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Dooma Wendschuh, Co-founder of Ebbu has ambitious plans for the cannabis industry. He wants to help you dial in the sensation or mood you want to experience and then guarantee you get that exact sensation over and over again. Ebbu does this with a proprietary distillation process. Ebbu will be launching with five signature “feelings” that include: chill, bills, giggle, create, and energy.
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Matthew: Hi, I’m Matthew Kind. Each week I’ll take you behind the scenes to interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.canninsider.com/trends. That’s www.canninsider.com/trends. Now here’s your program. Ebbu has perhaps one of the biggest and most ambitious businesses in the cannabis industry. The cornerstone of how Ebbu is different is that Ebbu focuses on how cannabis makes you feel. And once you dial in how you want to feel, Ebbu can guarantee you get that identical, predictable feeling again and again. I am pleased to welcome Dooma Wendschuh, CEO of Ebbu, to CannaInsider today. Welcome Dooma.
Dooma: Thank you.
Matthew: To give a sense of geography to listeners where is Ebbu located?
Dooma: Well I think a lot of people think that luck is something that happens to you, you know, like that guy’s so lucky he won the lottery. But to me luck is something that you create actively, right, by being in the right place at the right time. And if you want to do something really big, you want to change the world, you’re going to need a lot of luck. I started my career in the film industry. So naturally I had to be in Los Angeles where I had the greatest chance of being in the right place at the right time. At some point we transitioned to video games. I moved to Montreal because Montreal is where everything is happening in the video game industry. But when I wanted to start this company in the cannabis industry it was really clear that I had to be in Denver, because Denver is the epicenter of where everything is happening. So we’re actually located just outside of Denver although I do live in the city of Denver myself and really like it here.
Matthew: I love how big you think and how ambitious the goal is with Ebbu. Can you help listeners understand the “what” exactly Ebbu is doing?
Dooma: I think the easiest way to explain it is to use a metaphor and to say that we are a distillery which is not true at all. Like we don’t make alcohol or beverages, but what we do isn’t that different. You can think of how an alcohol distillery takes an inconsistent, natural product, for example potatoes, and turns it into vodka. We take a raw product, in our case it’s cannabis, and we transform it into something new. And we do this through our proprietary distillation process. And just like with alcohol when we run these natural products through our proprietary distillation process, we are creating an entirely new product category. You don’t look at a bottle of vodka and say to yourself, there’s some potato juice. They don’t sell vodka in the vegetable section of the supermarket, and the same is true for a product made using (2.59 unclear) distillation process right. It’s not marijuana anymore. It’s been transformed. And what we specialize in at Ebbu is creating this entirely new product category of distilled cannabis products, and we sell those in a variety of different ways. On the one hand we manufacture some very basic and simple delivery mechanisms which we wholesale to dispensaries, simple stuff like a soft gel or a sublingual spray. But the real magic is actually what’s inside. It’s these formulations that we create. And we also sell those to other companies, guys who are making brownies of vapor pens so that they can provide a predictable, reliable, active ingredient to their consumers. And all we ask in return is they put a little sticker on the box which says Ebbu Inside, like when you buy a laptop and says Intel Inside. And this is the way we hope to become really the juice that powers the cannabis industry.
Matthew: Very interesting. And you mentioned a little bit about Los Angeles and Montreal. How exactly did you get into those businesses and then get into cannabis? What was the process? I mean, was there like a flash where you said this is what I must do? I mean, how do you just decide to up and do this?
Dooma: You know, it was a pretty crazy series of events that led me here, but I’m really happy that they all turned out the way they did. I started, I went to the University of Princeton. I then went to film school in the University of Southern California Peter Stark Producing Program and started a film production company. We were not successful at all. We sort of failed at making motion pictures, although we did create a reasonably successful advertising agency which is still around today. At some point in the early 2000 we had the opportunity to get involved in the video game industry, and we pivoted and actually became extremely successful making games. At the peak or sort of around the time that I left the company, we had offices in Los Angeles and Montreal and we were involved in some of the biggest video game franchises in the world. And it was going very well. I had been doing a lot of sort of angel investing. Because of my background and because of this experience where we started one business and then pivoted into another, I always had philosophy that it doesn’t make sense to invest in a concept or to invest in the stock market, but rather to invest in people, people who I know who are really smart and who can pivot and who can adapt to the changes that are going to be thrown at you inevitably as an entrepreneur.
So as I mentioned most of my investments have been sort of angel type investments, you know, product placements. And I had this idea that I should look for a similar opportunity in the cannabis industry because there was a “Green Rush” and everybody was investing in cannabis. So I called up my good friend John Cooper who I’ve known for 12 years, and we decided, you know, he’s also a serial entrepreneur. We decided we would look for opportunities to invest in cannabis together. And what we found was just kind of disappointing. There were a lot of people who were trying to get us to invest in dispensaries or grow operations, and that doesn’t make any sense to me. If you look at the sports stadiums across the country, they’re not named after farmers, collectives or bars. They’re named after brands. And so when we looked at the brands what we found was even more disheartening that you could go to a dispensary and you can buy the same cannabis infused beverage three or four weeks in a row and every single time it would taste exactly the same, but the psychoactive response could be all over the map. And the same was true with the vapor pens. You know they always look cool in your hands, but you just had no idea how they were going to make you feel. And I think we all know can cannabis consumers don’t make their purchasing decisions based on the form factor of the can or the sugary flavoring of the edibles. They make their purchasing decisions based on perceived psychoactive response, you know, how the product is going to make them feel. And, you know, as hard as we looked we couldn’t find anyone who was trying to solve what I thought was the most fundamental problem in the industry. And after banging my head against it for a period of time, I realized listen, this is a problem that needs to be solved and I think I know how to solve it. And so much to my mom’s dismay, I just sold my stake in the game company that I helped create. It was a big decision, and moved out to Denver. Came out here March 1st of this year and Ebbu actually started up in January of 2014 and it’s been a wild ride every since. So that’s sort of how we got to where we are.
Matthew: That’s a great story. And sometimes it feels like I’m interviewing people only from Colorado or Seattle, but it’s not because that… it’s because everybody’s moving here. This is the epicenter of it. That’s why. It’s not because I’m choosing to, but that’s a great point you made. So let’s say I’m a vapor pen company, and I come to Ebbu and I say, Dooma we want to release a half dozen different psychoactive experience pens or cartridges and we want them to be consistent so every time a user can experience the same thing and then of course then buy our pens and cartridges again. How do you go down this road with them? How do you start that whole relationship?
Dooma: This is sort of one of the main ways that we intend to bring our product to market, and as I mentioned before we call this Ebbu Inside model, you know, much like a laptop would have Intel Inside on the boxes. These companies come to us because they are not able to deliver what the consumer most wants. They can deliver, in many case, just an extraordinary product. And I couldn’t say enough positive things about the edibles manufacturers and the vapor pen manufacturers in this industry. They are creating in some cases gourmet products that are on the top level of what you would see in a non-psychoactive version of their product, and they’re able to generate a lot of sales by making something that tastes great or that is very appealing to consumers for one reason or another. But the main reason that consumers buy cannabis is for that perceived psychoactive response. And what we can deliver at Ebbu is a predictable and reliable psychoactive response. And those two words are core to what Ebbu is about.
