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James Slatic is well known and respected pioneer and thought leader recognized by the Huffington Post as one of top five Cannabis industry movers and shakers. As the former CEO of Med-West, James led and grew to be a $12M a year California infused products company. James is an active industry advocate and has sat on the boards of the California & Nevada Cannabis Associations and the Marijuana Policy Project providing James with a deep understanding of regulatory markets and frameworks.
Listen in as James discusses his most recent move into automation and robotics in the cannabis industry.
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Matthew: Hi, I'm Matthew Kind. Every Monday, 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 cannainsider.com. That's C-A-N-N-A insider.com. Now here's your program. Robotic automation is making its way into the cannabis industry. Here to tell us about it is James Slatic of Todaro Robotics. James, welcome back to CannaInsider.
James: Thanks, Matt. Nice to be with you.
Matthew: Give us a sense of geography. