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The Future of Indoor Growing with Chad Sykes of Indoor Harvest

Chad Sykes

In this episode you’ll get a glimpse of what indoor growing will look like in the years ahead. Where water, nutrients, are delivered to plants on demand without the need for soil, the sun, or much growing space. Chad Sykes is the founder and CEO of Indoor Harvest, Indoor Harvest is traded under the symbol: INQD

*Get the FREE CannaInsider Podcast for your smartphone, CLICK HERE.*

Key Takeaways:
[1:22] – Chad’s background
[2:43] – What is Indoor Harvest
[4:27] – What is aeroponics
[8:29] – Chad explains his ideal way of indoor cultivation
[10:52] – How to reduce cultivation costs 70%
[13:18] – Chad explains where his ideas come from
[14:27] – Chad talks about the study being performed with Tweed
[18:35] – Chad talks about MIT’s City Farm
[20:55] – Produce that grows well using aeroponics
[23:20] – Indoor Harvest signs LOI with PUE 1.0
[28:05] – Lighting used for indoor farming
[29:11] – Chad’s final thoughts
[32:34] – Contact details for Indoor Harvest

Click Here to Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www.canninsider.com/consulting. Now here's your program.

As more capital flows into cannabis cultivation business owners are looking for ways to drive automation and yield for their plants. That’s why I’ve invited Chad Sykes CEO of Indoor Harvest to help us understand the latest in terms of technology and indoor growing. Welcome to CannaInsider Chad.

Chad: Thanks Matt.

Matthew: To give listeners a sense of geography can you tell us where you are in the world today?

Chad: Yeah we’re based in Houston, Texas about five/ten minutes from downtown Houston over here in the historic 5th Ward.

Matthew: Okay. I want to jump into everything you’re doing with Indoor Harvest, but before we do, can you tell us a little bit about your background and how you got in to indoor cultivation?

Chad: Yeah so originally I spent about ten years in the mechanical trade industry primarily on the plumbing side, but I did do some work on medical gas and HVAC. I worked for a number of mechanical contractors as a project manager and a superintendent. So I had quite a bit of experience in working on large mechanical projects, mainly hospitals. I did some breweries, dairy operations and things like that. I initially started my career out in the construction industry in mechanical trades and then served in the military and then got into doing investor relations once I got out of the military.

What basically got me into vertical farming was back in 2008 I was helping one of the first indoor farms in the United States, Angel Eyes Produce which is also the first to get organic certified vertical farming. Basically went in and was helping them raise money and that was when I was initially introduced to indoor vertical farming, and basically just followed the industry since now and been following ever since. And in 2011 I felt that there was an opportunity here so I quit my IR job and started Indoor Harvest.

Matthew: Now tell us exactly what Indoor Harvest does.

Chad: Okay so basically what we did was having followed the vertical farming industry since 2008, basically what I did was followed it and identified some key issues with how people were approaching the industry. There’s been a lot of large failures in the industry, VertiCrop, TerraSphere, companies like that. And basically what they all had in common was they were designing a large pre-engineered system. So you would franchise the system or license the system. The problem with that though is in vertical farming how you sell your crops, your business plan itself, you know, and the building, the infrastructure of local markets, everything all really dictates how the facility should be build. And so a one size fits all solution just really isn’t the future of vertical farming.

So we’ve spent all of our time since 2011 developing individual fixture components that we can basically combine in a number of variety of ways to build a variety of system types. So I guess the big differentiator between us and other people in the industry is that we’re setting up to be a mechanical contractor. What that means is we can be hired and do all the design and build work from process flow to automation, the system itself. Everything is completely designed from the ground up specific to that client’s needs. So we’ve basically developed all these fixtures, we just basically combine them using standard mechanical construction techniques.

Matthew: So to understand indoor farming it’s probably helpful to understand what aeroponics are. Can you explain briefly what that means, that term?

Chad: Yeah so aeroponics is the one discipline of cultivation that we’ve decided to focus on, but we do offer hydroponic methods and things like that. They’re a little more less complex than aeroponics, but the primary benefit of aeroponics itself is a dramatic reduction in water usage. You typically see about a 60 percent decrease in fertilizer usage. You can typically run an aeroponics system drain to waste and use the same amount of water as you would typically see in a recirculating hydroponic system. So you eliminate a lot of the controls and risk factors that go along with recirculating the system. You also see higher yields, faster growth, sometimes in the neighborhood of 30 to 40 percent faster. And you see higher photochemicals in the plants. So one of the reasons we chose to focus on high pressure aero, and not necessarily for produce production, I personally believe that for the most part hydroponics is going to be the indoor method primarily used to cultivate the low margin crops.

Our primary target market with the high pressure aero system is actually what we call bio-manufacturing or for plant based expression where crops are grown indoors primarily for their chemical content which is used in the pharmaceutical industry quite a bit to grow a variety of vaccines and various proteins. Yeah the big issue is, you know, the big issues looming right now are going to be, for example, antibiotics. We’re going to have a huge issue with antibiotics and new antibiotics which was recently discussed in a Vice News program on HBO that you know, most of these new antibiotics are going to probably most likely be plant based dry. So we’re going to you know extract the chemicals from these new found plants deep in the Amazon and you know they’ll have to be cultivated in order to express the plant or pull the chemicals out. That’s primarily what we’re developing on the high pressure aero side is a pharmaceutical based type production platform.

Matthew: So I understand this correctly, so aeroponics is kind of using a mist to nurture a plant to drive some compound out of the plant, but maybe not use the whole plant itself. Whereas hydroponics it’s some sort of soilless medium where you actually do want the full plant. Is that accurate?

Chad: Close. I mean basically the big difference is in the response of the plant. So with aeroponics, especially if you’re doing research, you can make changes to the inputs of the plant, both the climate environment and the nutrients and water amounts. And what you see is an immediate change in the plant. So when you’re using hydroponics you don’t typically see an immediate change in the plant. So you know it takes a couple of days to see changes once you’ve changed your formula. Whereas with the aeroponics because the plant is feeding so efficiently you can make very precision changes and then identify what that’s done to the plant itself.

The primary reason for this is because since the roots are being fed about a 50 micron mist, the water molecules and the nutrients and the atoms and all that kind of good stuff are more readily available to the plants, especially if you’re using an inorganic fertilizer. So the plants basically feed very very efficiently as opposed to hydroponics.

Matthew: Now when you look at indoor cannabis cultivation, I’m sure you don’t see it with the same lens as the average person. Can you just kind of walk us through how you think about cannabis cultivation done indoors? There’s the typical, traditional way that it’s done and the way that you would see it as an ideal. Can you just kind of walk us through that?

Chad: Yeah so the primary way most commercial facilities are cultivating cannabis are either in pots like coco or soil or their using like flood and drain system with rockwool. Basically the methods that are being used today in the cannabis are pretty much what the elicit growers were using for the last several decades. You know there’s been some advances in lighting technology. There’s been advances in HVAC and things of that nature, but there really hasn’t been any change in how the crops themselves are cultivated.

So the difference between a platform like ours is basically with cannabis you could expect as much as a 70 to 80 percent reduction in cost of goods using a platform like ours. You know, this is mainly the reduction in fertilizer usage, the reduction in labor because you eliminate all the labor associated with managing the medium. So if you got a grow with thousands of pots of soil or rockwool, that has to be disposed of and managed. So you eliminate all of that. The faster production rate, you’re going to get a faster production rate with aeroponics, and you have more precision control over the photochemical makeup. So you can dial the system in. You can purposely stress the plants to produce higher levels of photochemicals. So it’s an all around better platform. It’s basically like comparing a Pinto to a Porsche.

I believe the reason these technologies haven’t been adopted yet is just primarily because they haven’t been developed yet. To my knowledge we’re the first company actively doing controlled research and development to bring aeroponics into the cannabis cultivation.

Matthew: So I really want to dig into that 70 percent reduction, and I’m sure that’s probably an estimate, but it’s fascinating. Cultivators out there or business owners want to know, hey what exactly is the 70 percent. So you’re not lugging around huge bags of soil for one, so you need less space. It’s entirely more efficient and you’re delivering right to the root system exactly what it needs when it needs it. But what else, I mean what else makes up that 70 cost reduction?

Chad: It’s primarily just the operation itself. I mean for example I personally believe over the next decade or so you’ll start to see cannabis flowers becoming more of a connoisseur type product. I think that eventually the market will move more towards extracts and that’s only because of the labor involved in drying and curing and packaging raw flowers. I can envision in the future, you know, a large automated platform where there’s very minimal human input. You know a situation like aeroponics I mean if you’re dealing with any kind of a medium, that’s going to complicate the automation process. But if you’re working with a system that has no medium, you know, you can more readily automate that process.

So I would imagine future cannabis cultivation is going to be very strain specific or specific strains will be developed based on their growing qualities. You know for example you could see large scale sea of green type automated facilities that would go straight to extraction. So there’s minimal waste and ease of manufacturing. Basically long story short I mean the cannabis industry when I look at, you know, it’s about where the 8 track cassette player was. And we’re basically right now wrapping up development on the CD-ROM. I guess that’s a good way to kind of explain as we’re really working on the high tech side of the industry, you know, capex costs for these types of equipments are higher. I think due to the huge price, you know, of cannabis because it’s still technically in parity with the illicit market and things like that. There really hasn’t been no incentive for growers to use more advance technology, but I think that’s going to change. I think price pressures, you know, as the market started to become saturated and your supply and demand starts to come in parity with each other, I think what you’ll end up seeing is a move towards more higher automation just to be able to compete.

Matthew: Now where do you get your ideas for automation? I mean do they come to you in a dream? Do you take them from other industries? I mean do you go over to Holland because I’ve heard they’re way ahead of us, ten years ahead of us in their cultivation practices. Where do you get them? Is it necessity is the mother of invention? Where do your ideas come from?

Chad: You know I had no background in horticulture before I started this company. You know I just basically looked at it from a mechanical process. And for me when I was introduced to aeroponics everybody sort of displayed it as being some really high tech method and to me it was just a high pressure nozzle system that you would typically see in dust suppression in a mine or any sort of chemical process. So you know from a mechanical point of view I just looked at what people were doing and decided I can do that better. I can do it easier. And so we got started playing around with it and so that’s where we’re at today. And I guess it’s just a knowledge of mechanical processes. Whether you’re doing a dairy facility or a meat processing facility or a large hospital medical gas system. These are all large mechanical systems that require a certain level of automation and that’s my background.

Matthew: Now we’ve had the CEO of Tweed, Bruce Lenten, on CannaInsider in the past. I understand you’re doing a pilot study with them. Can you tell us a little bit about that?

