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Interview with Cy Scott co-founder of Leafly. Leafly is an application that allows you to learn and explore the universe of available cannabis strains to optimize your medicinal or recreational experience. Once you have dialed in on the strain of cannabis you want, Leafly helps you find the best local dispensary to fit your needs based on reviews from residents of your community. The Leafly App is very easy and fun to use to explore strains near you. Learn more at Leafly.com
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Leafly is an application that allows you to learn and explore the universe of available cannabis strains to optimize your medicinal recreational experience. Once you have dialed in on the strain of cannabis you want, Leafly helps you find the best local dispensary to fit your needs based on reviews from residents of your community. I'm pleased to have Cy Scott, co-founder of Leafly on CannaInsider today. Welcome, Cy.
Cy: Hi, Matt. Thanks for having me.
Matthew: So listeners can get a sense of your geography, can you tell us a little bit about where you're located?
Cy: Sure thing. Leafly is located in Seattle, Washington. We're actually pretty recent transplants here by way of California about a year ago now.
Matthew: How do you like Seattle compared to California apart from no state income tax.
Cy: Yeah. That's really nice. Miss the sun a little bit here and there, especially in the winter, but the rain is not as bad as they claim.
Matthew: Especially in the summertime it's not that bad.
Cy: It's beautiful.
Matthew: Can you tell us a little bit about yourself and why you co-founded Leafly?
Cy: Sure. So I'm basically a serial entrepreneur. I've got a real tech background doing app and web development. I co-founded Leafly with Scott Vicerks and Brian Wonslegdge. So the three of us put it together. We were actually working together at the time at Kelly Blue Book, and it so it was kind of a nights and weekends bootstrap project.
Scott was the one with the original idea. He thought it would be great to have some sort of location where people could track the different strains and their effects and what they like and didn't like. The market - this is about four and a half years ago now. So in California the market was growing. A lot of dispensaries were popping up in strictly medical. It made a lot of sense that there was a real need for a service like Leafly. And at the time, everybody really targeted pretty much the common stereotype for cannabis consumers, so we really wanted to go with something a little more mainstream, better design, something that medical patients could look to for information and feel safe and welcome there.
Matthew: Now you mentioned strains. Can you just give us an idea of how diverse the spectrum is of available strains for cannabis?
Cy: Yeah. There's quite a number of strains. Right now we track well over 1,000 strains. Of those strains, we have over 100,000 different individual reviews. So Leafly is all user contributed content, so people use it to journal what they like and don't like and tag strains on the different effects or what conditions or symptoms they might be using it for. Then we take that data, we aggregate it, give people kind of a general idea. The number is pretty large though with 1,000 strains. And that's across three primary categories: the Sativa, Indica, and hybrid.
Matthew: And what's your favorite strain?
Cy: Yeah. That's a tough one. There's just too many to choose from. I enjoy cannabis in the evenings to help with sleep, so I like the Indicas a lot. Some good Indicas, L.A. Confidential and Northern Lights, are my go to. For the daytime, when I get a chance, a good Sativa like Sour Diesel, I enjoy as well.
Matthew: What are some emerging strains that are popular on Leafly?
Cy: Yeah. We're noticing a lot with the recreational up here in Washington, a lot of the producer/processors coming up with some strains that are interesting crosses and gaining a lot of popularity, and that's due a lot to the retail stores opening up. And we're getting more and more here in Washington. So we see a lot of that like strains like Copper Cush that kind of came out of nowhere. Historically, a real good one was Girl Scout Cookies, whcih everyone is probably very aware of now, but we really saw that on Leafy kind of go from nothing to in our top ten most popular strains in the matter of six months.
Matthew: In fact that is the strain that I - I went into Leafly. I put in what I wanted. I didn't want to be paranoid and then all the other things I did want, and that's what came up for me. Thin Mint Girl Scout Cookies, I think it's called.
Cy: Yeah. There's a couple of variations, but it's absolutely a popular strain.
Matthew: Can you explain a little bit of what body high and mind high mean for people that aren't familiar?
Matthew: How those interact - those two ideas.
Cy: Right. So at Leafly when you review a strain, you can tag it with different effects. We have the kind of head high effects like euphoric and uplifted. So that's more of a mental effect. And then the body would be things like relaxed, tingly, just what you would actually feel in your body. And then kind of both mixed together, that's what you're really getting. So you'll see a lot of strains tagged with things like euphoria and relaxed. So that's kind of the head high/body high, and they definitely play off of each other.
Matthew: So let's get into a practical example here. Let's say I just got off of work on a Friday afternoon, and I pull out Leafly and kind of want to dial in how I feel and get a strain for that. How would I do that?
Cy: Yeah. A particular strain - we have an explorer. A strain infused product explorer where you can go in and actually filter the exact type of effect that you're looking for. So in your scenario, if you're looking for something that would leave you feeling upbeat, you just would dial that in. Include effects, uplifted, and then you can actually exclude things like making you hungry. So you can look for strains that include certain attributes and exclude others to really dial in that perfect strain. And then once you find it, Girl Scout Cookies you mentioned earlier, we also have an availability section so you can find out right where to get that. So it uses your geo-location, knows right the best area, or you can enter a city so if you're in Seattle, you can type in Seattle and find the top locations that would carry that particular strain.
We also have a dispensary finder, so if you're just looking to find locations right around your area, you can go directly there, and then start browing the different dispensary menus. And on the menus, when they're linked to strains in our inventory, you can actually get a good idea of the strains different effects and really find the one that's perfect for you.
Matthew: So how many people are currently using the app? I'm sure it fluctuates, but could you give us a rough idea?
Cy: We do about four million sessions a day - a month. We do about four million sessions a month. Four million a day would be nice, but it's still a pretty sizeable number. And that's between the web and the app. So it's pretty good. We've really seen the site and the app grow in adoption as different states come online. So new states adopting medical laws or your recreational states like Oregon, Alaska, and even D.C. We're seeing a lot of interest in Leafly when those laws passed. So as the United States continues to adopt cannabis - and the world, for that matter, we see increased interest. So that's really great for us.
Also, some of the trends, one of the most interesting things starting four years ago and where we are now, a lot of the branding is starting to happen. You're actually able to see different products and consistent brands across the industry where previously it was just dried flour in a jar at a dispensary. So that's a pretty interesting trend, and with that comes a lot of the rise of the concentrates in popularity there, whether it's the waxes or the little clearomizer cartridges for vape pens. We're seeing a lot of growth in that sector as well.
Matthew: Yes, the liquid in the vap pens. That's very interesting. Is that what kind of jumped out at you and surprized you the most about about the data, because I imagine you have just a ton of data if you have four sessions a month. Is there any data that is jumping out at you and saying wow, we did not expect to see this like - one thing that I thought of when I was using the mobile app for Leafly was why would anybody want dry mouuth? But then there are some reasons why someone would want dry mouth; isn't there?
Cy: Sure. I mean, we actually add that as negative so you could tag negatives from strain. Things like dry mouth or dry eyes, and you can actually exclude that, but you never know. There could be a reason why someone would want to include that. So we have that option as well.
Matthew: Well, I did find out why some people want the cotton mouth effect, and I had heard that ALS patients have a drooling problem, and the dry mouth can help them quite a bit. So I thought that was interesting.
Cy: That makes a lot of sense, definitely.
Matthew: Did you scratch your own itch with creating Leafly or saying okay, I want to see what the community is saying, and I'm going to let them steer maybe to my next decision on a strain for myself?
Cy: Definitely. When we first started, I really didn't have a good sense of the scope of the variety of strains and the different effects, and lot of that has to do with your access to cannabis. But after we started Leafly and getting more involved in it, learning more about the different strains, I definitely started scratching my own itch. If you go into any dispensary, and they could have any where between 20 and 30 different strains at a given time. And it's really tough to choose, and you rely on the bud tender at the counter. But if you're looking for a particular condition or what have you, it's great to have Leafly as a resource. Just having the app in your phone and you can check it real quick and compare to the menu that the dispensary lists and look at all of these rating. It's really been helpful for myself, and that helps drive new feathers that we put together because we all use the app as well.
Matthew: So you have all this data from your users. If you could only make one strain, I mean, I know people are picking out all these diverse strains, but you see that most people want something similar, the 80/20 rule. If you were aggrageate all that Leafly data - if you had to make one strain, what would be the characteristics of that strain?
Cy: Yeah. That's a great question. We see people searching for top conditions anxiety and migraines or ADD. Some of the top sypmtoms are depression, fatigue, and insomnia. So if somehow you could kind of bring those together in the perfect genetic cross. Also, you'd want to include some effects. You see a lot of people searching for creative, euphoric, or uplifted in the filters. So somehow if you could find the perfect combination, that would be the strain that I would try and put together definitely.
Matthew: How do Leafly users interact with each other? Is there social element?
Cy: We have a really light social layer within Leafly. Currently, you can tag different reviews. You mark them as helpful, not helpful, so both our strain reviews as well as our location reviews, that's about the best way right now. You can also dig into a user's profile for the non-anonymous users and see their review history. But it's actually something that we're working on right now and will have with our next release is more of a platform for peoople to connect and follow different individuals. We see a lot great reviews coming out of some of our visitors and, of course, and we want the ability to be able to follow those individuals and stay up todate with what they are viewing. So we're building that feature as we speak.