Predictable means that before you first try it you know how it’s going to make you feel. And I don’t know if you recall, but I certainly recall the first time I tried alcohol. And I had no metric by which to gauge what this idea of being drunk or being buzzed was going to be like because there was nothing in my previous experience that I could compare it to. The different psychoactive responses that Ebbu can guarantee are relatable. They’re predictable. So you may have never, you know, tried cannabis before or a cannabis distilled product, but you know what it’s like to have an energetic feeling because you’ve probably tried caffeine or something else that gives you that energetic feeling. You know what it’s like to have a relaxed feeling because you’ve probably drank a can of (10.32 unclear) that made you feel very relaxed. And our products are labeled in such a way that it’s very clear to the consumer before they first try it how it is going to make them feel. And that’s essential. And then the nature of the product is that it is 100 percent predictable so every time you get that same response. And the relationship that we have with the manufacturers of cannabis infused products who want to use us as a provider of their API, their active pharmaceutical ingredient is very simple and that we sell them a jar of our formulation. They can use that to make their products, and we require that they use sensible dosing. Meaning, one unit is one dose. We would never sell our product to someone who is making a brownie that was supposed to be cut up into 16 pieces and 1/16th was a dose because that’s crazy. Nobody eats 1/16th of a brownie especially if there’s a lot of sugar in it and it tastes good and you want to keep eating more. So we do require sensible dosing. And we are able to monitor for that by purchasing their products at the dispensary and testing it to make sure that the dosing is as it should be. And then we require that they put the Ebbu Inside sticker on the box, and that’s pretty much it. It’s a pretty simple relationship. It’s something that we hope we’re going to be able to grow into many other states and regions as our business grows.
Matthew: You mentioned that it’s good to think about Ebbu in terms of a distillery because that’s kind of a relatable concept most people can understand, but how is the chemistry behind Ebbu work? How do you come up with, one of your formulations is called Bliss, so how do you arrive at what the psychoactive experience should be for Bliss?
Dooma: You’re asking two questions right. I guess the chemistry question is analogous to the… let’s make the analogy we’re building a house. The chemistry is like the general contractor. It’s how you actually get the house built. And then the other portion is for the psychopharmacology which you can think of as the architect or the blueprints. So there’s not a whole lot of really in-depth chemistry that goes into figuring out what combinations of different components would need to create a specific ceiling, but there is a lot of chemistry in the execution. And the execution is best thought of as, you know, distillation that’s a metaphor I like to use. I’ll just give an example of sort of how it works. Because I think it’s easier to understand using a metaphor. Say you go to the grocery store, and you buy a bunch of apples, and you can imagine that they’re all from the same strains. So they’re all Granny Smith we’ll say. Now invariably these apples are going to be inconsistent. One might be sour, one might by mille, another might be crisp, but when it’s just something you eat you’re not going to let it ruin your day. You’re going to make a mental note that one apple isn’t that great, and you’re probably just going to go ahead and finish them all. But as we’ve all seen with that Maureen Dowd New York Times piece, when it’s a psychoactive this natural variability can be much more pronounced. You know what if we took all these apples instead and we turned them into hard apple cider through a distillation process. Every bottle would have the exact same taste, texture, smell and most importantly the psychoactive effect would be the same. And that’s the magic of distillation.
So we are able through this process to do what distilled alcohol products do to create something that is 100 percent consistent every single time. And as I mentioned before we can do something that alcohol products can’t do which is to create products are also 100 percent predictable. And that is all of the chemistry side of the equation. Now the other side of the equation is like I said the architect who creates the blueprint, the psychopharmacology. And Ebbu has an industry leading chemistry team for sure with three of the best sort permatographers that I know of in the industry. But we also have and are continuing to build what I think is probably the most established and reputable psychopharmacology team in the industry. And we approach our psychopharmacology from two different angles. We have a cellular psychopharmacology department which is analyzing the reactions at different cannabinoids which have with the receptors in people’s brains and throughout their bodies. And also clinical psychopharmacology team which is doing studies on the human beings to understand how cannabis both treats ailments and also creates specific psychoactive states. These two different departments working in combination are able to create this blueprint that we can then turn over to the chemistry team and they can create the products.
Matthew: Wow that’s so crazy. So the idea is to get this concept of bliss or optimal bliss for the widest spectrum of people possible where they would say yes I feel blissed out, you know, to standard deviations or whatever that might be. So do you get the plants yourself or do they come from the customers you sell the extracts to or the distilled products to?
Dooma: I suppose it doesn’t really matter. We have a wholesale model. So to the extent that something who, you know, in Colorado a lot of the people who are customers of ours who have dispensaries are also cultivators. So they do both. Our wholesale models means that we would purchase raw cannabis from whomever we can buy it from, and in some cases that is also going to be the same company that we might sell our products to, but it’s a separate transaction. There’s a trend in the industry right now for someone to give you a bunch of trim or a bunch of cannabis for you to process it, and then sell them back the processed material at a sort of discounted rate. So there’s not a lot of cash that changes hands.
Our process wouldn’t work in that way because we are dependent on a diversity of genetic material in order to make our products. So it’s highly unlikely that any grower in the state of Colorado would have a wide enough diversity of plant material for us to manufacture the products that we would need and then sell those products back to them in the sort of standard model that exists in the industry. So what we must do instead is aggregate plant material from a variety of different sources, you know, several different dispensaries who are also cultivators, and the few people who are cultivating but who are not dispensing. And from this aggregation, get the genetic material that we need or the dense diversity that we need to make our products and then create the products and then wholesale it back to those dispensaries. So in our standard process it’s a two step. We’ll buy the material, we’ll process it and then the second step is that we sell it back maybe to the people we bought it from or maybe someone else.
Matthew: Now circling back to what you were saying about how sports stadiums are typically named after some brand like the Staple Center, the United Center, things like that. In my mind, and I don’t know if you agree or not, but at some point there is going to be glut. The supply is going to outstrip demand in Colorado but also elsewhere. How will this affect Ebbu’s model or will it not?
Dooma: I can’t wait for that day. I mean you have to think about what Ebbu is. I’ll use another metaphor here. We don’t want to be the bar that serves beer, and if you know me, you know I have absolutely no skills that would qualify I think to be the farmer growing the barley or the hops. Our goal is to be the Heineken or the (18.21 unclear). We’re designed to do one thing and to do that thing very well, and that thing is to build a global brand. We don’t need to know how to grow crops. And I’m certainly the worst person to go out there and plant and grow anything. We don’t need to master bud tending, right. We need to stick to what we’re good at, and that’s our approach. So as the market adjusts and the supply increases to meet the demand, the cost of cannabis will go down, and it will become easier and easier for us to make our product.
Matthew: Okay so let’s say I am an infused products company and we’re considering making a THC soda, and I’ve heard of Ebbu and it sounds like a really cool company, but I’m looking at my profit margins and I want to ensure that I have a significant profit margin when I sell this soda. How can one of your customers or potential customers start to think about profit margin when they work with Ebbu?
Dooma: What you’re picking up on is various (19.29 unclear). In fact the process that we go through to distill cannabis is much, much more expensive than a simple extraction, right. The guys who are just doing extraction, whether it’s hydrocarbon or CO20 whatever process they’re using, are always going to be cheaper than what we’re doing. But the crazy thing is that because of the economics in this industry right now, for a period of time our products can still be a lot cheaper even though it costs more to manufacture. Our products can be cheaper as a API. You suggest extraction, and I’ll explain how that works. It’s going to take a little bit of thinking to get through this.
