heart disease or diabetes or things like that have higher incidents rates. Epilepsy, believe it or not, there are certain markets where there are higher incidents rates.

So you have to match the medical conditions and the incidents rates to the strain. Obviously for a spastic disorder, which is epilepsy, tourettes, (20.04 unclear) Syndrome, Parkinson’s, those diseases that cause the tremors, if there’s a lot of that in a market where you operate a dispensary, you want to be growing a lot more Indica, and you want to be growing at a higher CBD ratio of products that would settle those tremors for those patients. So we’re constantly studying data, but also this is an evolutionary process.

You come into a market, you study the incidents rates. I mean, the incidents rates for medical patients don’t tell you everything and you kind of make some educated guesses. I think it’s important though then that you study the data to understand who is buying what and why. So when we first opened up within one of our markets we did see that our highest THC content strain was the one that was flying off the hook, and it was 26 percent flower, it was a 26 percent Golden Goat flower and it was by far our best seller. I mean two to one, over the next closest flower.

Then as we started educating patients on the entourage effect and you don’t just have to have high content THC to get what you want out of this solution, we started to see those sales dip. Because what happens is, is people come into a market and they don’t know much. They’re novices at this. They have to learn and we have to teach them. Once we teach them, they adjust their tastes accordingly, and we’re educating them. So we’re using data, we’re using trial and error. We’re using experience. We’re using what flies off the shelf, and we’re taking all of that and putting that into a formula and basically determining which strains to grow.

The other thing is, and the last thing is, and this is more in the horticultural side, is there are certain strains that are more predisposed to things like powdery mildew and spider mites and other sorts of viruses, and we definitely try and stay away from those strains. For whatever reason, the genetics of certain strains are more predisposed to that, especially in an indoor climate. And the last thing you want is to be setting yourself to have to just eradicate a crop because of a spider mite infestation or a ton of powdery mildew. So we tried these very sensitive to using genetics that will allow us to avoid having those catastrophic viruses.

Matthew: Pete, how does extraction and infused products play a part in your business?

Pete: To me this is really the future, Matt. I mean, every week we look at our data, and our data tells us that people are migrating away from flower and more towards different types of product. The penetration is increasing for things like topicals, edibles, concentrates. And we believe that the business is becoming much more about experience and much less about strains. I have publically stated, I’ve given public discussions. I serve on the National Board of MPP (Marijuana Policy Project). I have stated a number of times, I think that we don’t do ourselves any service by using nomenclature like Maui Wowie and Great God Bud and OG Kush.

The reason I bring that up and I think that’s important is because we have to be a sophisticated industry, and I think the products and the nomenclature of the products has to be sophisticated along with it. So we’re working very hard to tweak our product offerings to provide more extracted products and to provide more experiences for people. I do believe that in 2-3-4 years that marketing will not be done via strain name, via flower. It will instead be done the formulation of some form of oil and extract. In other words, the example I always give, and it’s a little bit crazy, if I’m hiking in the Sierra Mountains and I want to enjoy the majesty and splendor of the Sierra Mountains, but I want to forget about the 40 pound backpack on my back, there should be a formulation of an extracted product for that.

I believe that the market is going to transition towards more extracted products that are formulated for very specific experiences and people will buy product based on experiences. So it is becoming a much bigger part of our business, and I think it’s going to be an incredibly important part of the industry going forward.

Matthew: Pete, running cultivation facilities and dispensaries is capital intensive. We know that, but it’s also human resources intensive. How do you organize your team members to ensure your goals are being met, especially when most people don’t have a background in executing on these things because no one really has experience in it because it was federally illegal, or still is federally illegal but it wasn’t state legal before. So how do you organize people to meet your objectives?

Pete: I and four other partners and all of us bring different assets to the equation here. I think the thing that I’m most well-known for in our partnership is my knowledge of hiring and recruiting and building up a team. That’s kind of what I’ve done with my prior businesses. So first we implement a system that ensures that we hire the right people. That system that we use is called Top Grading. It was invented by a guy named Bradford Smart out of Peoria, Illinois, and it was then basically kidnapped by Jack Welch of G.E. who made it famous, but the founder is this guy, Bradford Smart.

Effectively what he says is, no matter what industry someone comes from you should make sure that they have a track record of success. So even if someone was working behind the counter at a fast food restaurant or if they just got out of college or if they were actually in the cannabis space, you should see consistent success. You should see promotions. You should see that their manager elevated them and believed in them. You should see indications that they had a good attitude. So we use this system and it’s a very thoughtful, thorough interviewing process. Then we ask really, really tough questions. And you don’t have to have experience in the cannabis space to answer these questions.

Let me give you an example. We’re hiring a dispensary manager right now for our facility in Massachusetts, and one of the questions we asked him, and it’s an essay-type question, one of the questions we asked him is you find out that your best salesperson, your best patient consultant has been stealing money. Not a ton, $50, $75 a day out of the drawer and a couple weeks later you catch up with it and you see it on camera, and this person is a really, really talented salesperson, your best salesperson by a country mile. And if you fire him the patients will revolt. They’ll go elsewhere because he will undoubtedly get another job elsewhere. What do you do? Now that is a really tricky question.

Matthew: Yeah that is a tricky one.

Pete: But fundamentally it’s an important question and it’s important to assess how people answer that question. And that question, someone could have been managing a fast food restaurant, again, and would have had credible background. They don’t have to have cannabis specific knowledge, but we want to understand how people think. We want to understand what their attitudes are towards their colleagues and their employees and their subordinates and their managers too. So we ask tough questions. We go through a ridiculously challenging and arduous hiring process, and then congruent with hiring slow is frankly and honestly firing fast.

I mean we don’t screw around with people who we know are going to be cancerous to the culture. We don’t screw around with people who are not A players and have bad attitudes. We move them out quickly. And that may scare off some people from working at GTI, but the fact of the matter is is that I’ve learned over my 15 years of employing people that there’s nothing more that an A player hates than sitting next to and working next to a B player. So we focus a lot on, not on cannabis specific knowledge and the fact that say we, I’d advocate that we actually like the cross-pollination of other industries coming into our orbit, but we focus on the human being, their track record of success. Matt, this is not just senior level people who are managing operations. This is all the way down to the woman or the man who is trimming flower.

Matthew: Wow, such a good point there. I’ve been part of teams where you’re in a group of seven or ten people and everybody’s got a positive attitude and working hard except for one person brings it down, and it’s like you can’t help but notice it really does ratchet the whole operation down. There’s something about the morale, and the vibration of the team just gets anchored by that somehow. Also the difficult thing is that everybody has a bad day sometimes. So I guess you just try to look for patterns that are more medium and long term versus short term.

Pete: Yeah, everybody does have a bad day and unfortunately that includes me too. So we do recognize that. I have a theory around managing and employing people and I call it unwavering authenticity. If I’m transparent and really honest with you, there’s nothing more than a colleague or an employee hates than a manager who isn’t transparent with them about things like compensation or just about what’s going on in a business. Are we going to get acquired? Are we selling? Stuff like that really scares employees, and they don’t like that. So there’s this thing that I try to establish, kind of the core of the organization, where I am unwaveringly authentic with my colleagues, in exchange just by the associated property, they will in turn oftentimes be unwaveringly authentic with me. And that transparency allows for someone to be a little pissed off some days.

It doesn’t preclude you from kind of going on a rant every once in a while. There are times I have who is a little more reserved and like to really be contemplative, and I advocate to him, hey it’s okay to get mad once in a while. That is okay because those are human emotions and we don’t employ robots. We employ humans and they have emotions and they have bad days. And so you’re right, as long as we don’t see a trend there that makes us uneasy, those things happen and we deal with them on a case-by-case basis.

Matthew: You’ve compared and contrasted the states a little bit earlier, but is there any particular compliance challenges that you’re suffering through right now or have recently that you feel like may not be on the public’s radar neither in Nevada, Massachusetts or Maryland to an extent? It sounds like Maryland there’s legal proceedings going on, but for Nevada and Massachusetts, anything in the compliance structure there that’s particularly difficult to deal with?

Pete: Yeah, I mean, those states, all three of these states frankly, Maryland, Massachusetts and Nevada, have done a pretty good job. I mean, there have been issues in Maryland that we’re in the center of, but all-in-all I think the regulations are pretty good. There are some interesting things going on. For example, there’s some issues around hardship, and this has really reared its head in Massachusetts. There are some requirements from the Commonwealth on how to treat patients who are going through hardship.

So those are patients who are perhaps on federal benefits, who are impoverished. These are patients who I have a real soft spot for, but the problem is is there’s a number of people who are trying to take advantage of that. And as a result, there was this idiosyncratic thing happening where the laws weren’t necessarily congruent with reality. And reality was is that yeah we want to offer hardship allowances to people who can’t afford the medicine because there are no benefits that cover this medicine obviously. We also can’t give it to everybody, and a lot of people are trying to take advantage of the system and take a hardship allowance so that they can get their medicine for half off.

So, that isn’t just Massachusetts, but Massachusetts is where it’s kind of reared its head, but that issue is a pervasive issue and a really, really challenging issue and the markets are going to have to figure this out. We get questions all the time, when we go to open forums or community forums. In fact, I had a question the other day, which is a tough question to answer. There was a gentleman in the audience in a community that is kind of a little bit of a down and out community, and he asked me, he said, so we can’t use any benefits to secure this medicine. I said sir, unfortunately you can’t. And he said, so what you’re telling me is cannabis is for rich people, and that’s a tough thing to answer.

Unfortunately we don’t make the rules because if we did, it would be a lot different. That’s one of the regulatory compliance challenges that we see in other markets. We have to run a business, and we have to be profitable or else we do no one any good, but by the same token too, we want to offer hardship allowances to people who really deserve them. And so how do we manage through that, and that’s a really challenging thing. We’ve seen it in Massachusetts but also in all of our markets.

