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Justin Singer is the co-founder of Still Water Brands. Stillwater is focused on cannabis consumers that really don’t see themselves as cannabis consumers because they feel uncomfortable with the existing methods of consumption. For example, it is very confusing for a first-time cannabis consumer to understand why they don’t want to eat a 100mg infused chocolate bar, but instead, need to break it up into 10 or 20 pieces. First-time consumers ask, “wait, why do I need to break this bar up, isn’t a bar one dose?”
Justin and his team at Stillwater initially focused on rituals consumers are already comfortable with such as making a cup of tea. Stillwater’s water-soluble beverage additives including their best seller Ripple have resonated with a traditionally unrecognized and underserved market category.
Now Stillwater is going to offer their infused additives to other businesses.
This is a riveting interview you won’t want to miss.
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Here on CannaInsider we often talk about why having a me-too product won't work in the long run. It's imperative to have a unique selling proposition to keep competitors at bay and protect your profit margins. Today I'm pleased to have on the show an entrepreneur who identified a market that is not being properly served and who has created product-market fit. I'm pleased to have Justin Singer of Stillwater Brands on the show today. Justin, welcome to CannaInsider.
Justin: Thanks for having me.
Matthew: Give us a sense of geography, where are you in the world today?
Justin: I'm sitting at home right now in Boulder, Colorado.
Matthew: Oh great. And I am an Edinburgh, Scotland, sunny Edinburgh. Well...
Matthew: Tell us what is Stillwater Brands at a high level?
Justin: Oh, I mean, at a higher level, the brands, we're actually now Stillwater Foods.
Matthew: Stillwater Foods, okay.
Justin: Yeah. So we make soluble cannabinoids for scalable production. That's our nutshell description. But that sort of encompasses two business lines. One, brands which is consumer branded products. Today that means THC-infused products in Colorado and then Stillwater ingredients, which is scalable commercial ingredients, primarily hemp derived for B2B sale.
Matthew: Ah, that's a helpful thing so you don't have to work on the solubility yourself. If someone else's cracked that code, they can just buy it from you.
Justin: Exactly. We believe for this industry to really scale, you need to have a platform for growth so that people can focus on brands and on marketing as opposed to on all of the intricacies of getting cannabinoids to work in food forms. So to function more like the food markets already do today.
Matthew: Yeah, you got to specialize, right?
Matthew: But what if you have an unmarketable specialization like me? Like I'm a puppeteer and I can't really seem to do anything with that.
Justin: Well, you seem to be doing pretty well with this podcast.
Matthew: Okay. Good. Good answer. Good answer. Okay. So share a little bit about your background and journey and give a sense of how you got to this point.
Justin: Sure. So, let's see, my background, I was in The Manufacturing Institute at Michigan and their undergrad business school and then did a JD MBA in Columbia in telecom law and finance. Then had the foresight to graduate in 2009 into the worst recession in generations with no work experience and a couple graduate degrees. Was great strategic thinking there. But no, luckily, I ended up landing as an intern at a small venture capital fund in New York called IA Ventures which at that point was just three guys sharing space with the startup for 17 million friends and family. And I managed to latch on there and become full timer and stay until we had raised, you know, 153 million across two funds from institutional LPs to 30 investments the whole nine yards.
Matthew: Okay. And can you tell us a little bit about the companies you invested in?
Justin: Sure. So IA was started by a guy named Roger Ehrenberg who before launching the fund had been a prolific angel in New York and also had run DB Advisors which is Deutsche's quant hedge fund platform. So he had made deep contacts into the big data space in doing that, and that's who's seeded the fund. So we were focused on tools and technologies that were leveraging big data. This was circa 2010 before big data was quite the buzzword that it's become today. But that's what we were focused on, was companies that were working with massive datasets or building tools to help analyze those datasets. A great example of a company that we invested it was actually the first investment we made when I joined was a company called Trade Desk, which went public last year. It's a DSP on the tax base.
Matthew: Cool. And you also taught entrepreneurship in New York City. Can you tell us a little bit about that?
Justin: Yeah. So that was a great class. I taught that with Jerry Newman who is fantastic angel investor in New York City. I met him while co-investing at IA. The class was in the Engineering School of Columbia, and it was called Managing Technological Innovation. But we looked at it as sort of demythologization. I screwed up that one. We looked at it as...
Matthew: Let's try to get through this, demythologize. Okay, there we go.
Justin: We looked at as demythologizing entrepreneurship.
Justin: So we taught it to undergrads who hadn't already been through the Steve Blank school. They didn't have exposure to all the blogs and all of the startup corpus that's available today. And we were focused on showing them that, you know, the biggest impediment to being entrepreneur is believing you can be an entrepreneur. And then beyond that is actually finding a market and identifying products that people want to purchase and that you can deliver profitably.
Matthew: Right, okay. And what have you taken away from your VC experience that you've brought to obviously, you know, raising capital for your own business? That's an extremely important skill set that you are able to shift over. But when you look at what other entrepreneurs are doing, you know, how do you kind of see that with your VC head on and kind of your entrepreneur teacher hat on, what do you see?
Justin: You know, in its ideal form, VC is sort of an outside-in strategy prospecting for outside in, inside out execution. As a VC, I developed some ideas that have really guided the strategy as we've developed this company. You know, I saw from above that a lot of the most interesting new markets were often created more by regulatory change than necessarily by technological innovation. But I did see that where new industries were created by technological innovation, it often presented itself as a product innovation, but it was really a process innovation. I guess one way to tie that together as you say, as a VC, I look first at the market then deeper at the problem and then you try and build personnel around that because personnel is policy. So when it came to this company, I came at it from a perspective of first marijuana and the regulatory changes around it. We launched this company in, you know, January of 2014 right after Colorado went legal. And it was clear that this was an industry with established demand. People have been using marijuana and cannabis derivatives for generations. It's been enormously popular.
The question was could you apply existing technologies to a new industry with established demand in an efficient way? And could that open up the customer base if you were able to succeed there? So we started with marijuana, then we dug deeper in and decided that the biggest problem was that the industry was basically just a black market turned legal. It was overserving people who were already its best customers and was underserving people who had the potential to become good customers. And that was through the pushing of super high dose products. So not to jump ahead too much, the other point that I just wanna make in terms of strategy in being a VC is I think I learned really early on that it's very important to define who you are as a company from the get go. In our case, we defined ourselves as a food company from the start. Not a marijuana company, not a cannabis company, not a hemp company. We were a food company that was using cannabinoids. That has guided our strategy from day one and it's guided who we hire, what tasks we put them on, what projects we choose to pursue, and which projects we choose to ignore.
Matthew: Okay. Was there any ideas that you examined, but then threw away because you didn't feel like they pass muster?
Justin: Yeah. I mean, in the early days before we hit on food, we were looking at ancillary businesses. My background was in technology and my cofounder's background was in technology. We were looking at things like the ad business and, you know, we were also looking at different and digital players, and we just didn't feel like it was enough in the stream of value creation. You know, the one joke that we always had in VC was who was going to be the Yelp of X? The answer was Yelp. Like the general purpose tool tends to win out over time because they have the broader base. So when we were looking at the digital side, we just weren't seeing the opportunities for scale that you generally associate with tech. I mean, the idea behind the tech technology valuations is that it has access to a global market with very low supply chain costs. You have distribution that is just available through publicly supported internet. That's not the case with consumer packaged goods. These were markets that were extremely nascent and had no infrastructure available, that you couldn't just do the typical thing of like picking a super narrow and specialized niche and hoping that everybody was gonna catch up and trying to extract your value out of it, because there wasn't a niche to steal. Like this whole space was emerging out of whole cloth.
Matthew: Yeah. You know, you talk about the need for specialization, and that's a focus of yours. How do you really refine what it is that you're specialized at? You said you're a food company, is a specifically beverages? And then is it specifically how to do light touch-infused medicine and drinks? I mean, is that [inaudible [00:10:16]?
Justin: I don't think that's the right level of precision today. I think it might be, you know, five years from now. So can make this with an example. We, when we started on the food angle, we looked at traditional food startups. If you're gonna launch a food company, you go out, you find a co-manufacturer, you got out and you find a flavor house, and then you find a distributor, match those three things together with a concept and hopefully you come up with a product that actually gets play. That wasn't possible in the cannabis space. There were no flavor houses that were licensed. Vertical integration was a requirement by law and you couldn't get the economies of scale or that you would get out of a distribution network. And there were no distributors anyways in Colorado.
So we had to start from the very basics. And to operate in that whole ecosystem, I mean, it requires an ecosystem. You need to have flavor houses, distributors. If those don't exist, you sort of have to create them yourself. So specialization is great and important, but you got to set it at a level that makes sense in the context of your market and where it exists in its maturity level. For us, we set that as we don't do extraction, we don't do cultivation, we don't do retail. We do everything between extraction and the consumer. So we take oils that are tightly specified from vendors who we trust at very small subset who can beat our spec. We convert it into food ready forms. We package it into a food product and then we sell that to dispensaries and market it to consumers. That's our niche right now.
Matthew: You have kind of two things going here. You have your products, and then the B2B side of things. Why did you feel the need to do the B2B right away? Or did you feel like, "Hey, this is an opportunity I didn't wanna let someone else fill?"
Justin: Well, I would say we didn't do it right away by any stretch. So there's a saying that got drilled into me that, "Platforms are easy, ladders are hard." Everybody wants to be a platform. Platforms are scalable. They have fantastic economics. You can act as a gatekeeper. Creating the platform is the hard part. We looked at consumer branded goods as a ladder. That allowed us to refine what we were doing, learn how to actually produce at scale, learn what people who are producing at scale care about, have a direct line to consumers about what they care about. Understand just that whole setup to make sure that we were making a product that both the consumers wanted and that manufacturers valued. And we were our own manufacturer in that instance in that we were dog fooding it. We also, because of the uncertain regulatory environment, wanted to launch in a place where that environment was more certain and I could have comfort that the state would stand between me and the federal government. That's why we chose Colorado because we felt like it had the most robust regulatory regime and offered the most certainty to invest against.
So we spent two years building up our IP, building up our expertise, talking to consumers, developing products, developing manufacturing processes. And then once that business was established and clearly had proven successful, and we had gotten this great product rippled that had broken out within it and we saw this as a plastic ingredient that can be useful to others, that's when we felt comfortable to move into the industrial hemp space, which we always viewed as a market with less regulatory certainty. Certainly in 2014, less so today than it was four years ago. We have now reached the point where given our existing base of operations, plus today's regulatory environment, we feel comfortable moving into ingredients second.
Matthew: And what do you think that liquids are the ideal medium for delivery for cannabis and hemp?
Justin: You know, I don't know if it's liquids per se that are ideal, but water solubility is certainly key. Water solubility seems to promote a more rapid absorption of cannabinoids into the bloodstream. I say "seems," we have done blood tests. We have actually sat there and put IVs in people's arms and drawn blood every 15 minutes and then put them through a high resolution drug screen to figure out what the actual absorption of THC is. And we do know that ripple absorbs according to a different curve than you would expect with other edibles. Other edibles you see nothing, nothing, nothing and then you see the hepatic absorption through the liver two hours in and boom, people are way too stoned. With ripple, you see immediate onset within 15 minutes. Peak onset, 45 to 60 or peak absorption, 45 to 60 minutes. And then they like tail off over the course of the next two hours. And we validate that through empirical data. I don't know that that is entirely attributable to it being any liquid but it is attributable to it being formulated as water soluble.
Matthew: Okay. That's interesting. Yeah, that is a big problem with edibles on that delayed onset. And then people keep on eating more saying it's not working, it's not working. And then they have a rocket ship ride to a different galaxy. And...
Justin: Well, we realized early on that like the two things you had to give people in order for them to get comfortable in edibles again, especially after, you know, the Maureen Dowd experience, all of the bad stories people have about pot brownies, you have to give them two things. One, you have to give them a self-regulating product. That means that the feedback loop has to be tight enough for them to know and control what they're doing. So you drink a cup of our tea or a cup or liquid with ripple in it, you know where you're going before you're done with that cup within 15 minutes. You can decide whether to have another cup already knowing where you're going to be with that first one. And the second thing is you have to put it in a format that doesn't require them to self-identify as a drug user.
So we chose tea as our initial product because it shared all these great characteristics with marijuana. It was functional. It was organic. It was natural. It was ritualistic. But most importantly, people could consume it for functional reasons and not think of themselves as a drug user. And that's a huge hurdle that people have to overcome to get to the mass market. I think a lot of the products out there today, if you're overly medicinal, if you're smokable, if you're inhalable, these people, they have an audience for sure. But if you're trying to reach seniors, if you're trying to reach folks who never smoked pot in their life but are interested in the medicinal benefits, you've got to give it to them in a form that allows them to maintain who they are.
Matthew: Yeah. That's a good point. And, you know, with beverages, we all kind of think, "No. Like, hey, if I have a glass of beer, this is what happens. If I have a tea, this is what happens." So it's a nice unit of account in a way that where you can start to make it your benchmark.
Justin: Yeah. And this goes back to the origin story of our company is that in the early days of the industry, the industry broke the one serving one dose paradigm. So, like you said, you know what one glass of wine is, you know what one shot is, you know what one shot of whiskey is, you know what one beer is. Those are all essentially the same. But you take a brownie with 100 milligrams, and that's a one serving confection with 10 to 25 servings of THC. And it scares the hell out of people because it doesn't conform to their expectations. So like in the early days my grandmother, 92, she has diabetes, her husbands had Parkinson's. She was just interested in finding a pot brownie so that she could feel better. The only thing I could find her had 100 milligrams. I had to cut it in 20 pieces and individually bag each morsel and tell her to eat half of that and then wait two hours. Like none of that was working for her. She was never going to become a part of this industry with that type of product as a popular option.
Matthew: Yeah, that's a good point. And which of your products is most popular now? Did you say ripple?
Justin: Yeah, ripple is by far. So within ripple, our 10-milligram pure 10 THC SKU is the most popular. But we also have a balanced five, that's five milligrams THC, five milligrams CBD. And then our 20 to 1 CBD, that's 10 milligrams CBD and half a milligram of THC. And those two are equally popular and together as popular as the 10 milligram. One thing we've noticed, the CBD products are gaining rapidly in the market. It's great. The more dispensary owners promote it, the better it seems to do. You know, like I said, the dispensary sales channel is tough. It's geared towards heavy users just by virtue of path dependence. But the wellness demographic, I think is and always has been a larger market than recreational intoxication. So providing lower dose products to people who don't want to get stoned, who just want to feel better, is the larger opportunity even if it's hard to push in a dispensary channel.