Chad: Yeah so we needed, we had already developed our high pressure platform. We had already filed patents on the particular design that we developed, but what we needed for cannabis was to do additional R and D to be able to develop the platform for cannabis specifically. And each plant is a little different based on how its root structure develops and things like that.

So what we did with Tweed was we wanted to find a grower outside of the United States because of all the federal issues and you know we ended up setting on working with Tweed. And the purpose of this whole relationship with Tweed was to do the R and D that we needed to finish out developing this platform to bring to market. So we set up a pilot at Tweed’s facility and basically that pilot is underway right now. It started about a week ago. And we’ll start to get feedback based on how the plants are growing. And what that feedback will allow us to do is basically develop IP for the process, for specific to cannabis. And then what would happen is Tweed would have the rights to that IP outside of the United States and we would have the rights for the IP inside the United States, and we would have the exclusive manufacturing of all systems for period of ten years. So if Tweed likes the pilot, if they like the results, then they would have access to the IP for use in their facilities.

Matthew: So to give listeners a sense of context here, I believe health Canada has awarded somewhere in the neighborhood of 25 cannabis cultivation licenses. Tweed has one of them. And to compete in this market in Canada, you have to raise a lot of capital and it’s legal to raise capital on a national level. So Tweed is a publically traded company that’s raised a lot of money and they can really invest in their best cultivation practices. How large is the, roughly is the size of Tweed’s grow there in Canada, Chad.

Chad: I mean it’s pretty sizable. I’m not sure the exact space that they have. Having been in their facility they definitely have a lot of room to grow. I believe the facility they’re currently in, the indoor facility is I think roughly 400,000 square feet. I may be wrong about that.

Matthew: Yeah it’s enourmous.

Chad: What I can say, I’ve been in the facility and they’ve definitely got tons of room to expand.

Matthew: That’s good. Is there one aspect of the pilot that excites you the most that you think Tweed will see the most benefit from.

Chad: I think ultimately it will just be the data, the data that we pull out. You know the question will be whether it makes sense to their capex plans to you know to retrofit it or to do it slowly or whatever. You know I don’t know whether or not Tweed will end up using the equipment, but for us you know the relationship, the data that we get will allow us to develop the platform out regardless.

To back up a little bit, I mean, we’re not doing this to prove aeroponics works. We know it works. We’ve used the system. We’ve grown a number of in house technology pilots ourselves and then MIT has been using a platform we built for them for over a year and a half now, and they’ve grown a wide range of cultivars. They’ve grown everything from lettuce to cotton. And the numbers are pretty much average. I mean you pretty much see the same benefits regardless of the crop. So I don’t suspect this will be any different with cannabis.

Matthew: Yeah let’s talk about MIT a little bit. So they have a program called City Farm where they’re looking to help metro areas grow food vertically I believe in a kind of metropolitan environment versus a rural environment. Is that accurate?

Chad: For the most part yes. Basically MIT City Farm is developing the sort of brain or the software infrastructure which would be open source. So what they’re developing is a open source automation platform that will be able to collect a wide range of data and then share that data across the network basically for research purposes and hobbyists could use it to share lighting recipes and things like that. But also what City Farm is working on right now is developing a software platform that would be open source that would allow developers to develop a wide range of technologies for indoor farming upon that platform. It’s real similar a parallel to 3D printing. I mean that was basically designed out of MIT as well. You seen how well the 3D printing open source makers movement has really exploded because of that.

I think that openly what MIT is wanting to do is make the data and the platforms available to researchers and developers to help speed up development of vertical farming. Because the thing to understand is you know, even though cannabis growers have been growing indoors for years only recently has the produce role started to grow indoors. And there’s more money, you know, being invested into research in that area because of interest in food security and things like that. You’re not seeing that research being done in cannabis. I think that’s primarily because again there’s been no incentive for growers to really invest in new technology because the profit margins are so high or the cost of cannabis is so high. I mean compare that to a produce product like lettuce. I mean there’s no reason cannabis should be $2,000 a pound basically. So I think that ultimately that’s what, MIT is basically working towards developing open source platforms.

Matthew: So is there certain produce that lends itself to really doing well in the indoor growing environment with aeroponics. You mentioned lettuce. Is there any others?

Chad: Aeroponics will grow just about anything. I mean you can even take hardwood cuttings off of a shrub or a tree and you know for many strains or many types of hard woods you can actually propagate the hard wood from a cutting just like you would clone a tomato or a cannabis plant. So there’s a huge range of applications for aeroponics not just for what we consider crop production. There’s ornamental production, there’s mass production, there’s seedlings for forestry and things like that. So the applications are quite wide and vary dramatically.

There’s still actually, to be quite honest, a ton of R and D left to do. We’ve been approached to look at things like, you know, developing platforms to grow ginger, to grow saffron. So there’s definitely interest out there in the markets for very specific niche platforms. This R and D just has to be done. I mean nobody’s doing it really so somebody has to.

Matthew: Now there’s some large players like Aero Farms who have not gotten involved in cannabis. Why do you think that is?

Chad: Well I’m not specific to why Aero Farms has not. My gut reaction is that it’s just probably simply that the platform’s just not really designed to grow cannabis. The other issue I think for many or most people in our industry, in the vertical farming industry, the reason they have not crossed over to cannabis is that many of them are research heavy. So they’re being funded typically through colleges or research grants or things like that. And I think just simply being involved in cannabis is a concern for those groups because they could possibly lose their grant and research funding. All of our research has been privately funded. We have not attempted to gain any funding, but we could easily probably get it, but you know it is a sensitive topic. It’s a political topic and vertical farming is an industry that is moving towards government subsidies and research grants and things like that. So I think for a lot of these companies they just don’t want associate for that particular reason.

Matthew: Now Indoor Harvest recently signed a LOI with PUE 1.0, can you tell us more about that?

Chad: Yeah so PUE approached us, saw our news release about what we were working on in the vertical farming industry and they were looking to bring their HVAC system that is used in the data center industry to the vertical farming industry because there’s a lot of great technological features that would benefit indoor farming with PUE’s platform. And it’s a little different than your standard chill water or DX system. They include a heat well which is from a Koyoto. And long story short they basically have really really a high level of efficiency compared to other systems especially in cooler climates.

So the vertical farming for produce for example is going to be prevalent in areas where their water resources are going to be an issue or where climate such as cold weather or lack of sun or minimal sun like Canada and places like that, that’s where you’re going to really see vertical farms develop out. And in the colder climates these systems that PUE makes are in incredibly incredibly efficient. They’re able to take in outside air up to 60 or they can take 90, I think it’s 94 degree temperature inside facility temperatures and reduce that to 72 degrees with no compressor runs as long as the ambient temperature outside is 68 degrees. So it’s a very highly efficient system. And when we did our due diligence you know we found that there was a good fit. And so the letter of intent we signed with PUE is basically the first step in a collaboration with them to bring or develop their platform to work with indoor farming.

Matthew: Now you mentioned that indoor farming lends itself well to some place where water is scarce. You recently signed another LOI with the city of Pasadena. Can you tell us about that?

Chad: Yeah so the city of Pasadena Project is something we’re probably the most excited about. It is a public… if we can get everything set with the city, it would be a public/private partnership. So there would be a commercial aspect to what we’re doing as well as a nonprofit aspect. The primary purpose for us with the facility is to just basically develop a large scale demonstration farm. So something we can number one do long term R and D in. The other thing is to season our team, you know, it’s not like you can go out and hire somebody with experience in indoor farming. It’s a very very young industry. So there’s only a handful of people that are out there that have the knowledge.

So one of the benefits of this project is it’s going to include an academic aspect. So the city is trying to tie that into the academics that are local in Pasadena and Houston so that the facility would both serve not only as our demonstration facility and long term R and D facility, but it would also serve as a facility to educate and train the next generation of indoor farmers, especially managers and operators and things like that. So it’s a pretty broad project and it’s also part of Pasadena’s redevelopment plan for the North Pasadena area. So it’s going to be for the most part a show piece of that area. The facility itself is just really a big CSR R and D type of situation where we’re being subsidized by the city to provide fresh food and education and all the good stuff that comes with the nonprofit side of the project.

Matthew: Do you have any ideas on what kind of food is going to be grown there?

Chad: At present no. We actually have a project meeting May 4th and in that project meeting we’re going to start discussing the terms of the MOU which would be the final proposal that would then go in front of the city, the city council. And so I’m not exactly sure how that’s all going to work out just yet. Ultimately what we have to do is bring in some specialists here in the city of Houston and Pasadena to determine what the market is for particular crops. And ultimately the business, the commercial side of the business or the for profit side of the business will be based solely on what we think would be the most effective solution for the Pasadena area. But that will take place in the next month or so once we start doing that R and D.

Matthew: What kind of lighting do you typically use on the projects you work on? Is it traditional, LEDs, something else?

Chad: I mean as a mechanical contractor, for the most part we’re agnostics to lighting. We typically provide the client with information and let them decide. We do work closely with Illumintex which is an LED company. They’re sort of our default light system because it integrates well into our framing platform. But in terms of lighting, you know, like I said we are a mechanical contractor so we’ll use any lighting system that meets the client’s specifications. So it’s just really basically we just provide the client with information and allow them to make an informed decision on their own.

Matthew: Now Chad in closing do you have any final thoughts on how commercial cannabis cultivators should start to evolve their thinking around become more efficient because I feel the way you’re going is kind of inevitability here in the next five or ten years. And if there’s some cultivators listening now that can make some of these changes or tweaks that you’re talking about, adjust their thinking and process, they can have a real advantage. Is there anything you can share?

Chad: Again it’s just really about automation. You know, creating consistency in your crop. I’ve been in a lot of cannabis grows, and you know a good percentage of them didn’t have adequate integrated test management. You know, it has a lot to do with facility design I think. The best thing I can tell growers out there right now is don’t rush into setting up the cheapest grow you can because your more heavily funded competitor is going to develop a more advanced, more efficient platform and ultimately produce the product cheaper. So that’s the best thing I can tell growers is to look at what are the advanced technologies. Don’t assume you know rockwool and coco is the state of the art because it’s currently not. So that would be my best advice to growers is to just look out there and see what technologies are available, and there’s a lot of really interesting new technologies being developed on the produce side.

Matthew: Yeah. And a lot of cultivators that are on the fence about how to use this new technology might take a small portion of their grow and dedicate it to trying new things to see how it works and you know how they can evolve.