Matthew: So you mentioned you can be anonymous if you want to share information, but you just don't want people to know who you are?
Cy: Yeah, that's right. So there's a few ways right now within Leafly. You can actually journal your own usage and keep it completely private so no one would ever see. There's no anonymous listings. It's just a personalized journal. You can also share your review publicly, but you can choose whether or not to share your user name right now. So you can publish those anonymous or with a user name.
Matthew: Now switching gears a little bit and looking a Leafly from a merchant or dispensary's point of view, why do they want to be involved with Leafly?
Cy: Yeah. So dispensaries or recreational shops are primary customer and it's a great platform for them to be part of because it really does drive a lot of new patients to their location. Leafly's pretty special in the sense if you're in a new market - say you're in New York or a state where medical is just coming online or the dispensary system is just getting established, Leafly has been there for quiet a while. We have coverage and visitors coming from all over the world, and a lot of that has to do with strains being pretty widely available. So people are just looking for the information no matter where they are. So as soon as there's room for dispensaries or recreational shops, it's great for the dispensaries to sign up with us because we already have that user base using it search strains, and then you're location gets right in front of a potential new customer or patient.
Matthew: Can you give us an example of a merchant that is really leveraging Leafly properly to get new business?
Cy: Definitely. So with I502, which is the Washington recreational law up here, the recreational shops are continuing to open up. We still have a small amount, but we're seeing a lot of those new guys coming on, and they are really doing it right. The best way to get exposure on Leafly is to keep an updated menu. Our visits love to see the latest menu. If the menu gets too outdated, they might look at someone that has something more updated. Also having a menu and updated menu, it really helps with visibility because you're linked to those strains and edible products reviews. So if I'm buying Girl Scout Cookies, I can find the exact spot and you would show up if you're menu is linked. Also, we have ways for dispensaries to connect with their patients and recreational shops with their customers through a following system. So you can actually follow a dispensary and just stay tuned to their updates and dispensary and shop updates are basically like Twitter updates where they can post 140 characters at a time. And that's a grerat way to connect with your patients and stay up to date. Also, responding to reviews is really important. So provide that ability as well so whether it's a positive review or less than positive review, it's really good for the shops to get in front of that and start a conversation with their customers. So we're finding some of the new recreational shops here are really doing it right and getting a lot of traffic coming from Leafly.
Matthew: Now if there's a dispensary owner that says, you know, I just don't have a budget for this. I'm just getting startted. I've got a million other things to do, can you give them a sense of how easy or difficult it and how much money it takes to get started with Leafly?
Cy: Sure. It's quite easy. We have a services section in the footer so if you do have a story you could go there and sign up, and we'll - someone on our team will get in touch with and get your account created. We do have different service levels. The pricing ranging from a few hundred dollars to a few thousand dollars depending on how many ad placements you'd like or what kind of exposure you're looking at. So it's pretty flexible, so from the small shop that doesn't really have much of a budget, they can get some advantage out of Leafly to the bigger places that want to spend more, get more exposur. We have solutions for everybody.
Matthew: Other than legalization, are there any big trends you see growing in the cannabis technology sector that you're excited about?
Cy: Sure. Probably one of the best trends lately has been the increased professionalism and mainstream accessibility we're seeing in cannabis products. So the branding that doesn't just cater to the common stereotype of cannabis. We're seeing a lot of that happening now in Washington. Across the the U.S., we're seeing some really good branding happening, and that's exciting to see. It's a little more welcoming to a larger audience than what I think a lot of people associate cannabis with. And it's good for the whole movement as well. It kind of puts a nice face on cannabis when the branding looks nice and the packaging looks great, looks professional, and that's something we wanted to do with Leafly and we feel like we've really helped push this conversation forward by giving people something that looks nice, and is well designed, and feels comfortable when you use it. So we're seeing a lot of of that happening more and more through out the U.S., and I think that's just the nature of the industry kind of maturing. So that's a pretty exciting trend definitely.
Matthew: Now, Cy, how can people try Leafly for the first time? What's the easiest way?
Cy: Sure. We have a lot of ways to access Leafly. So you can find us on the web at Leafly.com. We also have an app for both ios and android, so just search Leafly in the app store or Google Play, and you can find us there.
Matthew: Great. Thanks so much, Cy. We really appreciate your time for the interview today.
Cy: Absolutely, Matt.
Cannabase offers an online wholesale marijuana marketplace that connects commercial growers with retailers and dispensaries. Cannabase promises to do the heavy lifting for retailers and growers to help them facilitate their ability to both buy and sell cannabis with the right partners. Listen to this interview with Jennifer Beck, co-founder and CEO of Cannabase in Denver Colorado.
Prior to October 1 2014 dispensaries were required to grow 70% of their own cannabis. This requirement was called, vertical integration. With the end of vertical integration both dispensaries and cultivators are freed from the burden of selling only what they grow. This presents tremendous opportunities for both growers and retailers. Cannabase.io aims to help these two parties connect.
Matthew: Cannabase offers an online wholesale marijuana marketplace that connects commercial growers with retailers and dispensaries. Cannabase promises to do the heavy lifting for retailers and growers to help them facilitate their ability to both buy and sell cannabis with the right partners. I'm happy to have Jennifer Beck, co-founder and CEO of Cannabase with us today. Hi, Jennifer.
Jennifer: Hi, Matt. Thank you for having me.
Matthew: Sure. Just so people understand where you are in the world, can you let them know where you are geographically?
Jennifer: Yes, we are in Denver, Colorado.
Matthew: Great. And can you give us some background on what Cannabase is and how it helps people?
Jennifer: Absolutely. Cannabase is a comprehensive network that connects the legal cannabis community. So there are three main components: Cannabase Marketplace, which has cannabis wholesale network; Cannabase Connects, a private network for consumers 21 plus; and Cannabase Maps, which is our dispensary finder.
But based on what we've talked about in the past, I think we'll probably be focusing on Cannabase Marketplace and the wholesale market that's inside of it.
Matthew: Okay. So how did you get into this business? I mean, were you involved in the business at some capacity and just saw the need, or were you talking with people? How did this come about? How did Cannabase come about?
Jennifer: Yeah. My background is in technology. So my emphasis has always been on online marketing and understanding consumer behavior. My actual background before that was in psychology. And so, I've always been fascinated with how technology can really encourage certain behaviors. And in an industry like cannabis, you have really complex systems that are changing frequently and are really hard to navigate. And so, when we decided to build Cannabase, I think one of the things that we were the most excited about was how we could bring some really powerful technology to the space to solve problems that still hadn't been solved yet.
And then on a more personal level, I've been fascinated with how we can help encourage the success of cannabis by helping business owners be compliant, be more efficient, and grow their businesses in a way that makes the rest of us - the consumers, and the political bodies watching over us happy as well.
Matthew: Now for listeners to really understand how Cannabase helps growers and dispensaries, can you tell us what vertical integration is and how since that has gone away that's a boon for Cannabase?
Jennifer: Absolutely. One of the reasons that when we entered this space wholesale wasn't a hugely defined component of the industry yet was because Colorado was vertically integrated. Vertical integration mandated that to have a cultivator license you had to also have a retail license and vice versa. So you had to grow 70 percent of what you were going to sell, leaving a 30 percent margin for wholesale.
This effectively kept the market really small while we were still testing out the first licenses and how legal cannabis was going to work. It was a very, very successful model for Colorado. But that law expired in October making it legal for first time for someone to get a specialty license as just a cultivator or a license as just a retailer. In addition, that 70/30 law has expired for recreational shops. So now they can choose how much of their own product they want to grow themselves and how much they want to buy on a wholesale market.
Matthew: So why would a dispensary want to buy wholesale versus growing themselves? I'm just playing devil's advocate here.
Jennifer: Absolutely. There's a number of reasons. When wholesale is limited to only 30 percent, dispensaries were required to be growing their own products. So it was a key component of their business plan and their brand. But even with that imposed, you still had situations like 420 is coming and you want to stock up on extra product, so you would buy it wholesale. Or something happened. You had mold problem, you could restock with somebody else's product or even variety. A lot of people have specialty strains and they might be excited to see how their consumers react to a new type of strain, if they're able to buy from another grower and decide then whether or not they want to start growing that themselves.
With the end of vertical integration, I think there are a lot of retailers who will abandon their grow altogether. A grow is specialty. It's a lot of work. It's very expensive, and you have to really have to have a passion for growing and maintaining that. Some businesses would prefer to focus on the consumer side, the retail shop, and growing a retail brand. For those businesses, it's going to be more cost effective and probably better for their quality of life and the growth of their business to abandon their own grow, and instead work on finding growers that they really know, like, and trust. And can focus their business on building their own brand.
Matthew: Now would you say that there's an element of match.com, eharmony, or yelp in Cannabase where these are two different parties coming together in evaluating each other online?
Jennifer: Absolutely. We borrow from all the major social networks. The reason for this is that there isn't one single place that can really join together cannabis users or cannabis businesses in an effective and tailored manner. So we've really taken the best of each of those existing social networks to try and make a really comprehensive community. For Cannabase Marketplace, which is our licensed business network, and that's where our wholesale market is, you have a LinkedIn like feel where to get on and to have a profile you have to have a valid license number as either a grower, a retailer, or marijuana and mj's product processor. Once you onboard with that license number, you're landed into this private network with in-app secure messaging and tons of brands represented.