Right now it’s very expensive to grow cannabis at a quality level that’s acceptable for making a high end oil like they might use in this soda. You want a good quality oil so you need to start with good quality material. But our focus isn’t on the quality and the way in which the plants were grown. Our focus is on getting the diversity, genetic diversity that we need to make our products. So as long as we’re getting that diversity, we don’t need quality grown indoor cannabis where they’re selling $3,200 a pound retail or $600 a pound on the high end for trim which is sort of expensive. We can take in outdoor grown cannabis. We can take in cannabis that maybe wasn’t grown to the same standards and that allows us to have a much less expensive source material. So while our process is more expensive for sure, in the short term we actually make up for that with a less expensive starting source material. And this capability is not going to be around forever, but in the short term if you’re going to make your own cannabis extract and use that to put in your soda, we could match or beat that price. Now upcoming years the supply of cannabis will increase to meet or keep the demand, but by then our process, because it’s more expensive, will cost more than a simple extraction. But hopefully by the value of our brand will carry the product. You know you can buy a bottle of vodka for $7.00, then you could buy that same sized bottle of Grey Goose instead for about $40. You know some of the difference in cost is attributable to the marketing cost, but a portion of that is that there’s an artismo [ph] process that’s used to make Grey Goose, and that’s what makes it taste better than the $7.00 vodka. Consumers are willing to pay more for something that tastes better. They’re also willing to pay more because they know that that bottle of Grey Goose is going to be consistent and predictable. And so as the cannabis becomes more of a commodity and the prices normalize and the advantage that we right now have because we can use inferior, quality source material dissipates. By that point we will have established a brand that consumers will prefer the sensation of instilled cannabis products like Ebbu’s over the sensation of a simple extract, and they will be willing to pay that difference.
Matthew: In Colorado and Washington it’s amazing to see how fast people’s perceptions of cannabis are changing. You know we might see a soccer mom choose a THC infused drink over a glass of wine, and that’s when you kind of, you know, you can really see people’s ideas of what cannabis is and the stigma going away. How do you see Ebbu accelerating in this?
Dooma: Well the change you describe is happening, but in my opinion it’s not happening fast enough. And the industry needs to shift in a very fundamental way for cannabis to really take hold with the soccer moms and the mainstream consumers. Ebbu was founded on this very simple vision, and it’s this dream that someday when you walk in to your favorite restaurant and the waiter comes around and instead of saying, can I get you something to drink, here’s she’s going to say, may I offer you something to make your evening more enjoyable and there’s going to be a distilled cannabis product on the menu alongside all the distilled alcohol products. But cannabis to realize its potential it does need to change. The kind of restaurant you and I could go to, they’re not going to pull out a grinder and roll you a joint. They’re not going to bring around a dapping rig and a blow torch to your table. For cannabis to achieve mainstream acceptance we need a product which is reliable and predictable. We need a brand we can trust and Ebbu is going to be that brand. We’re designed to be the first truly acceptable, high end mainstream cannabis based consumer product. And as more and more products come online of that nature, we will see cannabis achieve a more mainstream acceptance. People will not be afraid to try cannabis if we can put it into terms that they’re familiar with.
Matthew: As I mentioned before what you’re doing here with Ebbu is really ambitious and you kind of have this vision before the markets really mature. So in the next few years as the market becomes mature you’re going to be the really the only game in town doing this. So with that technology vision where do you see the cannabis business in 3 to 5 years? How will things be different than they are now? I feel like it’s moving fast, but a lot of people are doing the same things. You’re clearly doing something different here. Are we going to see more huge players come in and just do something revolutionary like you’re doing here?
Dooma: Well I think to answer your question of where the industry is going to be in three years, we have to take a long, hard look at where the industry is right now and be very critical. You know I think in every single way we are at the very dawn of this industry. It’s not like the Dawn of Man scene in Stanley Cooper’s 2001 where the apes gather around the (25.19 unclear) and they learn how to use a bone as a tool. Right now where we are, we are those apes, and cannabis is the bone. If you’re going to make a comparison to alcohol, the alcohol industry is so advanced that they’ve moved on from that bone centuries ago and they’re using sophisticated tools like smart phones and satellite guidance. They’re just light years ahead of us. We are so far back in the stone ages. Just to give a visual image of how far behind the alcohol industry we are, and how far behind are all the other psychoactives that are available legally. You know, the perception right now is that this industry, the cannabis, is about selling drugs to white guys with dreadlocks and lots of tattoos. That’s not what this is about. I mean sort of it is, but like really that’s just the tiniest micron fixed liver on the surface of the vast opportunity. You know we have to realize that we are at an epic moment in history. This is a huge paradigm shift from a world where there are three legal recreational psychoactives to this new world where there’s now a fourth, and this fourth is healthier and safer than the others. You know, it unleashes creativity in musicians and artist and has proven medical benefits. And when you think about how important is that, you know, think about the role that psychoactives play in our society. Alcohol brings people together. Find me a first date that didn’t go better when there’s a little bit of alcohol responsibly involved. People use Champaign to celebrate. It’s the icon of a celebration is a glass of Champaign. Find me business that hasn’t benefitted from that boost of productivity from a morning cup of coffee. And even nicotine is so engrained in our culture that just showing someone in a movie or a television show who is smoking a cigar tells us who that person is. You get it just like that. And when you think about it for hundreds of years alcohol has had this monopoly right as the only legal recreational psychoactive for social and leisure activities. And this has allowed Anheuser Busch to be the largest advertiser in the Super Bowl for five years running. And I use that statistic a lot because when you think about it, it’s kind of crazy right. If they are able to advertise more than General Motors or Ford or people that make airplanes, right. It’s crazy. I think what we’re going to see in the next three years is we’re going to see cannabis challenge that monopoly that alcohol has held for hundreds of years. And I hope that a large part of that is going to be due to the work that we’re doing here at Ebbu. And I want to take it a step further and say that if you look even further ahead than three years because it takes a long time for change to happen, but I think a hundred years in the future distilled cannabis products like what we make at Ebbu will have replaced alcohol as the dominant recreational psychoactive in our society. Alcohol is never going to go away, but it won’t be number one anymore. And I believe that’s going to happen because when you do the comparison cannabis is so much healthier. It’s so much better for you. It’s less addictive. It doesn’t impair your driving in the same way. It doesn’t make you belligerent. It doesn’t give you the same types of cancer that can come from alcohol use. It literally wins in every single category. And people eventually are going to realize that this is their choice and that’s what they’re going to choose.
Matthew: Great summary, yet when I hear you talk about Ebbu I think about a book most of us read in grammar school called Brave New World by Aldous Huxley. And in that book there’s a drug called Soma and Soma has really all the things that most people want with none of the negatives. And it seems like we’re getting closer to that goal. And Ebbu is accelerating that. Are there still opportunities for investors to invest in Ebbu?
Dooma: You know right now there’s not. We did a seed funding round that closed in May, and we raised $2 million from outside investors. In early January we’ll be opening a series A round where we will be raising $9 million. We’re going to raise that entire amount from accredited investors, mostly individual investors. So if there are sort of accredited investors who are interested in coming on board in our next round, obviously would be interested in speaking with them. And the way our business plan is laid out is that it’s not… this may be our last funding round although it’s really hard to predict that in the future.
Matthew: In closing, how can listeners learn more about Ebbu?
Dooma: I think, we’re very much in stealth mode. So while I’m happy to do these interviews from time to time and give people a general idea about what Ebbu is. We haven’t put up a website. We haven’t done a lot of the sort of social media and such it would give people the opportunity to have a well rounded understanding of how Ebbu works and who we really are. So given that we’re a startup and we’re still gearing up, I think the best way to learn more if you’re interested is to visit our website. There is a sign up on the website. You can sign up. Well get your email. You can tell us what you’re interested in leaning more about and then someone from the team will reply. I think the middle of 2015 we’ll be going a lot wider. We’ll be putting a lot more information on the web, but for now it’s just not available because again we’re trying to keep things close to the vest until the product is ready to roll out.
Matthew: And can you just spell the URL for the people who are listening?
Dooma: Absolutely, it is www.ebbu.com. So it’s www.ebbu.com.