Chad: Definitely, like I said, it’s ultimately going to come down to technology is going to evolve in the space to make operations more efficient. If that’s changing from high pressure sodium to LEDs, that alone is a pretty good drop. I know that some growers don’t like LEDs because they see generally a 20 to 30 percent reduction in their production output, but I think that if they looked at their grams per watt of their actual cost of goods, they would see that they actually have a higher margin. So as long as they can increase their production to meet whatever production they’re looking for, they would have a higher margin. Ultimately technology in this space is moving very quickly. It’s another reason why we have not focused on a pre-engineered system like companies like AeroFarms and other companies out there is that the technology is moving so quickly in the space it’s just better for us to focus on what are the new technologies and then adapt those to our current construction methods.

Matthew: Fascinating stuff. What I hear you saying is like don’t have a technology religion. You know, you said be agnostic. I think let the data speak for itself, try new things.

Chad: Exactly and there’s a lot of companies out there that say they have the next greatest best thing and ultimately for us as a mechanical contractor you know building out this Pasadena facility will provide us a location to test out these products and see if they actually, you know, can be integrated into our construction methodology. It really is. The technology is moving very quickly. This whole indoor farming space is truly at its infancy. And I think that if investors in the market were to closely look at our company they would find that we are probably one of the few companies positioned to be a design, build, engineer for the space.

Matthew: Now Chad where can investors learn more about Indoor Harvest and then people that are interested in becoming clients perhaps learn more?

Chad: Well the first thing they can go to our website which www.indoorharvest.com. We’re also pretty active on Twitter and that’s at www.twitter.com/indoorharvest. We also blog pretty regularly about our operations on our Facebook page which is also www.facebook.com/indoorharvest. You can reach us through any of those mediums. You can also go to our website and email us through our contact form. For our aeroponics platform we’re probably still at least another six to eight months out to wrap up development there, but if growers are interested, they can contact us. We are about to release our shallow raft system. So we’re hopefully going to get sales started on that either later this month or early next month.

Matthew: Okay. And is there a ticker symbol associated with Indoor Harvest?

Chad: Yeah the ticker symbol is INQD and we trade over the counter, actually OTC markets, OTCQB and we were one of the few companies that went public through an S1 directly as opposed to a reverse merger.

Matthew: Okay great. Well Chad thanks so much for coming on CannaInsider and educating us about indoor growing. This is a fascinating topic and I know a lot of people are going to be interested in learning how they can update their grows to get somewhere near the Star Trek utopia you’re talking about here.

Chad: The Star Trek utopia is not that far away.

Matthew: Cool. Thanks for being on CannaInsider Chad.

Chad: Thank you Matt.

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. Have a suggestion for an awesome guest on www.cannainsider.com, simply send us an email at feedback at cannainsider.com. We would love to hear from you.

Creating a Cannabis Edibles Company from Scratch with Julie Dooley

Julie Dooley

Interview with Julie Dooley, Founder of Julie’s Natural Edibles. Julie discusses the different ways to make cannabis infused edibles. Learn how different strains of edibles can affect your symptoms. We explore why Julie uses cannabis butter for her edibles.

*Guess What? You could be listening to this interview on your commute. Get the FREE iPhone app or Android App*

Key Takeaways:
[1:18] – Julie’s background
[2:38] – Julie discusses gluten sensitivity
[3:46] – What licenses are required to create edibles
[4:41] – Julie discusses how she cooks with cannabis
[6:37] – Julie talks about how they break down the cannabis plant
[9:23] – Julie explains why they use the butter
[10:42] – Julie discusses specific strains they use in their edibles
[13:49] – Julie explains how the butter is uniform in dosage
[15:31] – What does high metabolizers and low metabolizers mean
[17:22] – Do people get relief from autoimmune problems from edibles
[19:01] – What are flavonoids and terpenoids
[23:02] – Does having a full or empty stomach affect the effects of an edible
[25:37] – Julie discusses her appearance on the Pot Barons of Colorado
[26:51] – What’s next for Julie’s Natural Edibles
[27:23] – Julie’s Natural Edibles contact information

Click Here to Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you looking for a fulfilling and lucrative career in the cannabis industry? Visit www.cannainsider.com/careers. That’s www.cannainsider.com/careers. Now here’s your program.

Cannabis infused edibles continue to take market share away from flower at an accelerating pace. One of the reasons for this is there are many entrepreneurs creating tasty and healthy infused edibles that entice and delight us. Today we’re going to talk with one of the entrepreneurs doing interesting things in the edible space. I am pleased to welcome the owner of Julie’s Natural Edibles, Julie Dooley, to CannaInsider. Welcome Julie.

Julie: Thank you Matt for having me.

Matthew: Julie to give us a sense of geography, can you tell us where you are today?

Julie: Yes I am located in Denver, Colorado inside a manufacturing facility.

Matthew: Okay, and what’s your background? How did you get started making edibles?

Julie: So kind of a long story made short, I started my journey with education in genetics. I became a parent. I ended up working in the finance industry for many years as a budget officer mainly for a university here in Colorado. And then I entered into the entrepreneurial space in 2009 to jump into the edible market. Continue on if that’s okay Matt.

Matthew: Sure, absolutely.

Julie: So I was diagnosed with celiac disease in 2001 which kind of changed the entire course of my life. I began to pay attention to food and the sources and what I put into my body. And during this journey I was introduced to cannabis which helped with the issues related to celiac disease and continues to be my top choice anytime I need relief.

Matthew: Now you mentioned celiac disease and obviously gluten is involved in aggravating celiac disease, but I feel like that… is it possible that it’s the GMO in wheat or modern wheat that’s causing these sensitivities? I mean I know this is maybe anecdotal, but it seems like a lot of people when I was young could eat gluten and now there’s a real sensitivity to it. Do you notice that as well?

Julie: Yes, well I’m not a nutritionist. I do pay attention. I am very familiar with foods and the sources and agriculture today. I definitely would agree that wheat grown today is entirely different than it was 100 years ago. And it’s been modified to such an extent that celiac such as myself I don’t recognize it as a food anymore. It’s literally an antibody that my body attacks. Therefore it’s becoming much more prevalent in today’s society with the American diet as it is consuming the agriculture, the GMOs that we’re not sure what they’re going to do in our body. It’s an increasing food related illness. I would definitely agree with that.

Matthew: And for listeners that want to learn more about modern wheat and the problems it’s causing a great book is Wheat Belly, if you get a chance to read that. Now many people don’t understand there’s different kinds of licenses in Colorado. You’re not a dispensary and you’re not a cultivator. What kind of licenses do you need to create edibles?

Julie: So I’m known as a manufacturer or infused products here in the State of Colorado. The Department of Revenue is the specific area where I get my license from at the state level, and it’s an annual license. We are also licensed by the city that you’re manufacturing in. In my case it’s the city of Denver, Colorado. So we have a separate license with them. That’s also annual, and within the city of Denver we’re monitored by the traditional health department, fire department, you know, public neighborhood area and zoning if you will and like any normal manufacturing food facility would be.

Matthew: Now there’s a lot of ways to cook with cannabis, can you describe at a high level how you do that with butter or oil or what your preferences are?

Julie: Absolutely. So essentially once we’ve infused our marijuana into clarified butter or coconut oil in my kitchen. We bake with it as we please. The difference between home baked edibles versus manufactured edibles is laboratory testing and scientific methods maintained throughout the baking process. Does that answer your question.

Matthew: Yes, well when you talk about clarified butter, you know, a lot of us may not be familiar with that, people listening. Now Ghee is typically associated with Indian food, but is it the same thing. How is it different and what is clarified butter exactly?

Julie: Good question. Clarified butter is essentially the milk solids have been removed from the butter oil. So the flavor is still intact, but now you’re dealing with a pure oil, and in our case we use it strictly for a longer shelf life purposes.

Matthew: Okay, now someone that has a lactose intolerance are they typically, is it easier for them to handle clarified butter than other kinds of butter?

Julie: So again I’m not a nutritionist or a doctor, but for people with dairy intolerance I do know personally some that can handle clarified butter. That’s not why we chose to use it of course. It’s to extend the self life our natural products, but for people that do have dairy intolerance we also brew into a coconut oil just for that reason so we can offer somebody with a dairy intolerance still an edible that’s manufactured at a high level.

Matthew: Now for breaking down cannabis sugar leaf, flower or trim into oil, do you have a preference as far as BHO, CO2, alcohol? I know there’s a lot of different people saying things, different things out there. I’d like to hear what you think about that.

Julie: Yeah absolutely. So in our kitchen at Julie’s Natural Edibles we extract exclusively into clarified butter or coconut oil. We love this natural, old fashioned extraction. The attraction of cannabinoids to fat is very natural in nature and it pulls the cannabinoids off the plant in a slow warm process. So it’s easy, it’s safe. We don’t have the fire department worried about what we’re doing. As far as the other extractions, BHO, CO2 are similar in that they’re both a gas that’s used to extract on a cold level and it’s a lot faster and it produces a much more intensely potent oil. Not to say it’s bad, it’s just a different extraction which requires hardcore industrial machinery at this level. Alcohol is a truly cold extraction and really good for people who are using this as strictly a medicine. So I love the alcohol extraction, but that is again not something we do in the kitchen here.

Matthew: Now can you get the full cannabinoid profile from the plant when you’re going directly into butter or is there any limitations there?

Julie: So since current lab testing, this was an interesting question I thought Matt, because current lab testing doesn’t truly offer us all of the cannabinoid profile. To date, my laboratory that I use can test for nine cannabinoids only, and we do know that the butter when we do an extraction can show all nine. Now some of these we don’t want to show. We’re traditionally trying to avoid a cannabinoid called CBN. Now that makes you sleepy, and if we’re trying to do an uplifting product, we would avoid that cannabinoid all together. And we’ve learned through the years how to avoid it. So we strategically are extracting four specific cannabinoids that we can test for right now. In the future we’re going to be, every year we anticipate that the laboratories will be able to expand on this and we’ll get more and more information from these reports. Once we do then we’ll continue to go after certain cannabinoids.

Matthew: Now I want to kind of give listeners some context on the differences between, you know, BHO, CO2, alcohol extraction and what you’re doing with butter. Would you say what you’re doing with butter is kind of maybe a more natural and kind of a comfort food approach versus the others which seem to be more like hardcore industrial? Is that a fair description?

Julie: Yeah absolutely. It’s a natural. It’s an easy process. You know it took me still about a year to hone and perfect, and I couldn’t have done it without the laboratory testing helping. So it was relatively easy for me to get involved in whereas I said yeah, you need industrial level rooms at this level. The city of Denver has gotten very strict about extraction process and something that’s flammable is going to catch the eye of the fire department of course and they’re concerned. And so they lay down a lot more restrictions for those type of extractions. And so that’s why now I actually believe in CO2 extraction. We love that extraction for one of our products that needs to have a higher potency. So we buy that from a professional who makes that here in Boulder, Colorado. We don’t even try and get in their alley. We just leave those extractors to specialize in what they do and then I become kind of the specialist in butter.