We have over 40 percent of Colorado's licenses are in Cannabase Marketplace participating in the wholesale market with businesses profiles and employee accounts, and everything is handled on a connection basis, which uses our in-house secure messaging. So businesses can safety connect over listings and requests on the wholesale market. They can also connect with one another's private business profiles and their employees just to have a normal interaction like they would on Facebook or LinkedIn, but without having to have a profile that's going to be filled with spam because of solicitors or their mom asking if they want to come over for dinner. It's just strictly private business connection platform.
Matthew: Let's say a retailer might want to say this grower was great, five stars. They did everything that I requested. It was a great relationship, and then others have visibility to that?
Jennifer: Absolutely. We're really working towards how we can create a sophisticated vendor trust. The most important thing with whenever we open it up to ratings or reviews is that there's room for people to fudge it, for the data to not be 100 percent transparent. So we layer in features like that very, very slowly.
But when businesses are represented in our private wholesale network, they're brands are very apparent. The owner, the name, and so if somebody is going to post about someone else, it's clear who's doing the talking. Right now the best way that a retailer can evaluate a grower on the market place would be through their listings themselves because the listings are integrated with lab data. So if a grower chooses to they can push lab data straight from the lab itself.
We also have a really robust image galleries and listings show supply and demand. So they show the number of unique views and the number of active connections. So versus just getting on the phone and saying, hey, this is what we're selling. A lot of people want it. You had better hop on it quickly. We have the ability to at least back it up a little bit and say, hey, we see you've had 24 unique views. Our different viewers have been checking this out. There's five active connections. It must be a great deal. I had better hop on.
Matthew: If you're either a retailer or a grower, if not now in a few years, it's going to be a much more competitive business for both of them. What suggestions or tips could you offer both a grower and dispensary to make sure that they're not just another dispensary or another grower? That they stand out in some way?
Jennifer: I think the most important piece is really recognizing and accepting what you just said, which is that this is going to be a very deafened landscape in two, three, four, five years. A lot of the business owners who are very successful today, have been able to do that - have been able to achieve that level of success without having to analyze their business in other - in traditional capacities that are taken for granted in other industries. For instance, the world of wholesale being texting everybody you know and seeing who has what in stock, and then having one or two connections that you go to all the time to refill product.
I know on a long term basis, it's not the most affective way to be managing your inventory, your margins, the quality of product that you're bringing in. And so, the number one thing that I think that businesses need to be to doing now is having the humility to say, okay, I was a pioneer. I did build a great a business, but that doesn't mean that more people aren't going to enter and that it isn't going to change. And so, I'll be open to tools of the future, but they have to work for me in the present. And using tools like Cannabase, I think businesses can make that transition out of a more underground - small underground market that it sort of began as, and help move it into a more traditional, transparent, sophisticated, set up where you're comparing vendors, you're comparing analytics. You're seeing market forecasts and you're really evaluating your business in a more traditional light.
Matthew: Oregon and Alaska recreational use is legal as of yesterday. They don't have a market place yet, but will you be moving into those markets - and when, and how?
Jennifer: Absolutely. We're actually in Oregon and a beta phase with their medical market. So Cannabase works for both medical and recreational product. We really like Oregon - working with Oregon. Oregon is very compatible with Colorado in terms of on a culture level. But also it feels a lot like Colorado in terms the wild west they've built with their medical marijuana program and really how well it's run. It doesn't look to be very strictly managed. It's a little bit chaotic, yet it's been a very successful program. So we're really excited to expand our Oregon offerings to the new recreational user base that we'll be entering, but we're already really excited about it and we would love to expand to Alaska as well.
Matthew: As we see legalization become wider and more mainstream, and cultivators become - their ability to create and grow more marijuana is enhanced, where do you see the price dynamic changing? Where is it now and where do you see it changing?
Jennifer: It's going to change enormously. This go back to that same concept of helping the businesses realize that although they've been successful up until now, there are going to be a lot of changes that occur over the next two, five, to ten years. And to me, one of the biggest changes is going to be the ability to differentiate strains objectively, which we don't have very easily right now.
One dispensary will call above a cush what another dispensary would not call above a cush. And dispensary prices are relatively arbitrary because cannabis is not a - it's so far from being a commodity that we don't even know how to decipher - we're still comparing apples and oranges and calling them the same the strain.
So part of the power of Cannabase is taking the baby steps to be able to make sense of what product is hitting the market and begin validating the prices being asked. So for instance in our wholesale market, a brand could list a strain and put that strain on the wholesale market and integrate it with lab data straight from the source. We could see the number the number of listings, connections, and activity compared to other listings that are similar. Cannabase is the largest wholesale market in terms of amount of product available. And so, we have a pretty robust data set to being slicing and dicing where we're seeing the outliers and where we're seeing the patterns and the trends. So if you take that strain, and you integrate it with the lab data, and you integrate it with it's marketplace data, and you compare and contrast it against it's peers, it's a very powerful data set.
We also have Cannabase Connect, which is an individual social network. And in this social network it's a lot like a Facebook, but individuals can say what they're smoking, and we can have trending strains. So at the moment you can just say what strain you're smoking. But in the next release of Cannabase Connect, which should be this Friday of this week or Monday of next week, individuals will also be able to tag the store that strain was from.
And we think it's going to be incredibly powerful for those brands to be able to reinforce their price on the wholesale marketplace not only with that lab data, which is important, but it isn't everything. You don't go to a liquor store and just look for sulfates and alcohol content. You want to look for the deeper experience, popularity, and how many of your peers and appreciate that product over it's counterparts. We think it's going to be really powerful to be able to say that brand's strain performs X, Y, and Z in the wholesale market, but you know what? It's priced so high because it is trending four to five times more often than its counterparts in the individual network. And that's where we're really going to be able to validate the marketplace with true consumer data, consumer trends, and consumer feedback. And I think that's the ultimate dream of Cannabase is to be able to aggregate that data, make sense of it, and help our businesses know how and when to use that data to reinforce the price points that they believe in and that they're looking for that objective way to reinforce.
Matthew: As entrepreneurs, you create this software, and you hope people use it, and they do. But is there anything that surprised you about the way people are using it that you didn't anticipate?
Jennifer: That's a great question. And I chose to be surprised every step of the way. So one of the main things that defines Cannabase is that we are at our heart a tech company. My background is in tech. My husband is our CTO, and he a brilliant developer. We are nerds at heart, and we love technology, and we can stay in the office for 70, 80 hours a week building and improving our product. And that's what we know, and that's the heart of this business.
When we chose to start this company, we took a different approach than a lot of cannabis tech companies have taken. And I do not blame them for the road they've taken. Because of the limited access to funds, because the federally legal nature of cannabis, it's hard to get enough money to build a tech company in order to create an in-house development team. Normally, most businesses are outsourcing. A lot of businesses are outsourcing. They're buying an app. They're buying a product from an agency. And that's what they go sell. We took the opposite approach. We were able to solidify enough seed funding to build a really powerful in-house development team. And so, we were able to take a completely unique approach with our product and that was building it on a customer development feedback model.
So what we do is we launch wait we call MVPs, minimum viable products - minimum viable feature sets, and then we let our users tell us what they like and how we can make it better, and how we can make it more tailored to their unique business, and we listen. We improve our software every single week. We do deploys. We release bug fixes, or front-end improvements, or small new feature sets. And then we take the features that aren't being used and we cull them. So we've been able to really create very tailored piece of software for this very unique user base that doesn't have anywhere else to go.
So, yeah, every thing has surprised me. Everything has surprised me, but I've let them determine what the product would be versus what I thought it should be. And knowing that we have the users we have, we have their time, we have their ear, we know that we'll be able to crafting a more and more sophisticated product as the market evolves and as that's what the users are ready for.
Matthew: You mentioned minimum viable product or MVP there, and I'm taking it you probably read the book The Lean Start Up by Eric Ries?
Matthew: That is a great tool. And something that I just want to emphasize for other entrepreneurs out there is that you don't have to create this 100 feature software product or service, but just get it into the hands of your perspective clients as quickly as you can and get that feedback and then iterate. I mean that's kind of in a nutshell what the lean startup is. And so, it's so refreshing to hear you say that because I think it's frustrating for entrepreneurs to go into the cave and spend all that time, money, effort for something that prospective users may not even want. So that is great. I'm so glad to hear you say that, and so glad that you can share that lesson with other entrepreneurs in the space.
Now switching gears a little bit to your personal life, I read in a New York Times article about your wedding at Devil's Ranch here in Colorado. And you considered offering some cannabis infused cupcakes. What was it like to be the subject of that article, and do you see this as a trend to offer infused products or edibles at weddings?
Jennifer: It was very interesting being included in that series of articles around cannabis and weddings that were coming out right around when Chase and I were getting married. So we had solidified our wedding date for about two weeks after the Cannabis Cup, a year before - I mean, a year in advance. So we did before we decided to official start Cannabase. If we had known the schedule we would be on, we probably would not have planned a wedding for that time.
But because we had a wedding coming two weeks after the Cannabis Cup, we were included in a lot of these discussions around, yeah, incorporating cannabis into the event and, I mean, I do not - in a nutshell, I do not think it's going to become a big part of weddings especially bigger than alcohol, at least for a very long time. Although we thought it could be fun, and it could be a fun thing to give our friends, and a fun thing in light of what we do.