Matthew: Well thanks so much to Dooma Wendschuh, CEO of Ebbu or Ebbu for coming on CannaInsider today. We really appreciate it Dooma.
Dooma: It’s been my pleasure, and really appreciate you taking the interest and hope that we can continue this conversation.
Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes. Every five star review helps us to bring the best guest to you. Learn more at www.cannainsider.com/itunes. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. That's www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.canninsider.com, email us email@example.com. We would love to hear from you.
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In this interview filmmaker DJ Parmar tells CannaInsider about his new documentary CannaBizNess that will explore the topics of: cannabis entrepreneurs, cannabis investors, and the growing cannabis market.
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Matthew: Hi, I’m Matthew Kind. Each week I’ll take you behind the scenes to interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. That’s www.cannainsider.com/trends. Now here’s your program. The cannabis industry continues as exponential growth and as it creates more and more jobs, you and I may feel it is an unstoppable force. But most Americans still have grave misconceptions and fear around cannabis. That is why some bold filmmakers are stepping in to help the rest of America and the world understand what is really going on. I’m pleased to welcome to the show DJ Parmar, the filmmaker behind a documentary called Cannabizness. Welcome DJ.
DJ: Thanks for having me.
Matthew: To give the listeners a sense of geography, can you tell us where you are in the world?
DJ: I’m currently in Los Angeles, but my schedule brings me all over the world for the various projects I’m involved with, and all over the US for Cannabizness.
Matthew: What is Cannabizness about?
DJ: Cannabizness is the first theatrical documentary highlighting the legal cannabis industry and what it means to be an entrepreneur and investor in this multibillion dollar industry.
Matthew: What inspired you to make Cannabizness?
DJ: You know, a business partner of mine is heavily involved in the legal cannabis industry. And the reason behind creating the documentary was after speaking with a number of people across the US and Canada, I felt that there’s still a certain stigma attached to cannabis regardless of whether it’s a legal cannabis industry or not. And I think that your average individual just needs some more education and information on the legal cannabis industry to understand that it’s no longer an industry that’s a black market where you’re growing marijuana out of your basement and selling it out of your car. It’s actually a legitimate multibillion dollar emerging industry whereby there are many different business verticals that have high profile potential that are legitimate and legal that your average individual just doesn’t know about. So we just wanted to educate and inform audiences in the US, Canada and around the world what that industry meant.
Matthew: And what’s your background? How did you get started in the documentary business?
DJ: My background is I’m a film producer. I’m involved with a number of different high profile projects across US, China and India. And you know, my background has fortunately brought me into a number of various opportunities and one was the legal cannabis industry and this documentary. So it’s definitely a fascinating subject, and I think that it’s an industry that is one, is now highlighted as the new tech era of the world. So it’s a fascinating opportunity to be able to highlight and document this industry.
Matthew: What topics are you planning on spending the most time on in the documentary?
DJ: Well I think that, you know, there have been a number of documentaries on marijuana and they’ve covered, you know, politics, legalization, the drug war, etcetera. There hasn’t really been a documentary that’s covered the legal cannabis industry in the business investment side of the industry. So we focus really on what it means to be an entrepreneur and an investor in this industry highlighting the various business verticals and investment verticals for this industry.
Matthew: Since you’ve started digging into the cannabis industry, has there been anything that surprised you that you’ve discovered?
DJ: Yeah I mean I think the two things that have fascinated me the most about the legal cannabis industry, one is just the sheer amount of business verticals and the potential for this industry. You know, with the one comparison I would give is, you know, for example if you look at, you know, a different industry, say real estate, you compare marijuana to land, you look at land and talk with different business verticals that are built around land. You’ve got development companies, construction companies, insurance, financing, housing, trades, etcetera. So that is exactly the same for the legal cannabis industry. There are all these business verticals that are being built up from the ground up right now in this industry. So the sheer volume of opportunities and potential in this industry are massive.
And then the second point that was just fascinating to me was that, you know, meeting a ton of these investors and interviewing them, it was just so interesting to understand that there are so many investors. There literally is tens, if not hundreds of millions of dollars financing available in this industry. And there just aren’t enough investible companies yet in this industry, and that I feel is a lack of understanding for the industry, lack of entrepreneurs and a lack of just building companies that have a business model and a revenue model that makes sense to investors. And I think the great thing about this documentary is our goal is to really educate not only investors, but also entrepreneurs about this industry to be able to provide those opportunities to build and grow and have investible companies.
Matthew: Who are some of the people you’re going to interview for the documentary?
DJ: You know, we’ve had great access all across the board, across the cannabis industry from top entrepreneurs to top investors. So you know, it’s been fascinating to be able to have the access we do, and we’ve had some of the most high profile people in the industry from, you know, Steve Deangelo from Harborside or Troy Dayton from ArcView or Tripp Keber from Dixie Elixirs. You know that is definitely on the entrepreneur side. On the investor side we’ve had a lot of great people, you know, such as Douglas Laden and a lot of analytics and investor review companies such as Alan Brochstein and you know, the Marijuana Index. So all across the board. I mean it’s been fascinating to be able to have the access we do to very high profile individuals across all sectors of the cannabis industry.
Matthew: We recently had Adam Scorgie on the show, and he has two documentaries; The Culture High and The Union: The Business Behind Getting High. Most people who are listening are familiar with those documentaries. How would you contrast? You’re saying this is much more focused on the entrepreneurial possibilities and the investor possibilities. Is that fair?
DJ: Yeah it’s a really funny story. I was actually speaking to Adam a week ago, and we were talking about our documentary Cannabizness and what he did with The Culture High and the Union. And he said literally the one aspect that he didn’t cover in The Culture High and one of the areas that he felt there was a ton of potential to do with cannabis documentary was the business side of the legal cannabis industry. And you know, after talking to him in depth about Cannabizness, he had felt there was definitely an opportunity for this type of documentary in this space and it’s something that he didn’t actually cover in The Culture High. So definitely I think, you know, our difference subject matter wise from Adam’s documentaries is that we are definitely covering the aspect of the industry that hasn’t really been covered yet which is the business and investment side of the legal cannabis industry. So ultimately we feel that it’s a fresh, unique take on the industry, and something that’s definitely timely and needed for audiences to understand this industry.
Matthew: I enjoy documentaries a lot, but I have no idea what goes into making one. I’m sure there’s a lot of different variables. Can you tell us what it’s like? Give us a kind of a snap shot of what it’s like to make a documentary?
DJ: Yeah I mean, making a documentary is pretty fascinating. I think it really comes down to being able to manage high profile interviews. I think, you know, a documentary is really based on the information you provide audiences and the access to high profile individuals that people are very interested to hear and learn from. So I think, you know, the job of a documentary producer or director is really to access some of the most high profile interviews that you can from top keynote to individuals across various subject matters. And then also just providing accurate, up to date, and interesting information and data. So I think really a lot of it has to do with relationships, connections to access those individuals and then also just, you know, on a research and analytics side to really be able to take a fresh take on the industry or topic that you’re covering to provide information and data that people are hungry for and also interested to learn about.
Matthew: What do you think people are most hungry for? Is it how to invest? How to start a business? Because it does seem like the scale is there’s a lot more investors than there are entrepreneurs. So if you’re listening out there, I always try to ask the question to the guests on there, on the show is what are the big problems that need to be solved because this is an absolutely once in a lifetime opportunity. What have you found DJ?