Matthew: Okay so you, you know, a lot of times when we buy edibles we don’t know what strain of cannabis it comes from. It might just say hybrid or a sativa or indica. It doesn’t go into a strain. Do you edibles go into specific strains?

Julie: Absolutely, and that the scientist in me Matt. I want to understand cannabis on a very deep level and that’s part of the mission of our company is to learn about it and then to educate about it. And to do that we have to stay true to the string that way we can kind of dissect that one particular strain, understand anecdotally how it acts in the body for a general consensus. It’s going to be different for everybody, but generally we can start to predict that a specific strain is going to behave a certain way. And to do that you have to stay true to the strain. Now because I’ve been in this business for five years and have been testing for five years Julie’s natural edibles is able to start to blend hybrid and creating our own hybrid if you will going after specific anecdotal results. So for instance I want low anxiety that also stimulates the appetite. So I might need to combine two strains to get that desired result and having not understood the strain by itself I wouldn’t be able to then eventually blend it or not. Some of them are perfect just as they stand, and we’re happy to provide that to the public then so that they can appreciate and start learn themselves. Oh Afghani it’s an indica. It makes me kind of relax, and then they see Afghani again and they know what to expect and they can reach for that.

Matthew: Okay and what’s your most popular strain/product right now?

Julie: Our most popular is what we have in stock.

Matthew: Okay.

Julie: Basically I have seven strains currently. One second, we’ve got an Afghani of course which I just mentioned which is an indica and tends to keep people relaxed. It’s an low anxiety. We have something called D.J. Short Flow. Anything with Flow in it is a low anxiety, but this is still and uplifting sativa. We have something called Kaboom which is another uplifting sativa and that can be uplifting and a very intense euphoria, and so understanding Kaboom I can kind of prepare you for this intense euphoria that traditionally accompanies a strain like that. There’s more strains in the kitchen. They’re all fabulous. Get to know them and love them and we’ll keep producing them.

Matthew: So when you create a big batch of butter how do you make sure that when you get it on granola or one of your products that it’s perfectly uniform? It’s one thing I’ve been wondering about because, you know, especially with something like granola that’s loose. It’s like how do I know this bite is uniform with this bit in terms of getting a dosage?

Julie: That’s a great question and as an educator in consuming edibles I really appreciate this question because we worked hard to get to homogeneity which is kind of what you’re referring to right now. And to make a homogenous product that is the same as the first granola that I produced as the last granola we use the lab. That’s essentially how we master the technique. We tried several different ways of mixing and preparing and then when we consistently got a good lab result from one piece… the first one out of the batch and the middle out of the batch and then the last one we’re getting consistent results, we stick with that method. So basically the critical part to that question is that we have to use and work in tandem with a laboratory. Their tests are everything to our products. And once we receive the results then we just use the data to create the recipe.

Matthew: Okay.

Julie: And then of course we do verify our math by resubmitting finished product. So we submit it for potency and then we’ll do homogeneity. We’re also testing for microbials, and that’s been really helpful to help us determine shelf life for these products.

Matthew: Now as a creator of edibles I’m sure you’re very familiar with people that are high metabolizers and low metabolizers. Can you talk a little bit about what that means in the context of edibles and how people should think about it?

Julie: So start low and go slow is how we tell everybody how to consume an edible. You don’t, if you’ve never had it, it’s an entirely different experience than smoking cannabis and it lasts longer. It’s much more effective as far as pain relief and anxiety relief or whatever kind of relief you’re trying to achieve. I’m sorry.

Matthew: Low metabolizer.

Julie: Yes. I’m so sorry. So the metabolism, and so everybody’s different. So starting low, going slow. Once you’re familiar with it, then you can start to gauge what your dose is going to be and that’s where it’s so important to continue to use products that are produced at a level we produce at Julie’s Natural Edibles and other manufacturers here in Colorado where we lab test and that way you can kind of get used to what is a 10mg serving and is that effective for you or are you going to need 12mg or are you going to need 25mg. And so it’s kind of backwards whereas like the pharmaceutical company kind of gives you a pill bottle and suggests a serving or a dose, we do the opposite, try a little bit. Try a little bit more if necessary. It’s kind of you have to gauge it yourself. So understanding your own metabolism is very important.

Matthew: Now autoimmune issues there’s a lot of, it seems like a lot of autoimmune issues right now and there’s more and more I hear about it every day; Crohn’s disease, psoriasis, rheumatoid arthritis and there is more. Is there any of your edibles that you’ve heard anecdotally that people are really getting relief from their autoimmune problems?

Julie: So it’s a good question, and I thought about that a lot because I myself am a celiac. I have an autoimmune disease, and do I gravitate towards a specific strain, and the answer is no. It really depends for me on my mood and what time of day I want to consume it at. And you know my state of mind is very important. That being said, there’s some days that the flare up is really extensive and you know very painful and you’re looking for the strongest relief, that’s when I would gear towards a CBD. Anything higher, the cannabinoid known as CBD which I’m sure people are starting to really hear that word. Basically it is a cannabinoid that’s been isolated on the plant and it is a large reason that people are starting to be familiar with cannabis in general because of its ability to help with anti-inflammatory. It’s great for anti-nausea. We know that it’s helping with the neurological disorders. And so I would say that to somebody who is new, who really is in a peak bad experience during their autoimmunity, you know, because it kind of ebb and flows with any autoimmune. You have good days and bad days. So a high CBD would be something that I would gravitate towards.

Matthew: Now what about flavonoids and terpenoids? Can you explain what these are and how we should think about them in the context of edibles?

Julie: Yeah another great question Matt. So this is, flavonoids and terpenoids are responsible for the flavors and for the color and for the odor that cannabis might have. Now somebody like myself, I’m a connoisseur, if you will, of cannabis now. I am very familiar with strains and what I’m looking for in flavors. When I detect a sweet smell for instance, that’s a flavonoid that’s responsible for keeping that… I know that it’s going to be a relaxing edible. The sweet smelling cannabis is usually a higher indica and we know that indica dominance can be much more relaxing.

So it’s something that we actually look for now. And the sweeter they are, we’re starting to learn that that can mean even something more, and I’m just so excited to continue on the study of flavonoids and terpenoids. Without a microscope you can look at the cannabis and you can see yellow hairs or purple hairs as people call them off of the bud, and that is a flavonioid or a terpenoid. And when you smell it it’s sweet or it’s citrus or its opi, that again is terpenetes [ph] responsible for that. We can taste it in the butter as well. That does transfer. Once we get into an edible that flavor is not as dominant, however it’s still responsible for the anecdotal property that we’re expecting from the edible itself. So it does matter. Like I said if I’m looking for a sweet, a relaxing edible, I’ll look for a sweet smelling cannabis.

Matthew: It’s funny how far it’s come. I mean since I was in college it seemed like the quality was just unbelievably low and now it seems like it’s something from outer space. It just incredible variety and quality.

Julie: There is some truly wonderful growers in this state for sure.

Matthew: Now I have a friend that just loves your granola, and she swears that it acts way faster than other edibles, not necessarily stronger, but faster. Have you heard that feedback before?

Julie: You know I have and here is what we know about that. And this is still new data, so bear with us as we continue to study this, but because our edible is paired with fat, the natural oil of butter or coconut oil and then it’s paired with something like an oat or even a cranberry, we know that when they’re absorbed in the body it’s a little bit faster than if it was paired with just sugar which will essentially kind of fly through your digestive system. Some of it gets absorbed, some won’t . But when you pair it with a fat it’s a lot longer, you know, your body gives it a lot more attention essentially and it gets relatively quickly absorbed in the blood.

So that could be what you friend is experiencing, and we’re happy that she noticed that because that’s something that I was very… I had to, when I was creating the recipes for Julie’s Natural Edibles back in 2010, we knew that I couldn’t use sugar in the kitchen because that’s not the way I eat. We knew that we couldn’t use gluten because I’m a celiac and that wasn’t going to work. We did this without understanding truly that pairing with fat was naturally going to be a better product. And now that five years later that we know that in fact we may also understand a little bit why, we’re really proud of creating a product that’s good for you on many levels.

Matthew: Now how would eating a big, fatty or protein rich meal before consuming one of your edibles change the impact versus having let’s say an empty stomach?

Julie: Great question. So this is, again, to do with the fat. Assuming that the meal you ate was loaded with proteins and fats, your body is going to have that in its stomach and its early part of the digestive system, then the THC gets introduced. And the THC is going to bounce from fat to fat and then eventually into the blood stream. Once it hits the liver then all bets are off and we call that your second peak by the way. And that’s where we suggest people have planned their peak and they are where they’re supposed to be at that point. If you’ve eaten a meal, again, what happens in the liver is going to be much more intense. I’m still in the learning process of why so stay tuned. It’s kind of, we laugh, not that I’m a scientist like Einstein but something like that we just knew, you know, that gravity existed. We don’t know why. We know pairing THC with fat is really effective, but we’re still just learning why.

Matthew: Right. So it’s the exact opposite of alcohol, you know, you don’t want to be fall over drunk with a couple drinks, you have some food first. But with THC and cannabis, you know, having a fatty, protein rich meal can really turn up the volume on the effects.

Julie: Exactly, and that is a good point, if you don’t mind me throwing in here, that if you do find yourself that you ate, and I recommend eating before you consume an edible actually because on an empty stomach you can have kind of similar to the burps from omega pills. That can happen if you have an empty stomach. I’ve known people that have given us feedback, and we want to avoid that, but also then you have to eat less of the edible and that’s important because you know these edibles are expensive. And one dose, once you kind of figure out what your one dose is that’s with food, it’s really helpful information. But the point I wanted to bring up is that should you over indulge and you’ve eaten that mean, and you ate too much of your edible the best thing to do at this point is to just consume water, no fatty food. So you could eat candy. Sugar is actually it helps expel the THC from your system, and always be with a trusted friend.

Matthew: Good point. Now you were on the MSNBC show the Pot Barons of Colorado. What was that experience like?

Julie: That was a fun experience. We were, to put it mildly I guess, we were looking for an opportunity to educate the public. At this point we have a lot to offer in regards to edibles. And so we thought that this would be kind of a good platform for that. It turned out to be more of a learning experience about media. I now understand a lot more about interviewing process and media in general. So we’ll just kind of leave it at that.

Matthew: Yeah the editing process can be kind of harsh reality when you see what you thought happened and then the outcome I imagine.

Julie: Exactly, and it was time consuming so that… which was fine if they had passed on the educational message that we were so urgently trying to have them talk about, and then have it not mentioned was a real heart breaker here at my company.

Matthew: So what’s next, looking ahead, what’s next for Julie’s Natural Edibles?

