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Tripp Keber and his business Dixie Elixirs have been highlighted on 60 Minutes and more recently The Pot Barons of Colorado. Tripp is perhaps the most successful and visible entrepreneur in the cannabis space. In this interview you will learn about:
– Tripp’s background
– How Dixie Elixirs was started and how it got its name
– About the innovative delivery methods Dixie is developing for Cannabis
– Why Tripp believes we are in the midst of an exciting social change
– Why infused cannabis products are the future of cannabis
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. If you recognize anybody in the cannabis industry from TV, it is probably our next guest Tripp Keber, CEO of Dixie Brands of Denver, Colorado. While Dixie has a full line of cannabis infused products, they are still best known for their elixirs which are infused drinks. Tripp has been featured on 60 Minutes and most recently as a central figure at MSNBC’s The Pot Barons of Colorado. Tripp, welcome to CannaInsider.
Tripp: Good afternoon Matt and Happy Holidays to you and your listeners.
Matthew: Well thank you. Tripp, can you tell us a little bit about your background and how you got into this business?
Tripp: Sure well, you know, it’s been a fascinating ride, if you will, certainly the last five years have been the most challenging, but certainly the most exciting five years of my professional career. You know, I moved to Colorado. I ended up here in February of 2002, so celebrating, you know, 12+ years of successful living in Denver, Colorado. In 2009 I realized as the development industry, real estate development industry was really drying up, that there might be another opportunity and that was the Green Rush. So, you know, my career has generally been truly entrepreneurially have a high tolerance for risk. So I typically applied that. I’ve had various technology companies back East that were both national and international. Then recently I followed into the real estate development building resorts primarily in the South, specifically in the state of Alabama. And then certainly for the last five years been focusing my efforts solely on cannabis, both direct to the plant as well as ancillary service companies.
Matthew: And where does the name Dixie come from?
Tripp: Well, you know, ironically as I mentioned, we had a resort development company that was based in Alabama. And so some of my original team members, if you will, were also from the state of Alabama, and we named the company really to pay homage to those relationships. And so I never did I think that it would develop such a well-know brand, if you will. And so it really was something as simple as that, just that we had a commonality from the state of Alabama. I was born in Washington D.C. which is technically below the Mason-Dixon Line, so I was comfortable with it.
Matthew: Is Alabama considered the heart of Dixie? That might be a bone of contention, I don’t know.
Tripp: I don’t know. I’m not going to argue it since I grew up in Washington D.C. and now live in Denver, Colorado.
Matthew: Right. Now jumping into Dixie’s product line, can you tell us a little bit about all the different products you offer?
Tripp: Absolutely. I mean, I think Dixie Elixirs and Edibles was known for its flag ship product, Matt, which is that of the elixir. And that was a medicated soda. The media referred to it as a pop soda which technically was accurate I guess, but it truly drove me nuts because I thought we certainly had to the ability to develop something so much more sophisticated. But the elixir is indeed still our most popular product. It is the flag ship. Behind that there are 13 other delivery systems, if you will, innovative product lines give both the medical marijuana and the adult use consumer choice. And those would include edibles, which would be, you know, Colorado Bars and Dixie Rolls and the chocolate truffles. More recently to include now our Dew Dixie Mints which are a sublingual placed in your mouth offering 5mg, a truly low dose of active ingredient THC. And then certainly not to exclude our, you know, various lines of topical. So we have pain salves. We have muscle relief lotions and bath soaps. So all combined at any given time we have generally between 130 and 150 product skews, individual products. And we’re really excited about what 2015 has to offer which will include a minimum of three new delivery systems. So I’m really excited to start talking about those early in the next year.
Matthew: And which of the elixir drinks, which flavor is the most popular?
Tripp: You know, it’s tough to say because it really is based on seasonality. You know, we have our, you know, we started with three flavors in 2010 which were not exactly sophisticated. They were cherry, orange and grape. And fortunately today, four and a half years later, we have a much more sophisticated flavor and taste profile to include Sparkling Pomegranate and Peach. We have an Old Fashioned Sarsaparilla. So it’s difficult to say, but I mean we do some of the all time favorites which are that of the peach and, as I mentioned, the sarsaparilla. But it varies and on occasion we bring in new flavor profiles to tease the market, but really I think the single most popular elixir these is the brand new Dixie One which I think we’ll probably talk about a later, but that is a 5mg, 5 active milligrams of THC with a watermelon cream and it’s just absolutely a fabulous product that tastes delicious.