Matthew: Now this type of product requires some very specific knowledge in terms of beverages, creating a shelf-stable product and more. How did you go out and find somebody that could help you with that? Can you tell us a little bit about that?
Justin: Yeah. I mean, again, it starts with owning, being a food company. Like when you think of yourself as a food company, you look for people who understand food. We started out by looking for a food scientist. In the early days, I did a bunch of diligence. We realized that people were...that manufacturers working with high calorie, high fat food forms because THC and other cannabinoids are fat soluble. And in order to put it into a healthy water-based form with low calorie counts, you needed to render it water soluble. Well, first threshold question there is, is that possible? So I started out talking to a bunch of food scientists just to sanity check is it possible. They all said, "Yeah. It's a solved problem in food science. It just hasn't been applied to this before." And to do it for a natural component like a cannabinoid is hard. It requires effort and especially to get it to a high level of consistency.
So we were fortunate enough in the early days to meet someone who came on board as an advisor and ultimately became our lead scientist and/or head of Product Development Manufacturing. And, you know, he came from Mars where he had spent 25 years there as a senior food scientist, focused in the new product development groups and had launched, you know, 80 brands over the course of his time there. So he was absolutely perfect, he understood pilot scale up, he understood high end scale up for national branding, and he also understood functional foods and product development. So from there, it really became a matter of probing his mind to understand what made him tick and understand what the structure was within Mars for developing these things and then building outwards from there.
Matthew: Yeah, that's a key hire for sure. Someone that has that kind of knowledge set, that's great.
Justin: Yeah, I mean, it helps us see around corners that other people don't even see. Understand. Like, we don't just look at this as like, what can we shove pot into? We look at this as what are forms that naturally fit with cannabinoids? How can you deliver them safely to consumers? And I mean both in terms of consistency of dosing and in terms of food safety, when you don't have a reliable supply chain. It's not like delivering to a Walgreens where like you know they're going to refrigerate it immediately, it's gonna be delivered and refrigerated trucks and it's going to be checked every day to make sure that it hasn't expired. Like, you have to account for the fact that dispensaries are small businesses, for generally, they don't have the most robust infrastructure in place. There isn't a distributor channel that regularly does channel checks. So you've got to find products that fit into that channel that you are targeting.
Matthew: Okay. And tell us more about the supply chain with your business. How has that been? What kind of discoveries have you made? What kind of challenges have there been and how did you surmount those?
Justin: I mean, it's a tough supply chain. One of the problems is that it is vertical. It started off vertically integrated so you a lot of people doing a lot of things not very well. But they were making money, so they're hesitant to give it up. You also have a lot of people who, when they make money, this space has not attracted the most ethical people. There are plenty of ethical folks, let's be absolutely clear about that. There's some great entrepreneurs in the space. But there's also, like any space, more so than other spaces a share of charlatans. There's a lot of things that you can just promote and market versus actually produce. It's a lot easier to describe a thing than make a thing. And in our supply chain, we found a lot of people who were very good at describing what they did and very bad at actually doing that thing. It was terribly risky.
So for instance, we source our oils from extractors. We run a big recall risk in terms of pesticides. Then that is part of the supply chain that we don't have a direct touch point to. And we found some suppliers, who were willing to go back to the cultivators for us, actually get all of the documentation around pesticide usage and testing and deliver that to us as a precondition for sale on the oils. That was a requirement on our part, we didn't understand why anybody would do otherwise and yet we lost some vendors because they just said, "We don't wanna take responsibility for that." Like, ensuring quality in the supply chain has been hard. And we've had to reach into places that we initially did not want to or didn't think we would have to. And we've done it because ensuring quality and consistency is the most important thing to our brand and to our growth as a company.
Matthew: And you mentioned that Stillwater products are available in Colorado, what are the expansion plans beyond Colorado?
Justin: Yeah, so Stillwater brands products are in 20, 25 dispensaries in Colorado right now. We also have brand...there are products out there that are powered by our ingredients in another 250 stores across the country outside of the state. We are not focused on state by state THC expansion. I think, I said that we see ourselves as a food company. Above that we actually see ourselves as a cannabinoid company, whether that comes from cannabis and THC or hemp and non-psychoactives, I am somewhat indifferent to in terms of which area we pursue most aggressively at any given point. The state by state THC expansion is an iffy strategy to me. The nature of being a product manufacturer is that you wanna get economies of scale. You can't get that with state by state supply chains.
You also can't ensure quality across 50 states when you don't have a single supplier to work from. If you have to work from 50 different suppliers, it becomes really, really difficult. So we're more focused on opportunities that offer a national footprint. So that's hemp, that's Canada, and Europe. We recently signed a deal with the Green Organic Dutchman to provide a ripple ingredient platform to them for their efforts in producing non-psychoactive infused foods and beverages in Canada and the EU, as well as Jamaica. So we see that as a much more interesting opportunity in the long term than simply going to another state. That said, California is kind of, you know, its country all of its own, so I think you'll see us there sometime next year.
Matthew: Was it difficult at all to get into your first dispensaries in terms of, you know, getting purchasing manager, dispensary owner, bud tenders excited about it? How did that process work?
Justin: You know, it was hard. We launched with a 2.5 milligram micro dose tea, again into an environment where the traditional product was 100 milligram brownie or chocolate bar. A lot of people looked at us and said, "Why the hell would I recommend it to a 2.5 milligram product? I take 300 milligrams for breakfast." And we had to explain to them, "That's great. This product isn't for you. And not everybody who walks into your store is like you. In fact there are many more people who are not like you than who are like you." And we found a couple of dispensaries early on, The Farm in Boulder was great partner for us who were really intrigued with the idea of offering a product that was for people who weren't already in the dispensaries and can broaden their consumer base. So it was a differentiated product, we had a unique form factor in the tea stick format, we had great flavor. We were one of the very first products that just didn't have a hash-y taste with it.
So we were offering a lot of interesting value propositions and nobody else was and for dispensaries that could get over the idea that not all products had to be 100 milligrams and max out the regulatory limits, I think we had a pretty clear path. Ripple also was just a really well executed product that was differentiated. You know, people had tried sugars or whatnot but not everybody wants to add sugar to their food. Ripple was just odorless, flavorless, water soluble THC that could be added to anything. That was unique and it was a really well executed form of that idea. I think time and time again, it really comes down to execution. Anybody can claim to do a lot of things. To actually put it on the shelf exactly as you described, that's what gets word of mouth going. And that's what gets organic growth going which is just super important in industry where there's not the ability to do traditional marketing. You need word of mouth so, and the only way to get word of mouth is to deliver on your brand promise.
Matthew: And how has Boulder been for you in terms of networking in the cannabis community, especially compared to New York City, which is like...I don't know, I can't even gather how many multiples sizes it would be, you know. Boulder's probably 200,000 or 300,000 and New York City is like 10 million.
Justin: I mean, Boulder is fantastic. I've been coming out to Colorado my whole life. My wife and I love it here. Our dog loves it here. We just had a kid here. It's got a fantastic food scene, especially on the startup side that dovetails really well with what we're doing. Like I said, we see ourselves as part of the food scene even as much, if not more so than the cannabis scene. I think there's good stuff going on in the cannabis community, I'm really proud to be a part of it. It's just a good state. The regulatory bodies are trying very hard and they're doing a good job. On the whole, I've been impressed with the improvement over time. I think altogether I wouldn't have wanted to start somewhere else.
Matthew: Okay. One more question about the, you know, working with entrepreneurs and the VCs experience. Did you notice any trends in entrepreneurs that were successful in raising capital and then also the ones that took that capital and then went on to success versus the ones that weren't able to raise capital or did raise it and weren't able to get traction?
Justin: I mean, the number one predictor of being able to raise capital is being a sociopath.
Matthew: Tell us more.
Justin: No, I mean, raising capital is a completely different thing from actually running a business. Raising capital is often highly correlated with extreme overconfidence, bold claims, and telling a great story. There's a quote somewhere that like, "Raising capital is investor story time." And that's true from the bulk of investors. So, I always want to be careful to distinguish between success as measured by raising capital and success as measured by creating a cash flow, positive, growing business with solid fundamentals. The former, I don't really know any like, business way to predict that. Raising capital is almost an independent variable compared to business execution. It's unfortunate in these days, but I do think it's pretty true.
That said, I think the quality that is most common amongst successful entrepreneurs or people who...and you can define that in any way, raising capital, having successful business, whatever it may be, is just being in the right market. Choosing the right market can heal almost all wounds. I think Mike Mobbison said, "If you're good poker player, your time is better spent finding bad poker players than becoming a great poker player." It's the same for markets. If you pick a rising tide, your boat's gonna rise. If you pick the best team, won't be able to succeed in a terrible market.
Matthew: Right. Good points. And now speaking of capital raising, where are you in the capital raising process and are you looking for accredited investors?
Justin: So we're doing a round right now, small round where we look at capital raising as, you know, a series of checkpoints with a defined goal and reason for raising the capital. Right now, we're raising enough money so that we can continue our growth plans and set ourselves up for the time when cannabis or hemp is legalized at the federal level. With McConnell's farm bill, we're hoping that if that comes across, then that will open up institutional capital. So we're not raising a huge amount of money, we're raising enough because we can't deploy a huge amount of capital. I think you can have to match the amount of capital you have to the environment you're operating in.
So we're doing that right now. I'm looking for sort of pseudo institutions or well-structured private equity firms that can help provide an on ramp to institutional investors in the next phase. And we are also talking to value added accredited investors, although we have a pretty high minimum at this point. We've got a pretty short cap table, it's a bunch of very smart guys who are like...oh, and women who I like a lot. And I like keeping it that way because good, close knit investors are the most important thing in the world, especially when you keep them well informed of what's going on.
Matthew: Okay. And any accredited investors that meet those filters, is there a way that they should reach out to you or just through the website or what's the best way?
Justin: I mean, they can email me at firstname.lastname@example.org and I'd be happy to chat further.
Matthew: Okay. I'd like to ask a couple personal development questions to help listeners get a better sense of who you are personally. With that, is there a book that's had a big impact on your life or way of thinking that you'd like to share?
Justin: All right, so I'm gonna cheat a little here and give you three.
Matthew: All right, yeah. Let's do it.
Justin: So the first one, "Administrative Behavior" by Herbert Simon. So Herbert Simon, father of decision theory, organizational theory, cognitive science and also artificial intelligence. So a hell of a resume there. This book came out originally in the '40s. It's an examination of how organizational decision processes work. And it really helped me to learn to think of and frame my business as a series of decisions. And helps you to judge progress by the quality of information and the quality of the decision making progress as a process, as opposed to just big fluffy goals. Second one is, "Out of The Crisis" by Deming. So that was the book that really got me in on systems thinking, focusing on consistency as a platform for growth and just really essential-ness of coherence. And then a similar to that, "Good Strategy, Bad Strategy" by Richard Rumelt which in my view, was the best strategy book I've ever read. And that is just a real focus on coherence and direction. So you start out within the right direction, and you just keep learning and keep evolving, defining the problem set that you're facing with specificity. And ultimately, the better you understand the problem, and the better you understand how the problem applies, converts into money, the better chance you have for success as a business.
Matthew: Great recommendations. Your second book recommendation there of Deming, that was the gentleman, American gentleman that went over to Japan after World War II and kinda helped them get things going. And they kind of took his vision and applied it to their auto and manufacturing businesses. Is that right?
Justin: Yep. The Toyota production system is actually Deming. He was the first guy to think about quality as a form of consistency. And we take that view...like, we have very much internalized his view of quality. We think of consistency. When like, all of our packets, our doses of ripple, each dose is plus or minus 2%. We don't go for 15% variance. Everything we do is with that tight level of precision, and that's how we define quality. It's setting a target and then hitting it exactly every time.
Matthew: Is there a tool web-based or otherwise that you consider vital to your business or team productivity you'd like to share?
Matthew: Wow, so just a reference, the VBA you're talking about is Visual Basic which is like, you're using a coding language to supplement Excel if some people do that, and you're doing the similar thing with Google Apps. And so are you pulling in data from third parties to make like, key performance indicator type dashboards and things like that or?
Justin: Exactly. We track everything very tightly. And we finally have enough data for that information to be meaningful. But we pull that all in from, you know, we've got our CRM, we've got the state metric database, which we were the first company to request access to their API, and it confused the hell out of them to be honest. Honestly, when I was a VC it was easier to get access to Twitter's fire hose than it was to get access to the metric API as a licensee. Then we have a couple other supplemental tools that are manufacturing tools and then an additional tracking tools for...because we track information about our cannabinoids over and above what the state requires. And the state database doesn't really handle that well so, we have a sidecar database. And we use Google Apps Script to bring all these things together and present them in a unified way. So we have a good sense of what's going on with our business on any given day.
Matthew: Okay that makes sense. Justin as we close, tell listeners how they can learn more about Stillwater and find you online.
Justin: Sure. So our address is stillwaterfoods.life. That's stillwaterfoods.life.
Matthew: Well, Justin, this has been a great interview. Thanks so much for coming on the show and telling us everything you're doing with Stillwater. Good luck with the brand...
Justin: Thank you.
Matthew: ...and keep us updated.
Justin: I will. Thanks so much.
Dan Gusafik was recently featured in Rolling Stone magazine because he has developed a specialty in containing the scent of cannabis. It turns out local governments have created extremely harsh fines and can even close down your grow or extraction facility if the odor is too much. Listen in as Dan explains how to prevent odor and optimize your grow and extraction facility.
– How to contain cannabis odor to avoid fines
– The trade-offs of using different types of extraction
– The cost per square foot for grows and extraction facilities
– Why extractors do better than cultivators during gluts
– Best practices when designing a grow and extraction facility
– Creating two-tier grows
What are the 5 Trends Disrupting The Cannabis Industry?
Find out with your free cheat sheet at
One particularly vexing problem for cannabis cultivators is odor control regulations from city and municipal governments. One engineering firm in the cannabis space has made a name for itself in its ability to help their clients deal with the odor from cannabis and improve the efficiency of their grow. I am pleased to welcome Dan Gustafik, President of Hybrid Tech to tell us more. Dan, welcome to CannaInsider.