Matthew: How is your background in solar? I mean, I’m constantly getting questions about how can I conserve energy in my cultivation facility. What’s the better lighting, LED or traditional? All these types of questions. Do you try to bring any of your energy efficiency models or solar background into the grow facility for energy efficiency?

Pete: Yes. So I think there’s a difference between energy efficiency and solar. Energy efficiency is the process of looking at how you’re consuming power and tweaking that and reducing your demand. Whereas, solar is an onsite generating asset. The important thing that I explain to people, because everyone always says, oh is your facility powered by solar. I say no it’s not, and the reason it’s not is because our energy demand is so intense, I mean, millions of kilowatt hours, that if we were to throw up a solar installation on our roof or in the field around our facility, the offset would be so insignificant. Solar panels are still not that efficient.

So roughly 19 percent of the sunlight that hits a solar panel, only 19 percent of that sunlight actually converts into kilowatt hours. And so you have to have huge, huge, huge, you would have to have 20 acres of solar panels to make a dent in the energy demand. So I don’t advocate that solar is a good investment because I think your offsetting 1 or 2 or 3 percent of your total load. It’s going to make a marginal difference at best. I would advocate, and this is what we’re studying now, is that it is better to study the operations in the facility. Know your mechanical load, your lighting load, the way you bring CO2 into the building. It’s better to study those facets and to figure out how you can save kilowatt hours and be more efficient with the functions that are actually up and running than to add new power sources like solar onsite.

Matthew: Okay, that makes sense. Although Elon Musk there in Nevada in his huge factory might disagree with you. Are you pretty close to that Tesla factory in Nevada?

Pete: We are relatively close, but the problem is is that he has not quite yet commercialized battery storage. Battery storage would make a huge difference. That factory, the Giga Factory, is attempting to bring down the cost of battery storage and to commercialize battery storage at a price point where all of us can afford it. If we had battery storage, then all of a sudden maybe it makes more sense. Still though, that facility isn’t commercialized to the point where the cost of battery storage has come down. Then if you integrate battery storage, at this point, solar definitely wouldn’t make sense unfortunately.

Matthew: So you have a background as an entrepreneur, both in the cannabis business and before that, do you have any pain points where you’re wishing, god I wish an entrepreneur would come in and solve this problem for me. I’m too busy running my day-to-day or I would do it myself. What do you see where someone could step in and add some real value for a business owner like you?

Pete: I think the cool thing about being in inefficient and (36.39 unclear) market like cannabis is that there’s so much to improve. I don’t even know where to start. But the one that’s interesting is in the solar energy industry there was a portal, this is a very simple solution, but I kind of like simple things. There was a very simple solution called DSIRE, and it was this portal that anyone could go to in the industry and you could, in one click, figure out what the laws were, what the parameters were, how you had to comply with the laws in any state around the country. You could even drill in and figure out, okay I’m in Maryland. What are the laws in Baltimore County? What are the zoning requirements? How far do have to be from a place where children congregate.

It was this one stop shop for all this information. And when you end up spending a lot of time, energy, effort and frankly money with lawyers doing is researching the provincial laws and even the hyper provincial laws specific to a city or a county or a municipality relative to zoning and permitting. It’s not all in one place. It reeks havoc on your legal bills, and I really wish that the industry would come together, and essentially that’s what the solar industry did. The solar industry came together and collaborated with North Carolina State University to bring this database together that was updated in real time.

As we know look, on any given night in America, a city council could meet and change an ordinance. And so the other thing is this portal has to be responsive to those overnight changes. It has to be real time. I wish that we had that. And frankly, I think that would even the playing field for companies in the space. We, because maybe we’re a little bit better capitalized, can afford the lawyers in all these markets to study the markets and keep us up-to-date. There are a lot of other companies that can’t. I do think the industry should level the playing field in that regard, and that would be a huge win for the industry.

Matthew: Tell us a little bit about your partners. You’ve got some interesting people working at your business with different backgrounds, and I would love to hear a little bit more about them.

Pete: Yeah, I always say, you cannot do good business with bad people, and I’ve learned that over the time, over my 15 years in business and I have had some partners who frankly I probably regretted having. And I look back and I’ve learned from that. The luxury of picking your business partners and picking your colleagues is just this awesome luxury. And I work with an amazing team, but specifically four of the greatest guys in the world, each with different backgrounds.

Eugene Monroe is a former NFL football play, the 8th pick in the draft. Grew up in total poverty, the youngest of 16 children to drug addicted parents. Overcame everything to get to the University of Virginia. And last year kind of came out and became the first active NFL player to advocate for the use of medical cannabis in lieu of the opiates that frankly were killing his fellow athletes. So he’s just a great, smart guy who’s had real life experience that makes him believe that medical cannabis is the path to begin to alleviate the opioid epidemic.

A gentleman named Ben Kovler, who is a fascinating guy in his own right. He wrote a book called Fundrum My Conundrum, which is a very well-read book on puzzles and games, and Ben thinks in terms of solving puzzles and solving riddles. That’s how his brain works. You can buy his book Fundrum My Conundrum on Amazon. That’s a paid promotion for him. But he wrote this when he was twenty, and he’s a super smart guy and I just love the way he thinks. He balances me because I run businesses a lot more by gut and intuition, and he uses a lot more data, puzzle solving, analytics than I do.

Then got two other partners, Anthony Georgiadis, who is heavily involved in the industry. Anthony and I have known each other for 20 years. We have some good stories about one another. He was a fraternity brother of mine at Bucknell University. And then a gentleman named Andy Grossman, who started as an investor and love what we were doing so much, after he retired from the hedge fund industry, decided he was going to come work for us full time. So I’ve got a great crew of people, and like you said, from totally different walks of life.

Matthew: Yeah, it’s really nice to have people with different backgrounds and balance the ying and yang and all the different things involved. So that’s great because if everybody is exactly the same, then someone’s redundant.

Pete: Exactly.

Matthew: So where do you see the industry going in the next three to five years? It’s already changing now. I mean, especially after all the ballot initiatives in November. That was just a huge, huge change, but where do you think things will settle in three to five years? Especially I’m interested in what you think in terms of automation because there’s a lot of manual processes in this business. Do you see more automation coming in, because we are dealing with a plant that’s very high priced. I mean, if we’re talking about tomatoes, maybe not so much, but when a plant is over $1,000 maybe there’s room for some more automation. What do you think?

Pete: Yeah, no I totally agree Matt. I mean, like I said earlier, I saw, I personally first-hand witnessed the cost of solar coming down by 70 percent over 7 years, 75 percent over 7 years. I’m not sure that kind of cost compression is going to be as accelerating in the cannabis space, but I will tell you it’s coming, and it’s going to be led by industry leaders who thoughtfully figure out how to produce high quality cannabis at lower prices. I mean, you’ve seen it in markets across the country. I think most notable is Colorado of course, but that cost compression is coming fast and it’s through robotics. It’s through automation. There could be some artificial intelligence in there.

I frankly think it’s through just labor efficiencies, or what I call the learning curve and the experience curve. As we get more and more experienced at trimming plants, at drying and curing plants and packaging the plant and labeling, as we get better and better, we learn more and more. And so I think that the costs are going to come down over the next 2 to 3 years between 40 and 50 percent. And I think there are some organizations that won’t be prepared for that, and frankly they’ll be distressed as a result of that cost compression. I think there will be a market of opportunity that opens up for people who are well capitalized to begin to roll up the industry and consolidate it based upon that cost compression because there will be companies who just can’t get there. They can’t invest the cap X in systems and people and processes that help them reduce their costs, but that’s coming. And the day of reckoning associated with that cost compression is coming as well in my opinion.

And the other thing, I talked about it earlier, is I just believe there’s going to be this major shift in experiential marketing. I just believe people are going to be buying product for what it does for them, not just based on the phenotype, which is the taste, the smell, the feel. I think it’s going to be marketed to them based upon the experience it gives them, and I believe that’s going to be a huge momentous shift over the next two to three years, as this market becomes more educated as consumers and it becomes more pervasive and consumers have more access to it.

Matthew: If you could go back and prepare or change something about how you went into this business, what would it be?

Pete: I think we’d all raise more capital. I would have more lawyers in-house because you end up spending lots of money on outsourced lawyers, as I talked about earlier, each market has its own legal nuances. When you bring legal in-house I think my analysis is that you save money. So more capital and actually I’m advocating for more lawyers in-house with a real marijuana skill set. I think one of the challenges is we go to these professional service providers on the outside who to this point have had no experience in cannabis. And so you pay them, in large part, to get trained and educated.

I think one thing is I probably would have spent more time off the clock, hopefully, educating my professional service consultants, my accountants, my attorneys about the specifics of the industry so I wouldn’t had to have paid for that. I would like to go back and collect some of those dues and fees that I paid, but those are two things that I think of. I mean, the capital thing again. It’s just way more expensive than you could ever imagine. We’ve raised a good amount of capital, but I think we need even more because the challenge around real estate. There’s very little financing. There’s no such thing as a commercial mortgage in the cannabis space. And so you’re deploying your equity capital into real estate investments and that’s a real challenge I think. So I wish I’d had more equity capital to deploy for real estate, and I wish I kind of had more lawyers in-house. Those are the two things.

Matthew: I like to ask some personal development questions to give listeners and opportunity to get to know you a little bit better. With that, is there a book that has had a really big impact on your life or your way of thinking that you would like to share?