Matthew: Now that also kind of solves the problem or mitigates the problem of dosaging which is a big problem especially for tourists coming to Colorado who have no idea and tend to eat a whole candy bar or drink a whole drink. Can you talk a little bit about dosaging and Dixie One there?
Tripp: Absolutely. You know, Dixie has been notorious for being extremely conservative with respects to the levels of active ingredient, again THC, across all of our products. I think that’s primarily because the owner and CEO, meaning myself, has never had a real strong relationship with cannabis. And so when embracing cannabis of under the adult use rules here, I was always nervous that we were going to get too much. But, you know, more than a year ago we realized that it was likely that the adult use consumer was going to have a very very different interest and/or relationship with this plant from that of the medical marijuana patient who traditionally was a seasoned veteran and could ingest or enjoy a much higher dose.
And so with that we launched the thought process and bringing an innovated delivery system or delivery systems embracing a low dose. And so in the state of Colorado on dose is 10mg of active THC. We took it even more conservatively now, and so our Dixie One Elixir which is a watermelon cream, offers 5mg. And after about six months of reviews, sort of analytical data, it’s ironically out pacing the sale of the 75mg, our highest dose elixir, by almost three to one. And so I would suggest that this theory that we had, the adult use consumer wanting a lower dose and potentially being able to ingest more products over a longer period of time, just really paid off.
Matthew: Yeah people, I mean, maybe it’s just human nature. When people are eating an edible or having a drink it’s like, do you think they just don’t want to do the math where they’re saying okay I have to drink a quarter of this and it’s already open, and I like the flavor. Is that part of the theory behind it?
Tripp: You know I think so. If you go to a restaurant these days and you look at the portions that Americans are eating, it really is obscene. I think that coupled with the fact that Americans are not necessarily known for their discipline, and you know I’ll take part of the responsibility. These products, the taste profiles are truly superior. I mean they’re quite tasty, delicious if you will, and so we thought it would be prudent to offer obviously a very favorable taste profile, but also a lower dose to ensure that the adult use consumer was not going to consume too much of that active ingredient THC and have a negative experience. And I think you’ll start to see this concept apply to across all of our delivery systems, product lines. And then equally if not more importantly, if you can see other manufacturers follow suit as well. We’re really excited about what that product is going to offer to the state of Colorado’s out of state tourists but also citizens, residents here in the state that want to embrace marijuana for the first time or potentially for years and years to come.
Matthew: Great point. Now just rewinding a little bit, why did you choose to focus on elixirs out of the gate and edibles or infused products? I mean was that something when you decided to get into the cannabis industry that was your focus immediately or did you pivot to that?
Tripp: No, I did it for the simple reason I just wasn’t smart enough. I just did not understand how to cultivate marijuana. So there were really three options, right. You could grow marijuana for medical patients. You could be in marijuana infused products manufacture, or you could be a retailer serving the medical marijuana patient, if you will, the medical marijuana community. As I said, I don’t exactly have a green thumb. If I never grew marijuana, I’d probably be a happy guy. I mean, fortunately we have an incredibly sophisticated grow teams that focus on the commercial cultivation of marijuana. We have a strategic partnership with MedCanna who’s done an amazing job. But you know, as I said, I also didn’t understand really how you could market to, I mean, if you look at the economic or excuse me, the demographics of the medical marijuana patient, included a 23 year old lift operator who potentially had chronic pain which represented about 80 percent of the qualifying conditions, all the way up to maybe a 75 year old grandmother who had glaucoma. I just wasn’t smart enough to figure out how we could actually market to those individuals collectively.
And so we really figured out a way in which that we could develop a product or set of products that would allow us to medicate the masses. And again you know, 4 ½+ years later with 150 products, we’ve done an excellent job giving both that patient as well as the adult use consumer a broad selection of choice to embrace. It’s really paid off.
Matthew: Now moving to Dixie Dust, this is a pretty innovative thing that you’re doing here. Can you tell us how the Dust works?
Tripp: Sure. I mean, the Dixie Dust is really a highly concentrate, excuse me, a highly concentrated connoisseur grade THC. And it’s basically granulated oils, and it can be smoked or vaped. And you know, it’s certainly very popular with both the medical marijuana patient and/or the adult use consumer. To be blunt, on any given day we typically have a backlog because again you’re taking a very very highly concentrated oil and then rendering it into really a solid or a granulated oil. And as we both know, the dabbing community, concentrates community is very popular and growing. And so it’s been an interesting ride. I mean, it is not obviously our core focus because it represents a relatively small percentage of our overall revenue, but those hard core medical marijuana patients have really embraced this product coupled with the brand that they’re comfortable. These products are triple lab tested, and so that gives them the confidence based on the quality assurance, the quality control that Dixie has been committed to for, you know, 4+ years to reach out and embrace these products.
Matthew: Now let’s talk a little bit about CBD. Can you talk about some of the benefits that you’ve seen generally in the market with CBD and what about CBD excites you?
Tripp: Well you know cannabidiol, also known as CBD, in my humble opinion is truly a wonder drug, if you will. And this is where the true medicinal and redeeming qualities, if you will, of cannabis sativa and/or cannabis ruderalis which is also industrial hemp reside. And you know, 3 ½ years ago when we started to develop the intellectual property associated with our product line, which was under Dixie Botanicals, you know many people within the industry suggested that I would end up in jail in short order because our intentions were not only to distribute that to medical marijuana patients which was the community we were serving here in Colorado, but potentially consumers from around the country if not the globe.
And we started successfully distributing this product, cannabidiol rich products, whether they be tinctures or pharmaceuticals or a few skews associated with the topicals line, and we started distributing it domestically. I believe on probably no less than three separate occasions people reported me to the Drug Enforcement Agency for the distribution of what they believed was a CSA controlled substance Schedule 1. The fact of the matter is cannabidiol derived from industrial hemp which is a sister plant to marijuana or cannabis sativa, is really considered a dietary supplement. And so as long as it has below .03 percent THC, this is a product that is safely distributed, and candidly is one of the fastest growing segments of the industry. And we grew a business that was zero to millions and millions of dollars in a relatively short period of time. And that was exciting because patients and enthusiasts from around the country could embrace CBD for any purpose, whether it be stress or anxiety or anti-inflammatory purposes and do so safely without maybe the undesirable effect of, you know, euphoria. And so it’s been exciting. It’s been an amazing run. I mean it’s been widely reported that I successfully sold that company in June of this past year, 2014, and am in a non-compete environment for the next six months and that will expire early in 2015, and I think you’ll see some exciting things coming from this company associated with cannabidiol.
Matthew: Oh great. Now switching gears to AM Focus, can you tell us a little bit about that and kind of frame our understanding about how we should be thinking about Dixie Scripts and in particular AM Focus?
Tripp: Well, I mean, the AM Focus was script, if you will, that was created for people who really required pain relief, but also want to remain functional, I mean, focused and active. And I always have difficulties pronouncing some of these terms, but I mean ashwagandha has been out, and it’s to help mitigate the effects of stress without being a sedative. And so these scripts are great for chronic pain relief. They provide a consistent, reliable, long-lasting effect. And so obviously the key ingredient being THC, which is generally associated with euphoria and can assist with pain relief, but incorporated with other aspects, what we will call the entourage or a synergistic effect, really allow you to remain focused and alert. And so an incredibly popular product line that we continue to sort of build out on. So I think you’ll see again in 2015 some more products that will be focused on the active ingredient THC, but again allowing a patient and/or a consumer to really function efficiently throughout a day.
Matthew: Now I want to talk a little bit about brand building because Dixie’s just done an incredible incredible job with that, and I just want to understand how this works because my 65 year old mother would like a Dixie Elixir but so would my 21 year old cousin and those are two totally different demographics, and I just want to know how you did this. Is it accidental to some extent or is it intentional? What’s going on here?
Tripp: Well I mean first of all thank you very much for the generous compliment, and it really validates what I have stated was our initial mission is we wanted to give all aspects of the community, both the medical marijuana community which is what we served for the first 4 years and then more recently, since January of 2014, the adult use consumer. We wanted to give them choice, and you know, I’ve said it before, but you know, stealing from one, Matt, is plagiarism, borrowing from many is research. I laugh because I don’t drink coffee, but my business partner does. On any given day I call him part of the Starbucks nation. And you know, I understand fundamentally that drinking soda is generally not a good idea. It’s just not healthy, but on any given day or week I was consuming not one, not two, but three plus Izzes, if you will. And Izze is a soda here in the state of Colorado.