Dan: Thanks, Matt.
Mathew: Give us a sense of geography. Where are you in the world today?
Dan: Right now we're in a suburb of lovely, sunny Portland, Oregon.
Mathew: Great. And all the sunshine in Portland comes in the summertime. The rest of U.S. is kind of rainy. Is that right?
Dan: Yeah. That's pretty accurate. So we got a happier rain. It's not as heavy rain as Humboldt County, but it's pretty rainy. And the rest of the year is just glorious right around 75, 80 degrees. But, yeah, just perfect weather for kayaking and every other fun activity you can dream of.
Mathew: Oh, good. And what is Hybrid Tech at a high level?
Dan: That's a good question. So we're what's called an A&E firm which stands for Architectural and Engineering. And we are one of the few firms specializing in the cannabis sector. We also do Hemo, and currently we're leveraged across multiple different states. We've got 37 states licensed, and we've got multiple provinces up in Canada. And we tend to do mainly what we call construction drawings, which are basically drawings designed to go through permitting and get client's approval. We also novel systems, novel approaches like multi-layer cannabis and, obviously, the scent control piece we're talking about [inaudible 00:02:07] complex closest in greenhouse designs. But, yeah, that's generally our main thing.
Mathew: Can you tell us a little bit about your journey, what you were doing before Hybrid Tech, and how you came to start Hybrid Tech?
Dan: Yeah, absolutely. Well, Hybrid Tech's technically the third version of the kind of the company that I've been working with which is, we started off as a contractor, design-build, way back in the day with BGR Builders, started in 2000. And then from there we changed to another company called Synergy, basically doing the same things. We actually started out in, believe it or not, grow rooms. So about 20 years ago, I helped design and then build the first grow room that I've ever been in, which just kind of happened. And then from there, it turns out those people knew more people and more people. So, the contracting design-build companies evolved for the need to service the industry. But, technically, I've been doing more cannabis systems than anything else.
I did take a little hiatus for a while due to some work at Intel, some other companies. And then I kind of came back when the new recreational wave hit. Maybe with Canada, it came back with a very large Canadian project, filed some patents and the new name was Hybrid Tech. Now four years now we've have this new version. But, yeah, I've actually been in cannabis for technically the majority of my career which is kind of odd.
Mathew: Well, how many projects would you say you've worked on in the cannabis space?
Dan: Oh, me personally? I actually lost count. The new version, the Hybrid Tech, we actually think we have a tracker. So I know we're about 140 products in right now. The old version? I'd say below 200, but I don't have an accurate number anymore as it's been so long and, yeah, just we've done a lot of projects, right? Me, personally, throughout those three different companies, have done quite a few projects. So, yeah, general ballpark.
Mathew: And what buckets do those projects typically fall in most of the time?
Dan: Oh, well, across the board. So, in the beginning, lots of different kind of commercial and off-grid systems, specialization in like photovoltaics or, I'm sorry, solar panels for off-grid greenhouse systems. Obviously lots of internal indoor smaller grow operations, you know, less than a hundred lights, and then we started expanding from there to larger, and larger, and larger, more complex systems. And then, of course, more recently, now we're not exclusively larger systems, but, in general, we tend to get more complicated projects that are harder for others to complete, lots of extraction projects. About half our products are large scale extraction. I'm talking, you know, a ton a day of volume coming in. So we tend to focus more on those. In fact, we're MEP-focused, which is Mechanical, Electrical, Plumbing is our main background as well as my personal background.
Mathew: Okay. And, can you tell us a little bit more about the municipal and city ordinances that govern scents or odor? The nuisance laws, those things?
Dan: Oh yeah, absolutely. This is a kind of a misunderstood concept for the scent and odor pieces. So, a lot of people think that they're intentionally being levied at the cannabis sector, which, in some ways, they slightly are, the new ordinances. But the existing ones, actually, are not. They were originally designed for mainly agricultural, for swine, for avian, different operations that are, if they move next to your house, you'd be very unhappy and your home value would decrease, and it creates a whole lot of problems. So the nuisance ordinances were originally designed for those sectors, but they're now being re-utilized or re-targeted, I guess, towards the cannabis sector, and in some ways some disastrous results.
So, some people have been, due to their scents, it sounds like been shut down or sued. I don't have the exact information on how many times that has happened, but there was an article that came out which we were quoted in where this is actually happening, reoccurring. In more recent times, the new ordinances are basically written off of the state template. So, every state that has a recreational initiative being passed, they will normally have written into it some very vague language like, "All operations will control their scents." And that's the extent of it. And then their job's done. Now all of the local authorities having jurisdiction, which are normally gonna be counties or, in some cases, larger cities, they now have to write some method. And that's where the scent control ordinances you see today have emerged from, is they're more precise talking about directly cannabis and having exact requirements you have to meet.
They've now been replicated in multiple states, and, obviously, that trend will just continue because once one municipality [SP] has written, there'll be more and more, and more, just regurgitating that with the information.
Matthew: Okay. And how did this become one of your specialties figuring out how to control the scent or odor of cannabis plants?
Dan: That's actually kind of a funny story. Like many of the things in the cannabis sector, we are extremely flexible. So unlike, kind of, other more stoic engineering firms, when some new problem present itself, the very first thing we do is figure out exactly how to address this problem and then normally write up a template for addressing it. So, the ordinance originally emerged from Clackamas County, at least in Oregon. It's one of the first more aggressive and restrictive scent control ordinances we'd actually heard of. It was about two and a half something years ago that that got written, and at the time, the Commissioner, Ben Blessing, basically just had this ordinance. It got written. We didn't actually get requested for comment on it, which he said was unfortunate, but, oh, well. So they came out, we had to comply, and we immediately called his office. We had a project right away that needed to comply and we set up a template.
And then our template's very streamlined. So from there on I guess we did a quarter of the applications in the state of Oregon, just because he got them down pat, we got them down fast. And so we did acoustic and scent combined, which I know we weren't talking about acoustic. But that was part of the ordinance requirement. You had to comply with both. So we did a bunch of those packages, and I think they call them "land use compatibility statements," and those are required to get your State Recreational License. It's, kind of, one of those documents you must have to actually have a completed application.
Mathew: Okay. I've been in smaller grows, not the commercial grows you're talking about here, but some small scale commercial grows that use can fans and things like that. And those work really well. It's amazing how well they work. Can you go over some of the specifics of, you know, the equipment in design that you use that helps control the scent?
Dan: Sure. Actually, we still have can fans. So, some of those [inaudible 00:09:43] products were actually, you know, very small, a couple thousand square feet, and if they're small enough, we would immediately go to the inexpensive fallback like the can fan, because it's just, you know, it's an in-line fan with soft ducting, which is, again, very easy to install, very inexpensive to install. And then, of course, after that you tend to have some sort of activated charcoal filter, which is normally an inexpensive piece of equipment. They have a lot of problems though, but they are very cost-effective. So, on small operations, we still deploy those. On larger operations though, you can graduate to something that's way easier to clean and service, which is normally gonna be an actual fan with a filter bank. And the filter bank is the box that you could open up, pull out the actual filters, clean off the filters, put them back in, have a nice pre-filter that extends the life of the filter.
It also can all be done normally standing up on a ladder. You don't have to take down the equipment, whereas, the in-line can fan is legendary for having to be removed to replace the pre-filter service that's [inaudible 00:10:52] they weigh a decent amount. So, tends to be a lot of pain and suffering with servicing the in-line filter systems. And having the upgrade to actually like a fan, you know, where the filter bank is, it's a pretty large leap. That's what most commercial systems use. So we tend to have...and they call them "gas phase absorption," just basically a snappy way of saying that they're exchanging gas particles which are the scent profile, the little particles in the air. Normally with activated charcoal within them is kind of how they're doing the exchange because they're very porous.
So, of course all of the particles are slotting into those pores, and that's how you're exchanging the gas in the air. And at the end, you're left with far fresher air. And one of the keys is, of course, putting the room under a mild vacuum so that the particles aren't escaping through all the cracks and crevasses.
Matthew: Okay. And I'm sure you get a lot of clients when they call you asking about, "Hey, how much is it gonna cost, you know, dollars per square foot?" Or what's their total capital investment required to build out a grow? What do you tell them there?
Dan: Well, that's a very good question. Normally, it depends on the client for one. So depending on their size and the complexity of their project, a lot of people think that they can get something built for about...like, you know, a $100 a square foot is a very common number that we hear from medical states that are transitioning to recreational. Once you're actually going for recreational and you tend to have the requirements of having a licensed contractor pick up all the permits, having to have an entire construction drawing set done professionally and stamped, and, of course, the big one is meeting all of the applicable codes, suddenly, the dollar per square foot, it shifts drastically. So, on average, it's about $250 a square foot for an indoor grow operation. If you're going multi-layer, LED, it tends to ratchet up to over $300.
But that seems to be the good ballpark, $250, $350. That's a shocking number to most people, and we've actually had a lot of calls end with that information, saying, "Oh, my God. You guys are crazy." And they start talking to people and they finally get contractor quotes, and they go all the way to the end and find out, actually, no. You can't have it for less unless you actually are able to pull some amazing rabbits out of a hat. But, yeah, that's the grow operation number. And then the extraction number is even higher, of course, because the extraction number includes extremely expensive extraction equipment, whether they be pressure vessels for CO2, or, like I said, more pressure vessels for ethanol. You've also got lots of process typing, very often high hazard sprinkler systems.
So extraction areas tend to be even higher than that. And we've had them go as high as six to eight, depending upon the area, but then again those are smaller, much smaller regions, basically built to laboratory-grade standards. And, you know, we've got [inaudible 00:13:59] coming in with fifteen-thousand-something plus gallons of ethanol. So I guess that's some very massive hazard mitigation technique to deploy that level. But that's actually what you need when you're trying to process a couple tons of hemp.
Mathew: Tell me, what is a discovery in repair project, and why do you do these?
Dan: Oh, that's a good question. That's a new phenomenon, and it's exciting and terrifying at the same time. We get a lot of requests for those. So they are all these recreational states that have passed, Wichita's coursed down quite a few, have sizable operations that very often the original engineers, either they didn't get the right information or they designed it incorrectly. And very often, it's a combination of the two. It's not always at the original engineer's record. We're bad engineers, of course. It's very often they didn't receive the kind of information that they needed, and they just don't have the experience to know what to ask for. So, unfortunately, you have these very sizable systems sometimes that are not working. And they can be not working for a myriad of reasons, but, normally, it's most of the time something involving moisture control, pest mitigation, odor.
Generally, they're all kind of focused on different aspects of the mechanical systems not functioning. Sometimes plumbing is included as well. So our team is basically going out and reviewing this during the discovery phase, and we're discovering what's not working. And from there, after discovering what's not working, we're then gonna transition to a solution phase where we actually then do an engineering fix of the problem. And some of these fixes are really fun. Sometimes we have, like a project we've just finished, went from a single layer high pressure sodium grow to a triple layer LED. That was a very fun project. We worked on it for quite a few months. And that just went up. I think about last month they fully completed it. It looks fantastic. It's got a little lovely Codema robot in there that comes and grabs the trays, and just a very, very clean operation.
So things like that are very entertaining. Other ones are not as entertaining, and sometimes they've gotten literally busted by the fire marshall or the jurisdiction having authority, someone came in there and went, "What are you doing? Code violation, code violation, red flag, red flag." So, other discovery ones are less entertaining. It's more of they were told to cease and desist, and our team has to go in and troubleshoot what violations were committed where, how we can mitigate them without, of course, costing an arm and a leg. Those ones are a lot harder, but we've enjoyed both. And the good thing on the end is that we normally have a client who's extremely happy since now the system's actually working the way that they want it to be and they're a returncustomer for their next state project.
Mathew: Okay. You talked about extraction a little bit. When we're talking about extraction, do you have any recent customers or clients that you did a build-out for or an engineering work for that you can kind of walk us through what it looked like and what you did?
Dan: Oh, sure. Yeah. Well, technically, half of our work load's extraction. So, that one's pretty easy. So, yeah, we had a couple projects. So we complete an extraction. One of them actually was smaller, kind of like a micro-extraction system, and it was basically an ethanol combination system. And the reason why I'm talking about ethanol and CO2 and now I'm gonna talk about butane and propane real quickly is it is exceedingly important to the fire marshall the method that you're using to extract. In fact, it's the most important thing. And getting the fire marshall approval is technically the hardest part about extraction. So that tends to be a big governing input when we first come in on, "Hey, how are you doing this extraction process that you're currently doing? And how can we, you know, maybe help you make it better?"
In this case, the smaller one was we ended up using a paint booth which is, as it sounds, it's a large booth that they use for painting vehicles. And that allows us to pretty easily put in a structure that we can then fit in, in this case, I think they had a 300-liter ethanol skid, fit that unit inside of this paint booth, therefore, mitigating its requirements for building a special room that's kind of an explosion proof room. And then we had a couple other rooms. They were a lower hazard requirements. They were also built up a total of three. And one is the distillation room, isolation room, and the final one was actually just a packaging area, which still I'm a little unaware of why that one they want classified. I think it was mainly so they could do an upgrade in the future and expand a little bit.
A lot of these extraction facilities we will work on, we tend to actually start trying to fit in additional equipment for a future expansion effort. So very often, there's a...you know, if you have one 300-liter skid here, you can transition to a total of two shifts per day. And then after that you could actually drop another one if we located on the opposing side of the paint booth, something like that. So they have a lot of room for expansion because most of the time when extraction kicks off and it starts working, the investors realize [crosstalk [00:19:39]...
Mathew: "Holy cow. We've got a golden goose here."
Dan: Exactly, especially when there's an outdoor glut. Like right now in Oregon, there is an outdoor glut that's just...that is the golden time for extraction to come in and say, "Great. I will pick up those pounds for $50 a piece," or some ridiculous amount. That's too low. That's not a real number. I think the lowest I heard of was $150, which is still shockingly low for outdoor.
Mathew: That is shockingly low.
Dan: And then from there, they were able to say, "Okay. I'm gonna bag this whole lot, put it in shipping containers, put it in our main loading dock, and feed those machines." And suddenly, they're doing 24-hour shifts and just that extra space that we planned out normally isn't enough. Now, it's time to have three or four more slots. So that was one project. Anyway, it was very small. So the entire facility was only about 4,000 square feet, but they had the ability to process a pretty massive amount of product with that small facility. On the alternate site, we had a much larger one. It's more complicated. I don't know if you want me to go down that entire thing, but it had a lot more systems inside of it, all ethanol, no specialized butane mitigation process.