Pete: Yeah. I don’t know if there’s one book, but I’m going to give you two quick ones. The first, and it sounds kind of cheesy, but I read it when I was 12 years old, and I think it had a huge impact on my life. I think other than the Bible, I actually think it’s the most well-read book of all time, and that is How to Win Friends and Influence People by Dale Carnegie.

Matthew: Oh my gosh yes, I think I read it about the same age. That’s crazy.

Pete: Pretty simple stuff, right. The sweetest sound in the English language is a person’s own name. Don’t use I, the word I, the pronoun I, if you can avoid it. I mean, really simple stuff. But when you read it and you see and watch the stories and the anecdotes, the tales of a real life anecdotes about how using someone’s name could impact the success of a person over a lifetime. It really hit me hard and it made me a believer in being dignified and how you treat other people. I think that has hopefully been reflected in how I’ve employed people and how I work with my colleagues and being humble, using other people’s name. Simple stuff, but that really did make a big impact on my life.

I think the other one, just more from a business perspective is, there’s a book called American Icon and it’s a book about Alan Mulally. Alan was the CEO of Ford during the 2066-2010 crisis, and what he did with Ford during that period of time was a total metamorphosis. And it went from the brink of total collapse to being enormously successful. In many ways he did it by using data. And because I’m not predisposed to use data, my mind doesn’t think like my partner, Ben, I had to be trained on how to use data, and that book was really important in teaching me how to use data to better assess how to build businesses.

Matthew: Is there a tool, web-based or otherwise that you consider valuable to your day-to-day productivity?

Pete: Unfortunately I would say the tool, the app that I use most often at this point is the Southwest Airlines app, and I hate to admit it. But given my travel schedule to all these markets where we operate, that’s what I’m using most often. But truthfully, I’m not an app guy. Maybe it’s a little odd, but I still read the hard copy of newspapers and magazines, and now what I’m doing, which is kind of interesting, is I’m actually reading the hard copy of the newspapers and journals where we operate our businesses. So in Massachusetts, the Springfield Republican, and in Maryland, the Hagerstown Herald. And in Carson City, Nevada, the Nevada Appeal, and to me I want to really have the flavor of what’s going on, on the ground in the markets where we operate. So instead of using apps, I still like kind of touching and feeling the newspaper and so I get those sent to me and that’s what I read.

Matthew: Well thanks for Pete. I’m also going to link to your TED Talk so people can listen to that from the show notes here. So I would encourage everybody to take a listen to that too, if you would like. Just visit www(dot)cannainsider(dot)com and go to Pete’s interview, and you’ll be able to find the link directly to that TED Talk. Before we close, Pete can you tell listeners how they can find out more about GTI online and connect with you?

Pete: Sure. Our web address is www.gtigrows.com. And from that website you can find out all you need to know, and I think on my bio there’s a link to my email, if anyone wanted to reach out to me.

Matthew: Pete, thanks so much for coming on the show today. We really appreciate it. Good luck with the 20 inches of snow just dumped on Chicago, and good luck in all the different markets you’re operating in. You got your hands full.

Pete: Thanks Matt, it was a great time. Thank you so 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 guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on www(dot)cannainsider(dot)com, simply send us an email at feedback(at)cannainsider.com. We would love to hear from you.

Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Lastly the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you’re still paying attention. This little whistle jingle you’re listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye-bye.


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The Five Disruptive Trends Shaping The Cannabis Industry Now

Helping Cannabis Businesses Get & Keep a Bank Account

sundie seefried

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Sundie Seefried is the CEO of Safe Harbor Private Banking and shares why she is successful in helping cannabis companies get and keep a bank account. She also covers how to interpret The Cole Memo to stay in compliance with regulators and how she is successfully processing 65-70 Million dollars a month.

Key Takeaways
[0:51] – Sundie’s background in banking
[2:31] – What Partner Colorado Credit Union does
[5:51] – The current landscape of cannabis banking
[8:18] – Understanding The Cole Memo
[10:51] – Why Sundie is successful in cannabis banking
[13:38] – How Partner Colorado Credit Union makes money
[16:48] – Sundie talks about day-to-day banking challenges
[20:19] – Sundie talks about how they deal with all the cash
[22:12] – Common regulator concerns
[25:14] – Does banking work for companies that are licensed in multiple states?
[29:02] – How do debit and credit cards work for cannabis businesses
[31:57] – Sundie gives advice on banking in the cannabis industry
[33:44] – Sundie talks about her trip to D.C. to meet politicians
[35:37] – Cannabis banking three to five years in the future
[40:39] – Sundie answers some personal development questions
[43:38] – Contact details for Partner Colorado Credit Union

What are The Five Trends Disrupting Cannabis Industry?
Find out with your free guide at https://www.cannainsider.com/trends

Read Full Transcript

In the United States banking for cannabis related companies is a huge problem. Here to tell us about it and how you can have a responsible and safe banking relationship is Sundie Seefried, CEO and President of Partner Colorado Credit Union. Sundie, welcome to CannaInsider.

Sundie: Thank you Matt, glad to be here.

Matthew: Before we get started with banking, can you tell us a little bit about your background and how you got into banking and specifically, helping cannabis companies get banked?

Sundie: Sure, it’s an interesting story because I was headed to retirement. I’d actually put my notice in with the credit union here, and I had about six months left. And I was meeting with some attorney friends and they said well you’re a banker. Why can’t our clients get any bank accounts? And I said, well gee, we just came out of a recession, and nobody is interested in taking on additional risk, and I think our regulators really kind of just shake their heads no when the topic comes up, but let me do some research.

So I went and did some research, and I was really surprised by my findings. And I guess, the safety issue really stuck out, and when I explained to the board how the cash was being handled in their own communities they were a little appalled as well and feared for their members and their families. And the more we learned the less we could ignore the situation around us. The second thing that really bothered me about my research, as we were going through it, was that this was an industry that was emerging and legitimizing itself, and the lack of banking actually was forcing them to do less than legal activities within the system in order to get payment services.

So we were technically making criminals of the industry by not banking them, and I felt as a banker, our side of that equation, we weren’t living up to what we should be doing for our communities, especially as a credit union. So we really felt compelled to right this wrong and find a solution for Colorado.

Matthew: Well I’m glad you did. Can you tell us a little bit about Partner Colorado Credit Union, where it’s located and who you serve?

Sundie: We are in the greater Denver metro area, so we have about four branches around the city. And we were chartered in 1932 as a postal credit union. Post office employees pulled their funds and decided that they were going to create a credit union, and that’s where it started, as a cooperative. The interesting thing about credit unions is that we were actually chartered by Congress to serve the underserved and the unbanked. So philosophically this entire project fit into the foundation upon which credit unions were built to exist. And since we exist to serve our communities, it was important that we stepped up. Our communities changed when marijuana became legal and therefore our objectives and our strategies needed to change with our community. Safe Harbor Private Banking is actually a division of Partner Colorado Credit Union, and the reason we named it separately and hold all the accounts separately is for additional security purposes on these accounts.

Matthew: How long exactly have you been working with cannabis companies? How far does it go back specifically?

Sundie: I started my research in 2014, which is right after they issued the guidance from D.C. And we actually launched the program in January of 2015, after about 6 months of jumping through hoops and getting ready and developing all of our strategies. So it’s just been about over two years now, and we have about 110 clients. And we process probably $65million to $70million a month, which we feel pretty good about that because our intent was to get the money off the streets. Our first ten charter members were really quite instrumental in the success of the program.

They really trusted us, first of all, to bank with us, and then second of all, they understood that for us to bank the business we really needed to understand the industry. And so they were really generous with their time and their education and bringing us on-site and showing us all of their monitoring systems and allow us to just see everything in order for us to build a program that incorporated everything about the industry into this program and be able to mitigate all of the risk factors that we would find. So I really give them a lot of credit for helping us get this program launched.

Matthew: Can you paint a picture of where we are right now in terms of banking for cannabis related companies here in the United States? Because there’s a lot of people listening that will have one or two really bad pain points for their cannabis business. There’s people right now that are just starting their cannabis business, and they’ve heard there’s issues and they’re not quite sure of what they are. They just know there’s some pain. And then there’s even people in Canada or different places in the world that are just appalled by what’s going on with our banking. So maybe you could just paint a picture at a high level of what the situation and the problems and some of the opportunities are.

Sundie: Well first of all, I think the industry offers a lot of opportunity for the banking world, but the discrepancy between the legality at the state level and the illegality at the federal level makes it very difficult for anybody to enter this business. We are subject to prosecution and heavy fines just for doing what we’re doing today. It hasn’t been a practice of what’s happened in terms of people trying to serve the industry. Most of the time programs just get shut down, but you can’t put the entire credit union or banking institution at risk for a segment of business because what would happen is if it wasn’t done correctly, an institution could be easily fined millions of dollars, which would shut the entire organization down, not just the program.

So banks and credit unions are in a situation where they want to serve the industry, they see the legitimacy of the industry and the opportunity, but to enter that they’re thinking they’re risking their entire organization. And the larger the organization, the less likely they are to enter it. So what you find are more smaller community organizations, like ourselves, that would enter the market and pay attention to the community and take that risk, and it’s still a risk, but the way we went at it, and the way the other credit unions are going at it, is to be very transparent and very close to the regulators to make sure we’re doing it right.

I think everybody with whom we speak on any level knows the money needs to get off the streets. And so that is a factor that we took into consideration. If they want the money off the streets, even though there’s this discrepancy and the legality issue, are they really going to come in and prosecute us, or are they going to come in and say, somebody is going to have to start somewhere and this money has to get off the streets and we’re going to tolerate this until we can fix the legality issue. And that’s pretty much, I think, what we’re banking on.

Matthew: And can you talk a little bit about what the Cole Memo is and why that’s such an important memo?

Sundie: The Cole Memo is what I would consider a real show stopper for a lot of banking institutions and credit unions that want to get into this. And the reason is with our normal business accounts we don’t have to know how they’re protecting themselves on every level from prosecution or legal ramifications. But with this industry, the Cole Memo spells out the eight priorities, and every licensed entity needs to make sure they’re not implicating one of those eight priorities set forth in the Cole Memo.

Now to take that one step further, the bank environment has to make sure the client in this case isn’t doing anything to implicate one of those eight priorities. So if you take just one priority, which says, don’t sell cannabis to a minor, it’s difficult enough for the business to protect themselves, but how does your banking entity actually guarantee that that client is not implicating that priority and actually selling to a minor. How can anyone guarantee that product isn’t going over state lines? I don’t think anybody can guarantee that at any level. So the best thing we can do is monitor the business practices, get into the organization, see how they’re protecting themselves. The more they mitigate the risk, the less likely we are to get stuck in a situation where the regulators are thinking that we’re not watching the shop.

So that’s why the relationship is much tighter with cannabis organizations than regular organizations with whom we bank. It’s extremely important for us to watch this particular issue and to know that our clients know how important that Cole Memo is to them because it is also important to us.

Matthew: So the thing that strikes me about what you’re doing here is that you’re able to actually have live bank accounts for your clients. I mean, I keep on hearing all the time about people in the industry, oh I just got this bank account closed, I just got this bank account closed. But you seem to have a model here that works because you’re really, let’s say, focused on the details of what the entire ecosystem wants. So tell us, how are you able to accomplish this when all these other banks and credit unions just don’t seem to be able to?

Sundie: Well first I have to give credit to those who came before us, because I studied them and their actions and activities to make sure that I wouldn’t make any similar mistakes, or that I could learn from their experience. What I learned was if I was going to go into this, we had to go to the very highest level of compliance. And the thing about the guidelines that they give us is that they only give us red flags. The rest of it we have to make up. We have to meet the criteria sufficient enough to find those red flags and avoid any criminal activity.

So you’ve got every banking institution and credit union out there creating their own processes. So I said to myself, well I’m just going to create the highest level stand, and I have over 30 years of experience in the banking environment. So I had enough information and enough experience to know what an auditor would be looking for, what a regulator would be looking for, and I was able to create solid mitigating strategies. What has kept us in the business at this point in time is that we have spared no expense on resources, and we told all of our clients this coming in the door. That we have to operate to the highest level, which means it’s a compliance program first.

We now for those 110 clients have 10 full-time, management level bank secrecy officers, which is not a low cost resource. Sixty percent of their time is spent on compliance, not service. And even after two years, if I look to streamline the program I have to say that I have not been able to find any manner in which I could streamline this. And the same thing about that is I don’t know that I want to streamline this and put anybody’s account at risk because our whole objective was never to be that bank calling somebody and saying, we have to close your account because we didn’t do it thoroughly enough.

I think what really drove us, because this was not an easy process for us in any way, shape or form, but what really drove us was doing the right thing for our community, and the more we saw that cash starting to flow through, the more we started wondering where in the community this was being stored and hidden. And so I think that just gave us a good driving factor to keep us on track to get this done.

Matthew: Now how does your credit union make money from cannabis companies to keep the lights on and to continue to operate? Because typically credit unions are kind of low fee, but you have a high overhead model here with these banking secrecy officers and a lot of the compliance infrastructure you’ve set up. So how do you make money?

Sundie: Well I think everybody in the industry who’s banking will tell you that banking is expensive and it is. As a credit union professional, it’s been difficult for me to even charge the fees we have to charge, but at the same time, I know it won’t always be that expensive, but until that black market is minimized and the majority of industry has a bank account, we are going to have to keep this high level of resources on the task. We charge on incoming funds because that is where the risk is. Everything we do is based upon the dollars and the checks and any monetary instrument that comes into an account. We have to track that. We have to report that. We have to validate that, and we have to monitor that.

When I say monitor that, I mean also monitoring outgoing funds. We can’t just monitor incoming funds. We have to also, according to our guidelines, make sure that none of the funds are outgoing to any illicit or criminal activity. So it is expensive. It just depends on how people price it, but I kept watching this the first year and I think my clients realized it was a test for us. And we have made a sufficient amount of money. I can tell you that actually we are charging the same thing we started charging year one. So we were right on track with that, and it’s been plenty and sufficient money to do it. I haven’t really thought about increasing the fees because it’s covering the costs plus a little extra, which we do need to make money.

Matthew: So you charge as the money comes in, that’s the highest risk point is. Can you give us an idea of is there a range of what you charge per how much comes in, or is there a risk profile assessed by the type of companies, or how does that work specifically?

Sundie: They’re all charged the same amount, and it’s between 30 basis points and 45 basis points, at this point in time, but with the consideration of our national launch in program. We’re going to have to match the standards of the national program, and unfortunately taking a program nationally is not inexpensive. So if you were depositing at this point in time a million dollars a month, your fees would be about $3,000, and therefore when you get to the lower end they’re paying much less because they’re depositing less.

Matthew: So kind of between a quarter and a half of a percentage point.

Sundie: Yes, that would be about right.

Matthew: You mentioned your secrecy officers. You have a growing team there. Can you tell us what your day-to-day life is like? You’ve give us some details there, but day-to-day, week-to-week, what’s your life like? What kind of issues are you grappling with? You’re looking at transactions coming in and going out. You’re probably having things that your secrecy officers are coming back to you with. What other kind of issues do you grapple with, or do you find challenging, or if you could wave a magic wand, wish they would go away?

Sundie: I think the interesting thing too I’d like to say is that we are trying to slow our program down because we’ve gotten to a comfort point where we don’t want to have this program get much larger. You can only do so much at a certain size organization. We have limitations to manage too, which is unfortunate because there’s one thing. It’s really difficult for every one of us in the program is somebody calling and saying I just need a bank account, and they have all these stories, and we want to solve the problem, but we can’t solve it for all of them.

The most time consuming thing we do is onboard and do our due diligence, which can take two to three weeks, easily. And then all of the on-site activities, so bankers are required to go on-site and meet with the owners and the managers and understand all the cash flow, understand all the strategic direction and keep track of any changes in ownership or key personnel. That’s all required, so that’s very time consuming. And if we didn’t have to do that, I think life would be easier. In a normal business account, you probably have to do a drive-by once a year to make sure the business is still there.

So we’re looking at quarterly visits to do all of this, which is very, very time consuming. The rest of our time, as I said, 60% of it is spent on compliance. What that means is they’re looking at the deposits going into the account. They’re looking at the validation documents on a regular basis to make sure that the sales that are being reported to the state match the deposits going into the account. That legitimizes those transactions, but it’s not just sales deposits that require validation. There’s a lot of other cash and money flowing through these accounts. As an example, investment funds.

People would think that would be an easy thing to bring into a bank account, but even that must be validated. We have to know the source of all funds coming in to a cannabis account, and we have to validate it. So if there’s ten investors, we have to validate the process in which those investors are vetted. Are they accredited investors? Are they friends and family? We have to ensure those dollars coming in from investment funds are (1) not coming from any criminal activity or source out there, and (2) as they’re being returned to the investors, that they’re returning it according to contract and not necessarily… I mean, there’s a channel where additional money could run through if we’re not watching.

So it’s quite a process. That validation process is probably what takes up the most of their time. And while it would be nice to automate it, I think we’re going to be able to automate the sales activity as it matches up to the state and point of sale systems, but you’re never going to be able to validate automatically every deposit coming through an account. That personal element will always be there, which requires the banker’s attention.

Matthew: Now I’m curious, how do you deal with the massive amounts of cash that cannabis companies need to deposit? I mean, most of them are taking cash only. They have ATMs in their dispensary. Some have found ways to take debit cards and other inventive solutions that are out there, but what about all the cash?

Sundie: Yes, well we’re at approximately $2.4million a calendar day. That’s not even a business day. So you can imagine there’s no safe way for us to manage that kind of money through our staff and our branching footprint at this point in time. So we have been forced to use armored services to pick up the cash from each of our clients, and then take it to a vaulting facility, verify the cash, look for counterfeits, count it, and then they pool all of our client money and they take it to a federal reserve account.

This takes it one step further in terms of safety. Our members are safe because it’s not coming through our branches. Our employees are not fearful because they’re handling so much money. And then the businesses themselves are not carrying this cash all over town. So it’s just a big safety factor all around, and I think while it’s a little more expensive to do the armored services, it definitely starts taking the fear out of the communities about where that money is because they know it’s being handled from start to finish by the right professional resources.

Matthew: Yeah, because that’s a big bounty, a big booty, if some criminal gets their eyes on that much cash.

Sundie: Yes.

Matthew: I’m surprised that we don’t hear about more armed attacks and things like that because that is just such a mass amount of cash. But anyway, so when you talk to regulators is there one or two concerns that pops into their heads the most, that you hear the most, like we want to know this, we want to know that, or if you can give us this detail or that detail that assuages their concerns?

Sudie: I think right now the greatest concern at the regulatory level is the change in administration. We were starting to build some comfort, I think, at that level. And I think everybody thought it was going to be business as normal, as it was under Obama, but when the administration changed and a lot of talk has been out there everybody is kind of up in arms as to what’s going to happen and are banks and financial institutions in harm’s way at this point in time by continuing to bank this business.

So the biggest issue we talk about is, unfortunately, what’s your exit strategy. If there is one thing that comes out of the federal government, say the revocation of the Cole Memo, we’re all going to have to jump into action. Not just one of us, we’re all going to have to jump into action because they’re taking protective measures away. The other thing we’re talking about is the amendments are driven toward medicinal and not recreational or adult use as well, and you can’t bank half a business. So if they don’t straighten out the fact that all cannabis is the same for banking purposes, we are going to have to deal with that issue as well. It’s impossible for me to bank half a business.

The liquidity issue is driven by the exit strategy. In other words, if I’m sitting on $20million or $30million in deposits in cannabis money, I can’t use that money. I can’t loan it out. I can’t invest it. I must always have that money in reserve prepared to exit at any given day, which causes credit unions of my size to actually go out and borrow money to keep that money liquid. So it costs me money to have that money sitting on deposit. So those are issues that we’re dealing with at this point in time.

I think my bigger concern is if anything comes out of D.C. that would cause our regulators such discomfort that we would have to enact an exit strategy, putting $70million back on the streets in Colorado, inside of a month or two really should concern everybody. It definitely concerns me. How does that happen without disrupting an entire community and disrupting the lives of all those employees that are working for the industry. I think many times in D.C. they think a lot about just the business, and they forget how many employees would be forced back into a cash paycheck if not banked.

Matthew: Yeah, I don’t even think they think that far ahead. That’s my impression.

Sundie: We keep telling them that.

Matthew: Yeah. So if I’m an edibles company and I’m in multiple states, maybe through licensing or some other way, can I have one checking account, or how does that work?

Sundie: Well this is an interesting question because it goes back to the FINs and guidelines and the interpretation of the red flags and what were my mitigating strategies to meet that red flag. My interpretation in this particular situation is that you cannot co-mingle any funds derived from the sale of product between states. Therefore if I have ABC Company, Colorado and they want to have ABC Company in Nevada, they have to have two very separate bank accounts and keep that money completely separated. Of course that’s my interpretation.

Matthew: And do you have to close accounts often, and if you do, what are the typical reasons for that?

Sundie: Actually in two years I think we’ve closed less than five, five or less. So we don’t do that often. We’re really good about educating incoming clients on the rules. And when the bankers are on site quarterly they’re always talking about things they don’t want to do and put their bank account at risk. So because we’ve been able to offer the continuity of banking for them, our clients are more than cooperative to make sure that they’re doing all the right things to keep that bank account safe and the program safe.

Things that would cause us to close an account would be first and foremost if a business was not compliant with state regulations surrounding cannabis. That’s (26.49 unclear) and guideline is very clear on that. So if there are issues and a license is revoked, that account has to be closed. If licenses stop getting renewed, we have to determine at that point in time what’s happening and that’s probably going to cause us to close an account. Obviously violations and citations don’t necessarily force us to close an account, but it causes us to do deeper investigation in that organization. Ask them, how did this happens? What are you doing about this? How many violations is this now in the last 12 months? And then consider the risk of that organization at that point in time.

We’ve had citations happen or violations. And our clients are really good about being forthright and forthcoming and have solutions and do the right things, and keep themselves out of problems and try to prevent to the best of their ability for this to happen again. So that really makes us feel really good they have that level of cooperation. The last thing would be a lack of cooperation with their banker in terms of providing timely and sufficient documentation to justify deposits. Every dollar that banker allows to run through their portfolio has to be validated, and that banker is personally liable and can be banned from the financial industry if they don’t do this correctly. So it’s really up to the level of comfort that bank secrecy officer has with that account.

So I always tell clients, you got to keep your banker comfortable because they’re the one who actually has to make the call in the end on whether or not they can stand in front of federal agency or regulator and say, I can show you how legitimate all the dollars are that run through this account. So that’s why it becomes very important that the cooperation and providing documentation is there between the client and the banker.

Matthew: Now do you allow for your clients to accept debit and credit cards in a dispensary or even for wholesale transactions? I mentioned that briefly, but how does that work?

Sundie: That’s an interesting topic, and I think the majority of people I know in the industry are still holding their breath hoping that Visa and Mastercard and the other credit card companies will come around. This is really not something that is up to us. Really it’s up to the Visa, Mastercard, American Express, those companies as to whether they want any cannabis funds running through their channels. And so, where it really falls is to the sponsor bank who is allowing those transactions and guaranteeing those transactions to some level.

If a sponsor bank is willing to accept those, then we are willing to accept those. What’s happened and we did have a sponsor bank in the very beginning of our program, and we had several of our clients up on cards, and all of a sudden the volume got so high that the sponsor bank got nervous and then shut the program down. So That’s where the shutdown happens. The other thing that happens in this arena is a lot of times a sponsor bank isn’t aware it’s a cannabis organization and suddenly they find it. And then when they find it they go to that merchant processor who signed up that client and they just start shutting down all of their accounts because they know if they brought one cannabis entity, then they probably brought more in and they weren’t completely transparent.

So more than likely it’s not always the cannabis company that’s misrepresenting themselves. It’s the broker in between, the merchant processor that allows that to transpire. There may be some that are allowing this. We just don’t know where they are or who it is and they won’t probably open up to everybody because of the volume. We, on the other hand, have been beginning work with Wallet Solutions, mobile device solutions, real debit and ACH solutions that will be used on the phone where the consumer can go in and type in a code and just make a payment, and the money flows right through us. Right from the dispensary from the consumer into an account and distributed into the dispensary each time.

So those things will take a little time and adjustment, but I think in the long run, because it’s all mobile, I think people will adjust rather than have to worry about carrying cash. And ultimately in my opinion if the cannabis industry can move to these wallet solutions and implemented them, that’s a pretty big consumer base, and I think Mastercard and Visa and the other credit companies will probably lose out on a pretty good market.

Matthew: Yeah. Now if there are people that are listening that are looking to start in this industry, what advice would you give them about banking?

Sundie: I do get a lot of phone calls like that regularly. I tell them to do their research. First see if there’s anybody else being banked, and prepare for cash transactions for the majority of the time until the market changes and more banks and credit unions get into this. And in order to prepare for cash transactions, I would recommend that they hire somebody that understands cash handling. An ex-banker is a good bet, if they’ve handled cash and they’ve handled accounting and that type of thing.

As financial institutions, we are very limited in terms of what we can do. We have concentration limits. And in our particular case, we need to keep our program less than 10% of our assets. So once we start getting close to those limitations, we have to start slowing down the program or stopping the program in order to work within our concentration limits, which is also what we consider our comfort zone. So in our particular case, the cash flow has gotten so high that it’s just too much for once institution in Colorado to do it. We know that we need other institutions, and we’re trying to help in terms of bringing other banks and credit unions to the table.

That’s one of the reasons we went public with what we’re doing because nobody believed anybody was banking this. And that in itself was a risk to go public, but until I would go public and say we’re doing this, it can be done, it’s not easy, then other people weren’t going to be willing to follow. So I’m hoping that what we’re doing is going to help open up options for the industry.

Matthew: Now you went to D.C. last week and met with some politicians. Can you tell us what you did there?

Sundie: Sure, our trip to D.C. we have each year where all the credit unions from across the country fly into D.C., and we lobby all together and get caught up on all our governmental affairs and meet with all of the legislators, and they meet with us. I think there was over 5,000 people from the credit union industry there. And in particular we did two things. The first thing we did was we introduced our program, the Safe Harbor Program, to many credit unions while we were there, so that they understand that there’s a program that they can use that’s been proven and they can implement in their own state.

The second thing we did was I think even more important and that was we had a congressional briefing with four credit unions that got up in front of these congressional staffers and offices and told them what the banking issue was and the safety issue, and the fact that this money needs to continue to be banked and any quick decision in D.C. was going to put this money back on the streets. And I think that we made a lot of headway. A year ago people wouldn’t even want to talk about it. Two years ago they would laugh us out of the offices and say, nobody in D.C. wants to talk about marijuana right now.

So I think the fact that we had the ability to hold a congressional hearing and that we had a lot of attendees, and they were interested in knowing what the issues were as far as banking the money, I think we’re making progress. I think that’s forward movement. It doesn’t mean we’re going to sell the problem anytime soon, but each year we’re progressing forward.

Matthew: I know it’s hard to speculate, especially with a new attorney general, but where do you think we’re going to be with banking in three to five years in the U.S.?

Sundie: Everyone with whom I speak wants this money banked. They want it banked for the accountability purpose. They want it banked for the taxation purposes. They want it banked so they can monitor where the money is going, and they can start sorting out the bad players and the criminal activity. If it’s unbanked, they can’t do any of those things, not accurately. So it’s not that they don’t want it banked. It’s about getting legislation passed and through and signed, and it’s going to be a process.

I think it will probably take a couple more years, but I really believe that, after we launched our program, I really believe that people are going to start stepping up to the plate because they know that it’s working. And they also realize the money needs to be banked. Again, because we’re presenting this to credit unions, they’re concerned about their communities, and they know that they need to look at their communities and the safety in their families and members. So I believe credit unions will be the group of financial institutions that says we need to get this done. We were put here and created by Congress to serve the unbanked and it’s definitely an unserved market.

So I think we’re going to see progress. I think we’re going to see a few credit unions step up to the plate this year and some banks. And I think then after we get a footprint across the country where maybe four or five are operating under the program, then I think people are going to say okay, there’s a way to do this that the others are doing it and we can follow them.

Matthew: No I have a question for that’s unrelated to cannabis bur related to banking. When I go to the Office of the Controller of the Currency website, which anybody can go to, if you just type into Google “Office of Controller of Currency,” you can see the derivative exposures of different banks. And the big, big banks that almost everybody is at are doing a lot of casino level stuff that people just don’t understand. Derivatives trading, which not necessarily itself is bad. It’s just when you look at the size of the derivative exposure of some of these big banks, which almost everybody banks at, it’s in the trillions. The notional value of this derivatives exposure. And eventually we don’t know which snowflake will cause the avalanche here, but at some point this derivatives trading will have a crash again. I’d love people to understand that credit unions don’t have this going on do they? I mean, you don’t see, you’re not doing any kind of derivatives trading at a credit union are you?

Sundie: Credit unions are regulated quite differently than the banks, and our ability to invest in certain things is very limited. Once again, because we’re not for profit and we’re a cooperative. So we can only invest in things like government securities and mortgages. And the majority of the funds that we bring in in the cooperative are supposed to be loaned out to the very cooperative members. So that’s really how we operate. If we need more money to loan out, we raise interest rates. If we have a lot of money to loan out, we lower loan rates because that’s exactly how we invest our money. We really turn it right back and invest into our communities and our members.

So you’re absolutely right that credit unions are not making those risky investments. And that really was great, especially during recession because that’s what kept most all credit unions safe during recessionary times. We all had the same issues in terms of the housing market, but we didn’t make those loans and we didn’t participated in all of that activity that caused the problems that occurred

Matthew: Let’s move on to some personal development questions. I like to ask a few personal development questions to help listeners to get to know you a little bit. With that, is there a book that you feel like has had an important impact in your life or opened you up to a new way of thinking?

Sundie: I am not a big reader. I have to put that right out there. I think what I’m doing here and where we’ve gone as a credit union was really based upon the way I was raised. And my parents were Baptist missionaries my whole life, and they really taught us to do good by the people around us, to pay attention. So it’s probably why I ended up in a credit union as a career, but they always taught us that you need to do the right thing and don’t ignore it.

So when this project came up it was just all around us, and it was just pervasive in everything I did in terms of moving this forward. In fact I will tell you that I probably say it to myself two or three times a month when things get tough. You’re doing the right thing. Just stay on track, this is the right thing to do and it’s not always going to be easy, but you’re supposed to do the right thing, and people respect that. I find that if I had gone into this for the reason of profitability or to build a big reputation, even off of myself, it wouldn’t be the same thing if it was just for doing the right thing. I think some of that stuff happens because of what you do. I think a lot of good things happen when you do the right thing. I think that’s what really drives both myself and my team to keep going forward, even in the face of adversity.

Matthew: I think this is like karmic banking is what I’m hearing here. Doing the right thing.

Sundie: It’s kind of a credit union philosophy. It’s kind of pervasive in how we get taught in terms of banking through credit unions.

Matthew: One more question. Is there a tool, web-based or otherwise, that you consider vital to your day-to-day productivity?

Sundie: I have to say, as it pertains to this particular project, one of the toughest things I think I’ve ever tackled in my life is still the good ole fashioned talent, drive, perseverance, organizational skills and time management skills. But even beyond that, that’s just entrepreneurial talent, and beyond that in this industry you have to have that perseverance in order to sustain that performance long term, because it is such an uphill battle to do anything in the cannabis industry, that you’re always taking that two steps forward and one step back.

So sustaining a high-level performance is really necessary. This is not an industry or even banking program for anybody that doesn’t have a high-level of performance that they can sustain for a long period of time. You really have to have courage to be in this industry and a lot of stamina.

Matthew: How can listeners find out more about Partner Colorado Credit Union and Safe Harbor?

Sundie: That’s an interesting question. We actually had someone send… they came in to open an account the other day, and the interesting thing was he said he had heard about us because we were serving the cannabis industry. And then he had purchased my book and he read it and he couldn’t believe how community focused we were. So he and his wife decided that this was the place they wanted to bank because we were doing good things for our community.

If you want to learn about Partner Colorado Credit Union, you can go to our website which is www.partnercoloradocu.org. Again, that’s www.partnercoloradocu.org. The second place that you can learn about what we’re doing in terms of the cannabis program would be www.navigatingsafeharbor.com. That’s where you’ll learn a little bit more about the program and the journey and process it took to get where we are today.

Matthew: And you mentioned a book there that talks about community banking. What book is that?

Sundie: So very early I was getting a lot of phone calls and I really didn’t have time to take them because I needed my eyes on this program. So I wrote this book called Navigating Safe Harbor, and it answers a lot of questions. the reason I really wrote that book and put it out there was to get the conversation started. Bankers aren’t always the most progressive people, and to start a conversation regarding cannabis in the boardroom is very sensitive. So this book actually walks them through how to start having that conversation. All the things they need to consider about the industry in order to start a program of their own.

Matthew: Great, great, I’m guilty of not really thinking that deeply about when I make a deposit at a credit union that hey, this is going to a small business in my community. It’s like the circulatory system of communities, the cash flow, the money. So I’m glad that you’re doing that and I’m glad you’re doing this work Sundie, and thanks for coming on the show and educating us about banking. We really appreciate it, and thank you for what you are doing in the community there. It’s really important.

Sundie: Well thank you for having me. I have really enjoyed meeting the community. I’ll tell you that much.

Matthew: Great, well good luck to you.

Sundie: Alright, thank you Matt.

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The Five Disruptive Trends Shaping The Cannabis Industry Now

Mary’s Nutritionals / Mary’s Medicinals Review Coming Soon

mary's nutritionals cbd coupon code

Mary’s Medicinals made a splash at recreational and medical cannabis dispensaries. Unfortunately, this meant only customers who were in states that had access to dispensaries could access these products. Now the Marys team has answered the call of their customers and will be launching a full line of CBD-infused products that are available online including; tinctures, pens, transdermal pens, CBD oils, and capsules. Check back soon for our no holds barred review of Mary’s Nutritionals.

 

 

PharmaCielo is Growing Cannabis At The Equator to Export to The World

patricio stocker ceo of pharmacieo

Dr. Patricio Stocker PhD joins Matthew Kind to discuss why his company PharmaCielo is growing cannabis at the equator in Colombia for export to the rest of the world. Why not grow cannabis in an ideal environment where indoor lights aren’t needed and water is abundant?

Be sure to tune into this episode to understand how the international trade of legal cannabis is unfolding.

What are The Five Trends Disrupting Cannabis Industry?
Find out with your free guide at https://www.cannainsider.com/trends

Key Takeaways:
[1:10] – Dr. Stocker talks about his background
[2:19] – What is PharmaCielo
[5:10] – The government regulatory system in Colombia
[6:58] – The growing environment in Colombia
[11:14] – How the political & crime situation has improved in Colombia
[15:55] – Leveraging Colombians experience with flowers and coffee
[20:16] – What countries does PharmaCielo export their product to
[22:37] – Where the cannabis market is headed the next five years
[26:30] – Environmental standards that PharmaCielo adhere to
[30:47] – Dr. Stocker answers some personal development questions
[38:40] – Contact details for PharmaCielo

 

Read Full Transcript

PharmaCielo, a Canadian company, is looking to leverage the abundant sunshine, and ideal growing environment in Colombia to bring affordable, high-quality cannabis to other markets. Here to tell us more about it is Dr. Patricio Stocker, President and CEO of PharmaCielo. Dr. Stocker, welcome to CannaInsider.

Dr. Stocker: Thank you very much Matt, I’m very happy to be here with you today.

Matthew: Before we dive into PharmaCielo, can you give us a little background on yourself and your experience and your education and how you came to be part of PharmaCielo?

Dr. Stocker: I was born in Argentina and raised there and studied later on in Switzerland. Then I worked for more than 15 years in the automotive industry, most of the time at Daimler running brands like Mercedes Benz in Colombia and Latin America in general but also in Europe. And one day a very, very good friend of mine came to me, like three years ago, and explained to me this unique opportunity. And that’s the way I got to PharmaCielo, in a very probably unconventional way running corporations, running companies that were present around the world. But I decided a time ago to make a complete switch to the cannabis industry, which I think is the biggest opportunity for the years to come.

Matthew: Can you describe a little bit on a high level what PharmaCielo is,for listeners that may have heard of your company but aren’t exactly clear on all the details?

Dr. Stocker: Yes, PharmaCielo is a Canadian-founded company but with a total Colombian operation, and our focus is in processing flower into oil for the global market. So we’re not focusing on certain markets. We’re focusing on the world, and we’re aiming to become the world’s leading supplier of naturally produced standardized, medicinal-grade cannabis oils and extracts. For this we have a unique concept, and you already mentioned it in the introduction. And we want to produce all natural cannabis. Premium quality with the lowest possible cost, high yields in a scalable way.

Our project is completely scalable over time, environmentally friendly or sustainable and also socially inclusive. It sounds like it covers everything, but it’s a reality. Why do we say we have a premium quality? First of all, the premium quality... you know, Colombia is known for its strains in cannabis and the climate really allows us to use different micro climates so we will be able to get the best quality strains in a natural environment. And the low cost is possible due to the technology, let’s call it the technology of the Colombian flower growers that already are one of the biggest and most important in the world. And this also allows us to scale the project very very easily with a contract grower model.

Finally, the nature and the natural environment of Colombia really gives us a last push which allows us to be completely environmentally friendly in a very sustainable project. I could go deeper on this if you want. But the last point, which I think is also very, very important for us, Colombia is in this moment in a peace process and there are many people who were struck by the conflict and also by the war on drugs. And for this reason, we also set up a solution to be completely socially inclusive and to make in certain regions, the most struck regions in the country, those people our partners.

Matthew: Yes, and there’s still that when people think of Colombia they think of FARC or Pablo Escobar, and I want to get to that in a minute. But in terms of what kind of regulatory approval you have from the government of Colombia, can you tell us a little bit about that, what kind of licensure or what they’ve given you, how you can operate there?

Dr. Stocker: Yes, yes. The Colombian licensing process is a three stage approval process. You need to have an extraction license, an oil production license. You need to have a cultivation license and an export license. We as PharmaCielo are the first company to receive this first extraction license, so we’ve completed the first stage and we’re very, very close to get the second stage. What is important also to mention that Colombia’s law is completely ready for this new market, and it focuses only on oil extracts. So by Colombian law you won’t be able to sell any flower or to commercialize flower. Everything is focused on medicinal grade oil.