It’s distributed actually around the country, and they just did an excellent job marketing to me. I mean the product’s packaging was really attractive, and the flavor profiles were adult, and they, you know, really represented an effervescent product. And you know, if you look at Dixie 2.0 which is what we serve for the last 3 years of the medical marijuana regime, it looked almost identical. And so really looking at consumer packaged goods and seeing who are some of the thought leaders or the category leaders and really leveraging on that. Additionally, you know, we identified what we hoped to be best of breed thinkers, and whether it be strategic vendors like marketing agencies, originally Vladimir Jones, more recently Grit which is a Denver based agency. We really leveraged those skill sets that were not necessarily cannabis-centric or focused, and then brought them into our space, into our industry, educated them about the marijuana plant and really pivoted from there. And so it’s been incredibly exciting, and you know so many people give me the credit. It’s really unfair because there’s so many, you know, there’s dozens and dozens of team members, and then hundreds of vendors from all over the country that support this company. And you know, I would suggest that it’s truly paying off because I believe based on what we’ve dealt with for the last 8-9 months that Dixie is arguably one of the most recognizable brands in the country now as it relates to adult use marijuana.
Matthew: I would agree with that for sure. Now looking ahead to the next 12 months, I understand Dixie just raised some more capital. How are you going to use that capital to expand and grow into different markets?
Tripp: Well first and foremost everybody understands that you are not allowed to, by state and certainly not by federal law, to transport cannabis across state lines. And so by definition the industry is extremely inefficient. I just finished building, when we’re all said and done, about a $5 million mousetrap. And I would humbly submit that this is one of the finest state of the art marijuana facilities in the US. But unfortunately I have to build that in states like Arizona, Oregon, Washington, Nevada, Illinois, Massachusetts, Maine, if I intend to bring my brand there which obviously I do. And so these funds that we’ve subsequently raised from accredited investors and truly some amazing business partners that really check the box on a bunch of different categories. We use those monies to assist with the build out of our facilities and ultimately bring the brand to both medical marijuana patients, such as Arizona, but also adult use consumers now in Oregon and Washington State. And so I think you’re going to see hockey stick growth associated with Dixie brands over the next 12 to 24 months.
Matthew: And that does present some challenges there because there’s no interstate commerce allowed. So you essentially, do you have licensing partners in these different states? Is there some states where you’ll do some acquisitions? I mean, how does that work?
Tripp: Yes all the above. I mean the one thing that is consistent in this industry and that is change. And so each individual mark is unique unto itself, and so literally through the use of our legal partners, our legal teams and then our adept marketers, we really dig deep as to what each market will allow us to do legally because you’re really only as strong as you weakest link. So we are committed and truly passionate about compliance. And so in some cases it’s an arm’s length relationship where Dixie brands identifies the affiliate partner. And other times it’s potentially closer. It all just depends on what the market allows for. But to be very very clear, Dixie brands is really an IP firm, an intellectual property firm and does not deal directly in the manufacturing, cultivation and retail distribution of marijuana. It really is focusing on processes, formulations, innovative delivery systems and licensing that intellectual property to our partners. And that’s how we’re able to successfully bring that brand within the confines of each states’ laws successfully.
Matthew: Now where do you see the supply in demand dynamic in Colorado and perhaps Washington as well, settling in the next few years?
Tripp: Well, you know, that was what we call OTH, Matt. That is over the horizon, and it’s incredibly challenging to forecast what next quarter’s going to look like. I mean, you know, the adult use consumer, I think we all knew was going to show up and ring the bell on January 1st of this current year ’14. But I don’t think anybody and that includes myself, and I’m slightly embarrassed, sheepish if you will, you know, as considered a thought leader. I just had no idea what the voracious appetite was going to be for marijuana infused products.
I mean literally there are lines out the door with shops limiting one unit per customer, and the pricing has really gotten out of hand. But you know, I think you’ll start to see that. I mean at any given time my company has as much as a half a million dollar backlog, but as we create efficiencies in our production systems, we’re quickly catching up to that. But I think fortunately for me as a manufacturer but potentially unfortunately for cultivators, you know, cannabis in the state of Colorado and what ultimately will be Washington State, is clearly becoming commoditized and so prices are dropping at a precarious rate. And I think there was a statistic that was attributed to the department of revenue that there’s a million square feet in the city and county of Denver right now that is under construction associated with commercial cultivation of marijuana. And so that is going to flood the market. I read recently, Andy Williams who is a great friend and a business partner of ours, has 7,000 pounds of adult use marijuana in his vaults right now. If that were to be dropped onto the market, that would be disruptive.