Mathew: I think it might be helpful for people to just understand some of the tradeoffs between, like, a CO2 or butane extraction, or ethanol, and what the tradeoffs and pros and cons of each of those are.
Dan: Okay. That's actually a great call. Well, before you even select systems, the big thing to know is CO2 is normally selected as CO2 allows you to avoid most of the fire marshall's concerns. So, when you're dealing with CO2 a system, you're dealing with a system that is fully closed and using, of course, CO2 to actually remove or extract the active ingredient. It normally has less throughput which is basically the amount of [inaudible 00:21:32] material you're putting into it. And the quantity and, of course, potency of the material coming out is gonna be lower than ethanol, butane or even propane. So that's the big benefit of CO2 systems is that it's [inaudible 00:21:48] fire marshall the fact you don't have to have classified areas.
The negatives are it is power-intensive, requires a lot of compression, requires a dedicated chiller-boiler system, which, again, eats up a lot of energy. And they also, of course, still have to have some sort of ethanol for the final phase. They're good at making crude but they can't go all the way to define big [SP] products or the edible products. So they have to have some method of further distilling that crude oil, which is one of the main outputs of the extraction machines. If you switch to ethanol, which is kind of the industry standard for a large scale is you have a massive amount of throughput, but you have to have, again, have a massive amount of ethanol being stored, which creates huge hazard classification problems with figuring out how to store that much ethanol, having containment systems, fire suppression systems normally of a higher requirement, having certified rooms, classified areas.
Just it gets very complicated very quickly. Giving it up, however the rewards, are quite massive since it is one of the lower cost methods of having a massive amount of throughput. It doesn't require as much energy since it's mainly just some high pressure pumps. And it has, again, a much, much higher throughput. So you're getting more percentage of recoverable final crude versus CO2.
Last two are, I kept these kind of in the end for a reason, butane and propane. They are very difficult to deal with. We've had a couple projects with them. In fact, one, we just had very recently with butane and propane. Because they're gases, it's an extremely high hazard situation where we have a hard time mitigating them. We tend to have these specialized things called gas cabinets which have ridiculous ventilation requirements. We tend to have classified areas, and even with classified areas you still can't have that much of these compounds because they're actually in a very high hazard classification, which makes sense. It's a gas. If it leaks, it can fill the entire facility, and, you know, one spark and the whole facility goes up in flames, which is kind of what they're known for.
Also from the fire marshall standpoint, I had a direct conversation with the Deputy Fire Marshall, I believe, of Oregon. We talked about, initially, this happened a couple of years ago, and they asked us to cite precedent for butane and propane extraction being used in other industries. And we said, "Oh, we'll get back to you on that" We did look it up and we could actually find no precedent, which means there's no other industry that uses this, so it's hard to argue against the Code Official that it's a safe method when you can't cite some other application it's being used at. And that tends to be where you get on shaky ground. And once you're on shaky ground with the fire marshall, it's normally not a good side.
So those are difficult projects to deal with, and depending upon their size, they're normally smaller. So we don't take as many of those. We tend to focus more on the larger, more established ones that's generally are using either CO2 or ethanol.
Mathew: Yeah. I know that some people swear that the butane extracted oils taste the best, and that they've figured out ways to get any of the residual butane or propane out. And I believe that that might be true. I just, I don't know how it's true. And, you know, looking at some of the tradeoffs here, it's like, "Why would I ever want a butane or propane just because of the explosion risk?" It's like, things probably will go wrong if you follow the safety procedures, but at the same time, if they do go wrong, literally, it's like your whole place explodes. It's like, "I don't know if I would want to take that risk. But at same time, I haven't heard of any really exploding. Maybe one. I've heard of really just one exploding.
Dan: Well, they're not gonna explode. That's the thing is after we've mitigated it fully and it's, you know, approved, it will not explode because it actually has ventilation systems that go, you know, three cubic feet per minute of air flow. So, if a tornado of air picking up all the gas and exhausting it immediately, you have a interlock of your mechanical system that shut down all of your process gases and close all the cabinets, everything is gonna be explosion-proof rated. So after you're done to proof the facility, it won't blow up. It's just that you've now paid quite a bit for your systems and you also just have less ability to actually extract because you have less volume of propane and butane.
So, technically, if you go all the way up to a high hazard classification, you can store an unlimited quantity of ethanol because ethanol has a lower flammability, like a type 1B flammability, whereas propane and butane gas are in the higher classification. And at that point, I think you're stuck with, I think it's 480 or some very small quantity of gallons. And at that point, you just don't have the ability to actually have as large as the extraction facility using those methods. So, part of it is just how international fire code is written. Because those are higher hazard requirements, they're making people stick to having less of them. So I think you're gonna see...I don't think those [inaudible 00:27:16] those methods. I just think you're gonna see them just being smaller in more niche projects, products. And the larger systems are probably pivoting more towards ethanol and CO2, and some [inaudible 00:27:29] method, which is, of course, just a giant hydraulic press. We just don't see as many of those projects since they're not as difficult to get permitted to try in a hydraulic press.
So, most people, you know, or normal engineering team can deal with those. But, yeah, we've had a couple of those that's gets thrown on print sometimes at the very end. But they're not a very difficult to actually get a permit when you have just a giant hydraulic press. You know, you're pressing the plant for its extract.
Mathew: Okay. So, it sounds like ethanol, like when all the variables are weighed, you know, a lot of business owners who are newly licensed or they're expanding to other footprints are choosing ethanol.
Dan: In general, we tend to have a divide, I'll be honest. So, like even some of our largest hemp clients, one is squarely MV CO2 camp, and the other one is squarely in ethanol camp. And, yeah, they're both happy with, you know, how they're doing. It's just that they have very different methods. But, in general, it seems like the ethanol is [crosstalk 00:28:39]. Yeah. When you see the final throughput, it's pretty massive differential. But then again, the other companies have ways...they're just dropping more skids.
Mathew: So, if you were to say that, what you just said to me, to someone who has a CO2 extraction set up, what would they say, "Well, that's true, but the positive to the CO2 extraction method that ethanol doesn't have is this," what would those be?
Dan: Oh, oh, yeah. There are some extremely specialized machines, fabulous systems, from even waters that allow you to actually select and extract precise terpene profiles. You could actually get a perfect flavor profile. You can actually capture the flavors at different temperatures flawlessly. And then, of course, add those into new mixes. So CO2 does have some special...
Mathew: So, control, nuanced control and subtleties to customed flavor and terpene profiles.
Dan: Yes. And with the ethanol systems, you can get close to that, but not quite. They're mainly designed to basically push a pretty massive, you know, volume of ethanol through your finely ground material, and then extract, you know, whatever is actually in your base material in full. Whereas with CO2, you can, kind of, modulate. In fact, a lot of those machines are really made for full modulation. So you can actually target a very precise temperature range, which is targeting a very precise type of terpene profile that you're actually looking at capturing and putting into an extract. Or recombining into an extract, excuse me. That'd be one argument for that. For smaller operators, too, it's easier to get CO2 permitted than ethanol. I think there's a cost factor for smaller operations leaning them towards CO2.
Mathew: Now, you have a bit of a unique insight about which cannabis companies survive because you've seen it firsthand and you've talked about the glut in Oregon. And you think extraction companies survive, like we talked about, because they can endure the glut of cannabis. What does that mean exactly and why should we think about that? I mean, why is that true? And maybe, why doesn't the rest of the cannabis community really understand that at a deeper level?
Dan: That's another very good question. Well, in all honesty, there's this conception that is a misconception, I would actually honestly say, that seems to be slightly eroding. But for the longest time, basically the cultivation piece of cannabis was the leading defining aspect of all operations. So everyone must focus on the cultivation, cultivation, cultivation. And of the cultivation, the, you know, grade A flower was the primary focus. Grade A flower requires a massive intensity of light, a high level of CO2, flawless temperature, and, of course, humidity control capabilities. So that being said, it's obviously cost-intensive. That has been the focus for a long time. However, as the market seem to mature, which we've been on every [inaudible 00:31:59] wave so far it's happened. We've been a part of that process, obviously working on projects within those waves. We know it's a trend. From the beginning, you see a lot of grade A flower indoor operations [inaudible [00:32:11] first ones who fire off.
If they're not vertically integrated with cultivation mixed with retail, mixed with extraction, after that initial wave, the glut tends to hit, which is it happens pretty quickly. Some state just takes, you know, just one or so, one and a half years. Some states it takes two. But sooner or later the state has an over-production wave, which normally coincide with the mass amount of outdoor. It seems like the clients who didn't diversify and are just indoor because their cost of goods sold are much higher start having some hard times getting rid of that product. Unless they have, of course, the [inaudible 00:32:53] that they've also owned, or unless they have an extraction center they also own, which they're able to run through. And we've noticed that in the wave where people seem to be going unfortunately out of business, we've seen the extraction people come in and purchased [inaudible [00:33:09] operations, re-target them for everything going into extraction, and suddenly, kind of lift the business up with a profitable model.
That has happened over and over again. We've also seen extraction basically just let them die, which sounds terrible, then set up gigantic greenhouses where the, you know, volume and the production of the actual crop is incredibly cost-effective, run all of that volume straight to extraction where you, of course, equalize the net effect from Class A flower basically removed. So now you can actually have outdoor class C, even not light dep, you know, lower classification or lower quality cannabis that's steel grown. And from there... In fact, we probably should back up. I know I'm using a couple of classification terms. So real quick, let me go back to that just real quick. I don't know if you know the classification system. That's kind of an internal thing too that we made up. But we've talked to a lot of people, it seems to hold true when they use these different terms.
So class A flower, indoor quality with light-assisted CO2 or extremely high tech green house with, you know, blackout curtains which are light dep systems, [inaudible 00:34:25]. And then Class B Flower tends to be when you have less light available, which is normally gonna be a greenhouse and you have probably no CO2. And then when we say like class C, we're talking about basically steel grown or extremely low tech greenhouse. There's no light, very little temperature humidity control. There's a huge cost difference between making those different classification to flower, and a lot of people when they come in, and, again, I'm kind of pivoting back now to the extraction discussion, when they come in at the end to clean up, it turns out that the class C, since it's so incredibly cheap to make, you are able to funnel quite a bit of this product into the extraction machines for an incredibly low, you know, dollar amount. And from there, the profit margin tends to be extremely high.
So those are the ones we see that tend to be winning in the end as those that are producing the most product for the lowest cost, and then basically equalizing that product through the extraction process to then make edibles or vape pens or whatever the case may be. And the difference is kind of shocking because it's the same, you know, [inaudible 00:35:43] vape pen between the difference in class A flower and a class C, they won't know the difference. It's blue dream here and blue dream there. It's the same strain, and the same others after they're fully extracted, the effects basically seems to be almost the same. At least this is what we've heard from all the different consultants we've talked to. Of course, we're not the expert in all things cannabis and we do not claim to be in any way, shape or form. There's, you know, a lot of very gifted people who know far more when it comes to the actual products being consumed. But this is just something that we've noticed occurring since we've been actually building and designing the systems for them.
Mathew: Okay. Now, we've talked before, and you had mentioned that you don't think a lot of cannabis businesses or cultivators use on-demand services as much as they could. Can you talk a little bit about, you know, onsite harvesting, drying, curing, trimming services, packaging, and how can you maybe just focus on one thing and use these on-demand services and why that's important?
Dan: Oh, yeah, absolutely. Yeah, that was actually a novel little piece that came out. So, we actually figured out just last season for one of our clients, a full temporary plug-and-play curing and drying complex. And it may not sound revolutionary from the outside, but what it ends up being is, they had to just build the building, standard steel, you know, pre-fab building, so very cheap construction. After they built the building, they were out of time. They didn't have enough time to get the utility, electrical service delivered. They didn't have enough time to actually get all the HVAC specified, permitted and delivered, which creates some problems when you have, in their case, five acres of cannabis coming to fruition.
So, we had to think fast and design a different system, which we've actually done before. We call them, you know, temporary systems, which it's all rentable components. The system was delivered, actually hilariously enough, one week after it was designed which is great. It involves a temporary genset under a temporary permit, which is, of course, legally allowable in almost every jurisdiction. It gives you a one year rating as long as it has appropriate grounding and bonding. That went in and once the genset was connected, after that came in the HVAC, of course, which involved some pretty massive humidity rule components. And then from there we actually had the system, kind of, up and running, with again about a week later. And they were actually curing and drying about 12,000 pounds of cannabis every 7 days straight for extraction, which is why they were able to cure and dry in 7 days. So it's a very brittle product at the end.
That's one application. We had another client who ended up setting up some rolling company. Actually, that's in Oregon. And interestingly enough, this company would show up with a, kind of, expensive pre-roll machine. It just makes those perfect pre-rolls. And they would show up at a farm and part of their services were rather than you training your staff or hiring up people and, of course, buying those machines, since you only need them for just, you know, one month, with that you basically have the service show up and they would basically roll out your entire line into perfect joints, and then charge you a per joint fee. So a lot of companies are realizing rather than investing all this, which very intensive level of capital, all they have to do is basically think of some of these temporary resources focused just on cultivating, you know, high quality, in this case, we're talking about outdoor cannabis.
And at the end of the harvest cycle, basically getting these temporary systems in place for their mission-critical, high energy, technically, high permitting requirement items, and then those items disappear. So from their capital investment piece, it's highly novel, again, very profitable, and that tends to be far less than actually the cost of purchasing.
Mathew: Okay. Interesting. Is there any advancements in growing tech you see coming down the line that gets you excited?
Dan: Oh yeah. Yeah, definitely. Well, honestly, extraction currently is probably the most exciting for us. Cultivation is still exciting in a lot of ways, just the most advancements appear to be happening in extraction technologies rapidly. So we're seeing new machines probably every three to six month appearing. This is also just not just extraction vessels, but it also goes all the way down to the actual, you know, post process equipment, which is when you're finally distilling the product into more of a fine liquid, that's where you actually will see...more often than not you're gonna have specialized components like the white film extractors is one of the kind of newer items. Short path distillation units used to be one of the newer items. And then at the beginning it was things called [inaudible [00:40:52], one of the first items.