Julie: So thank you for asking. We are planning to relaunch. My company was known as Julie & Kate Baked Goods since 2009, and my dear friend Kate left for Atlanta many years ago, and so we finally decided it was time to rebrand officially, and we’re looking forward to a big launch for April 20th which is now kind of like a national thing.

Matthew: And where can listeners find Julie’s Natural Edibles?

Julie: So we’re available anywhere in the state of Colorado at a dispensary, licenced dispensary, available on the medical market as well as the recreational market. So if you’re out of state and you’re 21 you’re welcome to come here. We do have the most inventory is available in the city of Denver and Boulder. Please feel free to look at our website. It has a current list of where we’re located.

Matthew: And what’s the URL of your website?

Julie: www.juliesnaturaledibles.com

Matthew: Well July thank you so much for coming on CannaInsider. We really appreciate it.

Julie: I appreciate the questions Matt, thank you.

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

The Cannabis Search Engine and Insights Platform Called Weave

Christian Nitu

Interview with Christian Nitu, Co-founder of Weave. Weave is both a cannabis search engine, but also an analytics and insights platform for dispensaries.

Learn more at http://www.useweave.com

Key Takeaways:
[1:18] – Christian talks about his background and starting Weave
[3:15] – What is Weave?
[4:37] – Weave from a dispensary perspective
[6:12] – Christian talks about what Big Data and cannabis
[8:31] – Do you see the need for express lines in dispensaries
[9:35] – Christian talks about integration capabilities
[11:42] – Weave from an individual perspective
[13:11] – Who can access the dispensary analytics
[15:23] – Christian discusses possible delivery options for Colorado in the future
[16:49] – Health related queries
[17:43] – Becoming a Weave alpha user

Click Here to Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you looking for a fulfilling and lucrative career in the cannabis industry? Visit www.cannainsider.com/careers. That’s www.cannainsider.com/careers. Now here’s your program.

Weave is a search engine that helps customers find cannabis products easier. Weave allows customers to view real time menus and place orders online for in store pick-up. For dispensaries Weave is a resource planning tool to make sense of sales information and buyer behavior. Weave’s data analytics platforms transforms cannabis data into money making reports and easily digestible information. I’m pleased to welcome the co-founder of Weave Christian Nitu to CannaInsider today. Welcome Christian.

Christian: Hi Matt. Thank you for having me. I’m excited to be here and talk about Weave.

Matthew: Cool. I want to jump into Weave and everything you’re doing with it, but can you tell us a little bit about your background and how you came to start Weave?

Christian: Yeah sure. So was a student here at the University of Colorado back in 2011. So I started my first company here in Boulder, and that was around the hardware IOT space. So we developed a company called the Snow Gate that produced an electronic locker system that could be controlled by your phone. So I ran that for about three years and that’s where I got my experience with entrepreneurship and startups and technology. And it just kind of captivated me into getting more information about technology and how people used it as consumers for products and product development, and that’s where I started getting really interested.

But we ended up selling that company to the largest locker manufacturer in North America last year. And that kind of freed up my time and so I started to do some consulting for an ad agency in Boulder, and they were looking at the cannabis space as kind of a new business. And so I started to work with dispensary owners and managers. And just noticing different trends on the retail side, I started to figure out that there were a lot of pieces from a technology aspect that were missing in the industry that could really help clean up a lot of the inefficiencies from managing your inventory to helping consumers find the right products and then also, I mean, one of the biggest glaring problems that we saw was that there was this huge information gap. You have millions of customers going into stores asking for certain products to feed a certain need, but they don’t have any quantitative research or information to get that from.

So that’s kind of where we started to piece together Weave, and I started that company in September of last year with four other co-founders. So right now it’s just us five. We have our headquarters in Boulder and we’re just getting ready here to launch pretty soon.

Matthew: So Weave is pretty ambitious. Why don’t you tell us what it is and who should use it.

Christian: Yeah sure. So, you know, from your description you have it down to a “T”. The only thing I would add to it is that Weave is very focused on the localized approach. We see other search engine sites for this space, you know, gathering a lot of information on stores around the whole United States. Where Weave is focused is really providing kind of a localized experience. So getting as much information as we can from our POS API that we’ve developed from getting, you know, inventory results, starting to work with lab companies to get testing results, and really starting to track kind of buyer behavior and consumer behavior. Figuring out what people want so that we can help customers find the right products for a specific need and then help them reserve it through our service. And then we can help businesses make sense of all this data that they’re already gathering, and now being able to make business decisions on data driven information.

Matthew: Okay so looking at it from a dispensaries point of view first, Weave integrates through a API into the software at the dispensary at the point of sale, and collects that information and produces it into easy to understand reports and insights.

Christian: Yeah. So that is our first product that we are developing. It allows the dispensary managers and owners to see a very intuitive, simple way of the data that they’re already capturing. We allow them to kind of parse through that data in a very easy manner. The other products that we’re developing already is going to be allowing for a more full experience on the data side. So that will be separate from the POS integration, kind of our own platform of products coming to market.

Matthew: What kind of insights would a dispensary manager or dispensary owner be able to get out of using Weave that they might not typically be able to have if they were just, you know, looking at some spreadsheets or something like that?

Christian: Sure. So I think one of the biggest key values that Weave has is being able to gather all the information they’re already gathering, but being able to forecast that and make sense of the historical data so we can find out product trends around their particular store, product trends around particular geographic locations. We can help them with staffing, but more importantly the consumer side allows us with the technology that we’re building, we’re capturing search queries and we’re making sense of certain words that people are asking about cannabis. So if people are typing in beverage, we can figure out what products they’re actually looking for or what stores they’re looking at to find these products. So we can connect the consumer behavior with the data that they’re already capturing on the storefront and connect those two together.

Matthew: Now we hear that term “Big Data” thrown around a lot. What does that mean to you?

Christian: Big Data means that there’s a lot of unorganized data pipes out here in the cannabis industry. Right now, I mean, it’s still an industry that’s growing so a lot of people haven’t been able to kind of settle down and look through all the data. So you have stores collecting information on sales records. You have product, new companies trying to understand their inventory flow, and then you have people that are trying to figure out how to capture customers’ information, figure out how they’re buying things in stores and looking for certain products. So with Big Data with cannabis it’s being able to connect all of these different data points together and produce something that businesses can make decisions on.

Matthew: Now is there an aha moment when you’re talking to a dispensary owner where they kind of have, it clicks and they get what this can do for them? Is there one bullet point where they kind of say oh, okay this makes sense. I see the benefit for me.

Christian: Yeah sure. So I mean on our reservation product which is going to be in beta later this week in Boulder, we’re going to be giving that out for free. So we’re not going to be charging any dispensaries to upload their digital storefront. So I think the aha moment is when we’re telling them this piece. They are able to kind of see that as a great online marketing tool, being able to go and find people online in a way that adheres to the law and being able to get their customers online driven into their stores, and it’s at no cost to them. So I think that’s kind of the benefit from our first product.

Matthew: Right, there’s a huge value add there because the average dispensary customer spends $1,000 to $2,000 a year, and if they get frustrated having to wait on a Friday afternoon at 4 o’clock to get their order, that could be… the lifetime value of that customer is enormous that they’re losing. But this can only go well, this order ahead if the dispensary says, you know, we’re going to treat people that order ahead a little differently. We’re going to have a express desk kind of like Harbor Side Health Center has in Oakland where if you know what you want and you order ahead, you can just come in and pick it up. Do you see the dispensaries welcoming the idea of an express desk or something so people don’t have to wait in line, like people that want to talk to a bud tender?

Christian: Sure. I see huge value and we’ve already talked to stores about that. You know there are a lot of customers that are going into stores already knowing what they want. So they want to be able to cater to those customers’ needs as well. So I think initially, you know, they want to test it and make sure that it’s being used and it’s not disrupting any of the workflow that they’ve already established with their employees. But I think over time what they’ll see is that it actually reduces the inefficiencies. So with staffing being able to know when to have employees there with certain products trending faster throughout the day or whatever it is, but being able to reserve a spot, kind of an extra station for a self-checkout experience. It think they’re already… we were to have seen stores here in Colorado already doing that. So I think it goes in line with where the retail side of this stuff is going in the future.

Matthew: And is it pretty easy to integrate with Weave then? Let’s say if I have M.J. Freeway or Bio Track or Adolis or the big software packages out there, how do I integrate with Weave?

Christian: So right now we do have one integration partner already settled. We’re already working on a couple others as well. From the standpoint of the technology companies talking to the software providers, it’s very easy. We handle, we prefer kind of a rest API, that’s how we integrate with our technologies, but we work with the software company to build a bridge between Weave. And on the storefront level it takes a manager about two minutes to set up. They just have to go into their dashboard with whatever software provider they have, whether it’s Bio Track, M.J. Freeway or Adolis and then simply turn on our API key, and then we go ahead and we go ahead and we sync that. I think right now with what we have in our beta database, we have about 5,000 products and it takes us about 2, less than 2 milliseconds to kind of sync all of those together and figure out what’s where, you know, what quantity is where.

Matthew: Sometimes I feel like the cannabis software industry is a little bit closed. Like they don’t see the value of having an ecosystem, partners, but really if they let someone like Weave in that only strengthens their offering to the end user and makes them more sticky and less likely to leave because hey we’ve got our weave integrated with our POS software and our seed to sale software. We’re happier. We’re not, you know, there’s no threat.

Christian: Right exactly, and that’s kind of what we’re trying to make aware is that we’re helping bridge consumers to the stores in an online fashion. So for the POS systems we see them as a great source of technology in the backend for operations side on the storefront level, Weave helps bridge the gap with the customer end. So we kind of go in sync and provide partnerships that are beneficial for both parties.

Matthew: Now looking at Weave from a individual’s point of view, they’re just going to Weave and it looks like a Google search bar. There’s like a flashing cursor, like what do you want to know. So maybe you would type in, you know, autoimmune inflammation strain or something and you might see search results that would say here’s some information around that that you might find useful. Is that how it works?

Christian: Yes, so that’s the goal of it. The first alpha version that we’re releasing right now is going to be allowing people to just search by product name or store. But we’ve already started developing and we’ve been working on this for a while, kind of the core technology of the Weave search engine which we think makes us distinguishable is really on the natural language processing and machine learning techniques that we’re using. So you know we’re gathering data on what is exactly available at stores, knowing the quantity, knowing all of that information.

We’re starting to track user queries, kind of the words that people are asking bud tenders as if they’re in the store. And then we’re working with cannabis doctors as well as test lab companies and hopefully at some point research companies, people who that are doing, you know, the clinical research studies on things like PTSD, child epilepsy and different diseases. And taking all that information and we compile our own algorithm to help find the right product for that search query . So that’s kind of the evolution of where the search engine is going to go, but for right now we’re focused on just providing a simple service of being able to see exactly what’s in the store before you get to it and then as we collect more data the engine will get more powerful as time goes on.