I think three years ago cannabis was selling for between $350 and $400 an ounce for medical marijuana patients. Most recently I read about a distributor here in the state of Colorado, Live Well, that has 13 licenses. I think today they launched an ad campaign for marijuana to be sold $79 an ounce. And so that is disruptive pricing. For me as a manufacturer, that lowers my cost of goods sold. So I’m very very excited about being able to potentially offer products at a more affordable rate, and I think everybody benefits from it.
Matthew: I think that’s a great point for any entrepreneurs out there listening, you know, moving up to the top of the value pyramid with value added services, not just having a commodity is a really important thing to keep in mind. Now on TV you often appear as this larger than life persona that perhaps came out of the womb conquering industries. Can you tell us about a time when things didn’t look quite so rosy and there may have been some serious challenges that you had to push through in order to succeed?
Tripp: Well you know, I appreciate the compliments, and I’m sure my mother would appreciate it, but you know, I put my pants on like everybody else, and there are thousands if not tens of thousands of cannabis entrepreneurs, not only here in the state of Colorado but around the country that are conservative the same amount of respect and if you will an, you know, “atta boy”. Because in this industry you have to be delusional confident in yourself in order to be successful, and I think maybe that’s where you refer to that sort of larger than life. But you know, you referenced MSNBC’s Pot Barons of Colorado. You know just most recently last Sunday in Episode #3 you saw the true trials and tribulations. On any given frame I had my hands, my face in my hands or I was biting my nails. I mean there was an incredible amount of stress associated with this manufacturing facility because, you know, literally we were trying to manufacture widgets with a construction site swirling around us with the fire department trying to permit a facility that they’d never had any type of historical experience with.
And so, you know, listen not all days are perfect. I mean again, crisis management, if you will, by hour. And so what that delusional confidence, if you will Matt, truly keeps me going and you know, there’s been some dark days over the past 4 ½ years, but the future is so incredibly bright, not only for Dixie but the overarching industry, and it’s truly an honor, it’s a privilege to be part of it, to work alongside so many passionate men and women that are really changing the world for a much better place.
Matthew: Now is there anything on the political landscape that worries you right now. I mean we just had a very positive last couple of weeks because the Omnibus [ph] spending bill included a provision that would not allow the Department of Justice to go after states that have a framework of law set up for marijuana. But is there still anything on the horizon where you say hey, this is a threat and we should watch it?
Tripp: Well you know, I don’t have a crystal ball, but I can tell you the state of Colorado has got a very very strong regulatory framework with the majority of the state regulators and the state legislators in support. It’s important to note, Matt, that the state of Colorado was profiting immensely from this newfound industry potentially as much 60 plus million dollars have ended up in the state coffers from the sale of medical and adult use marijuana this year alone, and that’s probably only through the end of September. And so I think the states were previously “NIMBY” right, not in my back yard, are truly reaching out embracing. I have personally hosted delegations from all over the country, shoot, all over the globe, that are watching with great fascination, curiosity as to this wacky, social experiment that is taking place. I get it, right. We’re in the midst of political and legal change. We read about that every single day. You just mentioned this historic act with that Omnibus bill, but I think more importantly that it’s paying much greater dividends, much more a creed of value to our industry is the fact that we’re in the midst of social change, and that is so incredibly evident this past year. Marijuana has gone mainstream, and that is ultimately sort of debunking,demystifying the fact that there’s, you know, people in dark allies manufacturing pot brownies and serving them up to the public. That very well may be the case, but it’s probably from a gang member or from some loosely organized organization that is not fully compliant. And so that political, legal but most importantly social change is really what’s going to continue with the momentum we have in 2014 and beyond.
Matthew: Tripp, as we close, how can listeners learn more about Dixie Brands?
Tripp: Well Dixie Brands, I mean, we certainly have our website which is www.dixieelixirs.com, and we’ll continue to build out a more robust website. The reality is on any given day there is some journalist or some media outlets such as yourself that has been incredibly generous in making sure that the world understands that there are men and women here in the state of Colorado that are fully committed to building an industry under the strict rules and regulations with the state and supported us. We operate at the pleasure of the state of Colorado and ultimately the federal government. And so our intention is not only to do so responsibly as we bring the brand, but equally if not more importantly, to really educate the adult use consumer to embrace marijuana responsibly. We fundamentally believe that oil, if you will, infused products are the future of cannabis. And I think that ultimately is what makes Dixie Brands and its affiliate partners’ future so incredibly bright.
Matthew: Tripp, thanks so much for coming on CannaInsider today. We really appreciate it.