But it's basically they're refining more, and more, and more to higher performance items that are basically distilling the product further into a finer isolate for [inaudible 00:41:07] or whatever, you know, your end product use might be. That's one of the biggest exciting pieces we've seen. Also, people are getting more and more comfortable with LEDs on cultivation. That part is exciting since it allows us to do things like multilayered canopies, which we're not legally able to do with standard high pressure sodium grows. And multi-layer is...you know, vertical farming is...
Mathew: What was the reason for that? Why couldn't you do multi-layer with a high pressure sodium?
Dan: Code violation. Yeah, we discovered that one in Washington where the electron inspectors are very, very qualified, fantastic individuals. I can't say enough good things about them. Those people know their codebook. It turns out that the light fixture right beneath your ebb and flow tray, logically, would be have to classified as a wet location fixture. It must be splash-rated. Now, if you know anything about high pressure sodium bulbs, if you get any water on them, they're not just resistant to it, they actually explode, because they're running at 498 degrees. So they're definitely not wet location-rated, so you have to transition your multi-layered canopy to some fixture whether it be like a T5 that's basically resistant to, well, splash, or you have to transition to one of these lovely LED products which, of course, are also resistant to splash.
And that's where you've seen this massive emergence in LEDs is mainly in the multi-layer category, which grants a lot of benefits. It also makes it easier to deal with the amount of heat the cannabis is putting off, which it is putting off quite a bit of heat.
Mathew: Okay. I wanted you to transition to some personal development questions to help listeners get a better sense of who you are personally. With that, is there a book that has had a big impact on your life or way of thinking that you'd like to share?
Dan: This is actually an interesting question. A book that had a large impact. Honestly, I unfortunately have to say that, and this is gonna sound horrible, but it's just true, some of the code books that we have are, kind of, like, well, version of the Bible which is, kind of, hilarious sounding, but...
Mathew: I might have to issue my first nerd alert here on CannaInsider. Nerd alert, nerd alert.
Dan: Yeah, it's true.
Mathew: I read code books for fun.
Dan: International building code, international fire code. I have to admit, I have had to bone up on international fire code, and it's been an invaluable volume. It sounds horrible but with extraction there's just so many landmines mainly in the fire mitigation, fire classification, category. Just, you have to know the book inside and outside and know all the exemptions to make sure you don't have to build complex, extremely costly systems. I hate to say it, but it's just, it sounds terrible, the code book is probably have the most impact. From a philosophical perspective, I think that maybe...I feel like you're kind of reaching for more on a personal side. I don't really have anything in that category that I can kind of readily pull out. I guess probably because I've been doing this for nearly 20 years, so I have had the...it's not like I woke up one day and went, "I'm gonna go work in cannabis." That just didn't happen.
So I don't have some inspirational, you know, book that changed my life forever. It was actually kind of the opposite. I just basically walked into a grow room because one of my friends got one of the first cards in California on Medical Prop 215 and wanted to set up his basement. I feel like I've more stumbled into the cannabis sector than, you know, had an awakening and a change I guess than other people might have, if that helps.
Mathew: Okay. And, is there a tool, web-based or otherwise, that you consider vital to your productivity or your company's productivity?
Dan: Yeah, you might have to issue a second nerd alert.
Mathew: Okay. I'm ready.
Dan: Yeah, actually, technically, Revit is our kind of become our backbone. So Revit is like Autocad, which is, you know, one of the modelling programs. A while back, Revit is basically a 3D modeling program, and it is...well, it's basically overtaken Autocad. And it's something that's absolutely critical to absolutely everything we do. We literally now do calculations inside of it. There's custom code we have written for it. We have a huge amount of custom calculators for calculating, you know, actual water usage, which is kinda the largest piece when cultivation operation gets wrong. And in the end, you end up with a bunch of outputs which are all 3D models of the actual highly complicated systems, which is critical because without those actual 3D models, you'd never know if you had conflicts.
It also allows us to have all of our stuff basically on the web. We have engineers currently all over the actual world technically, who work and crack into the system, and after they log in, they're actually able to check out one of these Revit keys and start working on a project, which...
Dan: They sometimes do in unique locations. So, actually, yeah, one of our team members just left for a month in Europe, and he's still working while he's gone. That's perfectly fine, and it's allowed us to be a lot more flexible at the company , have talents, higher level of talent than I think other firms that wanna lock you down to a desk would be able to acquire, which we need. We need people who enjoy being on the tip of the spear, which is normally a terrifying place for most engineers to be. Whereas, with our team, that's kind of where we thrive.
Mathew: How do you spell that software package name? I've not heard about it.
Dan: Oh, Revit, R-E-V-I-T.
Mathew: Okay, great. Well, Dan, let's wrap up here, and let everybody know how they can find you and connect with you, especially if they have a project and just follow your work with Hybrid Tech
Dan: Absolutely. We've got our website, the main, easy way in on there. We've got, you know, bots that actually help people. And it's hybridtech.us. You can actually go log on there. We've got a bunch of nifty pictures, a bunch of, you know, how we do things. We've got a huge amount of videos, and then from there you can get a look through those resources. And, normally, I think there's a couple of chat bots that chat you up right away should you want to actually schedule a half hour kind of consult, and from there we give out half our consults actually every week with one of our design professionals, which very often I take those consults myself and talk about the potential of the project, and see if, you know, we're a good fit for their team.
Mathew: Have you tried to game your chat bots at all and see if you can get them to answer strange questions or is that not a possibility? That's where my mind goes instantly.
Dan: We actually have. And the chat bots are actually monitored by live people. So, part of the thing is if chat bot runs into something that doesn't make any sense, it immediately actually pings an actual live person which we have that, of course, checks on that and goes up, so that's giving the real answer. But, yeah, we have kind of a funny amount of bots actually that currently we've deployed in different categories that I don't think most firms would actually use, but being that we are who we are, it's kind of one of those things that just evolved and we went, "Hey, we need a little bit more help here, so we can either, you know, hire people just to sit here and monitor this, or we can use some of the technology that's available," so we opted for the latter.
Mathew: Okay, cool. Well, Dan, thanks so much for coming on the show today and educating us about odor control, engineering of the grow room extraction. We covered a lot of ground here and good luck with everything you're doing.
Dan: Yeah, thank you, Matthew. Really appreciate it and thanks for your time.
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Many people are becoming familiar with hemp-derived CBD. Today’s guest is a Michigan entrepreneur that lost his wife and was left with three children. He started experiencing panic attacks. Frustrated with traditional pharmaceutical options his neighbor turned him onto CBD and it changed his life and eventually led him to launch MadeByHemp to offer CBD to the public.
Learn more at
CannaInsider listeners can get a 10% discount at MadeByHemp by using the coupon: insider
– Jeff’s background
– How Jeff lost his wife
– Turning to traditional Pharma
– Jeff’s neighbor offered him CBD
– Feeling human after abandoning traditional meds
– Starting the business in his basement
– Opening a retail storefront in Indiana
– Hemp incubator plans
After experiencing the death of a close loved one and growing dependence on traditional pharmaceuticals, Jeff Gallagher helped himself and his customers enjoy better health with hemp. I'm pleased to have Jeff Gallagher, founder of Made by Hemp, on the show today. Jeff, welcome to CannaInsider.
Jeff: Thanks, Matt. Thanks for having me.
Matthew: Give us a sense of geography. Where are you sitting today?
Jeff: I'm in West Michigan, about 20 minutes due west of Grand Rapids.
Matthew: Okay. And I'm in Edinburgh, Scotland. What is Made by Hemp at a high level?
Jeff: Made by Hemp is...it's a retail outreach. So when I started the company, originally it was Michigan Herbal Remedies LLC. That's our actual parent company name. If I had had known my hobby would've tooken [SP] off, I would've probably came up with a more creative name. So Made by Hemp it is. So, everything we do is made by hemp, and we educate about hemp. So that's what you'll find at our website. And then now, with Indiana's expressed interest in legalization and CBD and the fact that there's a lot of people that don't know what they don't know, we're gonna be doing a brick-and-mortar in Indiana, under the same name.
Matthew: Okay, okay. So you're in Michigan but you're so close to Indiana that you kinda cross over the state line and do things there as well.
Jeff: Yep, we're just getting ready to just start our first brick-and-mortar.
Matthew: Okay. And tell us a little bit about your journey, what you were doing before starting this company and how you came to start Made by Hemp.
Jeff: Sure. My whole life I've been into computers. So I guess my professional name would be network engineer, after doing it for my whole life. So I worked from home. I was widowed, as you said. My wife passed away about 12-and-a-half years ago. Left me with three children at the time, two teenagers and a two year old. Now, two well into adulthood, and one that is in driver's training, almost 15. So, during that journey and when you go through loss, you do what everybody else does, right? You go to the doctor and you do what you're told. Got into some pharmaceuticals and I felt like I wasn't human. So, during that journey I wanted to feel human again and I worked myself. I found a naturopath. There's not a one-size-fits-all approach, right? So I found a naturopath. At first, I thought it was a little odd, but what she had to tell me and what I learned made sense. Good in, good out, right?
So, after a long struggle with everything, I still was very anxious and I actually ran into CBD on accident. My neighbor where I had moved into said that he had something that would help, and he was taking stalks of marijuana plants, of the waste product, and grinding them up and making capsules out of them. And it took him a while to convince me to try these things because I was like, "Yeah, I'm gonna get high, you know." The anxiety and high don't work. Fast forward, I tried them, realized I wasn't anxious. And then...I didn't know what I was eating though. So I took them to a local...well, I guess it wasn't local. The only one in the state of Michigan at the time, a testing facility for cannabis, and I found out it had CBD in it. And at the time, I had no clue what CBD was, and this was in 2012.
So after a little bit of research, finding out what CBD was, I found a company in Colorado that had industrial hemp-based CBD products, which sounded a little more legit than the guy that was taking waste product and making them into capsules. And bought some and started selling it online because I wanted to help other people experience what I had experienced with hemp, or CBD in general, and that was...you know, the fact that I am no longer dependent on any pharmaceuticals. I sleep well and I have a very stable and positive life. I actually have been blessed. I have remarried. So even more teenagers in the house now. I don't know if that was a wise choice but they're amazing.
Matthew: Okay. So you had anxiety, and then once you started taking CBD, it just kinda went away? I'm trying to help people that have never tried it before. I know most listeners are familiar with it but there's still a lot of people that haven't tried it and maybe you could tell them about your experience of like what it did exactly.
Jeff: Well, sure. It's hard to explain what CBD does, right? It's like what does Vitamin C do? You know, Vitamin C doesn't really do anything that we can quantify, right? Or does it? You know, they say we need it, but do we? So, CBD is very similar. It's like a nutrient to me. I'm not a doctor, so I can't treat or diagnose anything, but how do you explain the lack of something, right? I used to have panic attacks. I never had one before my wife had passed away. She had had them all the time. And actually, I thought they were all psychological. Well, when you have your first one and you think you're dying of a heart attack and then subsequent panic attacks for years after that, you realize, well, A, you can't control them, and B, once you start down what I call the slippery slope of having a panic attack, you're going for the ride. So what I have realized was there was a lack of anxiousness, if that makes any sense. And how do you quantify a lack of something, right? That's the hardest thing to explain to somebody. It's the lack of, you know. So it's sort of like...it's light and dark. Dark is the lack of light. But it's easy because you can see it. But to me, it was hard for me to, you know, quantify until I realized, after taking these capsules for a while, that I just wasn't. You know, and I had realized I hadn't taken, you know, any pharma in a while and I'm like, "Wow, this is crazy." And then I wanted to help five people a month. I started a blog, which failed. I started a little website which didn't take off very well. And back in 2012, I was on Amazon, Etsy, eBay. I mean, I was everywhere. Or 2013, when I started selling online. And nobody knew what CBD was at that time, except for in the cannabis...you know, the people in California that had...that knew what it was.
Matthew: They already had access to it probably.
Jeff: Yeah, for years, right? And then Sanjay Gupta got on TV and talked about CBD. And then I would have to say that was one of the catalysts that launched the hemp CBD industry forward.
Matthew: Okay. And then for people that ask "Does it get you high?" I'm sure that's a question you get a lot. What do you say?
Jeff: No, it doesn't. So there's no real feeling with CBD, right? So if you've ever used cannabis and used THC specifically, there's a euphoria feeling, or everybody has a different set of feelings that they receive. With CBD, it's not that way. So, no, there's no high feeling, but what...and I'm very in tune to my body because I watch what I put in it, and large amounts of CBD will make me tired. So that can happen. And it's an oil, so, you know, if you eat too much oil, even if it was canola oil, you might get an upset tummy. So those are the two things that I personally have noticed as far as feeling. Does that make sense?
Matthew: Yeah, that makes sense. And then for people that are considering like, "Hey, should I vape this or should I take a tincture or a transdermal patch?" what do you tell them?
Jeff: Well, it depends on the person. First of all, hemp is very earthy. So if you like the closest to the plant you can get, right, closest to the source, it tastes...the best description, and in my opinion one of the best ingestion methods, is sublingually, you know, closest to the source. But some people can't take a flavor profile, right, of that, so a tincture helps mimic the flavor profile a little bit, and people have a more palatable way ingesting it. And then depending on the person, some people like subdermal patches. I have a lot of people that use those for a variety of reasons, mostly localized. They say, you know, that they work for whatever reason they're putting them on their body for. CBD is an anti-inflammatory, so, you know, if you remove inflammation, other things happen, right? So it just depends on what the person wants. We have topicals. I mean, it's really good for dry skin. You know, it's good moisturizers. So we have a variety of different methods of, you know, absorbing CBD. People don't believe that your skin absorbs just as much as eating something. It's just a different way of ingesting, right? And it doesn't ingest as fast, but, you know, it's an organ just like sort of your stomach. So...
Matthew: Okay. And when you say you take the inflammation away, you mean that inflammation is a symptom of something and you wanna try to treat what the root cause versus just the symptom?
Jeff: Well, I wouldn't say treat, but yeah. So, people have a variety of different issues, right? And cannabis isn't the panacea of everything, but it is, in combination with, you know, good eating habits, lots of water...it helps. Inflammation is rampant in America, in the world, and if you remove inflammation, whatever it's caused by, right, you're gonna find that it's easier to move. You're, you know, maybe not feeling as in pain. Again, I don't think it's treating something, I think it's just removing the cause, I guess. It isn't really treating it though. Does that make sense?