DJ: Yeah I think it’s fascinating. I think people are interested to know more about the industry in general. A lot of people just don’t understand it. You know, our media has created a certain stigma about marijuana and the cannabis industry. And I think we’re just here to help educate and inform people that, you know, it’s not an illegal substance that is run by the mafia. It’s literally a medical drug that is used by patients and also has the potential for massive business opportunities for legitimate entrepreneurs and businesses. So really it’s just educating and informing not only entrepreneurs, but investors the opportunities and investments that are available in this industry that are very high profile and have massive potentials. So I think it’s literally just, you know, highlighting an industry that most people don’t know or understand. So it’s really just providing them that information to understand it in more detail.
Matthew: Now you mentioned you have a career that spans several continents here. Can you tell us some of the other projects that you’re doing overseas?
DJ: Yeah definitely. My company is Original Entertainment. We are very heavily involved in the Indian and Chinese markets. We closed a very high profile deal whereby we purchased the official remake rights for a series of hit action Hollywood franchises such as Rambo and the Expendables which we’re remaking into big budget Bollywood blockbusters for the Indian market. We’re also now in the process of closing a very similar deal to secure a number of high profile films for co-production out of China. And then ultimately we’re doing some films out of Hollywood as well that are various action/romantic/comedy films and ultimately we’re focused on the international markets. So whether that means we’re doing Hollywood, Bollywood or Chinese co-productions, we’re really focused on appealing to the international market.
Matthew: Gosh I can’t wait to see Rambo as a Bollywood film. That sounds pretty interesting. There’s a lot of people that are listening that have heard the term Bollywood that maybe haven’t seen a Bollywood film. I saw one about a year ago that someone suggested. I can’t remember the name of it, but it was just fantastical dancing and singing. It was just… it was so much going on. It was really a feast for the eyes. If something just wants to see their first Bollywood film and kind of put their toe on the water, is there one or two titles you could recommend?
DJ: Yeah I mean, there are a number of great Bollywood films and classics. And I think, you know, the Bollywood industry is also progressed so much that, you know, we not only have the typical song and dance type movies. We also have more progressive cinema that is definitely catering to be more edgy and doesn’t have song and dance. But definitely a huge hit in recent years is a film called Three Idiots, which is now being remade into a Hollywood movie. So that’s definitely a huge blockbuster but also a very amazing story that people really connected with. There are just a ton of movies. I think Bollywood makes many more movies statistically and percentagewise compared to Hollywood, but Three Idiots is definitely a great start to enjoying the Bollywood experience.
Matthew: DJ I understand you’re crowdfunding this documentary. How can listeners support your efforts?
DJ: Yeah definitely we’re looking for people to support this documentary and people who want to see this film come out, educate and inform the world about this industry. So we have a Kickstarter campaign that’s live right now, and we’re driving all of our traffic to our website which is www.cannabizness.com, and that’s spelled www.cannabizness.com.
Matthew: Great. Well thanks so much for being on the show today DJ. We really appreciate it. We wish you all the best with Cannabizness. It sounds like you’ve got some big names and I hope everybody will go out there and support your efforts.
DJ: Thanks so much. I really appreciate it. Thanks for having me.
Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes. Every five star review helps us to bring the best guests to you. Learn more at www.cannainsider.com/itunes. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. That's www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.cannainsider.com, email us firstname.lastname@example.org. We would love to hear from you.
Betty Aldworth, Executive Director of Students for Sensible Drug Policy talks about what it is like on the front lines in Washington D.C. fighting to ensure the continued progress of the legalization movement.
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Matthew: Hi, I’m Matthew Kind. Each week I’ll take you behind the scenes to interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.canninsider.com/trends. That’s www.canninsider.com/trends. Now here’s your program. “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed it is the only thing that ever has.” I believe this quote from Margaret Meade serves as a perfect introduction to our next guest, Betty Aldworth. Betty is the executive director of Students for Sensible Drug Policy, commonly called SSDP. SSDP is a grassroots student led effort to end the failing war on drugs. I’m pleased to have Betty on the show today. Welcome Betty.
Betty: Matt thanks so much for having me.
Matthew: So listeners get a sense of your geography, can you tell us where you are in the world?
Betty: Yes, I’m today sitting in the Students for Sensible Drug Policy office in DC just a couple of miles from Capitol Hill.
Matthew: How cool.
Betty: And I also spend a great deal of time in Denver, my hometown. My hometown for the last 20 years anyhow.
Matthew: For listeners who have never heard of SSDP, can you tell us a little bit about it?
Betty: Sure. In 1998 we were founded by a group of students who connected across the nation from their various campuses over bulletin boards, a very early communication tool on the internet where they were able to, over the Drug Reform Network, a very specific set of bulletin boards, they were able to share their experiences, talk about why they thought the war on drugs was failing, start to build a community of students who cared about this then activate that network. We were founded in 1998 in that way, and we have been working to end the failed war on drugs ever since. We today have a network of more than 3,000 students on almost 250 campuses nationwide and a handful of international campuses as well. We also have about 30,000 alumni members who have come through the SSDP program including some of the most prominent members, prominent leaders of the cannabis industry.
Matthew: So Betty how did you personally get involved in Students for Sensible Drug Policy?
Betty: SSDP actually wasn’t a thing when I started college. I became involved in 2012 when I was working on the Amendment 64 campaign in Colorado, and at that time Students for Sensible Drug Policy members were integral in helping us get the word out about the initiative, especially on campus with the young people. And earlier this year I took over as executive director here after spending a year with the National Cannabis Industry Association. I’ve been doing drug policy and marijuana policy work for about five years.
Matthew: Okay and where are we right now in the push to end the war on drugs and adopt a sensible policy?
Betty: Certainly much further than any of us had imagined at this point I think, even the most optimistic. The national conversation about the war on drugs is really shifting and significantly is right now. People broadly are recognizing that the war on drugs is a failure, that criminalizing drug users does nothing to actually help them in their individual situations, and also significantly harms communities. Especially communities of color and communities of low income. In that recognition, people are realizing that the negative impacts on the war on drugs reach so much further than they ever imagined, and they are starting to stand up and say no more. A very, very small percentage of Americans actually support the war on drugs. I believe the last poll that I saw was about 4 percent. Everyone else feels that it is either a tremendous failure or a marginal failure. We just have got to get politicians to come along with us in significant and substantial ways.
Matthew: Do you ever get the opportunity to speak with members of Congress or the Senate and kind of get their views of how they really feel about it and what could be done to change federal laws?
Betty: Well I don’t know that I necessarily get to know how they really feel about it. But as much as I am able to have conversations with our supporters, you know, people like Representative Blumenauer out of Oregon, Representatives Polis and DeGette and Perlmutter out of Colorado. They really understand that marijuana prohibition is a total failure. And they are 100 percent in support of fixing that system and allowing states to figure out the best ways to handle marijuana within their borders. Some of them are more progressive than others. I think though that much like with the end of alcohol prohibition we can assume that politicians will be the last to come along.
Matthew: Right. Now we had Brian Vicente an attorney here in Denver on the show recently, and he said that there’s so many representatives from California that he thinks once that state adopts wider legalization it could be the breaking point. What do you think about that?
Betty: Sure, I mean I think that we’re looking at a series of tipping points both in terms of the public perception and in terms of the federal approach, specifically to marijuana. There are a couple of states that once they tax and regulate or adopt medical marijuana will push the conversation forward more quickly than others. You know, smaller states have less influence. It’s going to be less important. One of the real disappointments about Florida this year and that’s the failure of that initiative to reach the 60 percent mark is that if Florida had passed, that would have been an incredible strategic victory in terms of bringing along a very large percentage of the population and a very large percentage of Congress who would then be interested in supporting their state’s ability to move the program forward. So yes, California, Florida, New York, Illinois, those are all very important states.