I think there's a lot of risks when you are bringing family members in from other states and even friends in that you maybe don't see all the time and encouraging them to try a brand new substance. You know you don't want anybody drinking for the first time at your wedding anymore than you want anybody smoking pot at your wedding. And I definitely think, although we considered the edibles road, it's a dangerous because as we all know edibles hits slow, unpredictably, and very intense. I mean, of all the drugs, I don't think cannabis is necessarily the best for a wedding.
A wedding is supposed to be a celebration. And it's emotional and you want people dancing and getting excited. Some people are able to do that with pot, but a lot of people - most people, especially if they don't smoke often are going to become a little more introverted or introspective or relaxed, not necessarily going into wedding dancing mode. So I don't think it's necessarily the best fit. But Chase, my husband, him and his groomsmen did go to a cabin nearby, and they were going to smoke a little bit afterwards, and that was really fun for them. And so, I think as long as it's done with taste and thought through, there's no reason it can be incorporated a little bit.
Matthew: Excellent point. I agree. Jennifer in closing, how can listeners learn more about Cannabase?
Jennifer: We encourage you to vised Cannabase.io, which is our website. From there you can really discover each of our offerings. Like I said in this interview, we really focused on Cannabase Marketplace, which is our network for licensed businesses, and within that is the wholesale market.
But we also have Cannabase Connect for cannabis consumers 21 plus. And it's a private portal where they can connect with those business owners through virtual private store fronts.
And we also have Cannabase Maps, which is our public facing dynamic dispensary finder. We'll be launching - we really only launched the MVP of our map up until now, which came out about August. But we'll be launching the really official Cannabase Maps at the end of this week or the beginning of next week. It's the first map with driving directions, really beautiful dynamic filters, really, really phenomenal, fast, robust, user experience. And then you're able to rate and review any of the stores on that map by signing in with a Cannabase Connect user account, and you're able to be on that map if you are a business in Cannabase Marketplace. So it's a pretty exceeding suite of tools, and we always encourage everyone to check out Cannabase.io, and find their place in the base.
Matthew: Thanks so much for the interview, Jennifer. We really appreciate it.
Jennifer: Thank you, Matt. Thank you for all your time.
The Handheld Device That Will Revolutionize Cannabis Testing and Optimization, Daniel Yazbeck, CEO of CDx
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MyDx is a handheld device straight out of a Star Trek episode. Simply place a small amount of cannabis into it’s sensor and watch as your smart phone is illuminated with information about the plant. MyDx will provide information on: toxicity, cannabinoid profile, THC concentration and more.
Beyond reporting on various attributes of the plant, MyDx will also help you optimize what specifically you like about a plant so you can refine and optimize your medicinal or recreational experience.
If you are an accredited investor Daniel also shares how you can learn more about investing in his company CDx, Inc. Learn more at cdxlife.com
Get 10% of your MyDx and AquaDx at CannaInsider
Our next guest is developing a device straight out of Star Trek. The device will allow anybody to put a small amount of cannabis into a palm-sized device and get the whole profile of the plant including THC concentrations, toxicity profiles, and more. I am pleased to have on the show Daniel Yasbek, CEO of CDX. Welcome, Daniel.
Daniel: Thank you for having me.
Matthew: Daniel, this device is so crazy, I really want to get into it. But before we do, can you give us a little background on yourself and why you started CDX?
Daniel: Well, where do I start? It's such a long story, and it's overwhelming. So I started my career at Pfizer Pharmaceuticals. I lived in Canada most of my life. I graduated there. I went to Pfizer and helped them look at analytical - just ways to develop drugs really using enzymes. So from green chemistry to make pharmaceutical drugs, and I automated their labs.
And eventually I wanted to shift over to the business side so I went over to Panasonic because Pfizer didn't have a place for me at the time on that end and I just didn't the experience. Panasonic took me on. And I started creating new markets for Panasonic in the medical industry. So I took all my network and my experience from Pfizer and my understanding of science and technology, and I started implementing it into the diagnostics world. So I entered into the electronic devices that can diagnose disease and ailments.
And then right around the age of 30, I started learning more about cannabis, and studying it, and reading everything I could learn about it because I realized it has a profound effect on people's minds and bodies. And then quickly as I started understanding the industry more, and I became a medical cannabis patient myself. I started understanding the plant a little better.
It was obvious that this plant has an incredible effect on us, and I needed to understand more. So I couldn't. I'm a chemist. I need to understand the science, the chemistry behind what's happening. Why are these cannabinoids and terpenoids affecting our minds and bodies and how? And I needed to hone in on it. And then I watched the movie called limitless with Bradley Cooper.
Daniel: I don't know if you've seen that movie.
Matthew: I have.
Daniel: He takes the MVP pill and then becomes 10 - 12 percent smarter. And it was at that moment that - and then he hones in on it right at the end where he paid a chemist $2 million to tweak it right at the spot so he can make the perfect plant.
It was my mission at the beginning - I've got to understand what's in this thing, and why it's doing this to me. And so, I took everything I learned at Pfizer and Panasonic and then we created CDx and MyDx, which is the first hand-held chemical analyzer to test everything you eat, drink, and inhale. And that's broad, right, but the bottom line is we're building a chemical analyzer. It's an electronic nose. It's something that sniffs chemicals from whatever you put in the sample chamber, eventually when you get.
So you're going to be able to sniff the chemicals in that sample, and it's going to tell you what it is. But more importantly, then you take our app, and that couples with the device, and then you're going to correlate how those chemicals made you feel. You're going to say this helped me alleviate this symptom, or this symptom, or make me fee this way, or this way and honing in on those feelings and ailments is a process that we've been going through.
But once you can do that, you can physically hone in on which specific chemicals are making you feel how, and save it to your profile, MyDx, my profile, my diagnostic is what it stands for. So that's what's going to enable us to - it's just empowering us to hone in on what's working for us and what's not. And then you mine your own database, and you mine it against other people's data. We're empowering ourselves to trust and verify what we put into our mind and body and more importantly tweak it from there so you can get the epilepsy patients that are contacting us who have children who are four or five years old, and they need a 20:1 THC to CDV ratio and a 3:1 is not working and a 6:1. And can they even trust what they're buying and selling from the dispensaries and what the labels are saying? We have every incentive in the world to put this out there, and we're very excited to do it. I've rambled on.
Matthew: No. That's a beautiful thing. And it will be possible at some point to have it so dialed in where you can say this is the profile of the plant that helps me as a recreational user or as a patient, and then you could even seen growers kind of developing strains based on those ideals.
Daniel: The chemical profiles, exactly. We call it total chemical profile, and that's what we've developed. It's not just about THC, CBD, and some of these things. It's about the total chemistry. It's all of it. We're sniffing all of it. And then we're going to optimize and improve it over time so we dial it in. I'm not saying it's dialed in now. I haven't hit my limitless dream, and we've created a website called Think Limitless to help educate people about cannabis. It's not ready yet. So give us a few minutes. I haven't had a chance to really optimize it. But the key is - you have to understand more. And we don't know enough. We don't know enough about it.
And the scientific community doesn't know because it's been deprived of research for so many years because of some law. You know what I mean, that somebody created at some point. So the bottom line is that we have to - it's no more. We have to study it. We have to understand it. And we have to give it to the world because they deserve it. It was given to us by God or whoever, so the bottom line is it should belong to the people. And our goal is to empower people to really get closer to this plant in a healthy way - especially medical patients.
Matthew: I love your passion around this. Now the MyDx technology, some of it came from the NASA jet propulsion laboratory. Could you describe what came from the jet propulsion laboratory? What exactly is going on in this device? It sounds so crazy, a digital nose. But help us understand that better.
Daniel: So an electronic nose - so the human nose has, I don't remember the exact amount of sensors. Let's say 10,000 sensors. But a dogs nose has much more sensors. It's insignificant the amount. The point is the more sensors you have in your nose, the more things you can analyze. What we've done is we've basically taken the same concept that a human nose or a dog's nose has, which it's got many sensors on the surface of the nose.
And then those sensors react differently to different smells, and then they generate a pattern. And that pattern gets recognized as a strawberry or fish or you know what I mean. When you're born, you train your nose what is what. So what is a strawberry when you're born? You don't know. Your mother tells you, right. So we did the same technology, we took - all we did was we created sensors - an array of sensors on a digital board that will read those the response of those sensors towards different chemicals that present. And we analyze that sensor's response with very highly sensitive, low-noise, circitry in terms of the electronics that will read the sensors based on what you just exposed them to, and they're sniffing with palm part. When you sniff you - we basically built an electronic nose that sniffs chemicals and tells you what's in based on the other end, which is pattern recognition, algorythyms, data, big data.
So we look at everything under the sun. We know what a THC, CBD, everything else smells like. We can just train our sensor to smell things that we tell it to smell. It's like taining a dog to sniff out chemicals like kariotholene (ph) or something in cannabis, and that' what they're trained to sniff out specific chemicals. That's why they're very sensitive to it. So it's the same way.