Matthew: Yeah. Let's pivot to last week and what happened with...I think it was one of the senators or congressmen from Iowa tried to slip into a bill to make CBD illegal. I'm sure you're familiar with that. What was that all about and what do you think was going on there?
Jeff: That was the Grassley Amendment, and it didn't make it into the final language. I think it's a lack of education. I don't think...I mean, we're five, six years into hemp production. The University of Kentucky, I mean, they'll tell you we're relearning, you know, something we forgot. So, people don't know what they don't know. Maybe outside pressures from different groups don't know what they don't know. You know, they think CBD and THC are the same. You wouldn't believe how many people think hemp is marijuana. So, maybe it's just a lack of true knowledge and information. I think that, in my experience, when you communicate with, you know, the legislature, they're just like me and you. They're clueless until they're informed. And when they hear crazy stories, and this is what gives it a bad rap, people call and it might have done X, Y, or Z for that person, right? Maybe, maybe not. Who knows? We can't say for sure. But when 100 phone calls come in to their senator saying it did X for them, you know, or their third eyeball went away or, you know, crazy stuff to them which sounds like, you know, miracles or whatever, they get scared and it's...I don't know. I mean, they're trying to make everybody happy, I guess you could say, and there's a lot of groups with more money than me and companies like me that can sway opinions.
Matthew: Yeah, I think it's more the latter, but I might just be a cynical person.
Jeff: You know, me too.
Matthew: Tell me, when customers come to your site or call in, what symptoms do they say they are looking for relief from primarily? We talked about inflammation. We talked about anxiety. Is there any others?
Jeff: There's a myriad of different symptoms that people call for. Unfortunately, and our go-to is we sell for the overall health and well-being, you know. And we can't guarantee or make any claims that it'll help them, because they hear 1,000 different things from 1,000 different sources. So, our number one is, do some homework, understand what you're taking and where it comes from. Those are the key things for us. And then we have a 100% money back guarantee, so for whatever reason if it didn't give you the benefit that you were looking for, you could have your money back because I want you to be a happy person. Most people, and then this is more anecdotal for me, when people call, I try to explain to them that our bodies have a whole system to process these substances called Cannabinoids and that we ingest a variety of them every day. CBD can be one added. But since our bodies have never processed these substances before, I find that most people, you know, will take, you know...they'll expect it to be like cannabis and make them feel something, right? So they'll eat it once or twice and they'll, "Oh, this didn't work for me." And they'll stop taking it. And I usually ask them, even after a refund, I go, "Hey, why don't you do me a favor? Take one to two serving sizes for two weeks and call me back." Almost every person that has actually called me back has called me back with positive...they were happy that they continued to take the product and that it was doing what they were looking for for them.
Matthew: And do you put dosaging recommendations on tinctures? Are they right on there, or how do you know what the dosage should be?
Jeff: Well, we put serving sizes. So, it's just like food, right? How do you...for what works for me might not work for you. So, our bodies all process things differently based on, you know, our environment and our physiology, and there's not really been any research done because, you know, the powers that be haven't allowed the floodgates of research to begin in the United States. So we recommend everything as a serving. We recommend everybody try the serving, and if they don't feel that they're getting what they want out of it, to double or triple it up. But, you know, more is not always greater. Just like anything we eat, our bodies only absorb a percentage of it, right? So, no matter what we do, if our body isn't absorbing it, it doesn't matter how much we ingest. And it's very expensive to ingest to waste it.
Matthew: Okay. So you mentioned that, you know, sometimes people will call and you say, "Hey, take it for a little bit longer." What's the most common feedback you get from customers in general after they've tried it, and just what do they say to you?
Jeff: Well, it's hard to quantify a lack of something, right, until you experience it. So when they call back, they're like, "Wow, I understand." And it's hard to quantify the fact that I can move my shoulder more than I could move it before without wincing, or I notice that I didn't toss and turn all night. But yet, can you quantify that to, you know, I got exercise and some water and I'm now taking CBD? Or is that, you know...I think it's all encompassing. I also think if we believe something is going to help us, we will see a positive result one way or another. I'm not saying that CBD is...doesn't help, because it does. And it's been proven that it does a lot of different things in other countries, but in the United States, they don't like us to talk about those things.
Matthew: You're considering creating a hemp incubator. You got a lot of moving pieces here. You got the website. You've got the store you're opening right now, and you're considering a hemp incubator. Can you tell us a little bit about what sparked that idea?
Jeff: Well, we have all these people growing hemp now, a lot for CBD, but there's so many other uses and a lot of material left over that isn't used for CBD production. And I'm assuming that there's some great minds out there that would love to play with this stuff and have access to some resources and some technology to use this hemp for something else. I mean, I even heard it makes a better battery. I have no idea. But I would love to allow some young minds to get together and try. What do we have to lose?
Matthew: Yeah. It seems like the senator from Kentucky, it was Mitch McConnell, he's finally, I think, seen the light, like what this could do for his state, because Kentucky is pretty forward in hemp production. Because I think it was the 2012 farm bill, I think that's why they're kinda jumping everybody. I think I got that correct. And so, there seems to be, like, the initial, like the phase transition has happened here. I don't know if we call it the floodgates have opened, but there's that critical mass within the legislative bodies that they say, "Oh, we see this now." What do you think about that?
Jeff: I agree. I was at University of Kentucky for the HIA conference last year. Very impressive, what they're doing. They'll even tell you they're learning every year something new. What you think would work sometimes doesn't work, and, you know, they're learning about a piece of agriculture that for over 100 years we've forgotten. But it's exciting because now these farmers, especially in Kentucky, have a new cash crop potential. As you know, tobacco...I don't know how many people you know that still smoke but I smoked for a long time and I haven't had a cigarette in a decade almost now. So, you know, the tobacco farmers don't have a cash crop. And from everything I pieced together, Kentucky was one of the first...I mean, they grew hemp there rampantly. And when hemp was made illegal back in the '30s, tobacco took over because that was definitely a crop that they could grow and make money on. So, I see it coming back.
Matthew: This has got to be the most successful propaganda campaign ever in history. What William Randolph Hearst did with marijuana and hemp, is like, I mean, so effective that we're talking about it nearly 100 years later and having to convince people one by one. I mean, for those people who don't know what I'm talking about, William Randolph Hearst was a newspaper baron and he had cotton farms. I believe this is the genesis of it. He had the cotton farms and he saw hemp as a competitor. So, first thing he did was conflated hemp and marijuana as the same plant and then he made all these outrageous claims of all these terrible things that mostly men did when they consumed that plant, and then got it made illegal so that he could squash his competitors. And it's really hard to compete with someone that owns all the newspapers in the country because they can get their message out over and over again every day.
But I just look and I think like, "Wow, if anybody ever has a doubt that propaganda can work, this has gotta be the poster of an example, because it's just amazing." Because you look before that, you know, this was like an apothecary, you know, type staple to have hemp and tinctures of this kind, and no one thought of it as anything crazy at all.
Jeff: From all the research I've seen, it was in a vast majority even of the pharmaceuticals but over the counter. You know, if you owned a certain amount of acreage, you grew it. You could pay taxes with it. I think you were misspoken about the cotton. I think he owned paper trees, like pulp trees.
Matthew: Paper trees, okay, okay.
Jeff: In my opinion, they were made worthless when they came up with the decorticator to make the manual processing of hemp much more cost efficient. It makes sense. He owned all the newspapers. So if you own the newspapers, then you own everything at that time.
Matthew: Right. The message, the message. So, yeah. Well, tell us some more here. You talked about the incubator a little bit. I mean, you and I talked offline a little bit, and what I found fascinating about your situation is that you've really scaled up from just kind of a one-man band, and that's a hard thing to do because it takes a lot of different skill sets to be an entrepreneur. How have you managed that? And have you looked to any outside tools or groups or resources to kind of make that transition instead of becoming the doer, kind of the executive in your business?
Jeff: Actually, I have. As I was growing my company in my basement, just me, to what is...I think we're at 27 team members, and I have five open positions just in Michigan right now. So as you grow and you scale and you're hanging out with your friends, well, your conversations that you wanna have with people change, right? How do you have a conversation about payroll when your buddies, you know, they have no clue what it's like to have made payroll? So I went on a mission to find, you know, other people that had my issues, like payroll, and I found one group. It's called the Entrepreneurs' Organization. And it's a fairly large group but there's certain requirements to join it, and I hadn't quite reached those requirements when I found it. But I strived for it, and once I did...there's a peer group part of it that's monthly which they call forum, which is really interesting. It's six to eight people, all business owners that talk about the good, the bad, and the ugly of everything, life, business, marriage, it doesn't matter. It's a place for us to talk about that stuff in a private setting. And it's been very beneficial. But the one thing that's allowed me to have 100% growth two years, and now this year we're about 50% growth - I don't think my team could handle another 100% year growth - is a tool called Entrepreneurs Operating System. And I'm gonna plug Gino here. He's the author, Gino Wickman. And if you search for it online, there's a bock called "What the Heck is EOS?" And his first book is called "Fraction." But that is the system that I've used. I found out that my title, I guess we could call it, is visionary, according to this system. I became the vision behind the brand. And most people don't...there's two types of high-level people. There's integrators and visionaries. Most companies don't need a visionary, but a company like mine and like Walt Disney did. Like, Walt Disney was a visionary, Roy was the guy that made it work.
So I found that part about myself, and I've just grown my team through that system. That's been one of the most amazing things that could've ever happened for my company.
Matthew: Is it kind of similar to, like, some people are starters and some people are finishers, and so an integrator would be more of a person that takes your idea and makes it a reality and does all the nuts and bolts of it?
Jeff: Make sure that all the pieces are put in place, yep.
Matthew: Okay. Is there any other roles besides visionary and integrator?
Jeff: I mean, those are the main ones as far as, like, usually founders in organizations that take a vision to grow. CBD was a concept five years ago, right? Now, we're at almost 30 people. It's taken me a lot of trial and error, a lot of, "Oops, that didn't works. Oh, people don't like that. Oh, people love that." So, the visionary and the integrator are like the Yin and the Yang. You know, I got 100 new ideas every day and it's that person, the integrator's time to go, "Hey, Jeff, these two are awesome. Let's kill it." And then we go from there.
Matthew: That frees up the visionary, too, because if the visionary gets down in the weeds too much, they can't be dreaming up more vision like Walt Disney did. And Roy Disney can kind of take the pain away from it and he can be free to just say, what if or what's possible.
Jeff: Correct. Yep. And part of the EOS, they call it delegate and elevate. So, you delegate what you can do and you're good at but you shouldn't be doing, and you try to find things and limit yourself to the things that you should be doing. I still work every day in the business, if needed. You know, I'm all hands on deck, right? But we're to that point where now I get to work on the business way more than I work in the business, which has allowed us to scale. Like I said, we're almost 30 people. We should be 50 by this time next year, maybe a little larger, depending on which areas we grow in. Kentucky, you had mentioned. I would love to have a full processing facility in Kentucky, work with some of the local farmers. As they're learning, we can all learn together. And I would like to be completely what they call farm-to-shelf, you could say.
Matthew: Okay, instead of farm-to-table, farm-to-shelf. I like it.
Jeff: You know, in the next 18 months.
Matthew: Did you find it difficult at all in terms of letting go? Because there's, you know, probably no one that cares about your business quite as much as you do. How did you, you know, release and allow some of this delegation to happen? And then, how do you have your team members help you in a way that was helpful to you?
Jeff: Well, we live by our core values, and I realize that everybody here wants the best for the company. So if I'm hiring right and firing right and recognizing right and rewarding right, then my team, I learn to trust them. Now, don't get me wrong. I make mistakes. We had bad hires. But I had to let go. I was juggling 87 things and dropping 45 of them, and doing 3 of them okay and the rest of them horrible. So I realized that if I didn't start doing what I do really, really well, amazing, and letting other people do things that can do them much better than me do them, I was probably gonna have a heart attack and my business probably wouldn't have survived.
Matthew: Okay. Let go or get dragged. That's what they say, right?
Jeff: Pretty much.
Matthew: Okay. Now, I like to ask some personal development questions to help listeners get a better sense of who you are. You already kind of answered the one about a book, the EOS, the Entrepreneur's Operating System. Is there any other book that you consider vital to how you think or has had an impact on your business?
Jeff: There is another one. There is an author named Mike Michalowicz, and he wrote a book called, "The Pumpkin Plan." That was the second book of his I read. [inaudible 00:31:06]. But he wrote a book called, "Profit First." And I'm in the helping people business. We volunteer. My whole team goes and volunteers at local charities. I mean, during work. So we're about giving and education. Well, I also realize that I'm the one that holds all the chips, and at the end of the day, if I don't get to enjoy some of the fruits of my labor, why am I doing what I'm doing? I didn't wanna build myself a job. So that's the other book that I found. And we're working toward that complete implementation of that. And believe it or not, we actually are growing. We're more profitable, and everybody seems to be very open to the idea. And that book was called "Profit First."
Matthew: Okay. And I've heard of that book but I'd never heard the details about it, and I will say, I've talked to a couple of people on your team and they've been very smart and outgoing, and one of them even coordinated this interview. So, thank you for that, Brady. And is there a tool that you consider helpful or vital to running your business? It could be something that's web-based. It can be anything.
Jeff: So, with my background in technology, it's just like a tricky one for me, because I've been around technology since I was five. So what, a specific tool? Not necessarily because no one tool will fit the whole gamut, right? In the Operating EOS, they have online tools you can use, but Google or Microsoft both...I live and die by my calendar. And the second most important thing that I found once I got to a size where I was dropping a lot of balls, is that I needed help, personally needed somebody that knew how to make sure that I was at the right place at the right time and I never missed a meeting or an interview or, you know, had to be back in the laboratory or whatever they needed from me. So I hired a personal assistant that's virtual, and it was the best thing that I ever did in my entire life.
Matthew: Oh, great. Now, Jeff, as we close, how can listeners learn more about Made by Hemp and find your products online and connect with you in all the different ways that are possible?