Matthew: And just to point out I think Florida, they needed a 60 percent vote, but they got 57 percent or 58 percent and not even the last few governors, I think the last five governors haven’t gotten a 60 percent majority. So it’s an incredible hard thing to do and just how close it came is really remarkable.
Betty: You know it’s one of those loses that you almost count as a win when it comes to how voters at least felt about it. It’s incredibly rare these days for any ballot initiative to surpass 52 percent, 56 percent anywhere. In order to reach that 60 percent threshold that would have been quite a significant lift.
Matthew: Is there a formal cannabis lobby in DC that represents businesses?
Betty: Of course. You know for many years Drug Policy Alliance, Marijuana Policy Project, Americans for Safe Access and others have been working on Capitol Hill to shift the conversation around cannabis in general. But since 2011 the National Cannabis Industry Association, for which I worked last year, has been specifically focused on the issues for cannabis businesses inking protection from the federal government and tax issues that are mostly relevant to businesses.
Matthew: What is the response you get from law enforcement about your efforts for a sensible drug policy?
Betty: Well there is one organization out there, Law Enforcement Against Prohibition, that is bring together those members of law enforcement who are outspoken against the war on drugs. And many times those folks though are retired because that’s the point at which they have the freedom to speak out. There are Progressive Sheriffs. For example the King County Sheriff up in Seattle who is adamantly against marijuana prohibition and takes fairly progressive approaches to the drug war generally. But as much as we get a great deal of support from beat cops and those in lower level positions, it’s very difficult for a law enforcement officer at a higher level position in their department to come out in support of drug policy or forum. It’s a very political statement unfortunately still in police departments and sheriffs’ departments across America. So that’s a difficulty. But when we were out campaigning for Initiative 71 waving signs here in DC every cop car that drove passed us, every marked car that drove passed us we were getting a honk and a wave.
Betty: So clearly there’s a great deal of support, you know, police officers just as well as anyone else understands that marijuana prohibition is a failure and waste of their resources. They don’t want to be doing this job to bust people for using drugs. So they tend to support on that level. And in fact I was having a conversation with a retired sheriff a couple of weeks ago in my hometown who understands the failures of the drug war so well that he was actually able to arise me a little bit by making a joke about the gateway effect which I took seriously. So we do get a great deal of support from those members of law enforcement who are free to talk about it.
Matthew: One thing I would like to point out too is that there is prison guard unions that are extremely powerful, particularly in California, that have a vested interest in seeing prohibition continue for cannabis, and you know I encourage listeners to support representatives that are aware of this fact and are trying too. And prison guards pull in the political process. Have you seen or heard anything around that at all?
Betty: We talk all the time as performers about the fact that marijuana and marijuana prohibition leads people down a path that traps them in the criminal justice system. And you know we can’t for moment be so naïve as to think that the people who benefit from that system aren’t as aware of that issue as we are. Whether that’s a prison guard union or a private prison company or a private prison advocacy organizations here in DC, they all understand that as well as we do. And they will be, I think, among our most formable allies when it comes to trying to change this conversation and change the way that we’re approaching marijuana policy. Our prison industrial complex is a business, hands down. We saw after the passage of 47 in California to reduces mandatory minimums and to free many prisoners that one of the arguments against letting prisoners out as quickly as possible is it reduces the prison workforce. These are people who are getting paid pennies a day to do labor. It is hands down the new American slavery system.
Matthew: That sounds exactly like slavery.
Betty: It really does. And as advocates and as entrepreneurs we have a responsibility to ensure that we are remembering that there are still people who are trapped in this system, and we are responsible for making a better world for them and getting them out of prison and rehabilitated. And that’s one of the reasons that I advocate strongly for state laws that don’t disallow with criminal convictions for drug use, possession or low level distribution to participate in the cannabis industry. And I advocate strongly for businesses to hire formerly incarcerated people.
Matthew: Great point. I want to ask you who would be the best presidential candidate in 2016, but I think that’s somewhat of a polarizing issue. So maybe you could describe what characteristics a good presidential candidate would have around cannabis.
Betty: I think that the most important thing is finding a candidate to support who really fundamentally understands that prohibition is a failed policy. Who is willing to look objectively at the evidence and not be swayed by the political, the overtly political influences that are holding back our current efforts for reform. One of the things that’s really interesting about the Obama presidency in particular and that isn’t talked about very often is that the Affordable Care Act is actually one of the most significant drug policy reforms of the last 40 years in that it puts treatment for drug misuse into the mental health context in a much more significant way than any other policy shift. Unfortunately we also see with the Obama administration a lot of lip service given to focusing on treatment in the priorities of the Department of Justice and the DEA and out of the office of the Drug Czar where they’re actually still spending much more effort and energy on supply reduction rather than demand reduction. So we need a presidential candidate and leaders in general who really understand that effective methods for reducing demand are much more critical than trying to fight supply. Because if there is a demand, someone will be ready to meet it whether it is criminalized or not.
Matthew: Sometimes we as individuals may feel a little bit discouraged or powerless when trying to affect changes in DC, but you seen some amazing examples of how small groups of students can really have an impact. Can you give us an example of how students are having impact in changing the conversation?
Betty: Sure. Students for Sensible Drug Policy itself was founded to dismantle the drug policy related pieces of the HEA, the Higher Education Act. Many listeners should be familiar with these policies which divorce students who have drug convictions on their record from being able to access financial aid. I mean if that’s not a perfect example of how the drug war keeps people down, I don’t know what is. You get busted for pot on graduation night from high school and you can’t get financial aid. That ruins a person’s life potentially. So over our first eight years we worked on fixing that provision. Is it perfect, no, but we gained a major victory in 2006 when the HEA was substantially changed to allow those students to access federal funding for higher education. That’s one great example. It took only eight years which I know sounds like a really long time, but that is… in Washington that’s almost light speed, especially these days. We also had a lobby day a couple of months ago and our efforts really did educate a number of offices, congressional offices on the issues that are facing students. And we were able to influence a number of representatives to consider signing on to the Smarter Sentencing Act, which is reducing mandatory minimums across the board in order to allow judges and juries more flexibility.
Matthew: Now I’m sure you’re familiar with Portugal’s drug policy. They have somewhat of an unorthodox but effective drug policy. Can you tell us a little bit about that and any pros that you see that we can adopt from them?
Betty: Yeah so about 12 or 13 years ago Portugal decriminalized all drugs across the board, use and possession, not distribution. So drug users are no longer criminalized, no longer put into jail or prison for their use or abuse. And what we’ve seen over the course of the past decade or so is that drug use rates in Portugal have dropped to the lowest level of any European Union country, and drug misuse rates have basically been cut in half across the board.
Betty: Yeah, I know it’s an incredibly powerful example of what taking a health based approach will do. So when someone is found by the police to have a problem with drugs in Portugal they aren’t put into prison, they are given the option to go into non-coercive treatment, and that is really the core piece of how we best approach drug use, drug misuse from a harm reduction prospective is allowing people to enter treatment when they are ready. And when you do that you remove a great number of the social and community negative impacts of drug use and misuse.
Matthew: Great point. I think that’s something people really need to understand is that if we arrest someone that’s an addict, we’ve just criminalized an addict. We haven’t solved the addiction problem. So really happy to hear that about Portugal. Hope we can steal some best practices from them.
Betty: Well you know, Matt, the Global Commission on Drugs recently released a report, and this is Kofi Annan and Richard Branson and former presidents of various Latin American countries, recommending a new global approach on drugs that focuses on regulation based on actual harm and decriminalization across the board. Focusing on treatment, and making drug use when people are going to engage in it safer.
Matthew: What big events do you see coming down the pipe that we should be aware of either in DC or the state level or even internationally?