Matthew: So with all the data that will be collected at the dispensary, will you be able to generate reports or something for the industry with insights about what’s happening for people that don’t own a dispensary but are interested?

Christian: Sure so I think… our main concern at Weave is definitely privacy. We take a very hard approach about what we’re doing with people’s information. You know from a consumer perspective we don’t capture anything that’s incriminating. We don’t require you to give us an email address or require you to give us any personal information other than a phone number when you’re ordering, but we redact and erase that information within 24 hours to 36 hours. So we don’t keep anything on the personal side.

What we’re being able to aggregate though are the questions and the reasons why people are reserving certain products. So from an industry perspective, I think that’s very valuable to know insights into consumer behavior. On the store side, you know, what we’re doing is we’re pulling together a lot of product inventory levels and understanding the flow of business through a dispensary, but again we don’t want to be, you know, exposing all that kind of information out to the public. So we’re going to be aggregating all of this stuff and displaying it in a way that people will be able to see kind of generalized approaches of edibles are trending here, you know, certain products are doing well over here, and these are the questions people are asking in these areas.

Matthew: Okay so there’s a predictive component to it where a dispensary owner would maybe say okay it looks like Girl Scout Cookie strain is going to be popular for the next ten days, make sure we get more of that over here, start curing more, you know, they make decisions around that so that they have more available in the next couple of weeks. Is that how you see the dispensaries using it more?

Christian: Yeah and I think it’s going to go in line with how this industry is working. I mean right now people are still figuring out the supply and demand issue and getting their operations to a point where they don’t run out of inventory. So that’s what we want to do. We want to be that layer of service that helps them plan and forecast, kind of like resource planning tools.

Matthew: So there’s an order ahead component which is, in Colorado, unlike California where you can have cannabis delivered that meets certain conditions. In Colorado that can’t happen, do you see any kind of delivery option in the future or is that just too far out?

Christian: So for our immediate roadmap, it’s not on there. We would welcome actually the opportunity to talk to other companies that are providing this service. But I think the mission really for Weave is to get information out there into the public sphere about cannabis products. You know, the landscape of consumers are changing. You don’t have your typical stigma of what a consumer is anymore going into stores. You have moms, doctors, lawyers, people from the past that have used it before and now are coming back. And some of their questions, some of the stuff that we’ve been capturing already, it’s interesting; 75 percent of the search queries are related to health and wellness.

So being able to help people find products for health and wellness reasons I think that’s a very good mission that Weave is trying to achieve. So being able to get that in a quantitative fashion, I think that would be… any service that helps us get there, I think that would be a benefit.

Matthew: Yeah, and there’s a lot of… there’s a certain demographic of people that are interested in cannabis but still kind of have this nagging bias in their head that it’s something that’s wrong, that they’re trying to get over and this is a good first step to educate themselves before going into a dispensary as well. So what kind of health related inquiries or queries do you see that maybe surprised you a little bit?

Christian: Sure. I mean we have, you know, some of the most common ones are obviously things like back pain, insomnia is a very big one. There are things that go along with finding high CBD strains. I think a couple of interesting ones are finding things that affect, you know, finding out cognitive effects. Finding out what can help with eye strains. And another interesting thing is we’ve had a lot of queries around athletes and sports. What is good for running? What is good for lifting? Things like that that you wouldn’t kind of equate to being a cannabis user. So you see there are multiple applications for the plant, and if we can help people find the right products for that reason, I think that’s a very good thing to offer the industry.

Matthew: Now you mentioned that Weave is in alpha, if listeners are interested in becoming an alpha user, how can they do that?

Christian: Yeah sure. So they can go ahead and go to our website which is www.useweave.com. We sometimes have a problem with people just going to weave.com and seeing a bunch of hair products. So we just want to make sure that people know to go to the www.useweave.com domain. Go ahead and enter an email address and we’ll add you on our list to check out our staging site, but we’re going to be releasing that here in Boulder this week with about four stores, and then the hope is that at the end of April we’ll have been in Boulder, Denver and a couple other locations that we’ve been talking to.

Matthew: Great. Great, and how about investors? Are you still open to new investors?

Christian: Yeah, I mean, I think it’s every entrepreneur’s job to always be open to getting more money. So yeah, so we’re definitely very much in our seed round still. We raised a small investment early, late last year and now we’re looking to bring in some more money so we can add some engineers. I think the cool thing about Weave is that we’re very engineering heavy and we’re very tech focused. We have about three engineers on our team, and we’re looking to add more and Boulder’s a great hot bed for attracting great talent. So we’re looking to raise some more money this month to get us out and going. But if they’re interested in contacting, you know, please reach out to me at Christian@useweave.com and I would be happy to field any questions.

Matthew: Great. Well Christian thanks so much for being on CannaInsider today.

Christian: Yeah, thank you very much Matt. I appreciate our talk and thank you for having me.

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

The Size of the Cannabis Market – Diving into the Numbers and Insights of Cannabis Legalization with Matt Karnes

Matt Karnes

Matt Karnes, founder of GreenWave Advisors takes his keen analytical eye and helps us understand the cannabis industry in size and profit potential compared to other “sin” industries.

Get 10% off Matt Karnes industry report at: http://www.greenwaveadvisors.com/
with the coupon code: cannainsider

Key Takeaways:
[1:25] – Matt’s background
[3:31] – Matt talks about the content and numbers in his research report
[5:42] – Matt discusses the difficulties in analyzing the cannabis market
[6:57] – Comparing cannabis to alcohol
[7:50] – Matt compares the marijuana and alcohol industry in terms of size
[11:09] – Matt discusses why cannabis business can’t write off certain expenses
[15:11] – The big takeaways from Matt’s report
[17:27] – Matt talks about the new tax numbers coming out of Colorado
[21:06] – Matt discusses the marijuana industry moving forward
[22:42] – Contact details for GreenWave

*Get the FREE CannaInsider Podcast for your smartphone, CLICK HERE.*

Click Here to Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www.canninsider.com/consulting. Now here's your program.

We hear a lot of wild speculations thrown around about the size and scope of the cannabis industry. A lot of it without any real substance or data behind it. Today we’re going to take a much closer look at the size of the cannabis market from an industry researcher that has dug into the numbers and can paint a picture of the size and potential of the cannabis opportunity. I am pleased to welcome Matt Karnes of GreenWave Advisors to CannaInsider. Welcome Matt.

Matt: Thank you , good to be here.

Matthew: Now Matt to give listeners a sense of geography, can you tell us where you are in the world today?

Matt: I am in New York City in Manhattan.

Matthew: Matt you have quite a media report on the cannabis industry, but before we get into that, can you tell us a little bit about your background as an analyst and why you started GreenWave Advisors?

Matt: Sure. I served as an equity analyst both on the sell side and as an analyst on the buy side for a hedge fund. And during my tenure as a sell side analyst, I authored various industry reports on different emerging technologies, disruptive technologies, etcetera, and analyzed those type of companies when I was an analyst on the buy side. Prior to that I served as an auditor for Price Waterhouse. I had varying financial roles during the course of my career. And about a year, year and a half ago I just really took an interest in the cannabis sector realizing that there’s tremendous growth opportunity. And as I was doing my due diligence on the industry it occurred to me that there was really no information that was available in terms of, you know, quantifying the industry that provide, you know, real transparency into how you could take it, go about determining what the market size, potential market size is.

So I took that opportunity to conduct my own further due diligence and analyze the information that was available in those markets where marijuana is legally sold, and use that as a basis to prepare this report, this industry report which is, you know, a pretty lengthy, detailed report on where we are right now.

Matthew: Yeah it’s such an opaque market. It’s state by state. There’s the information can be slow to come out. It’s very difficult for someone that wants to get a macro sense of what’s going on to get real true information. What subjects are explored in your research report so listeners can get an idea of what you dig into.

Matt: Sure so basically what the objective of this report, our first report is sort of like a primer for those new to the industry, and you know maybe just puts things in a different perspective to those who are well familiar with the industry. And what we do is we kind of provide an overview of, you know, basically what cannabis is, what are the different components of the ecosystem. We also talk about federal laws, why we believe federal laws are likely to change, and we also provide an overview of some of the state laws. And then we do a deep dive, and we also have a long term view, a thesis on which direction we think the industry is going to ultimately… how it’s going to end up ultimately.

And a big part of what our report is is that we do a deep dive into those states where marijuana is legally sold, and we analyze the data and we look for commonalities among the states and we use that as a reasonable basis for our projections for those states that have not yet legalized. And we did this, we approached this in two ways. We looked at the medical marijuana market, and then we also looked at the recreational market, and we built two models. We have a detailed model state by state, and we map out our methodology. We indicate exactly how we get to our assumptions, why we use our assumptions. And then we consolidate both of our models to have, you know, to provide the industry estimates.

Matthew: So your background as an analyst, publically traded companies have so much information as far as, you know, the financials that it’s much easier to do due diligence on a company and figure out what they have going on. In contrast, what kind of information do we have for companies for people that want to dig into it, but they don’t have the readily accessible information of say a publically traded company?

Matt: Well it is really difficult and particularly trying to analyze the recreational market because we just don’t have the data available. On the medical side, you know, we know what the patient data is, we know sales are. There’s certain metrics that we’re able to calculate and we’re able to identify trends. But on the recreational size it’s much more difficult. And so looking at, you know, publically traded companies, what I believe is that everything is going to trade. At some point there are going to be more and more publically traded companies that are going to trade on exchanges that provide more liquidity and are, you know, more acceptable from the institutional standpoint. And these type of stocks whether or not, you know, in any type of ancillary business I believe that these stocks will trade in tandem with how the industry is moving as a whole.

Matthew: Now how can we thing about the cannabis industry in terms of prohibition ending similar to let’s say alcohol and then something that’s never been really in prohibition, cigarettes perhaps? I mean what kind of lens do you use to compare cannabis to alcohol?

Matt: Well there is actually a lot of similarities between prohibition with alcohol and where we are now in marijuana. So for example back in the day if somebody had some type of ailment, their doctor would prescribe whisky to alleviate that. We kind of go… we do an analysis and we do talk about the similarities between prohibition then and now. What we also find is that after prohibition the growth rate in alcohol sales was pretty significant. It was north of 20 percent. So we kind of factored that into what we are forecasting from the recreational standpoint, taking a haircut to that assumption.

Matthew: Okay. Now in terms of size, what is the size of the legal cannabis industry versus the alcohol industry so we can get a sense of comparison.