We've taken that technology. We've licensed that technology. It's been around for about 20 years now, and it's been optimized. We chose to work with the the most advanced. Our technology is out of Cal Tech in California. It's the Institute of Technology in Pasadena, and that was about 15 years ago from the Lewis Group. Some of the folks who were working in that group since started their company has licensed a lot of that technology. We've partnered with them. We've licensed for our applications what we need to do, and we've developed a hand held version of what everybody has had in the lab for so long.
Matthew: Now is the MyDx - how big is the device? Is it the palm of my hand?
Daniel: It's in the palm of your hand.
Matthew: Okay. It's in the palm of my hand.
Daniel: If you take two iPhones and stack them, it's about that size.
Matthew: Okay. And so, I think -
Daniel: It may be a little bit wider - a little bit wider but not much.
Matthew: I have the MyDx in my hand, let's say. How much of a sample of cannabis do I need to put in the MyDx to get an accurate result?
Daniel: So currently we're at 50 milligrams. So you have to put in 50 milligrams of sample to get a result that is accurate within the variances that we've established for the first application. We're trying to drive that down. We're testing now at 25. We're going higher. We're looking at sensitivities, the cost of a sensors now, what's better, but at 50 milligrams that what our sensors have been ran at. So far it's been working.
Matthew: Okay. So the little chamber is about 50 milligrams in size you know how much to put in?
Daniel: It's bigger than that. There's a line - there will be a fill line. There's a fill line that tells you where to fill it to. Now we are looking at a process where we just simply puncture the cannabis, and it's enough. So you might not even have to grind. So by Christmas, we'll be completely chosen. For right now the 50 milligrams ground samples you have to put inside your device. You close the sample chamber. It's connected to your blue tooth to your app on IOS or Android device, you push measure, and in approximately one and a half minutes you can have your answer.
Matthew: Okay. So it syncs with your phone via blue tooth?
Matthew: And how much training do you think is necessary? Is it something that you can just learn like that, you pick up, or do you have to go through some sort of video training to understand how to use the device?
Daniel: It's so simple. We've dumbed it down where you just - I mean literally you're putting a sample in a sample chamber; you close it. They're disposable, so basically you put the sample in the disposable, you close the sample chamber and push start. And the blue tooth is like any blue tooth, so if you're going to connect your blue tooth device to your car - some people have trouble with blue tooth, but we have a customer service staff available to help people trouble shoot anything they have because we understand we might need to hand some folks on the blue tooth issue or something else. I mean, it's a new technology so we've beefed up on our customer service division to just be ready to hand hold people to make sure they get it right.
Matthew: Sure. That makes sense. Now what is the name of the software that works with the device for the cannabis industry is called CannaDx; is that correct?
Daniel: So here's how it works. Basically we have interchangeable sensors for various applications, right. So you have a handheld multi-use device. This is the MyDx unit. It's like your phone, right. And then basically it's like a phone. This what we hope this will be one day, another phone that people will carry around with them. It's a chemical analyzer. Whenever I walk around I want to check chemicals in my water, chemicals in my food, chemicals in the air I breathe and the safety and potency of my cannabis samples. So basically we want to - and the way you do that is you swap the sensors. So one sensor is made for organa, that's for the pesticides in food and agua for the chemicals in water, and aero, is another sensor. And then canna is the canna Dx. So the app goes with the sensor, the app will work with that sensor to analyze what you need to analyze.
Matthew: So how does the MyDx analyzer replace or compliment existing lab tests? Now when a grower wants their cannabis tested, they send a sample off to a lab - a traditional lab where a battery of tests is run. How is MyDx different or similar or better?
Daniel: Well, it's not better. The central labs have better quality data than MyDx will produce inherently. We're trying to take a $100,000 to $150,000 piece of lab equipment and miniaturize it into a $699 or $599 device in the palm of your hand. It's a lab in the palm of your hands. Our accuracy will not be as accurate as the central labs because there's a process, a workup. They charge you $50 or $60 a sample to run and for good reason because they have to actually pay the technicians in the lab to actually run the very specific test that needs to be done on an expensive piece of equipment to run it, and then analyze the data, and spit it back to you. We're a first level screen. We're going to be a total chemical profile. You're sniffing it from a different angle.
Daniel: And you're still sniffing all the terpenes and the cannabinoids, and you're still quantifying them all. But the accuracy level is not going to be as accurate as GC. Not at least for a few years. Now in a few years I'm not going to say we're not going to beat that, but right now conventional lab equipment has better accuracy than the MyDx unit will have.
The relevance - this answers your other question. When a lab tells you 18 percent PHC and 1 percent CBD, okay. But you have to - there's more to it than that, and then there's a 12 chemical profile component. So we're approaching it from a different dimension, a different angle. So I think we're complimentary. My colleagues in the central lab space are an important part of our success because they are the ones testing, analyzing, bringing clarity to what it is, and they're going to advance the science either way. So for me, I hope to work with all of them to help us populate the MyDx database.
We actually have a central lab partner, AZ Med testing. And they have - our sensor works side by side with their GC units because we need the lab tested data to make the MyDx data more powerful and better and more accurate.
Matthew: That makes sense. Right, now the MyDx device is a more of a high level screen and a traditional lab would be more granular, but your focus is not so much to replace the traditional lab as to help people using MyDx dial into exactly the profile of the plant that's optimal for their needs.
Daniel: That is correct.
Matthew: So let's say I'm a grower, and I have the MyDx. It's out of beta and it's working. Is it something that they're going to sample as the plant grows, or do you suggest wait until it's mature, and we've cut off the buds and dried them?
Daniel: No, definitely as the plant grows. I would definitely do it as the plant grows, so you can see the chemical profile and then define the optimal time for harvest based on the ideal chemical profile you need. Remember, we're still going to help you quantify THC and CBD and some of the other chemicals, if that's what you're interested, but not to the accuracy of the labs.
So the bottomline is if that's what you care about fine, but the total chemcial profile is critical. It's actually even more critical now because you're going to see the spectrum change, and you will dial in because then you can harvest at that moment, and you can test your plant and see did it result in a better or worse effect based on some focus group you might have or whatever it may be.
And then you can use our app to check the data because our app is a tracking system. You can use our app today without our device. The device comes in later. Just the app alone allows you track what you're doing. So right now today I use our app every day. I use our app because I track everything I do at the lab. What did you just intake? All my stuff is tested. So even when I buy it from the central lab, I just take a sample ID that's associated with that test, and I plug it into the app. And then it pulls up the chemical profile on the backend or I just manually put in, I know this thing has 19 percent THC, 2 percent CBD, and here's how it makes me feel. And I start - I've already started before the MyDx even is out because I need to start tracking what's working for me and then, of course, all these samples we also test over MyDx. So the key is you want to be able to - so you can track today at least because everybody - it's hard to track right now. I mean, nobody even tracks; do they what they're doing?
Matthew: This is really moving into the quantified self-movement where it's like fit bits and some of these other sleep pattern technologies that really help you look at your behavior that optimized your life. In this case, your life with specific medicines or recreational use of cannabis. I understand it's much better now.
Daniel: Exactly. That is exactly where we're coming from. It's funny you said that. We're in a quantified health (indiscernible) ideal thing, and medical patients especially because they need to quantify. If they don't, they can't operate. And now the medical community, and that's our core focus at this time, but yeah, go ahead.
Matthew: I see this as being a great tool for regulators that are trying to get a handle on regulating undesirable qualities of plants while regulating the desireable parts as well. So consumers and patients are protected. How do you envision regulators using MyDx?
Daniel: Regulators, yeah, it's one of our target markets. They need to be able to track batch to batch, even product lots movement of product, if they needed to. You scan it. Every single plant gives you a very unique signature finger print. You'll know exactly which one it is. Not just some label, and you can approach it that way.
In terms of DUI content, we haven't validated application yet, but it's on our radar in terms of looking, taking saliva samples, or - I don't think anybody's accepted the fact whether somebody can breathe into - you can't do a Breathalyzer test for cannabis today. So it's not - I don't think it's an accepted technology. Right now you have to take a blood test or even a saliva test in some cases.
So we - it's funny. We saw a picture of this big electronic nose in one of these articles at one point where this cop was holding it, and it was like smelling cannabis from far away. That was an idea. We're actually building that in a hand held. But anyway it's on our radar but we have to validate it. It's all in appliction development right now. Our focus is to stay focused, flower, making sure that's a start, even concentrates, everything is time consuming for us, and we're growing. We're still a start up. We're raising money, we're hiring more people. But we have to grow smartly, and so there's so much we want to do, but we just have to do it step by step.
Matthew: Sure. That makes sense. This is truly an ambitious technology that you're developing, so kudos to to you. Is there a price range for what MyDx will cost when it cones out?
Daniel: Definitely. It's $5.99 for the MyDx for cannabis, and that's just for one application, one sensor, and it's the $6.99 for MyDx multi-use. Now the first sensor we're putting out there is the canna sensor, and that goes with the canna application. So that's $6.99. If you want to be able to interchange sensors when we come out with the Organa March of next year, and then you have the Aqua and the Aero. Then you'd have to buy the interchangeable device, which is $100 more.
Matthew: Yeah, we're definitely talking about just cannabis on this show today, but the device can do so much more than that with the water and the air, so that's definitely something to look at. Is there anybody using it in a commercial setting right now or or is it all still in your research and development laboratory?
Daniel: No. No comerercial use yet. It's all in our laboratories.
Matthew: Are there patents pending around this technology or is it not patentable?