Betty: Sure, 2016 of course is going to be a huge year for marijuana policy reform at the ballot box. And in the coming years we can expect to see a handful of states take up marijuana policy reforms in the legislature. I think that there’s general consensus that as long as we continue to build a responsible, accountable and transparent marijuana industry that we will be able to see these reforms continue to move forward in other states. There’s also the question of what the federal government is going to do about the marijuana question, and that will be very interesting in the coming years. The question has been batted back and forth between Congress and the Department of Justice and the Executive Branch more generally around marijuana rescheduling. There’s even a court case going on right now that will address the question of rescheduling. So these are all major events to watch. We also have coming up in 2016 in New York City at the UN, the UN General Assembly special session on drugs. This is a great opportunity for the UN to look again at drug policy treaties that govern international drug policy. And one of the really interesting things for us as Americans is that the US has been driving the drug war globally for 40 years, but we’re also right now leading, along with Uruguay and Chile and other countries that are considering lessening penalties or even taxing and regulating marijuana, we are now leading the dismantling as well. And I think it’s incumbent on us to make sure that our voices are very loud and saying listen, this is a failed policy globally. It’s not okay that we can go buy marijuana legally in Colorado, Oregon, Washington and Alaska and Uruguay, but in some countries possession of marijuana can lead to a death penalty.
Matthew: God, that’s really an important point. I mean we got to remember, and Troy Dayton did a really good job of pointing this out at his last event, is that there’s people sitting in jail right now at this moment, thousands in this country and families that are broken apart. This is not an intellectual argument. This is real consequences that have disturbing effects of people’s lives. So I really encourage them to support SSDP. In a closing Betty, what’s the best way for listeners to learn more about SSDP?
Betty: Sure. I would invite anyone to visit our website www.schoolsnotprisons.org or www.ssdp.org, where you can learn much more about the work that we’re doing to dismantle the war on drugs. And for those listeners who are members of the cannabis industry, we will be launching a job board as well as a new internship program so the students in SSDP are able to bring the skills and values that they learn while they’re with us to the (24.14 unclear) marijuana industry and make sure to create these accountable, responsible and transparent business that will be looking to right some of these wrongs. So that’s an opportunity for businesses to support out work and our individual students. We also have something called the Sensible Society. There are many businesses and individuals who are supporting us on a monthly basis with donations ranging from $25 to $500 a month or more that are enabling us to do the work of supporting these 3,000 students nationwide and really pushing the envelope on the question.
Matthew: Betty, are there any businesses out there that are really helping SSDP that you would like to give a shout out to?
Betty: Oh absolutely. We get such great support from some really wonderful members of the cannabis industry, and there are quite a few. So bear with me for a moment. We have CannInsure Insurance Advisors, Idea 420, Dixie Elixirs for some national groups as well as the Vicente Sederberg of course, the ArcView Group and Troy and Michael from the ArcView Group, and Greenbridge Corporate Council. A couple of dispensaries out in California including Tahoe Wellness Center, Berkley Patients Group, Spark and Harbor Side Health Center. In the Denver area we have Terpene Care Station. Let’s see, we’ve also got Good Chemistry and the Farm in Boulder. Those are some of the dispensaries that are wonderfully helpful for us. James Sladdock [ph] at Med West in California and so many others who have just done such an incredible job of supporting us this year. But I really have to give a big thanks to Idea 420. They’ve done a wonderful job of incorporating SSDP into their (26.18 unclear) plan this year and become one of our most significant supporters.
Matthew: Well thanks so much Betty for being on the show. We really appreciate it.
Betty: Oh it’s such a pleasure, Matt. Thank you so much. It’s a great show. I’m really excited.
Matthew: Thank you. If you enjoyed the show today, please consider leaving us a review on iTunes. Every five star review helps us to bring the best guest to you. Learn more at www.cannainsider.com/itunes. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. That's www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.canninsider.com, email us email@example.com. We would love to hear from you.
Sean Campbell, CEO of Blue Line Protection Group (BLPG) describes how to meet all the regulatory hurdles and satisfy the legal requirements to open a bank account for your cannabis business.
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Matthew: Hi, I'm Matthew Kind. Each week I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at www.cannainsider.com. That's www.cannainsider.com. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. That's www.cannainsider.com/trends. Now here's your program. Something as simple as having a business checking account is a difficult thing for most cannabis related businesses. Sean Campbell from Blue Line Protection Group is going to brief us today on how cannabis related businesses can have a banking relationship. Welcome Sean.
Sean: Thank you very much Matt.
Matt: Sean can you tell us a little bit about Blue Line Protection Group and the clients you serve?
Sean: Blue Line Protection Group was set up to help people in the cannabis industry initially to protect their premises and protect their businesses and to help them with the transportation of their product and the transportation of their currency to wherever they wanted it to be distributed to. However we've progressed that substantially, recently with being able to help these cannabis businesses and presenting them to certain banks who are willing to bank them provided they do the appropriate compliance basically as dictated by the feds and some of the memos that they put out in response to states legalizing cannabis.
Matt: I want to dig in a little bit to those memos, but first tell us a little bit about your background and how you got started in the industry.
Sean: My background is a bit different as far as the industry itself. I came from the hedge fund industry where I've been for the last 10 years. We've invested in many microcap and smaller companies, under $300 million generally. And so I have quite a bit of experience evaluating companies and evaluating opportunities and in this case evaluating the industry. And what made this particular business exciting was that every contract they engaged was profitable, so that they were doing real business, real revenues. At least initially in the industry a lot of the publicly traded companies were largely story lines where they were planning on doing things and planning on being successful. Whereas this is the real company doing real business and having real connections with the various players in the industry.
Matt: Now the banks are or some of the banks are a bit skittish about working with clients in the cannabis industry. However, there's some recent developments and memos from the federal government that you touched on just a couple of minutes ago. Can you tell us about those memos, the banks' skittishness and how to bridge that gap so banks are comfortable working with cannabis companies?
Sean: Well initially you cannot blame the banks too much because obviously cannabis is federally restricted as a product that can be bought and sold. And because the banks, whether they're state chartered or nationally chartered, are still regulated by the feds because of the insurance aspect. All banks have to have insurance. They're subject to federal regulation. However, the feds recognize there was a bit of conflict now with the states legalizing the production and sale of cannabis and the banks' inability to help with that. I mean any normal business would be able to find banking to carry on their business. The two problems with that are one, that money cannot be used by the cannabis producer or seller. And secondly, of course, you've created a crime magnet. All this cash moving around creates quite the potential for crime, and that's something that the feds didn't want to be responsible for in my view. In response they issued several memos, the most famous of which is the Cole Memo, where they enunciated eight points at the banks would have to hit. And if they were able to meet these requirements then the feds would basically say that were allowed to bank cannabis accounts.
Matt: Interesting. Can you highlight one or two of those eight points that are the most important?
Sean: The problem of course for the banks is that they’re not used to doing, I would say, any of the eight points.
Matt: Okay. Sean: The points they require is that the age of the purchaser is validated. The banks have what they call KYC, Know Your Customer, but that’s generally they know the business that they’re banking. Generally that doesn't require for them to know the customer of that business and who that customer is and what their age is and that it’s been validated. The memo requires that they make sure that the product’s not grown on federal land. They make sure that no one is driving high. Obviously responsibilities the banks don’t usually undertake. The memo requires that they validate that the product being sold is exactly the same as the product that’s being taxed so there’s no criminal enterprise, so there’s nothing going missing, so there’s no skimming out the back with the money or product. And it’s features like these that the bank never undertakes in any other business. And so the feds is now mandating that they have to be responsible for making sure that these actions are undertaken and that there is no criminal enterprise and that none of these requirements are being breached. So that’s why the banks appreciated that they made this effort to give them this memo, but immediately stated for the public that we can’t hit any of these requirements.