Matthew: Medellin-and you’ve mentioned a little bit about Colombia, and in my mind’s eye until I had been there over the summer, it’s pretty close to the equator so I was picturing more kind of high humidity and very difficult to get around, kind of tropical environment. I think it is that way by the coast but Medellin, where I was and where your South American headquarters are, they call it the Land of Eternal Spring because it’s this high altitude, even though it’s on the equator, and it’s kind of somewhat gifted in terms of where it’s situated in the world. Can you tell us a little bit about that and the kind of environment where the cannabis is actually grown, and is it indoor or outdoor and that type of thing?

Dr. Stocker: First of all, we are developing different micro-climates, or the production in different micro-climates. We want really to take advantage of all those native strains in Colombia and all of the best strains around the world to adapt them in the best way to the Colombian environment. What do I mean with this Colombian environment? For example, you have been in Medellin and we’re very close to Medellin, closer to the airport in Rionegro, which is around 2,000 meters altitude, so this is our first environment that we have.

The second one is in Cauca, which is the biggest cannabis-growing region probably in the world, as of today. And there we have an environment around 1,000 meters. We’re also developing other projects at close to sea level, around the 100-400 meters altitude. So we want to really, over time, take advantage of all these possibilities that Colombia gives us through its natural environments. For this we’re going to use open-air greenhouses. The open-air greenhouses are the methodology that flower growers in Colombia use to produce their flowers.

In those-open air greenhouses we have a possibility to control the climate in a natural way, in a very cost efficient way. So simply by opening or closing those greenhouses by using some basic ventilations systems, which make much, much easier the climate control in general. And of course, in all those places taking advantage of the 12-hour light cycle, of natural water sources. So this is the basic concept that really allows us to get this premium quality at a very cost competitive level.
Matthew: Yes, and I mean, that’s part of what PharmaCielo sees is that eventually this is going to come down to economies of scale and the ability to produce massive volumes while controlling the cost of your inputs. So you’re making a big bet now, that’s where the market is headed. Would you say that’s accurate?

Dr. Stocker: I would add to this. I think it’s accurate that we’re trying to really develop the most cost efficient concept, but it’s really focused on a natural growing process. It’s really focused on an environmentally friendly-that will be our biggest differentiator together with the social inclusive model. So I think around the world there is produced cannabis in probably locations which aren’t natural locations to produce cannabis. For example, you don’t produce in the Northern Hemisphere bananas or mangos, but you produce cannabis. And this is the natural environment where we really can produce with no energy cost or very low energy cost, and this is the big differentiator that we have.

Instead of using energy from the grid, we use the sun. Instead of using water from the tap, we use the water from natural sources. We have a system that collects all the water from over our greenhouses and in natural ponds and this really allows us to make the biggest differentiator and the biggest impact with the lowest possible footprint.

Matthew: Nows you mentioned you’re originally from Argentina but can you give us just a quick rundown of what the lay of the land is like in Colombias because a lot of people listening they’re watching “Narcos” on Net Flix and they’ve heard of Pablo Escobar even though he’s been dead for quite some time, or hear about the dangers of FARC. Can you just touch on a couple of those things and then maybe talk about how Colombia has evolved in the last 20 years or so?

Dr. Stocker: First of all, I had the same impression when I first came to Colombia over 20 years ago, and yes, Colombia has or had this image combining guerrillas, drug lords, etc. This is probably not the good side of Colombia. But if you take the real facts, Colombia is one of the most stable economies in Latin America. Colombia is probably the only or one of the few countries in Latin America without a military government in the last 60 years.

Colombia is the only country, as far as I can recall, which had stable growth around 4.5% every year plus/minus 2 percentage points. So there are many things that make Colombia an ideal investment spot in Latin America, with good laws that protect foreign investment and with a big focus in trade and opening the country. Colombia signed FTAs with the United States, with Canada, with the Latin American and Central American countries through Mercosur, the Caricom countries, with Europe. Colombia is trying to negotiate for years with Japan. So Colombia is really open to the world and wants to grow. Colombia is very, very well logistically positioned between the two oceans, very close to North America.

So there are many, many benefits around Columbia.

When we first started this project we really had two clear visions to develop this project and the first vision was we want to transform, or help to transform, the image of Colombia which comes from a legal drug image country. Everything that you mentioned, all the Netflix series, etc., that show really this illegal drug country to a medicinal drug country. This will take several decades to change this because it’s the first thing everybody knows about Colombia and what comes to its mind.

The second really big vision of us is to develop a complete new industry that is made based on the natural advantages that Colombia has. But this is the general situation. The peace process the FARC, I think this is something very, very positive for the country. Colombia, from my point of view, was always like two Colombias. You had a very safe Colombia, a country where doing business was-you could do it in the normal way like in any other country in the world, and a part of the country which was not so normal, which was not so safe in this way and what is making this peace process in Colombia.

That you will have a Colombia that is united as a safer place again, developing with people who are really are tired of this conflict that took over more than 50 years. So I think the outlook is very, very positive for Colombia at this moment. Even President Santos got the Peace Nobel Prize some months ago as a recognition for this big effort of the Colombian people to change the situation of the country and to change also the general image of Colombia.

Matthew: Yeah, that’s great. I’ve heard a lot of positive things about Santos and what he was able to accomplish. I mean, that’s incredible, because this conflict with the guerrillas has really been… it seemed like it may never be resolved, so it was really miraculous that that was able to come to pass. The Colombians are no strangers to growing agricultural crops like coffee and cut flowers. Have you been able to parlay the agricultural skills of people down there over into cannabis, or I should say commercial cannabis? Have you seen a lot of carryover of skills and so forth?

Dr. Stocker: Yes, yes. First of all, Colombia is a country with an extreme or an incredible bio-diversity. If you take a look at what all kind of fruits that the country has it’s really incredible, but there are the main traditional industries, as you know, our coffee and cut flowers. And in cut flowers Colombia is one of the biggest players in the world with 70% of all the cut-flower market is being… or 70% of all the cut flowers in the world come from Colombia. Seventy-five percent of all cut flowers imported to the United States and Canada come from Colombia. So Colombia is very, very competitive due to a combination of nature and special skills that were developed and all the logistics that the Colombian flower industry developed here.

And here we see that as PharmaCielo we can, and as a new industry, we really can take advantage of this. You have really skilled people there, knowing how to work in the flower industry and cannabis is a kind of a chrysanthemum. With Colombian, in one of the regions where we are going to produce, 90% of the chrysanthemums of the United States come from this region. So we have those skills and this will be very, very helpful to develop the business. Trained people on the workers’ level but also trained people on the agronomists level, the way you build greenhouses. So all the infrastructure already exists and finally, we’re changing the flower.

Matthew: I saw some picture of greenhouse on your website. So you’re saying this is just a matter of taking greenhouses in Colombia that have already been used for the cut flower industry where the cut flowers are grown and then a lot of them shipped all over the world, but mostly to North America. You just pretty much take those type of greenhouses and growing environments and get them close to natural water supplies and grow at different altitudes, anywhere from 6,000 feet, I think you said, down to 1,000 feet, and you’re going to do that all over Colombia.

Dr. Stocker: It’s not as simple as you’re saying it but the basic concept is correct. What do we need to do? We are setting standards. PharmaCielo’s wanting to set standards in an industry that is evolving and an industry that is growing and developing. So we are part of the creation of this industry in Colombia. And, of course, we’re taking advantage of all this knowledge but we’re building the greenhouses in the proper wa,y adapted to what we need. We need also to comply with all the government regulations.

So the first hurdle is to get all those licenses and the next role is really also to ensure all the security you need to put on those facilities. It’s not simply using a greenhouse. You’re building using Colombian regulations. Let’s call it a high-security tract where you are not allowed to lose any of what you’re producing, any of the flowers and you also need to have a complete tracking of all the process. So it’s not as simple but the basic concept of taking advantage of this knowledge, adapting it to the cannabis industry is correct.

Matthew: Now, after the flower is grown in Colombia and I’m assuming you’re going to export it to Canada, but not exclusively? Are there other countries on the list where it will be exported to?

Dr. Stocker: We are focusing on the world. We are not focusing on Canada. We’re a Canadian/Colombian company. Our operations, as I said, are fully in Colombia, but we’re focusing on the world. We want to sell to every country in the world where it’s legal to sell cannabis oils and where it makes also sense for us from a business point of view. What do we see? We see the first market for us will be Colombia, then the rest of Latin America. The biggest focus there is Brazil because of the size, but we won’t leave countries out if it makes sense there.

Then, of course, we want to focus on Canada, on Australia, on South Africa and Europe. And every week I receive contacts from people around the world from countries that are evolving in a medicinal market and the health market that are approaching us to evaluate possible, distribution agreements. And so, again we are a Colombian/Canadian or Canadian/Colombian company, but we are focusing on the world. All these facilities and the extraction plant is going to be built to focus on the world cannabis market.

Matthew: That’s fascinating. It really is. How do you see the market for cannabis flower changing and maturing over the next three to five years? I mean, you’re taking probably the most comprehensive international approach that I’ve seen so far. There’s maybe just one or two others that really kind of have this big global vision on how the cannabis trade will operate, but even those competitors don’t have the ability to grow at the equator right now quite like you. So you’re in a good position I think, ideally. And your opinion of where the market is going is probably different from smaller producers, but I’m curious to hear what you think is happening and where you think the market will be three to five years from now and what PharmaCielo will look like then.