Jeff: Well, madebyhemp.com is the easiest way to find us. We have a support staff...I think it's 8:00 to 5:00, Monday through Friday, Eastern Standard Time. We always wanna answer the phone. Sometimes we lack on that when we get high call volumes. So we're very accessible. Please call us. Please ask questions. We wanna hear from you. Our blog is full of resources and information about who we are and how we wanna help people. And then very soon we'll be releasing some more information about our retail walk-in store which is gonna be more of an educational experience than a store. We're hoping to help a lot of people understand what hemp is and what hemp isn't.
Matthew: Okay. And one final question is that I'm always on the lookout for cool places, and you're headquartered in Grand Rapids, Michigan, and it's kind of becoming a little bit of a, like, a hipster hub there. You know, brewhouses and just cool scene, and not a lot of people know about it. Can you just give us a quick overview? Is it like a mini "Portlandia," or what's going on there?
Jeff: Well, I'm not familiar with "Portlandia," and I grew up...
Matthew: Oh, you gotta watch that. You gotta watch it. Drop everything. You gotta watch it.
Jeff: Will do. Fair enough. I will do that in the next couple of days. I'm from the Flint, Michigan area. So, after I moved to west Michigan for a fresh start, it's different. The people here are different. Everybody's happy. I mean, it's not a panacea, but we're working. There's help wanted signs everywhere. People walk around with smiles on their faces. There is the brew pubs. The food scene is amazing. The spirits, since all these brew masters perfected their art with beer, they're now doing craft distillery. So that's growing in Michigan as well. Music venues. It's a pretty nice place to live. I live west of there in Holland, and I'm 10 minutes from Lake Michigan. So, 90 days of the year at the Caribbean, the rest of the year I have up to 100 inches of snow.
Matthew: Okay. So it's kind of a mixed bag there, yeah. I grew up in the Midwest so I know what you're talking about. Well, Jeff, thanks for that color about Grand Rapids, and congratulations on your business. What a big accomplishment, and you're really helping a lot of people. We appreciate you coming on the show. Keep us updated, and good luck in the rest of 2018.
Jeff: Thank you, Matt. I appreciate your time today.
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Michael Kadonoff is the Founder and CEO of Braingrid. Braingrid allows any non-technical person to hang little devices around your grow room and immediately start collecting data about your grow. Including temperature, humidity, CO2 and more. Learn how growers are harnessing this data to build the grow rooms of the future today.
– Michael’s background as an inventor and at GE
– What growers think they know about their garden is actually not wrong but incomplete
– How Braingrid’s Sentroller collects data and presents that data as insights
– Will this system increase your yield or your efficiency
– Preventing mold and equipment failure
– Creating redundancy in your grow
– Traceability and health compliance
– Michael’s favorite book and tool
One of the most helpful and powerful new tools in the cannabis cultivators toolbox is data. Data that can help growers understand all the variables of their grow at a glance so they can react, pivot, and plan their way to an abundant harvest. Here to tell us about the latest in the connected grow room is Michael Kadanoff of Braingrid. Michael, welcome to "CannaInsider."
Michael: Thank you so much, Matt, for having me. It's a pleasure to be here.
Matthew: Michael, give us a sense of geography. Where are you in the world today?
Michael: Braingrid is based in Toronto, Ontario, Canada.
Matthew: Okay. And what is Braingrid at a high level so people can understand?
Michael: Braingrid is a technology company. It would be considered an IoT company, I guess. But it spans vertically, everything from hardware, our own design hardware, produced hardware, all the way through to visualizations, and reports, and dashboard, the whole the whole kit caboodle.
Matthew: Okay. And can you share a little bit about your background, and journey, and how you came to start Braingrid?
Michael: Well, my background is, well, I'm truly an inventor by night and an engineer by day. My last life, I was a designer, a hardware designer for General Electric. I was responsible for designing things that kept the lights on on the energy grid, a fascinating role. And now, I'm into the IoT game with Braingrid. I started Braingrid because I realized that technology is hard. Getting data is hard. Understanding how to use that data and interpreting that data is hard. And at GE, we make great products, a very difficult to the commission and install. And I set out to answer the question of how can you know your role better? Because if you know it, you can actually affect it, you can control your destiny inside of it. You can reduce your cost. And we'll get into all that, of course.
Matthew: Sure. Well, tell us a little bit about your flagship product, the Sentroller. I mean, since we're in a audio medium here, maybe you could tell us a little bit about how big it is, what it does, and why it's important to have in the grow room?
Michael: Okay, sure. Well, it starts with a Sentroller. Although, that's not the only part of our product line of course. The Sentroller itself is a little white box as I tell my daughter that tells you if the plants are happy or sad. It's about the size of an iPad mini.
Michael: It's a little thicker. It's rounded in shape. You can visit it on our website. It's a pretty different looking device because it's meant to actually exist in a grow environment or outdoors. So it's pretty tough. But it doesn't look like your traditional box.
Michael: I'm a little biased but I think it looks great.
Matthew: Yeah, it's pretty sleek, okay. And so it's important to have in the grow room because at a high level, it gives you data on your plants?
Michael: It's meant to blend into the background and not just in the grow room. It can exist in any part of the facility. And commonly, we go to the drawing room or the vault. It can be placed outdoors, if need be, to capture other conditions like weather.
Matthew: Okay. I think it would be helpful for us to talk a little bit about maybe what a legacy grow room would look like, one that doesn't have all the bells and whistles, and technology, and the Internet of Things, and everything you do with Braingrid, and then contrast it to kind of a fully connected grow environment that has Braingrid. And you can kind of walk through the differences and the kind of the benefits, if that sounds good.
Michael: Sure. Sure, sure. So growers or growing facilities today are met with a myriad of ideas and opportunities to control and monitor the room. But traditionally, they're dealing with control and automation company. So that's the systems that are very heavy, very hard to install, large panels on walls, a few sensor points that require, again, a lot of commissioning and an installation effort from very skilled people. Well, think of electricians and technicians and that, you know, data acquisition people, building automation people.
So the end result here is that we have very expensive and pretty rigid system meant for controlling a building more than it is for monitoring a grow environment. So what that results in is that we have very expensive systems that offer very little data and requires that the grower, a person who's not necessarily an IT guru or a technology guru, to understand and interact with the system. And often, the system doesn't rely information outside of the building. So when everybody goes home for the weekend, you don't even know what's going on. So you'll basically see at a high level, you'll see a master guru running a, you know, 25,000-square foot facility being thrust into a campus of hundreds of thousands if not millions of square feet with their old SOPs, like manual processes and fixed growing recipes.
They were basing their whole life around anecdotal results and inconsistent outcomes. And they're not even considering energy yet. So all they have in their toolbox is usually one sensor, two sensors per room and rooms of thousands of square feet. So it's okay for today. And what investment in this market now wants is more scale, but the growers want easy to use systems, and no one really cares about efficiency. So that, you know, I don't know if you want me to get to the next step but what we really do here is comment on the three main things responsible for growing, okay?
Matthew: Yeah. Let's talk about that. What are the three main things?
Michael: You could group them inside of quantity, quality, or time. And I'll explain what each one of those means.
Michael: Quantity is just sheer number of grams or ounces or pounds, it doesn't really matter. You know, if you have more pounds, you have more product, you have more money. So that's obvious. But it's more than that. There is quality. So a lower yield in terms of THC or even CBD, even though you have lots of grams may not actually work. So you now actually have to get the yield as well as the number of grams. And then finally, assuming you have quantity and quality, what about time? If it takes you, you know, four months to put out a yield, which is obviously silly. That's not good either. So as an extreme storyline, you know, you can have lots of quantity in a short time. But you actually have very poor yield.
So we try to impact any one of those three metrics in a variety of ways. What we really do is just make it easy to buy, easy to install, and easy to use to get data that affects any one of those three things. So it's now a reality to put in hundreds or even thousands of measured points in a grow environment, all the way through the facility to understand microclimates, to use us like an early warning system or scout to protect and act against bad things like mold or equipment failure before they happen. We can validate growing recipes, provide redundant real-time measurements of existing systems when they're in place because they usually are.
We can tie in the supply chain into the growing practice and really what that means is identify best and worst in class not just in the rooms, not just the facility but across a country or even a state or province. And then finally, I think it's a little not exciting is traceability and health compliance. We can bring a level of awareness to auditors and the governments, and the regulators that is so needed for this industry to take off properly to provide that legitimacy. So that was a long-winded answer.
Matthew: No, no, that's good. Tell us a little bit about what variables are measured in the grow room in terms of, you know, humidity, and temperature, and all those different things?
Michael: Well, so there are a variety of things to measure. And let's just establish one thing. Braingrid is not a sensor company. We're a data acquisition analytics knowledge company, really. Of course, we have to collect the data to deliver that but the straight answer is the typical default solution is temperature, relative humidity, and carbon dioxide in the air. And that's an in grow environment. It can get more advanced. You can have air flow, oxygen, even trace gases being monitored in the air quality, again, other zones of interest or things like energy quality like consumption or equipment use, nutrient quality, electrical conductivity or EC, volumetric water content, DH, total dissolved solids, nitrogen, phosphorus, potassium, level flow. The list goes on. And frankly, there are thousands and thousands of opportunities to measure anywhere. But the defaults, the go-to solutions because they work in so many possible ways is temp humidity and CO2 usually.
Matthew: Okay. So at the center of this Braingrid is the Sentroller or is that like the...it's the brain that takes all the data from the sensors that can be third-party, and it collects them and puts them into actionable data so you could have insights, and you could take action, and learn about what's going on your grow which is a...is that a good summation?
Michael: It is. And I'll add only just one more thing that makes it really different. And remember, the Sentroller is just the tip of the iceberg.
Michael: The special sauce of our hardware product, the Sentroller, is the fact that anybody can install it. It requires little to no maintenance, it's online in minutes, truly minutes. And it requires no IT support or Wi-Fi passwords or anything really. It usually just sticks to the wall magnetically and it's up. So it's like instant awareness, instant bionic eyes right there for the grower.
Matthew: Okay. So it skips Wi-Fi it goes over some sort of other wireless medium?
Michael: Yes, that's right. Locally, we use a very long range transceiver. It's based on a Lora, L-O-R-A. And that whole infrastructure relays to a cellular gateway, which looks exactly like a Sentroller, again, which we call the Synapse. That takes the data from the facility to our, you know, through very, very rigorous security practices to our stack, or network stack, and our data leak for further analysis, analytics, representation, alarming, you name it.
Matthew: Okay. So you have the Sentroller installed. It's wireless, it just sticks to the wall, and then the Synapse is the cellular gateway. And so let's just kind of walk through, let's say I'm a grower or a business owner, I've just implemented some Braingrid solutions. I was kind of just doing everything by kind of a stare and compare before, and just kind of anecdotal evidence. And now, install everything that's suggested, do it myself. Do you have an app or a web dashboard? What's next?
Michael: Of course, it's a web dashboard that accessible anywhere in the world, allows you to, at a very high level, see the facility for its status because no news is good news, and a lot of the times you don't need to stare at a graph. You just need to know if everything's okay based on the alarms the grower or cultivator sets out. So our dashboards are there for them to log into anywhere in the world, and it's mobile-friendly, and it just gives you straightforward answers about what's going on, red or green, good or bad.
What we find, that's really interesting, is because we can measure so many things with a granularity that is unprecedented, we find that the growers have this sense of disbelief, you know, especially after they spent about a million bucks on a grow system or from building automation system, they simply don't believe that microclimates can exist in a premier growing environment. So the absolute disbelief in their eyes is great to see, but it's telltale that there's so much room for the understanding of microclimates, and the nuances of a room, and degradation of equipment. So it's really not about the data, it's about how easy it is to get the data. That's clearly the statement of the day.
Matthew: And is there a common theme you see for someone that's looking at the dashboard for the first time, or they say, "Wow, you know, just for my first visit, this is the most helpful thing. You know, everything is helpful here, but right away, this is helpful."
Michael: Right away, the first thing they notice or tell us is, "Wow, this is so easy. I can understand it so much easier. It's all here," are the statements we hear time and time again.
Michael: Nobody really wants another engineering-focused engineered product for only engineers. This is a product for growers. It gives them eyes, new eyes. Doesn't tell them how to do their job, it doesn't even replace them. That's not the point. It's enabling. That's the message I want to leave you with.
Matthew: Okay, that makes sense. So if I'm staring over your shoulder as you walk me through the dashboard, what does it look like? What am I looking at?
Michael: When you first logged in, you're met with a heads-up display of the devices and their zones as a...just a heads-up. So this is what's going on. And you'll see alarms above the zones if there are any, which you can click on and dive deep on. They can pull up charts, graphs, reports. You can also go into a more advanced alarm view where you can start sliding things around to tune in your critical and your warning levels for any of the metrics we collect for humidity, temperature, CO2.
There are kind of heads-up warnings. So one of the things is kind of cool that the growers like is a distribution of humidity for instance. It's like a pie chart, and it tells you what was too high, what was okay, and what was not like, you know, warning, critical, and okay, and the ratios of that. That's kind of a really great way to tell if your HVAC systems is fighting or it's well-controlled. So it's really about turning the data into insights or into knowledge really quickly, taking a sip from Niagara Falls is the analogy I like to use. And the dashboard just facilitates that. It's about getting right now what's going on. And if there are any issues, the grower or the finance body can just dive in and understand what's going on. The last part of the dashboard I should just share is reporting.
Michael: If an auditor shows up, you need to be able to demonstrate, for instance, the last six months of the environment, like, can you split? You can't pull out filing cabinets and paper records, it has to be demonstrated immediately.
Michael: So with one-click, we can deliver that through the dashboard as well.
Matthew: Okay. And give us a sense of how many Sentrollers and what's needed for, all let's say an average grow?
Michael: Well, okay. Sentrollers are capable of measuring multiple points. So every grower environment, every facility is very different not just because of that...Every facility is dependent on the growing situation, their municipal water supply. I'll cut to the chase and just say, we usually see about 10 cents a square foot or about 2 cents a gram, and we're subscription model. So they don't really pay for the product, the Sentroller, they pay for the data, which is really great because, again, it's easy, you know? If ever there's an equipment problem where somebody smashes one of our devices or lands in a puddle or whatever. It's just another replacement, it's not a big deal.
Matthew: Okay. That brings my next question. This gives an idea of cost here. So, you know, growers and business owners can understand, you know, what it would take to invest in this and to get started.