Tripp: It is absolutely my pleasure. Again I truly appreciate the opportunity. I wish you and your listeners a Happy Holidays, and good luck to us all in 2015 and beyond.
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.
In the strong tradition of technology accelerators like TechStars and Y Cominbator, Patrick Rea has created CanopyBoulder. Unlike the other accelerators, CanopyBoulder is focused exclusively on cannabis startups. Listen to the interview and learn what an accelerator is, how it helps entrepreneurs not only with capital, but also with mentors, office space and more. Learn more at: http://www.canopyboulder.com
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. Building on a strong tradition of accelerators like Y Combinator and Techstars, CanopyBoulder is a new accelerator focusing exclusively on cannabis opportunities. I’m pleased to have Patrick Rea of CanopyBoulder on CannaInsider today. Welcome Patrick.
Patrick: Thank you. Glad to be here.
Matthew: Patrick before we get into what CanopyBoulder does, can you describe to listeners what an accelerator is?
Patrick: Sure no problem. An accelerator is basically a structured deadline driven boot camp for entrepreneurs who want to rapidly progress the creation, development or launch of their businesses. For entrepreneurs it’s a great place to focus on what they want to do, get the support that they need from mentors and others going through the same challenges. To launch as business, it’s not easy as we know. For investors it’s a great place to identify or get some early identification of startup talent and startup opportunities. For an industry it’s a great place to focus that entrepreneurial energy into a place where the startups and the founders are going to be mentored and taken care of. And for a community or a town it’s a great thing to stimulate economic activity and create jobs.
Matthew: And what’s your background? How did you get interested in creating an Accelerator specifically in the cannabis industry?
Patrick: Well I’ve always been a bit of a giver. I just love to help entrepreneurs develop their business ideas because I’ve been there too, and I know how hard it is. I know what it’s like, and I guess I just have a bit of a gift with working with founders and giving them actionable guidance. And I’ve been doing this for years, no matter what job I had. Actually I started my first incubator unofficially out of my apartment after I graduated from college with a couple of friends who were starting up a software company which actually ended up doing pretty well. But if you look at my LinkedIn page I have a pretty varied background. My own entrepreneurial ventures, I worked in investment banking in venture capital. I’ve had advisory roles and you know, done all sorts of executive management roles in corporations as well.
Matthew: Now drilling down a little bit into what CanopyBoulder does, what’s the benefit for becoming a CanopyBoulder investor?
Patrick: Well that’s a great question. For investors the benefits are quite vast and varied. An investment in CanopyBoulder provides investors equity in 20 marijuana industry startups in a one year investment period. Now these startups will be focused in ancillary products and services. So nothing that touches the plant which enables investors to join in from any state in the nation. They don’t have to have residence which is a key a challenge for making investments in businesses like dispensaries and grow operations often. You know, and many investors interested in the cannabis space are not writing checks. That’s been my experience. They don’t know where to jump in or they don’t have time to pursue the opportunities in this emerging industry. So CanopyBoulder gives the investors an ability to invest and play immediately with, you know, some trusted, well connected group like CanopyBoulder that has great partnerships. One with ArcView, the leading investor forum in the industry, and pursuing a proven investment model and strategy.
Matthew: Is there a halo effect to being an entrepreneur in an accelerator? I’ve seen events like Startup Weekend where there’s a tremendous amount of energy around startup ideas. Can you tell me a little bit about that osmosis effect of being around other entrepreneurs that are doing something exciting in the cannabis space?
Patrick: Yeah absolutely. I mean when an entrepreneur can focus on their business and surround themselves with like minded people doing the same thing, you know, good things just happen. And I think through the accelerator models like Techstars and Y Combinator we’ve seen that happen. Not only is there good energy around just the creative forces required to start a business and the mental challenges, but there’s also good competitive forces when you’re involved with a couple of other businesses. And that’s something we want to generate. So think of it as like a three month boot camp course where you need to attend daily education sessions, trainings, meetings, consultations. When you’re doing that with a group magic things start to happen.
Matthew: Now just to reiterate you said that none of these startups will touch the plant, so meaning there will be no cultivation going on at all. That’s great to know for an investor point of view because you can be out of state, but an entrepreneur that touches the plant say hey I might not qualify here. And the converse of that is that if you have some idea that’s ancillary to, you know, growing, this could be a good fit.