Daniel: No. No, definitely. It's all patented. We've licensed over a 100 patents that we have to maintain. So it costs a lot of money. And then on top of that, we added our own IP, which we added to it. I don't want to discuss the details but basically so there's a pleasant - there's a series of patents we've filed. CDx has filed a PCG application that's going to go into 130 countries around this device. So apart from the IP that we've licensed, and then the trade secrets that we maintain on the sensor side, which makes sure that we're building a business and we have to protect it. So we have our protections in place, but at the same time we want to launch a good product we can be proud of like Steve Jobs.
Matthew: Sure. When will MyDx be available?
Daniel: So Christmas our beta units go out to our beta customers, who ordered on Indigogo (ph). So they're the first people to back us and support us, and they got a discounted rate, but they were very early. And so, they're the first. And they are becoming our beta testers. That's going to be in Christmas and then with that feedback, anything that goes wrong within the field when it's tested, we're rigorously testing between now and Christmas in our labs, and we're populting our database extensively. So at this time I'm testing sensor-to-sensor variation. We take 100 sensors, look at the variation across the board. It's a tight schedule, but we're going to meet our beta customers in Christmas, and then in March it should be generally available for the public.
Matthew: And you said it's available in March. Can you preorder even though it's not -
Daniel: Yes. Whoever preorders gets it first. You can go on our website, and you can preorder it there.
Matthew: How long do you expect the beta testing phase to last?
Daniel: It's about a month to a month and a half. So by March we would turn around and make the modifications required. Now we've already gone through rigorous iterations of this device to kind of tweak. There's always going to be tweaking. There's going to be MyDx1 and then MyDx2 like an iPhone1 and iPhone2, and the next one will be better than the next one. So this is the process that we're approaching it as because there's so many things. Somebody wants a scale on it, so you can weigh. Things like this - I mean, it's a good idea. So you're always going to have the next versions, but initially the beta testing should take a month, and then we should be deployed again in available in March.
Matthew: Okay. And will the MyDx integrate with any other platforms out there?
Daniel: So we've already been working with MJ Freeway in terms of their ATI because they have access to inventories, and our app can actually tie into their app, so we're working on that front. And then with Weedmaps as well we are discussing all the details that we can do to actually help people find the strains once they identify what they need or the strain profile.
It's a collaborative effort. We can't do it alone. We're working with as many people in the industry as we can. Our goal was still the same - help you tweak and identify the perfect strain profile for you and then find a way to get it somewhere. Half of the battle is identifying it. Then how do you get it? So our goal is to empower anybody in the industry who is going to allow people feel how they want to feel when they want to feel it.
Matthew: Sure. Now is there still opportunities to invest in MyDX?
Daniel: Definitely. We have our second half of our series B round right now. So if there is anybody interested they can just send an email to Skip S-K-I-P @CDxlife.com. And he will definitely be able to help you. He'll reach out to you, and you can coordinate.
Matthew: I'm sure that's for accredited investors?
Daniel: That is correct. We have an investment bank representing us and - but investors are investors. And if people are interested in investing, there's always an opportunity for accredited investors based on the fact that we're a venture company.
Matthew: Daniel, as we close, how can listeners learn more about CDx and follow your work?
Daniel: CDxlife.com, and stay tuned. There's a lot more coming, and we have a character called Molecule that we're introducing that's going to dumb down the science and technology and make it very simple for you to learn and understand. So this sites being updated as well. There's a lot of good things coming. Bear with us and this is just the beginning for us.
Matthew: Great. Thanks again to Daniel Yazbek, CEO of CDx. Thanks for being on the show today, Daniel.
Daniel: Thank you, Matt. I appreciate it.
Many cannabis business owners focus only on the bottom line, serving their customers and generating revenue. But just as important as making money is mitigating risk. Mark Slaugh, CEO of iComplyCannabis.com gives us a brief on staying in compliance with regulators.
Matthew: I'd like to welcome to the show Mark Slaugh, CEO of iComply in Colorado. Mark, are you in Denver or Colorado Springs? I'm not sure.
Mark: Well, actually, I have offices in both cities. They are first and second largest markets in Colorado, and I'm kind of following where the business is. But we extended our Denver office in February.
Matthew: Can you give listeners a little bit of background on what I iComply does?
Mark: Yeah. I started iComply back in the year 2011, when I saw the need for commercial cannabis regulations and someone to really help hone in these businesses. Believe it or not a lot of marijuana operators kind of came from a different background than a regulated, licensed, and strictly controlled marketplace. So if all of the nuances ñ the rules that we have here in Colorado, we started our business with the understanding that with regulations naturally comes regulatory enforcement, and that if we want to keep violating federal law legally, we have to show compliance with state law.
Matthew: And how do individuals in the cannabis business demonstrate compliance?
Mark: Well, I mean, the biggest way is certainly by not getting in trouble. But that's the simple answer I think. More realistically how we show compliance in the long run is by showing that we're working the world of mitigation. In the laws here in Colorado, we have about 500 pages of rules. It's actually more regulations, I think, than even oil and gas. I often joke it's easier regulatorily speaking to frack in Colorado than it is too grow the hemp plant. But anyway you look at it, we have seed to sale tracking, and we have regular inspections by enforcement.
So certainly with our tracking software especially, which tends to be a hallmark of the industry regulations here in Colorado, and it's something that other states are looking at. We literally track every gram that is grown down to every dollar that is sold from the seed through the cultivation, through the harvesting, through the packaging and processing all the way until it reaches the point of sale. That entire process has various points of data that are collected, and this statewide system has to be used by every operator out there. So the system itself is a regulatory tool for enforcement so that they can analyze metadata from these operations and be able to tell when someone is out of compliance.
So in terms of the ability when you're being watched 24/7 on camera, those cameras record up to a period of a month and a week or 40 days, all of these business have faced intense scrutiny and can be caught at any moment if doing the wrong thing. Of course, all it takes is one employee not knowing what that one thing is. And so, that's where we really help work in the world of mitigation by training them up front, by ensuring the (indiscernible) was off, that their compliance was on, and can build a history of that compliance success over time, and that they have standard operating procedures that take into account compliance protocols so that they can operate in a fashion that is compliant an ensure that all their employees adhere to those SOPs.
Matthew: That's good to know. One thing listeners should understand is that Mark is talking largely about Colorado, but all these regulations in some fashion are coming to states where there's medical marijuana is legal or adult use, so this is very apropos to those other states outside of Colorado as well to kind of get a sense of what regulation looks like even though some of the details will be different for whatever state you're in. Now digging back into Colorado a little bit, I think it was 30 new regulations that were released a couple of weeks ago. Can you give us a little background on what those are exactly or what the highlights of those are?
Mark: Definitely. The few rules that were released a couple of weeks ago were just from the rule-making process. And as you get in regulations, no matter where you are in the county, and you can see sort of out here in Colorado rules coming out every month or every two months. So it's a pretty rapidly moving target and it changes pretty often. What they changed from a 30,000 level view are some pretty important areas: things like 30-day patient registration rule, which actually determines plant count in medical marijuana here in Colorado. For some odd reason the constitution limit 20, we tie our patient plant count to the number of patients that are registered with the center. So many other places operate in a similar model of cooperatives and that sort of thing.
The rule has changed so that those folks are now being tracked through the inventory compliance system known as METRIC. So the regulators have a really good understanding if patients are registered to multiple locations at the same time. And they're cracking down on that and reining that in, which of course on the production side reduces the amount of plants that any facility is able to grow, if they have patients that are registered to multiple facilities. That's a pretty big change.
Other things that we've seen come in this rule update deal with labeling and packaging. They're even debating now possibly color strips, stamping, shaping, and making edibles look at certain way and recently had a proposed edibles ban come out from the Colorado Department of Public Health and Environment, which we were successful in sort of beating back.
But here's the reactionary force to legalization that I think everyone really has to pay attention to. Some of the rules were really around production and inventory control systems for regulators. So not only can they control price through taxation and determining what supply and demand is, keeping a close eye on that, now they have mechanisms to also determine the overall capacity of production of each type and essentially now have the power to reign that in at any given point, and that operators aren't allowed to expand that in terms of their capacity for retail marijuana unless they can prove a running three-month period of selling at least 85 percent of what they had cultivated. So they really want to be able to warrant the demands of the marketplace not being by an oversupply of new market entrants and people growing and benefiting from the economy of scale. So we're starting to see the med put in regulatory tools to control supply and demand and inevitably price. The goal is to put out the black market, but at the same time ensure that we're not encouraging black-market, but such low prices that we incentivize out-of-state sales and diversion to minors.
Matthew: Just rewinding a little to what you said about edibles and beating efforts to ban edibles, was there some sort of other suggestion about making edibles look very distinct so there was absolutely no confusion about, hey, what you're about to eat is confused with THC? I heard some rumors about that, but I was wondering if you had any more details.
Mark: Yeah. We're just about to have a meeting here about 30 minutes to talk about industry groups out here. But we did on Friday have recommendations come to the enforcement agency and the regulators from the Colorado Department of Public Health and Environment. And one of the folks over there sort of blind-sided some of his colleagues by recommending that all edibles either be lozenges or tinctures, period. No more cookies, no more brownies, no more candies, no more soda pops, no more drinks, with the concern around the Halloween fear that somehow kids are not going to be able to tell the difference. We have hashed this out before having dealt with the public CDPHD and the Colorado Department of Public Health and Environment. As well as Children's Hospital here in Denver really focused around how do we prevent accidental ingestions or people not being able to tell the difference between a regular candy and a marijuana candy. And so, there's where the policy discussion lies and really the most effective solutions are the things we've done already, which is child resistant packaging, labeling, and education.