Michael: Typically because the sensors are something we have to buy as well, there's a small upfront fee to match the sensing requirements that they have. And then after that, it's about $30 a point per month indefinitely. However, because there's a sense of disbelief about these prices, we're doing a trial program with Ample Organics, our partner right, now to do two basic air quality Sentrollers for two months and gets about a cycle to really help you understand what's going on your grow without any risk. And that delivers temperature, humidity, and CO2.
Matthew: So, you know, we talked a little bit about microclimates, and there's hot spots and stuff and grows, and if you look at like an infrared overlays, you can see like, "Wow, this this spot shouldn't be hot but it is." I mean, it looks like there's air flow, and, you know, the lights are placed evenly. But if this is bright red right here for some reason and then...well, why do you think that happens?
Michael: Oh man, do you have a minute?
Matthew: Yeah, yeah, let's hear it.
Michael: Oh, man. Microclimates are a real thing. Namely, I think the first reason that it happen is because the room is a dynamic thing now. It's literally a biological entity. Plants grow, they start out as little things in the veg stage just after they've been cloned or, you know, when they're babies, effectively. But then they get much larger. And then the airflow conditions change because their stores are different, the HVAC is loaded heavier because the transpiration rate is higher. The amount of CO2 changes because they need to consume more. The amount of water then changes, the nutrients change. Everything just a moving target. There are thousands upon thousands of variables. And I'm not excluding the people that enter the room and exit the room.
So microclimates and the results of microclimates are a function of how the ecosystem there changes dominantly with the plants as they grow. I've heard some crazy numbers where there are liters per plant per day being transpired into the air. An HVAC system has to be able to deal with that at times however many thousand plants there are.
Matthew: Yeah, you can feel for sure in there when you go into a grow room.
Michael: And we can see the...sorry, we could see the signatures of that when an HVAC system shows signs of stress where it can...it's got the set point and the building system is doing its job, but it's struggling to keep that humidity in check or that temperature in check because as there's thousand HBS lights in a room or something like that, and there's new plants or, you know, they spray the room down with a fungicide. It creates huge spikes to the plant, and that can actually can really affect yield. I've heard some interesting outcomes from keeping the room consistent. Our own master grower suggests that, you know, it's very important to keep room consistent.
So microclimates are kind of the evil enemy of these growers. And they can lead to crop ending outbreaks and mold. They can lead to burnt sections of the room. They can lead to disposal and cleanup efforts. It's not fun. And it's important to catch it before it happens. So really, we're dealing with is, and I'll get to what we're gonna deliver soon. I'll leave it there.
Matthew: Yeah. Mold, fungus, insects, these are all problems. And they do happen. I've seen them myself and it's a tragedy. So let's say we're like a few weeks in or a month into to some clones, and we can see our HVAC system, we're saying, "Hey, this is looking like it's already starting to struggle as these plants get even larger, we're gonna have a breaking point here where it's not gonna be able to suck the temperature humidity out at the rate we need." How would this system recognize that the HVAC system is struggling or perhaps a dehumidifier or something like that?
Michael: It's when the measured point, let's call it humidity, goes above the threshold, that the growers establishes for a period of time that is not acceptable. That's a fancy way of saying it alarms.
Michael: It just alarms. And it's, again, green and red, good and bad. More advanced things in our roadmap are to understand trends, deeper trends, deeper learning through watching thousands of cycles and hundreds of HVAC systems to see that, yeah, this thing will fail in two weeks, better call your HVAC company and here's the number. You know, that's the kind of knowledge and service we wanna deliver to our customers. We're not there exactly yet, but we've already uncovered some really alarming things that we've saved a few rooms on already, I'd say. I mean, avoiding our crop failures, $800,000 in a small room, that's just the product, you know?
Michael: The size of the product is definitely there.
Matthew: Yeah. Yeah, this is a good business to be in here because, you know, all you have to ask is like how much can you afford for your crop to fail? And everybody's gonna say, "Oh, I can't." So there needs to be some sort of measure. And now, what about in terms of alerts, like, if I see that humidity or temperature in the middle of the night has crossed a threshold, can you get alerted by about that or how does that work?
Michael: Yes. Of course, you can get alerted not just you, anybody you set to be alerted and based on the criticality of it. So there are warning levels and then there are critical levels. And clearly, it goes up the totem pole when it gets too critical. The alerts come in the form through our dashboard, of course, and through emails, text alerts are also a possibility if a customer requests it. So the whole message here is awareness, catching it before things go off the rails is really...an ounce of prevention is worth a pound of cure is the analogy.
Matthew: So we've heard about the Internet of Things, is this considered the Internet of Things. I know that's kind of a nebulous concept to some extents. I mean can we call it that?
Michael: Yeah, you can call with that. It's absolutely a wireless sensor note in the most basic version of life. However, I think Braingrid is really honored IoT, in the fundamentals of IOT, because it is low cost which means it's for anyone. And it's many of them. We can literally go to any plant, multiple points per plant or any part of the facility and measure things that matter to the bottom line of the business. It's extremely low-power, which means we can go to the table and we don't need a plug, right? That has to happen. Doesn't need batteries. Doesn't need anything. And frankly, it should be forgotten, it should just disappear into the background and just be that ever watching on to protect the investors, to protect the growers, to increase the peace of mind.
And that my favorite...And this is where the patent lies inside of the Sentroller, and not to say that that's the only area of our innovation, is that it harvests energy, it's always available. It never ever stops watching stuff. And that's critical for such a valuable product that is creating jobs and using a ton of energy. And is really bringing in a new market that hasn't been seen a new capitalist market that hasn't been seen for many, many years now, so it's necessary.
Matthew: Yeah. It reminds me of this quote I heard that said, "AI won't replace humans but humans using AI will replace humans that don't use it."
Matthew: So it's like once you get these tools that leverage technology, and a connectivity, and can do things that's just like it's a super tool in your tool belt. So what kind of bump in yield can growers expect and the business owners expect? Because people wear different hats, sometimes they're growers, sometimes they're the business owner and they look at this from different perspectives. And so if I'm a business owner, I'm saying, "Well, I do want to avoid the worst case scenario and I wanna get alerted if temperature, you know, humidity gets too high. That's a huge, you know, that would be kind of the stick." What's the carrot [SP] in terms of, you know, increased yield or healthier plants?
Michael: Okay. So what you gotta know about Braingrid is that we're not one of those companies that says, "Up to X percent is coming out of us," for sure, you know up to. That's not a statement that we wanna make or we will make in the immediate sense. Of course, we're working towards it with Ample, our partner again, our own master cultivator that we've retained, and the growers we service right now to actually deliver even 1% yield results in an ROI that basically pays for our product for a number of years in fact. The biggest bump comes from not really yield but efficiency.
So what we can say right now is $10,000 in energy savings is the same thing as one kilogram of high-quality yield. Predictability and finance in a, you know, financial context of plus or minus 15% on your badges to plus or minus 1%, like, that's where we wanna go. We wanna be able to predict. Again, crop failure, if you, you know, yield a 0, well, that's minus 100%. You know, that's something we have to be very, very vigilant to and watch out for. So, you know, catching and heating it...like, here's a good example, catching, heating, and cooling at the same time, it's like thousands of dollars per day, thousands. That happens. Sometimes things go haywire, we can catch them. And let's not forget that if you pump too much CO2 in a room, you can kill people, you can literally kill people. It could be a liability issue. And that will shut down a business. Who cares about yield when your business cannot run?
Michael: So these are really important things. And there's a huge list reducing touch time, manual watering is a good example, contamination risks from people entering and exiting. You just wanna eliminate all that. And my favorite is legitimizing and demonstrating best practices through traceability to the governments, to the regulatory bodies, to the people, the population that have still think this industry is taboo. I'm an engineer. I'm a data junkie. I feel it's a shame to demonize this industry with empirical results, you know, I really think bringing some science, some rigor, some stats will really reinforce the value of bringing medicine, good medicine, and good products to this population. I think it's fantastic stuff that what cannabis is doing.
Matthew: So when you look out in the horizon, what kind of trends do you see driving the grow room of the future three to five years out? What does it look like? How is it different? How has it evolved? We won't hold you to it, but where do you think it's going?
Michael: You can hold me do it. I haven't folded.
Matthew: I'm looking at calendar not right now, hold Michael. I'll tweet this out in three to five years. Was Michael right?
Michael: Do you know my wife? Yeah, she holds me to account on everything. So I think the easiest way to answer this question is look at the other industries where there's agriculture, where there isn't high value in the crop or at least not as high. You know, look at tomatoes, that's not even high value crop, it's like $70 and 50 cents a year or you know cannabis is $750 or I think that's that might even be old now. So what I think will happen is you'll see a few dominant LPs, federal conglomerate of probably acquired facilities and campuses that look kind of like these coops, these farms, these large-scale production facilities with very few people in them, lots of square feet, but very few people, all automated, all robotic. And the people really only exist to maintain the equipment not really there to cultivate the plants.
And you'll see all this data that we provide and other companies provide, for sure, being piped into their head office which isn't the facility, somewhere out there through, you know, supply chain metrics and ERP, and business intelligence, you know, as a commentary. And it'll just be bubbled up into one succinct clean message that is this business is good or this business needs something. That's the future to me. It's making machines do what people don't want to is another way of saying it. Our devices are there because it's a mundane task to collect data. It's a mundane task to analyze, it's a mundane...or owners task to report on it. So let computers do what they do best and enable the humans to understand, to gain knowledge to ensure their future through this intelligence. I hope that answered it. I think that's how it's gonna look.
Matthew: Well, tell us a little bit about where you are the capital raising process of the Braingrid.
Michael: So we completed an arm's length transaction in 2016 and for about a half-a-million dollars. But more recently, about $2.6 million was raised, again, with an arm's length transaction in February of 2018. It's been really great. And I don't know if you've heard, we made a public announcement where we're going to be doing a reverse takeover in September of this year. And we're presently in a raise for about $2 million to $3 million. And it's apparently going really well, subscription-wise. So we're very happy with this. The message behind all this money is to really enable us to pick our strategic partners very carefully, be able to merge or acquire, wherever necessary, and to exercise our ability to market our business within the states throughout the rest of this year and into next year because that's where there's so much demand for a product like ours to regulate, let's call it like it is, quite a fragmented market in the States.
Matthew: Yes. Yes, it is. That's a nice way of saying it. Now, if there's investors that are accredited that want to, you know, participate or invest with you, are you looking for accredited investors, or is that ship sailed, or what can you say?
Michael: Yeah, it's never too late. I think the subscription is pretty good right now, but accredited investors can speak with EMD in Montreal. It's run by fellows named Perry and John. And I can connect anybody who's interested. And EMD is not...They are exempt market dealers, but it's just a coincidence that their name is also EMD. Yeah.
Matthew: Okay. Well, Michael, I like to ask a few personal development questions to help listeners get a better sense of who you are. With that, is there a book that has had a big impact on your life or your way of thinking that you'd like to share?
Michael: Yeah, yeah. It's actually a short story by Isaac Asimov.
Michael: He's one of my favorite writers because he's such a dreamer. The name of the story is "The Last Question." It actually discusses how perhaps Google will look in a number of years. And the reason I love that story is so much is because at some point, if you zoom out far enough and you ask the right questions you understand enough, everything just gets really simple and the knowledge becomes your existence. It's a little mind-bending, but if you read the story, it's only maybe 15 or 20 pages. But it's so powerful as a storyline about what it is to discuss our existence in this universe. How and what entropy means to us? Whether the stars will run out, whether we'll run out of energy, because my personal passion is energy. I think that's one of the issues we face as a society now is how we fight, and pillage, and grab at all the resources we can when really we have more than enough abundance here for everybody. So the Asimov story really discusses how it's all very renewable and flat, and we can all play nicely in the sandbox. That makes any sense.
Matthew: Okay, "The Last Question" by Isaac Asimov, is that what it is?
Michael: Yeah, that's right.
Matthew: That's cool. Is there a tool web-based or, otherwise, you consider vital to the productivity of your company or yourself individually apart from the Sentroller?
Michael: Well, I assume you're talking about a technology tool.
Matthew: Sure, well, any kind of tool. I mean, it could be the wheel. Unicycle.
Michael: One of the tools that I really like using is something that helps me quiet my mind in such a noisy world. And I don't mean auditory, I mean there's just so much information coming at me. It's kind of the name of our business, right? So a meditation tool. It's a headband called a muse headset.
Matthew: I've seen pictures of this, but I never know anybody to use it. Tell us what it's about.
Michael: Well of course, being the data junkie I am, it measures a variety of signals coming from your head, frankly, alpha, gamma, beta, all these waves. Even knows if you're blinking or not, it's pretty crazy. And really, it's just a tool to help you practice mindful meditation, get really...not calm because there's nothing to achieve or attain when you're meditating, but just help you and coach you along. It gives you auditory feedback about what's happening right now in your head even though you may not be aware of it. So when your mind drifts off or you're kind of nervous or anxious, or thinking about anything, it helps remind you gently with auditory feedback in the form of a storm. You can actually hear storm or some sort of noise. And it helps you recenter, is a loose way of putting it. And it's cool because it's got a ton of data coming out of it. And it's also cool because it helps keep people sane and level. And that's great.
Matthew: And so since there's feedback loops in there, have you noticed yourself getting better? And how long did that take, if so?
Michael: It was immediate, but just like lifting weights, it takes time to get that mind muscle to keep the duration of your focus longer. It's not about whether you can or can't, it's how many recoveries, they call it. How can you recover to a quiet state? And how long can you keep it for? That's the game, if you will.
Matthew: I would think this would be a super popular stocking stuffer come the holidays. That's like, here, yeah, everybody will give this to their spouse, like, you could even be kinder gentler person if you just use this muse.
Michael: Yeah, yeah, yeah. I think it's a ways off yet because it seems almost too impossible that it's measuring your brainwaves, you know? But it really works.
Matthew: Well, Michael, as we close, can you tell listeners how to find your website and connect with you online? And if looking for accredited investors how they can connect with you as well?
Michael: For sure. Let's start with the website, braingrid.io. So that's brain, like the one on your head, grid, grid.oi. And anybody who's interested in speaking with me about investment opportunities, or integration opportunities, or partnerships, whatever. My name is firstname.lastname@example.org.
Matthew: Well, Michael, thanks so much for coming on the show today and telling us about the connected grow room and painting a picture of what it looks like in the future. We really appreciate it. And good luck with everything you're doing with Braingrid.
Michael: Appreciate it, Matt. Really enjoyed being with you.