Patrick: Yeah absolutely. I mean we’re focused on tech software, media, data but even grow tech. So people that have unique solutions for growers or even unique solutions for any level of the value chain from extractors, manufacturers or dispensaries. People that are going to develop startups and businesses that service those key parts of the value chain, that’s who we want to talk to. And the reason we want to talk to them is that those types of businesses aren’t regulated in the same way. They’re not restricted. They don’t have interstate commerce restrictions. You know, ancillary products and services can benefit from IP protections like patents where businesses touching the plant cannot. And you know being able to serve the entire country, these businesses have immediate scale. So if it’s a startup in the planning stages that has high margins and high growth opportunities that’s solving a unique need in the industry, we definitely want to talk to them.
Matthew: Now you and I’ve both seen entrepreneurs that have a really good idea and seem like they have a good ability to execute, but they lack the ability of putting themselves in the shoes of an investor. And it’s often said that the pain of loss is four times greater than the pleasure of gain. Can you give a little bit of guidance about how an entrepreneur can be investor friendly?
Patrick: Yeah, no it’s a great question, and it gets to the core of one of the primary reasons we wanted to start an accelerator. The accelerator is solving three problems. CanopyBoulder strives to solve three problems in the industry. One, a lack of investment ready businesses. I’ve been researching startups and interacting with them for well over a year. Partnered up with ArcView, the investor forum, primary investor forum in the cannabis industry. And what we see is just not completely prepared a company’s pitching. And you know it makes it difficult for an investor to write a check. These companies, they need to have the mentality of growth, accountability, opportunistic tendencies, aggressiveness, but also being smart, thoughtful and pragmatic about their approach because investors are sitting on the sidelines and that’s the second problem, right. There’s a lot of investors that are interested, but they just don’t know where to jump in. So we try to solve that problem as well. And the third problem that we solve is valuation. You know one of the big issues are unrealistic valuations out there, especially at this point in the industry when it’s less than $3 billion in sales, legal sales in the United States. The opportunities are great, but right now at early stages a lot of companies are putting too high valuations on them.
So we work with the companies to make sure that their finances are in order and that their valuation is correct. So you know, be investment ready which is what we strive to get all of our startups to be, means sitting in the shoes or sitting in the seat in the mind of the investor and understanding what their needs are as well as the needs of the business and trying to find some sort of complementary relationship there that will give the startups the opportunity to raise even more capital and be successful in this market.
Matthew: Great point. So you know, the seed round, Pre-A, whatever you want to call it, that’s just the beginning of the road for many people. It’s not the end. So it’s good to keep that in mind and have mentor and guidance on, you know, the subsequent rounds of funding. What ownership or what equity stake will CanopyBoulder take in the startups, and how much equity, how much capital do they get in return?
Patrick: So there’s hard capital that we provide each startup, and the hard capital is designed to enable the entrepreneurs or the founders to come to Boulder and spend three months focused on their startup. You know, it’s a small amount. It’s $20,000 in seed capital that we provide. And then on top of that we provide office space, a long roster of mentors who are open, interested and willing and want to help these startups. We provide all sorts of events to generate interest around the businesses and these startups and the accelerator. And we also provide an investor forum for at the finale the grand finale pitch slam or sometimes they’re called demo days where the entrepreneur gets up on stage in front of a large crowd of investors and the mentors in the community and people that are interested in what’s going on to get their idea out there, to get their startup some traction and hopefully raise more capital.
Matthew: Now there might be a lot of potential entrepreneurs out there listening that say I have a good idea, but I’m too young, I’m too old, I don’t have the connections, I don’t understand finance, all these different possible obstacles in their mind. What would you say to somebody listening that has some of those obstacles in mind?
Patrick: you know I would say an accelerator is probably perfect for you. It is a safe place to come to get the education or the experience or the contacts, the exposure that you need. We help you round out that business plan, round out that strategy and get it in front of the right people. I mean the mentors and investors in CanopyBoulder are the icons of the industry. These are the people that have the rolodexes, the connections. They are the pot barons. You know, they are the people who you see on TV, and they want to have a long term impact on the industry shaping its future by helping the entrepreneurs in ancillary products and services today. And I think that’s an enormous value for people that are looking to get in this industry. Whether they’re in the industry and they have an idea, that they see a void that needs to be filled or they’re people from outside the industry who come with great expertise, but don’t know the industry or they are experienced professionals who’ve never launched their own business. That’s what business accelerators are for.
Matthew: And can you give us some of the details as far as how you apply, what the deadline is, you know, things like that?