Dr. Stocker: The first thing that we see, and just is one of the basic parameters of our business plan, is that we will have a very strong regulated market. The market will become highly regulated in cannabis. We have a tendency of legalizing use of cannabis for medicinal and other purposes around the world, but this will become very, very highly regulated. So today, as of today, what do we see? We see even in developed countries that the consumer has no real guarantee of what he’s buying. What can be assured what he’s really getting for kind of a product? Maybe he’s using it for a medicinal purpose, but there are many side effects of pesticides, of other problems that…t the cannabis as it’s grown today that you’re not sure.

So on one side we see that we’re in a moment like we had many years ago when alcohol moved from prohibition to a legal market. And during Prohibition, there were no standardized products, there were no clear product definitions so everyone bought what was on the market. This is something that in some countries in the world can be seen also. And here I see clearly a shift that will go to a very very regulated market. And for this, PharmaCielo is prepared. We see, maybe you saw our board members that have this high experience coming from tobacco industry, coming from areas like the World Medical Association, that come from pharmaceutical companies. So we have a team of people that know how to handle this.

And for this is what we are preparing us for the next, as you said, three to five years where we see a highly regulated market and a market that will be very, very much controlled. And for this reason, we are also preparing PharmaCielo to become the leading supplier of standardized medicinal grade cannabis oil extracts. And our project, really, PharmaCielo, I always compare it with building the biggest surfboard so when the wave, the real big wave comes that we are ready. We want to have this biggest surfboard of the world so when this legalization of cannabis wave really is here we are ready to take it. And as of today, for example, we’re in the middle of a financing round, just preparing us for the next steps, where we have investors from around the world that really are as convinced as I am of this unique concept of PharmaCielo that will change and shape the cannabis industry in the future.

Matthew: I know it’s a focus of the company to maintain high environmental standards. Can you give us a little more detail about that? I know you have the greenhouses, and that’s definitely a way to save on electricity, but is there anything else you’re doing in terms of specifics that you would say emphasize sustainability?

Dr. Stocker: Now, this is a very, very interesting question and again, this is I think our biggest differentiator that we have compared with other cannabis companies. The central point here in the environmental issue is what you mentioned, the low energy cost or really no energy cost. But we are also using or planning to use for all the pests and all those problems, all natural products. For example, we are growing special crops outside of the property that trap certain insects.

We’re using kind of vacuum cleaners that can trap the insects you don’t want that can be a problem, but release the insects that you need for a natural environment. This is what makes our product really completely natural on this side. In some weeks, we are participating in a study that is being performed by the Global Footprint Network. This is a company based out of Zurich. They are the specialists in measuring global footprint, or the footprint of agricultural production activities and other activities, and they are comparing different ways how to cultivate and harvest cannabis. And so we’re comparing our model with a model in the northern regions, let’s say California, let’s say Colorado, let’s say Canada, let’s say other places in the world, and I don’t have still the results, but the first comments that we expect that it may be several hundred or several thousand times of difference on the footprint.

Why? Why is this the key issue? Because yes, you can have energy, you can have water, and this is clear, what I was seeing that using the pesticides and other maybe unnatural ways how to produce cannabis, this makes the biggest difference. I always say we are producing with open-air greenhouses in a natural environment, and in other places in the world it’s like producing on Mars or like producing on the moon because you have a closed environment, you have to generate the climate of a tropic, subtropic area with energy. You have then to try to handle all kind of pests, diseases in a closed environment.

So it’s not that we are much more intelligent. It’s simply we have a much simpler environment and natural environment. And I say again, how many of these people produce a certain part in the north or in the south of the planet, bananas or mangos or even flowers. You don’t do it. And this is the biggest differentiator that helps us really to make a key difference on the environmental impact and on the footprint area.

Matthew: Great points, and sustainability is I think going to become more of a topic not just for preserving the Earth but as fossil fuels become more expensive there’s a secondary benefit there of looking for ways to keep the input cost down. So it’s a win/win/win all the way around if you can make that happen.

Dr. Stocker: Yes this is exactly and this is the, I insist. the biggest differentiator and was one of the factors that really trapped me and gained me for this project.

Matthew: Patricio, I like to ask a few personal development questions to help listeners to get to know you a little bit. Is there a book that you feel had an important impact on your life or opened you up to a new way of thinking you’d like to share with listeners?

Dr. Stocker: There was one book… okay, there were several books that shaped my life, but there is one book that shaped my vision of Colombia very, very strongly, and it’s the book Cien Anos de Soledad-let me translate it, 100 Years of Solitude- from Gabriel Garcia Marquez, who was the Nobel Prize winner, or the only Nobel Prize winner until Santos received his Nobel Prize for Peace before. And this book really shows this diversity of Colombia, this magical realism. And maybe this book also showed me with all this confusion in a country with so many facets, so many different aspects that you have, why also it is possible within big difficulties to get the best things out of the people.

And here in our concept we really see here how in an environment that was not easy, how we can take all the good things, all the natural and the cost-efficient issues, the environmentally friendly issues that we’re taking out, and taking advantage to produce this cannabis. It’s a really wonderful book with a hundred stories. If you read it, probably you will start forgetting half of the stories when you finish it because it’s many generations of a family going over, and it’s a fiction book but I think it describes Colombia very well. What Colombia says is a magical realism.

Matthew: Great suggestion. Second question. Is there a tool, web-based or otherwise, that you consider vital to your day-to-day productivity?

Dr. Stocker: I think my day-to-day productivity is really moved to being connected. So you are anywhere in the world and through a little phone or a computer allows you really to be in touch with your team in Colombia, with the team in Canada. It allows me to talk to you. It allows to meet investors, to have conferences with our experts, potential distributors. So I think the biggest tool for me is simply the smartphone that allows me to be in touch. I remember when I moved to Switzerland in the 80s to study there I had to pay more than $5 for one minute of a phone call. Today, we have Skype or other different tools, you’re in touch with everybody for zero cost, more or less.

So this is really a tool that made it easy to bring the world closer again, to be in touch with people. Maybe you don’t write any letters anymore. This is the only sad thing about this but you can be connected very, very quickly and very easily. So this is a tool that helps me on my day-to-day basis.

Matthew: It’s a great point. Yeah, it was just a short time ago that it was so expensive for long distance. I remember that too. There’s the futurist, Peter Diamandis, that talks about how the world’s dematerializing, how we used to have a separate GPS device and a separate digital camera and now that’s all in our phone, so those two industries are kind of going away and they’re integrated as an app. It’s just an amazing time.

Yeah, I know I said I only had two questions, but I have a third question for you just because I am so interested in Argentina and what’s going on there. I followed when Cristina Kirchner was the president of Argentina. I just wanted to get your thoughts on the new president, Mauricio Macri and how you felt-- I think I got his name right-- but how you felt that transition was going and what you thought of the Kirchner legacy and the general direction of Argentina.

Dr. Stocker: Oh, first of all, you got the name right. And Mr. Macri is a pro-business person and he brought back Argentina into the financial markets so this, I think, is a first important step for Argentina. He is facing still many difficulties on the . It’s more of a political issue because he’s not from the party that normally had the power in Argentina, so he will struggle with this. But from my point of view he’s doing the right things. The people I have touch with constantly, they are positive. They see Argentina in a different way, and they’re believing in what is really developing today in Argentina. Mauricio Macri also pushed again all the agricultural sector that the former government didn’t want to push and I think Argentina is coming back to the basics and doing its homework and going the right route today.

Matthew: I have to say I’ve noticed a very positive attribute of Argentineans. I lived in Chile for a year and one of my good friends is from Argentina, and I said to him, you have an ability to get things done that I don’t see in other people. He said, you know, the reason why, Matt, is because you come from a system where the system generally works so you just have to focus on whatever it is you’re working on. But in Argentina the system doesn’t work so well so you have to be good on navigating the system that doesn’t work and then doing what you’re doing on top of it. Would you say that’s why Argentineans really have kind of a knack for getting things done, maybe compared to other places? I’m curious of your thoughts on that.

Dr. Stocker: I think this is true, because basic things in Argentina, like we were talking about technology, how easy it is in somewhere in the world to make a wire transfer from your computer or your cellphone or to get an ID, a passport or whatever. Such of those basic things in Argentina aren’t always as easy as probably in the US or in Canada or Europe. But what is interesting here on this side, and coming back to Colombia, and really after all of those years, Colombia is also Latin America, but I see Columbia at a different level of this development. And it’s not Europe, but finally you have many of those things that are so complicated or maybe so complicated in Argentina, like making an international wire transfer. Such kind of things Colombia always had been looking in the last years to support and to make it easy for foreign investment. So you have different countries, you mentioned Chile. Chile is a very much organized country in Latin America and it’s close to where Colombia is becoming today. Argentina still has a long way to go.

Matthew: Okay, great. Well, Patricio, as we close, what’s the best way for listeners to learn more about PharmaCielo if they’re interested in investing or just learning more about what you do?

Dr. Stocker: The best way is to go to our webpage, which is www.pharmacielo.com. There you can find all our approach, many of the things I was telling you, and it’s also the way to make contact with us, to get in touch with us if you’re interested in participating in this unique business opportunity and this unique way to shape the cannabis business in the long run.

Matthew: Well, Patricio, thanks so much for coming on the show today and educating us. We really appreciate it. I forgot to mention you’re joining us from Toronto, Canada, so I hope you can make it down out of the winter in Canada and down back to Medellin soon. Thanks so much again for coming on the show today.

Dr. Stocker: Thank you very much, Matt. I’m very, very happy to be here on your show today and, of course, I’m just here in Canada to meet my main investors and also to remember every day to myself looking at the climate why we’re producing in Colombia.

Matthew: Good point. We could all agree on that.

Dr. Stocker: Thank you very much, Matt.

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

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