And our packages actually have to be okayed so they can't even see the gummy bears inside the bottle for example. It would look like any other pill bottle. So the concern from sort of the traditional prohibition is from the CDPHE recommendation were really in the realm of getting rid of getting rid of all those other products so that there as no confusion, and there simply would lozenges and simply be tinctures for every business model out there. So some questions whether or not that's constitutional and certainly whether or not it's even effective public policy is in the realm of accidental ingestion. You have between a million, a million and a half, two million products, be issued here in Colorado since the start of retail marijuana in January. And during that time, we've only had nine children end up in the hospital.
If you look at the rate of accidental ingestion to the number of products that could potentially be eaten accidentally, I think we're having a better track record than prescription pills, probably cleaning supplies in people's homes, let alone anything else a kid can tend to pick up and put in their mouth. So far the question really then, I think, becomes how much more effective is regulation like that banning cookies or drinks or going to be in preventing such a low accidental ingestion rate anyway? And we have to look at that in the context of people's ability to operate in the market place and also what consumer demand is. Cookies and candies aren't just for children. Seventy-five percent of adults consume candy. So where do we draw that line? How do we make that distinction beyond what we've already done when sort of the reactionary force to a kid ending up in the hospital for eating a gummy bear tends to be a lot more extreme than other industries that maybe facing some more challenges than accidental ingestion.
Matthew: Can you give and overview of what responsible vendor training is, and how iComply can help with delivery of that for people who have no idea ñ I know responsible vendor training exists in other industries besides cannabis but just give an overview of what that term means, and then what kind of training is given for people in the cannabis industry to satisfy the responsible vendor training?
Mark: Absolutely. It does exist in other industries. A lot of people know it from the alcohol industry as sort of the TIPS program. But it's essentially training for frontline bud tenders, owners, and managers of the dispensaries. It teaches them the overall view of what cannabis is, what it's effects are, and how to educate people at a standard level that is not just compliant with the rules and regulations. There are some components and compliance there that is also in the realm of responsibility. So just like we would teach a bartender not to over serve, or not to not serve to intoxicated persons, or how to check IDs, we're doing very similar training for the workers in the field.
With the influx and demand for labor since retail has exploded in business, we don't want a lot of qualified persons out there. So we have been extremely busy at iComply doing our responsible vendor training. We've actually had a course in place around compliance since around 2012. So we've been there for a little while in terms of training and certification. So we have a comprehensive compliance course that's sort of our flag ship bread and butter that a lot of people know us for and love us for. And then we also have our responsible vendor training program which is MITS and the new rules that they just came out with a couple of weeks ago in the process of developing approval programs around.
Matthew: Okay. Is that primarily ñ does that mitigate the risk of the business owner again back to that point? So an employee takes the responsible vendor training, something ends up happening down the road, and you could say, look, we did take the steps required to ensure this employee had all the information they needed. It's just that a mistake was made somehow?
Mark: Yeah. Exactly. There's some state statutes on the books since about 2012 that have really outlined this process program as something that can mitigate those offenses. So it will be a lot smaller slap on the wrist if an owner or bud tender or someone under them mistakenly or even on purpose secondly has a violation of any sort. And so, yes, it does kind of provide that for a of line defense for the business as well. And it reduces product liability and other factors that might be outside of the regulatory regime.
Matthew: And so, a new employee comes on. Let's say a bud tender, how long does the owner ñ business owner have before that employee needs the training?
Mark: Yeah. They have a 90-day window to get that employee trained. We hold our supplementary courses once a month, so there are at least two opportunities there get that particular employee up to speed.
Matthew: What do you think the biggest mistake is that owners make in the compliance arena?
Mark: I think it's assuming they won't be caught. Lots of times we're coming from a mentality that's hard to change. I think the biggest mistake is instilling a mentality of irresponsibility and sort of hiding from the law. I don't mean to say that about everybody out there. I think the industry is certainly becoming a lot more professional and growing up very quickly. But there tends to be an old school mentality certainly in places without a lot of robust regulation and certainly even here in Colorado where we've had to mature very quickly. I still see in particular operations biggest mistake being we can do this, this one time. And we can kind of get away with this. And don't worry, they're never going to come through and catch us. And so, you get a little bit lax over time because you're really worried about patients and plants and all of the operational things that go into running a business.
Compliance tends to be an extremely important detail that gets overlooked. And when you're starting to sow a culture of non-compliance because of excuses or rationale around it, that's often times, I think, that's the most fatal mistake owners can make. And I've seen some very drastic action be taken by regulators. They catch these folks with their pants down. And if you don't really understand the realm of what that compliance world looks like, there's a lot of risk being run in terms of non-compliance, and the costs involved in that are pretty hefty. I think that tends to be the biggest mistake is guys just assuming they know what they're doing.
If it's ñ we have a running joke that every grower is the best grower and every owner is 100 percent compliant. We've never walked into a facility that's been 100 percent compliant. It's always something. There's always some detail. And with as many regulations as we have, it's no surprise. It's all these new markets coming up. It's really important that they design and implement their systems, and their process, and their procedures, and their people into that keeping compliance in mind not as the last detail, but as the most important detail up front.
Matthew: Right. So I'm hearing you need a good offense, but also a good defense. I mean, a lot of business owners are really good at the offense, the cultivation or the dispensary piece, but they're not looking at the defense part, and that's just as big a part of the game. And by ignoring it doesn't mean it's not there, it's just you're exposed even if you're not aware of it. So those are good points.
Mark: Exactly. And no matter how good your product is, how awesome you people are, how many awards you win, all of that is at risk and can go away because somebody didn't know what they are doing or because there's some misunderstanding or some detail got missed. The entire world is helping manage those details and organize those structures so that compliance becomes something that is instilled as a culture within the organization and everybody holds each other accountable because not a single person can be responsible for the amount of compliance we have to deal with.
Matthew: Where do you see compliance and compliance training in the next two to three years? I mean, it's changing very quickly, but what's your best estimation of where we're be?
Mark: I think it's an absolutely necessity. It's just a question of whether or not owners recognize it. And those that are out ahead of the curve and see where the puck is going to be played are going to be in a better position to manage it and to take it seriously. But when you're monitored on cameras all the time just like in the casino world, you don't see 1,000 different casino operators. You see a very select few know how to handle it and do it right. And so, I think in a lot of ways compliance can be a bit of a threat to those folks out there that can't make that paradigm shift . And it really is a market that's starting to consolidate into medium and large-scale players.
I think training becomes an absolute necessity. The more businesses you have, the more employees you have, the higher turnover rate you have, the more transactions you have going on, the more risks you're running. And if you really understand the defense part of that, you begin to mitigate the risk and make sure that you have systems in place to handle that, and remediate it. There is no non-compliance. All of that becomes the realm of this new highly regulated industry. Besides, I think it will be a pretty big business in terms of training because it's going to be necessary for everyone coming in. If you're going to play the game, you've got to know the rules to the game.
Matthew: Do owners of infused products businesses have more or different kind of risk in general that's not as well understood compared to cultivators or other ancillary businesses?
Mark: Oh yeah, absolutely. In the extraction realm especially when you're dealing with solvents and flammable solvents, in dealing with bomb-proof rooms that are dictated by Denver Fire, there's a lot of compliance that goes into what it takes to extract using butane, propane, CO2 under heavy pressure. So there's a lot of regulations that go especially into the extraction realm just around safety. And there's also a lot of regulations that go into the food processing realm just around safety.
So marijuana-infused product manufactures in Colorado have to take Serve Safe Training. It's required, where it's optional in restaurants. They have to have inspections. They have to be OSHA compliant. There's a lot of other regulatory agencies that overlook them like health and safety in Denver and fire departments to ensure that they're not going to explode like we've seen a lot of hash explosions out there. So everyone has to have a separate enclosed room that they extract in. It has to be bomb-proof and rated that way. It also has to meet up to physical engineer certified industrial hygienist standards locked in the facility. All the equipment has to be enclosed loop extraction. It has to be UL listed or ETL listed. So there's a whole lot that goes into that whole realm to protect workers.
There's training programs that have to be instilled, documentation that has to be kept that everyone is adequately trained. There's a lot that goes into just the infused-products manufacturing realm that I don't think a lot of people are thinking about right now. In California and Washington there's a big learning curve there. There's quite a bit of expense that goes into it, and a lot of nuances especially when you're tracking production batches from your harvest batches. And in terms of how that comes out, I know Colorado is rolling out testing results as well. So you have contaminate testings and potency testing. If you fail your testing, you're destroying your entire batch, so your product is at risk of being completely lost, which is another big concern that bolt pros and MITS serve products are going to have to be aware of.
Matthew: Mark, as we close, how can listeners find out more about iComply?
Mark: You're welcome to visit our website. It's www.icomplycannabis.com. You can also send me an email at firstname.lastname@example.org. We're happy to answer any questions and take a look at sort of what the next horizon might be for those listeners out there.