Patrick: Sure. Everything is available on www.canopyboulder.com. So I’d suggest everyone go there, check it out. Our intention is to run two classes of ten startups in 2015, one in the spring, one in the fall. So go to www.canopyboulder.com. Our deadline is in early January 2015. So there’s still time. And we welcome all applicants, and we pledge to give every applicant feedback on their application and their business so we can have our own impact on the development of the industry even with startups and individuals who don’t get selected for the accelerator in 2015.
Matthew: That’s very generous of you, and that’s good for people to know that if they do submit an application even if they’re not approved, someone’s going to respond to them and let them know what’s going on.
Patrick: Yeah I mean there’s, again, the accelerator, our vision is to have a lasting impact on the future of the industry, and really help as many people as we possibly can. We have to make a selection of… there will be 20 companies that we run through accelerator in 2015. But, you know, great ideas that don’t get accepted in this first round could get accepted in the second round, could get accepted in the subsequent rounds. And we do have plans to expand the accelerator across the country where hubs of the industry crop up like San Francisco, Seattle, Chicago, New York, Las Vegas. As more states come on board we will have accelerators in those cities, and try to make sure that the industry grows up as it should.
Matthew: And what about investors? Are there opportunities to invest in CanopyBoulder still?
Patrick: Absolutely. Absolutely. We are still amidst the raise for CanopyBoulder 2015 as of December 3rd. We’re raising $1.2 million that will fund the accelerator for 2015 and give investors a 9.5 percent equity ownership stake in each of the 20 startups. So for their investment, you know, they will get great exposure to ancillary products and services. And I think that’s a real distinguishing factor for individuals who want to get involved investing in the industry. Of course everyone has to be accredited, but it’s very different to sit on the sidelines and read the news and look at business plans. It’s a very different thing to get behind the curtain and have exposure to the businesses and operations and the challenges they have. The learning curve increases dramatically, and I can say that with experience having gotten involved and behind the curtain with a number of startups in this last year. It’s just night and day, and I would encourage people that are serious about becoming part of this movement, becoming part of and trying to benefit financially from the growth of this fastest growing industry in the country. If they are looking for a first step that is a facilitated first step where they aren’t required to do their due diligence, they don’t have to negotiate terms and they want to get in and play, CanopyBoulder is the solution.
Matthew: Now you talk to a lot of entrepreneurs in this space and see a lot of pitches. What do you see right now that excites you? I mean, I see a lot of competition in things like vaporizer pens. There’s some extraction equipment, but maybe something that we haven’t seen that you thought was exciting.
Patrick: What I’ve seen that is exciting is data opportunities. The businesses that really excite me now are those that are in tech and software that are going to take the data and help businesses be run better. That might be a dispensary app that is going to take the data and help those dispensaries target the best price points and the best inventory for their highest return. It might be a grower journal app that is helping growers get better and more efficient at their growing processes and improve over time. And then that data can be extracted out and presented to help others in aggregate make better decisions that will move the industry forward. Again, our vision is to have an impact on the industry and we want to get involved with businesses that share that vision and through their business.
Matthew: So this brings up a question. What if I’m a potential applicant to CanopyBoulder, and I have really strong software development skills, can I have a partner that I apply with?
Patrick: Absolutely. You know, every startup we want to bring the founders in and usually that’s somewhere between one and three people. We like to see two to three partners on a team come out to Boulder to be part of Canopy. You know, it’s just hard to do it on your own, and I applaud everyone who’s jumping in and figuring it out, but partners that complement one another that have proven that they can work well together and make progress, that’s definitely a positive when we’re looking at applicants.
Matthew: In closing Patrick, how can both investors and entrepreneurs find out more about CanopyBoulder?
Patrick: You know go to www.canopyboulder.com there is a lot of information there. We welcome all levels of interest; applicants, investors, mentors, volunteers, even people with just general questions. You know go to CanopyBoulder, all the contact information is there and you can reach out to me directly.
Matthew: And just something as simple as filling out an application if you feel like you have a great idea is very easy to do, but the regret of not doing it can weigh on you for years. And if you have a spark, if you have some great idea, I think this is a potentially incredible opportunity, especially get in early and hear about accelerators like Techstars and Y Combinator that has spawned such businesses as (19.02 unclear) B&B and you can be getting in at the ground floor. I am super excited about this Patrick and thanks for being on CannaInsider.
Patrick: Thank you very much Matt. Take care.
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.cannainsider.com, email us email@example.com. We would love to hear from you.
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 firstname.lastname@example.org. 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.
Learn more at: http://www.cannabizness.com/
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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 email@example.com. We would love to hear from you.