Matt: Well the thing is it’s really hard right now to figure out, you know, what the terminal value of marijuana is. So the alcohol industry is a mature industry as other sin industries. And the alcohol industry is, you know, triple digit in the millions, $100 million, $200 million. The spirits is about $72 million, wine about, I guess about a $30, I’m sorry, billions not millions. $72 billion for spirits, about $30 billion for wine, beer is about $100 billion. So that’s north of $200 billion. So where does that… how does marijuana compare to that, and also cigarettes, tobacco is about $290 billion.

So if you look at marijuana, what we anticipate under the trajectory, our anticipated trajectory for legalization. By 2020 we would expect a combined medical and recreational market to approach about $20 billion, and if you just then in 2020 say okay, all those remaining states, if they were to legalize by 2020, in that first year the market would be about $35 billion. So clearly from there we have a lot of growth. So it would not be unreasonable to assume that the marijuana industry could surpass the alcohol industry as well as the tobacco industry.

Matthew: Yeah and cannabilize it as well at the same time as it exceeds it. You know a lot of people turning to perhaps edibles or drinks infused with THC versus having a glass of wine or a beer. So I imagine that you know the big alcohol companies are really looking at this closely.

Matt: Absolutely.

Matthew: So the fact that most cannabis that are traded publically are penny stocks or what some people refer to as the OTC stocks, over the counter stocks, do you anticipate this keeping out the big Wall Street money from trading these shares?

Matt: Oh absolutely because there’s really a very limited liquidity. That’s a big concern. And also there’s, you know, very little transparency from some of these smaller companies. And you know, they need to be traded on a more stringent type of platform such as the New York Stock Exchange or the NASDAQ or what have you. That’s what’s going to attract the institutional investor base. Those exchanges also provide added comfort in the fact that, you know, there are more restrictions to list on those type of exchanges. So that’s another reason why institutional investors would be looking to invest in companies that are listed as opposed to the current environment.

Matthew: Now you mentioned you’re also a CPA. As you’re probably aware cannabis cultivators can’t write off a lot of their expenses. Can you just talk a little bit about how a normal business writes off expenses and then how a cannabis business can’t really do the same thing and how that hampers their profitability?

Matt: Yeah sure so basically, you know, any other type of business you have your revenues and you have your expenses. Your normal operating expenses are tax deductable. But in the case of cannabis, those companies that touch the plant are prohibited under Section 280E from writing off their operating expenses. So their rent and their, you know, utilities or what have you. The exception to that is the cost of sales which is the cost of the product, the actual flower, you know for example that a dispensary would purchase, and then also for a grow facility, you know the cost of producing that plant. But those are the cost of sales, but you know that’s it. That’s where the buck stops. And the IRS is scrutinizing all these type of businesses because there have been loopholes in which for example a medical marijuana dispensary would set up a separate consulting division within their dispensary to consult patients on various types of marijuana that would be advisable, you know, for a particular ailment.

And so by doing so they would justify writing off that pro-rata portion of the rent and all the overhead expenses. And so the IRS is really cracking down on this. The silver lining behind this though, at least the State of Colorado I know does allow normal operating expenses as tax deductions. So while you can’t take those write-offs, you know, at the federal level, you still have some benefit at the state level.

Matthew: Okay. So do you think there’s the prospect of cannabis as a medicine being something people individually put on their tax return and saying hey this is a tax deductible medical expense?

Matt: Well the federal government will disallow that because it’s illegal. Well there are still some questions regarding the tax deduct.. the personal tax deductibility of marijuana for medical purposes. But because it’s a Schedule I drug, you know, it’s likely that they’ll follow suit with how they’re viewing cannabis businesses from writing off operating expenses. But from a state perspective it would not be unreasonable to assume that if the state is allowing these type of deductions for a business, that they would also allow an individual to claim these type of medical expenses on their individual tax returns, you know, for their state income tax filing.

Matthew: Gosh that seems just crazy that, you know, unfair on how they’re treating cannabis businesses. Is there any other business out there that gets treated this unfairly in your mind?

Matt: It really comes down to, you know, being a Schedule I, you know, drug and you know when that changes tax laws will change and profitability will increase. And that’s in answer to the second part of your question, you know, how is it affecting profitability. Well essentially a business entity that is in this business that is touching the plant can conceivably pay more taxes. They can pay taxes even if they have a net loss. So you know it really is very challenging for these businesses.

Matthew: Now turning back to your report. It’s a big media report as I mentioned. What are some of the biggest benefits prospective customers would have in reading this report? What are their takeaways going to be? What are they going to learn?

Matthew: Well I think it really identifies certain trends that we’re seeing in those markets where marijuana is legally sold. And the takeaway would be like if you’re looking to invest in a state that is going to implement a marijuana program, you would you know have some insight as to what you could expect. We go to great lengths to identify the market size for the medical marijuana market. And by so doing we identify the different ailments and we come up with, you know, the potential market size and it’s very interesting, our observations, in terms of what we’re seeing that’s consistent among the states. And also, you know, we can look, we can clearly identify spending habits for medical marijuana users.

So you know while clear our model is not bulletproof and you know there’s definitely a broad range of assumptions that we make, but we believe that the analysis that we did in those states where marijuana is legally sold, provides a reasonable basis for our projections as well as the trajectory of, you know, when we think a different state will come on board. We expect once legalization occurs, we anticipate about a year before sales are actually transacted because it’s going to take about, as we all know, about you know that amount of time, maybe even a little longer to implement a program. However as time goes on we believe that best practices will be followed, and it will just make it that much easier for the new states that are coming on board to implement. So that actual timeframe could conceivably compress from a year plus to, you know, less than a year.

Matthew: And that is happening as you mentioned. I’ve talked to some state regulators, and they mentioned that other states are reaching out to them asking for advice, what’s worked, what hasn’t worked. So they iterate and they get better with each state coming online which is nice to hear. Now I understand that the Colorado tax figures just came out. Can you tell us a little bit about what those numbers said?

Matt: Well yeah so the interesting thing is that we are seeing, as we outline in our report, the medical marijuana is declining. Year over year is, I think it’s roughly negative, it’s decreased about one percent or so. And the recreational market is growing. It’s yet to be seen, you know, how everything’s going to play out. The number of patients also is declining, and so we believe that the recreational market is disrupting the medical market. And long term we believe that they’re just going to be one market. And now from a tax standpoint, you know, fell a little short I believe from expectations. That could be in partial because of an excess supply.

So because of the excess supply prices came down, and as a result of that, there’s less sales tax. Now bear in mind that’s about half of the revenues because if you make the assumption that about 50 percent of the retail sales come from edible products and 50 percent are from flower. It’s really the flower that has that exposure to the oversupply because for the most part the edible products and the infused products the price points pretty much stay consistent. So it’s that’s flower. And I think this is a lesson learned that for any state you really don’t want too much supply out there. While it’s nice to get these application fees from everybody, you know, longer term if there’s an oversupply, that’s going to continue to put pressure on pricing, and as a result of that we’ll see lower excise tax collections and we’ll see lower sales tax collections.

Matthew: It really is about finding that balance as a state too because you know a black market still exists for a lot of different reasons that people listening to the show may not really think about. So it’s like you want the price to be low enough where it gets rid of the largest bulk of the black market possible, but you don’t want it so low that they don’t make any tax revenue and you know don’t get any benefit from having legal cannabis from… that’s states’ perspective anyway.

Matt: Absolutely. And you know the interesting thing is there’s so many opportunities in this industry. It’s not all about the products that contain the THC. It’s the cannabinoids, you know, the industrial hemp, that’s another huge area that we will explore. And the non-THC products, it’s just amazing how the elder generation are now warming up to the idea of marijuana legalization. I can tell you I have a 87 year old aunt who suffers from chronic nerve pain. She’s tried everything possible. I convinced her to get a medical marijuana card in Arizona. She got one, and she tried different ointments and so forth and it’s really helping.

Matthew: Oh that’s great.

Matt: And you know I think that’s kind of the buzz around the retirement community.

Matthew: I bet. That’s some juicy information. Okay so you were just recently in Colorado. You’ve kind of done your tour around here, and what do you see that kind of excites you or looking ahead, how do you see the industry changing because it is moving so quickly. What are your general thoughts about where we are versus what’s coming in the next year or two?

Matt: Well you know clearly branding is very promising. There are many companies, not many, but there are a handful of companies that are really very appealing from a branding standpoint, and I believe, you know, they’re going to continue to expand and look at opportunities in other states via licensing deals. And I just think you know certain subsectors of this industry are either going to be irrelevant or insignificant, you know, at some point when laws change. Not every aspect of the ecosystem is sustainable, but there’s going to be a lot of changes I believe.

Matthew: We now can you give an example or two of what you mean might go extinct?

Matt: Well for example if you go to a dispensary, as you know they don’t… there’s limited banking capabilities so most just deal in hard cash. And as a result of that and because there’s so much cash on hand they have to hire armed guards. And the security costs are a lot more than they would have been otherwise if banking was permitted. So those type of companies I don’t believe will be needed to the extent that they are now when laws change.

Matthew: Yes, that’s a great point. That’s an excellent point. Well Matt as we close here, how can listeners learn more about you and find your report?

Matt: Well we are at… you can visit us at www.greenwaveadvisors.com. We just issued our State of Colorado report. It’s a one year anniversary. It’s a look at what we’ve seen, the first state with a dual market for one full year. So we look at the dynamics from the recreational market and the medical marijuana market and what patterns we’re seeing. And we do a real deep dive and we look at, you know, information across different counties within the state, different trends. And we hope that readers will find it of interest as they evaluate investment opportunities either within the State of Colorado or look to that as the bellwether for or best practices for other states, for investing in other states.

Matthew: Well that’s great. I really encourage readers to check out Matt’s website. He does bring a high level of knowledge as he mentioned from another industry and focuses that right on the cannabis industry. He’s really digging into a lot of information at a granular level that no one else is really doing right now. Matt, can you give out your URL one more time?

Matt: Sure it’s www.greenwaveadvisors.com. And I would like to also offer your listeners and your visitors to your website a 10 percent discount code off the price of the product and the coupon code is CANNAINSIDER.

Matthew: We always like that, thank you Matt. Well Matt thanks so much for being on CannaInsider today we really appreciate it.

Matt: No problem.

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. Have a suggestion for an awesome guest on www.cannainsider.com, simply send us an email at feedback at cannainsider.com. We would love to hear from you.

Growing Cannabis and Hemp from Seed Versus Clones with Ben Holmes

Ben Holmes - Centennial Seed

In this episode Ben Holmes of Centennial Seeds helps us understand the importance of cannabis and hemp seeds and where we are in terms of having a good seed stock. Ben also talks about why it is often preferable to grow cannabis from seed instead of growing clones from a mother plant.