Matthew: Thanks so much, Mark, for the brief today. We really appreciate it.
Mark: Thanks for taking the time. We look forward to doing it again.
Alaska, Oregon, California, Washington D.C. Florida and Guam all had various forms of cannabis legalization on the ballot. Listen in as Diane Czarkowski of Canna Advisors gives us expert insight into what happened in each state, including one shocker that surprised us both.
I'm happy to welcome back to the show Diane Czarkowski. Diane is a managing partner at Canna Advisors in Boulder, Colorado. Diane is going to share with us what happened yesterday in the different states in various forms of legalization measures on the ballot. Welcome back, Diane.
Diane: Thanks for having me, Matthew:.
Matthew: Diane, can you just give us an overview of what happened on all of these ballot measures yesterday, November 4th, in Oregon, Alaska, Florida, and D.C.? And then there was a small vote also in California. What's the big headline over there? What's the big story?
Diane: Last night was a great night for drug policy reform because I think most of the measures that were out there did pass. So it was a great night for people who had been involved in this industry. I think one in particular headline that I think we saw was kind of the irony and also that the implications of Washington D.C. passing a legalization initiative. It's scaled back from some of the other initiatives. There's no regulatory structure say for the sales and distribution and production of cannabis. But it's interesting. If it's in the hub of our federal government, how is that going to roll out? So I think that really got a lot of attention.
Matthew: Right. Right. How will that roll out? How will that look? I think it would help some of our - it only helped our approval rating. I think it's like seven percent or ten percent. So I think that can only help their approval rating if they start to consume cannabis in Washington D.C.
Diane: I hope so. I hope so. And then I think it was really fun and kind of kicked off, I guess, the excitement of election night for us to hear that Guam, the U.S. territory, passed legalization. That was a really great news story to hear early on in the evening.
And then as the evening went on, we heard that Oregon was passing. That law went into effect allowing adults 21 and over to be able to legally consume cannabis and also they have a provision in their - in the law that was passed, that there's also a commercial regulatory system that will be put into place which will be really great because I feel that these laws as they pass to protect the citizens of the United States from prosecution and things like that, we have to give them a safe place to access the cannabis for it to really be a good program. And so, I was really excited to hear that Oregon passed as well.
Matthew: Great. So is Oregon pretty much going to like - would you say it will be akin to Colorado and what they're trying to do there?
Diane. Definitely. I think that I'm sure that they're going to follow their neighboring state, Washington, and how it's been rolling their regulations. I know that there were - I saw some rumblings and some discussions in the newspaper and stuff that there's some concern that if they don't tax similarly to Washington, there might be some interstate -
Matthew: Arbitrage. I want cheaper cannabis.
Diane: Yeah. People might be going across state lines to purchase their cannabis in Oregon rather than to have it taxed more in Washington. But most of those arguments fail to really point out that's illegal. You can't go across state lines with cannabis. And I was born and raised in Kansas City, and going across the Kansas-Missouri border was something that we did very often. We either work go to events on both sides. And I just can't imagine that would be something that would really drive people to go across the state line, and I just really can't see that would be a big impact.
Matthew: Right. That's a lot of time and effort.
Diane: It's an interesting conversation nonetheless. California's measure wasn't as, I guess, as much of a head liner as some of the other ones, but they did pass a provision that says "so many" sentencing will no longer be applicable for non-violent and low-level drug possession. So that's good news. I know that California really is trying to get some type of statewide regulation in place, and I think that will help a lot in California.
Matthew: That's great.
Diane: Do you want me to continue?
Diane: There's been a lot going on.
Matthew: Please do.
Diane: Since presidential election there was a lot of drug policy reform going on. Alaska passed, which is great, and they have provisions for regulating the production and sale of the cannabis. Maybe we're looking forward to maybe having an opportunity to go up there. I haven't ever been so that could be also a great change for Alaska.
And then let's talk about Florida because even though it did not pass, 57 percent of the voters made a statement last night. They believe in medical marijuana and believe that it needs to be taxed and regulated in the state for their citizens. And if it's okay with you, I'd love to share a letter that was emailed out to some of the supporters of the United for Care Campaign, which was that campaign that was trying push through this measure.
Matthew: Sure. So you're saying that 57 percent of the populace that voted, voted for medical marijuana legalization, but it required 60 percent. That is incredible.
Matthew: That is incredible. That is absolutely incredible how close that ism, but yes, please read the letter. I'd love to hear it.
Diane: Yeah. Let's think about that. In most states, had that been a measure, it would have passed. It would have been called a landslide, quite frankly, with that much of a difference. But ironically, there was a vote, I think, about a year ago that they passed that said any change to the constitution must be passed by at least 60 percent of the vote. And I think that the irony about that is that measure only passed by, I think, 53 percent. Had that not been changed, very recently actually, we would be talking about a win in Florida right now.
But I would love to share the letter from John Morgan because I think it really articulates that even though, like I just said, this was a loss, what this really means for Florida. And so, the email starts off,
"We may not have passed the amendment two tonight. But make no mistake, tonight was a victory in the fight for medical marijuana in Florida. Our next governor will take the oath of office having one less than a majority of the Floridian's votes. The idea that marijuana is medicine and that those suffering and in pain should not be made criminals, received a larger share of the vote than the winner of the last six gubernatorial elections and every presidential campaign in Florida for decades."
So a great statement by John Morgan. I think that one thing that his campaign faced that a lot of the other campaigns did not face was a lot more funding from the opposition. And I think that's what had the biggest impact is that the opposition really came in strong at the end, and had a lot of campaigning out there. So I'm very hopeful that things will still like John Morgan said, this next person that's taking oath, all of the people are in fact that are taking oath for the new political positions that they're taking, they have to understand that if they're the public servants that they really need to carry forward the will of the voters.
Matthew: Yes. Also in Florida, it's alleged that the casino magnate, Sheldon Adelson, he came up with - he's a billionaire, and he came up with millions at the last minute with smear campaigns on TV to scare people about legalization, which is frustrating because A) he's not a Florida resident. He's a resident of Nevada; and B) that he is doing it allegedly on behalf of somebody else. So the person that's actually requested it allegedly is not the person that paid for it. So some frustrations there, but still despite that a 57 percent vote for medical marijuana is huge. And my take away from that letter that you just read is that is that cannabis ran governor, cannabis would win. It would beat out any other candidate.
Matthew: Oh my God. That is so crazy. Do you think this puts pressure on other states to adopt or liberalize their cannabis prohibition laws, Diane?
Diane: I do think so. I think it creates pressure on them in that if they're being faced say with budget restrictions, or trying to bring new jobs and revenue to their states, and they're not looking at this as an opportunity, they're really causing harm to their states by not taxing and regulating this plant.
And even more so, I think people are really becoming aware of how many people are incarcerated because of possession - you know, minor possession charges for this plant. And no one should be in jail for possession of this plant. We're seeing our prisons systems are more full than in any other nation. We have more people incarcerated in most of them for non-violent crimes. So I think there's a big shift there as well.
And then also, if now there are enough states that have some type of legislation passed, all those neighboring states have to become concerned with that product coming over into their state, and what do they do? They have to keep abiding their laws, but if it's nearby, people might cross the state lines to get access, right?
Matthew: Great point. And none off the tax benefits back to the state that -
Diane: None of the tax benefits, none of the - the cannabis industry certainly saved the commercial real estate conundrum that was going on in 2009, 2010. There were so many empty warehouses and our industry alone, I think, helped that real estate decline - lessen. And I think that they have to look at some of those other impacts as well.
And I think too when people go to places where there's adult legalization like Colorado and Washington, and they maybe have an experience by going into a dispensary or they're around people who have an experience with the plant and they see that hey, this isn't so bad. And it's just like going to a party where people are drinking alcohol, and then they go back to their states and wonder if that has had any impact on the change of the voters minds nationally. They see that really if it's done well, like it has been done in Colorado and Washington, it can be a great benefit to where they are living.
Matthew: Now you and I both know that just because some states like Oregon or Alaska has passed laws now that legalize cannabis, it doesn't mean that there's going to be a functioning market place anytime soon. What do you anticipate - how long is it going to take before patients and adult users can successfully access cannabis and in a functioning market?
Diane: Well, it's going to take at least a year for that kind of regulatory system, I think, to really be able to - a year would be really pushing it, I think, because you have to - there's a little bit of definition that usually goes into this legislation. But really you have to have lots of discussion groups created and people on advisory boards to really think about the great details that need to go into a brand new industry. So that all has to take place, and then they have to get people properly licensed, and then those facilities have to be built out. And then, of course, the plant has to be able to grow and be harvested. That all takes a lot of time, but hopefully they're already thinking about that, and they'll push things forward as quickly as they can.
Matthew: Diane, as we close, what's the best way for listeners to get in touch with you. Can you tell us a little bit about what Canna Advisors does and how we can get a hold of you?
Diane: Sure. You can find us on the internet at thinkcanna.com. That's T-H- I-N-K-C-A-N-N-A.com. And Canna Advisors is in the national business of helping businesses in the cannabis industry win licenses. We build out their facilities, and we help manage their operations.
Matthew: Diane, we'll definitely have to have you back on the show again soon as there's more legalization updates and things to let the audience know, but we thank you for being on the show today.
Diane: Thanks for having me, Matt.
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