Matt: Okay got it. And so what are banks doing to help cannabis businesses right now? How do they work with them then?
Sean: I would say that the banks generally are not working with the cannabis businesses to help them and that’s probably 99 percent of the banks out there. So what you’re left with is smaller banks if you are looking at the opportunity and going well how can we effectively meet these requirements. And that’s generally where Blue Line comes in. I mean there’s three things that we very quickly do, we think, and that’s help people get their license, help people keep their license so they don’t break the rules. And the third thing is that we help them get their money into the banks by helping the businesses meet the Cole Memo and the other (6.57 unclear) requirements that are out there. And so we provide the guards. We did normally anyway and these guards validate the age. We provide the product, so we weigh the product when we pick it up, and we weigh the product when we drop it off. And we make sure that where we’re picking this product up from is the actual grower. And we make sure when they give us their money to distribute that it matches the product they sold. And finally we actually take their money to the tax office so we know what they paid in taxes and that it relates exactly to the monies they've earned from the sale of the product. So with these features in place we’re able to add what we call Hard Compliance, and we’re in the best position to do that because we’re vertically integrated all the way through. We provide all of these services naturally. And going forward we’re taken that one step further where we’re now providing kiosks, so when the purchaser comes in they select from the touchscreen the product they want which can only be the product that’s been delivered there. The home base, the office, the grower can manage exactly what the dispenser has available and that it’s been tracked seed to sale all the way through so that we integrate with several of the seed to sale companies and their software. Once they’ve chosen that product, the customer puts the money into the kiosk directly so that there’s no opportunity for the bud tender or anybody else to skim the money, goes straight into a safe which is part of the kiosk. We then remove that kiosk and take it to the bank that’s agreed that it’s customer is meeting the compliance requirements. And therefore we’ll be able to service the industry in that respect. These are all safeguards to make sure that we are able to say, not really us, the bank is able to say to the feds when they inquire, are you hitting this compliance that they can respond we could do no more. We have done everything that we possibly could to hit your requirement. Matt: Interesting. And then you also have some sort of documentation that says hey we picked up the cannabis, picked up the cash. We matched all those things so you have a record. Sean: We do a compliance package. We were doing it every month, and a couple of the banks have said that every quarter will suffice. So we’re doing a package. It’s about 132 pages long. It compiles all the people that have purchased the product in that time. It compiles all the products that came at that time, seed to sale tracking of what we sold, the tracking of the taxes and that all reconcile together. We have forensic detectives doing this. When we were doing it monthly, they were spending 8 to 16 hours per dispensary to prepare this package and then present it to the bank because it’s really the bank’s digression. But with the package and with the thoroughness of our compliance requirements, we have found several banks now who are willing to accept cannabis cash openly and willing to work with the feds to show them the compliance that they’re undertaking to make sure that these Memos and so forth are hit.
Matt: So when a bank starts to welcome cannabis customers is there like a tidal wave of new customers that are lining up to get into that bank?
Sean: There are. In Nevada where they haven’t even started the business yet, one of the banks has at least 80 customers all ready to go the day that they start business. Likewise in Colorado. It’s been over a year without banking, and the bank that has agreed to now undertake this it will start with a beta which they’re doing this month. And they’ll start taking all accounts on January 1st.
Matt: If I’m a bank president, I might say well, yes I’m welcoming some cannabis customers, but do I want a quarter of my business to be cannabis customers. Are they putting a ceiling on how many, what percentage of their customers will be cannabis related or is that a non-issue?
Sean: That’s going to be different for every bank. It’s different in Nevada as opposed to Colorado. In Colorado they’ve agreed to access additional equity so that they can take a larger deposit. That’s something the banks have to work with, and they believe they’re capable of that. If they are not capable of it, that would be different. But then we would look for another bank.
Matt: Okay. Recently the IRS issued a notice in regards to CPAs working with cannabis businesses. Did you read that? Can you comment on it at all?
Sean: Not really. I know very little of it. They’re generally just… they seem to be mostly concerned about making sure they get paid.
Matt: Right. They want to make sure.
Sean: So it would be any industry, but the IRS just want to make sure they get paid which again is rather hypocritical. It’s the same for the states. I mean they take cash. We deliver cash to the state to pay the taxes, and somehow that cash manages to get into the banking system.
Matt: Yes so that’s interesting. It’s okay.. well I will reserve my comment there, but it’s not a positive one. So you drive in armored vehicles with like AKs or how does this work when you’re pulling up to deliver huge amounts of cash somewhere?
Sean: Ninety-five percent of our employees are ex-police or ex-military. They are better trained, we believe, than anyone else on the street currently. We feel that makes them hard targets and therefore not the first option for criminality. We haven’t had any instances of anyone going after our guys yet, obviously happy about that. Honestly there’s too many easy targets for them currently in every state where we've been. The number of easy targets is so common and so large in number that they don’t need to go after the hard targets which is our guys, and yes they roll fully armed with the equipment you can imagine they would need to carry.
Matt: Okay and so they’re not only transporting large sums of cash but at times large amounts of cannabis and some other special cargo. Okay.
Sean: Special cargo is probably the right word. But you know the edibles and so forth, some of the concentrates are so valuable and do not take up very much space. So the value can be significant.
Matt: So from a compliance point of view if you’re educating a dispensary or infused products company about Blue Line’s compliance services, how should they start to think about compliance, security and cash management in a way they probably haven’t before?
Sean: We won’t take any legacy monies from any of the business that we start to help get or introduce them to banking. Because what’s most important is you’re able to track the sales from the product, the creation of the product to the sale of the product to the taxes, all the way through. So that we have to have a tracking on them. So I think as a first instance they should start to make sure that they have those tracking facilities in place and how they’re going to get there, and how they’re going to make sure that they can track everything all the way through. If they have those systems in place and I have auditors doing their accounts and they’re accounts are up to speed, it’s going to make our job easier. It’s going to be very much less expensive for them to use our service, and the bank is going to be very much happier that they can be confident that the business that they’re banking has been legit from day one and didn't just suddenly become more legit.
Matt: And for the listeners that are perhaps Illinois or Oregon or Alaska or Washington DC, different places where legalization efforts are going on or there’s medical marijuana is legal, will Blue Line be able to help them there or are you only in the larger states where cannabis is legal?
Sean: We’re in four states currently. We are in Illinois. We are in Nevada. We are in Colorado. We are in Washington. We went to California. We ran away partly because they weren't really interested in compliance at that point in time and they will be in the future. We will be going into Oregon. We would advise these people applying for licenses to choose the best companies with the best reputation. We find that helps with their license. We've helped hundreds of people with their applications at this point. In Nevada we were mentioned, I think, 44 times in the hearings as a name. And hopefully that helped some of the ones that got their licenses, and we’d love to help people in these new states on their application.
Matt: Great. In closing how can listeners learn more about Blue Line Protection group?
Sean: It’s easy to look us up on the internet. You will see lots of nice videos and nice things that we’re doing even on YouTube. Just look at www.bluelineprotectiongroup.com. That will give you a link to most of the press we've had and most of the videos and so forth. We’re also publicly listed so that you can check our filings to see what sort of company we are and our board members and so forth.
Matt: What’s your ticker symbol? I’m sorry to interrupt. Sean: BLPG, Blue Line Protection Group, BLPG. Matt: Great. Sean: That 1-800 number which is 1-800-844-5576. Matt: Great. Well thanks so much to Sean Campbell of Blue Line Protection group for being on Canna Insider today. Thanks Sean.
Sean: Thank you very much Matt, thank you.
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