*Guess What? You could be listening to this interview on your commute. Get the FREE iPhone app or Android App*

Key Takeaways:
[1:28] – Benefits of cloning
[3:17] – How to get better seed
[4:30] – Why taking too many cuttings from a mother plant causes issues
[6:56] – Ben explains what he grows from
[8:07] – Ben talks about exciting things going on in the seed industry
[9:54] – Ben talks about the hemp industry
[12:34] – What is autoflowering
[13:36] – Contact details for Centennial Seeds

Click Here to Read Full Transcript

Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www.canninsider.com/consulting. Now here's your program.

Ben Holmes is the owner of Centennial Seeds and is a s subject matter expert on cannabis and hemp in particular when it comes to seeds. Before talking with Ben I was caught up on the efficiency of growing only from clones for a lot of reasons, but as you’ll see growing from seed is something we should all know more about. Welcome to CannaInsider Ben.

Ben: Hi, thanks for having me.

Matthew: Ben to give listeners a sense of geography, can you tell us where you are today?

Ben: I’m in Lafayette, Colorado which is in East Boulder County.

Matthew: Now a lot of listeners out there don’t think much about seeds. Most cultivators today get a prize train of cannabis then have a mother plant. From that mother they then cut off little sections of that plant to create a whole new plant. Can you tell us first the benefits of cloning and then why it might be optimal to grow from seeds at time?

Ben: Well it all boils back to where the state of the cannabis seed industry at this point and over the last few decades and that is that there are sort of people operating, you know, I don’t want to say, slightly above the hobby level. You know, somewhere in a professional capacity they make seed, and they sell them into the market via the internet or what have you. A lot of those seeds are made quickly. They’re single generation crosses. It’s two parents that are unrelated that they find interesting. They make the cross. They write some ad copy, and then they release the seed.

So when it gets to the end buyer that person will germinate a dozen seeds, and you’ll get, you know, eight different types. You know it will be sort of short ones and tall ones and heavy yielders and scraggly plants. The point is that no one’s gone to the trouble of stabilizing those varieties or those seed types so that it forces the grower, the end user to rely on special plants. You get one good plant out of the packet, you save that plant and then you propagate. You cut it and cut it and cut it and clone it until it collapses, until it no longer is clonable. That’s kind of why people rely on clones.

Matthew: Okay. And what in your mind is a better way of doing it?

Ben: Well if the market would produce a stable seed that breeds true for a particular type and particular traits, those seeds can be reliable and a grower can expect when they put them in the ground for them all to product, you know, desirable plant types versus the variation we’re getting now.

Matthew: Okay so if someone’s looking to buy seed, is there any kind of diligence they can do to ensure they’re getting something better than most?

Ben: The industry is so immature there really isn’t… there’s not much to pick from. I mean you have to know your breeder, and you have to kind of ask the questions is this stable. Not just for things like gender where plants can switch from female to male in the middle of a grow, and that’s terrible for a seedless gardener, you know, that creates seeds. Stability just in a sense that you get uniformity across the individuals from seed.

Growing from seed versus growing from a cutting, the plant will always be more vigorous, all things being equal. And then that’s because you’ve brought a seed from, you know, this is billions of years of evolutions that’s created these things. They’re near perfect. I mean you take seeds that are completed on the plant, they pretty much all germinate and pretty much all turn into a plant. Nature’s really incredible that way. But we lack that uniformity and that reliability, and we really even lack metrics, you know, by which to compare these things. It’s sort of a fragmented market. There are hundreds of seed producers and really no dominant players, you know.

Matthew: Now can a mother plant become fatigued or injured over time if too many cuttings are taken?

Ben: Yes, and that’s another…it’s a function of the industry being very immature. And this is not, you know, this came out of dirt. This came out of nothing. This industry was out of the crawl spaces in the basements. So to learn aseptic technique where you clean your tools and you work on a clean surface, you clean the plant before you cut it. You clean the tool after you cut, before you cut another plant and everything is handled in gloves. It gives those plants a longer life span, the mother plants, because like you said every time you cut them, you introduce some biological insult be it a virus or a mold spore or a bacterium. You’re infecting the plant a little bit at a time. And over time the plant doesn’t have the normal resources in healthy outdoor soil that would allow it to build defenses for those, those disease, and eventually they just succumb and they die, yeah.

Matthew: Okay so a mother plant can start to look droopy or even diseased after a while. You mentioned the gloves and cleaning the scissors, but is there anything else we can do to ensure that you not introduce any kind of bacteria or foreign bodies to the mother plant?

Ben: The grow space has to be kept clean. You know a lot of these places are run, you know, they’re pretty messy. There’s a lot of opportunity for infection and cross infection of material. You can avoid clones from the community. You don’t want to take clones that come out of grow operating for instance because when they sell you their clones they’re really selling you their culls. They’re not selling you the best looking clones. They’re taking the last 12 that they really don’t think are going to do very well, and they take them out to the store and they sell them. It’s not geared to give you the best plant that they can produce. It’s not in their best interest.

And second a lot of those places have contantly overturned, perpetual, harvest-type grow rooms. Those rooms develop colonies of bugs that become super resistant to whatever measures are available to you through the retail channels in terms of pest control. So you’re really introducing bugs into your room and into your situation when you bring clones from other people’s gardens that you’re not in direct control of. It’s just a risk.

Matthew: Do you pretty much only grow from seed done yourself personally or do you also sometimes grow from a cutting?

Ben: Once in a while something comes along where there’s no opportunity to grow it from seed. A good example would be the Harlequin CBD line which is a high CBD, low THC cultivar that’s grown for a CBD extraction. It’s a clone only. It’s never been released in seed form that I know of, and I wanted to at least have the opportunity to outcross some of my material to it. So somebody gave me a clone, and I set it in a room by itself, put up some sticky traps and watered it really heavily to see if I could drive any bugs out of the soil, any fungus gnats. And then you take leaves and you go under the scope and make sure that they’re clean, that there’s no mites or any kind of thrippy looking bug, eggs. And you know you have to sort of quarantine these plants when you bring them in. Once they’re inside your room and they’re clean and you’re using aseptic technique and you’re making clean cuttings, it’s you know, then it’s inside your system and you can deal with it. But it’s just bringing that material in for the first time I think is risky.

Matthew: What do you think is the most exciting thing going on in the world of seeds right now?

Ben: I would have to say the Cannabis Genomic Research Initiative out of the University of Colorado at Boulder. That’s being administered and investigated by the Kane Laboratory. It’s Nolan Kane and Daniela Vergara. And that bit of science, most people roll their eyes. So if they don’t do it outwardly, at least, you know, sort they shy away from it because it really isn’t something that people understand, but I can tell you that the tools and the resources that are developed as a result of mapping the genome of cannabis are going to be commonwealth technologies that any company or any innovator can utilize to make better stuff, better pest control, better pest resistance, better yields. All of the things that we want, all of the characteristics that we want are traits that can be identified and screened for. And we’re not talking about genomic engineering or GMO work.

We’re talking about just very very precise technology assisted selections just like using an instrument to measure THC. You can look at their genes and decide whether or not they have more or less of the gene for expression of THC synthase. They may have a very large amount of that and it’s visible in a assay that can be done at a very young stage, maybe from the seedling stage. So the technology is so far beyond where we are right now, but it yields so many benefits to us. I would urge anybody out there to find it and support the heck out of it.

Matthew: Now switching gears to hemp, you’re really involved in a young but growing hemp industry here in Colorado. What do you see is the biggest problems and opportunities surrounding hemp right now?

Ben: Well the regulatory environment is the best in the country. I’ve read the programs from the other states and Kentucky and Tennessee and so on and so forth, even Florida has some CBD-ish kind of hemp-ish type law. And the platform is very simple. The rules are very reasonable. We have light bright lines in terms of what we can and can’t do, and it really revolves around concentration of tetrahydra delta-9 THC in the plant material. And as long as you work around that bright line it’s really, it’s a wonderful platform to watch be developed. But what’s missing right now is reliable seed. It’s the same as on the drug resin side. It’s just a lack of a reliable seed supply.

You know, this has been held under water for more than 75 years. In 1937 it went prohibited. And just now are we allowed to begin to play with it and study it and work with it, innovate with it. The seed supply has just been completely abolished. It’s gone. Whatever the USDA held in their sessions in lost to time, poorly stored, what have you, it’s seed. The biggest problem we face is without a doubt seed. Having said that, it’s also for me the biggest opportunity. It’s what I see that I can do to contribute. So I see it as both a hindrance and an opportunity.

Matthew: Now you test hemp in your lab. Does anything surprise you in your findings of samples that are sent to you?

Ben: Not really. I’m probably testing a dozen different varieties in a week’s time. You know people bring me samples of things they are growing, and I see a lot of the same material, and that’s just because of the limited amount of seed. In some ways that limited amount of seed you know that it went to people who are going to utilize it, you know, it’s put to use because they paid big premiums for it in most cases and some people went to great lengths to smuggle it or whatever they had to do to get it here. I don’t judge. But it’s clear that people are putting that seed down, and they’re trying to make more seeds. So we’ll see after this season how people do and how people are able to work around the embargo on seed and maybe bring in more material to the state. This novel material is really what we need. It’s not that we need a supplier in Ukraine or Canada to ship us seed. That’s not what we want to be is reliant. We want to be self-sufficient in terms of the industry and make our own.

Matthew: Now for people that are not familiar with the term autoflowering, you see that term thrown around a lot when it comes to seed, can you describe what that means?

Ben: Yeah. It’s a short day crop which means it will flower when the days reach a certain length. Going down from the longest day on June 21st, the day length will shorten all the way down to September 21st when the days are equal and it will lose about two or three minutes a day let’s say. So at some point around the first week of August in our latitude that’s the trigger length of day and the plants will begin to flower. So autoflowers come from material that was bred up in the Arctic Circle way up there, you know, Finland, really really high latitudes where the days are super long in the summer so they would never get that signal of a short day to begin flowering. So it does flower regardless of the day you put them down and then 45 days later you harvest them regardless of the time of year. Obviously you can’t grow in the winter, but it’s irrespective of the length of the day, it will flower.

Matthew: What an amazing adaptation that is.

Ben: Yeah.

Matthew: Great. Well Ben in closing how can listeners learn more about Centennial Seeds?

Ben: Oh you can go to my website. It’s www.centennialseeds.com. I maintain a blog. I write a lot of tech pieces and just sort of help pieces. And you know I encourage people to just check it out and see what it is that we do.

Matthew: Cool, well Ben thanks for being on CannaInsider today.

Ben: All right thanks for having me.

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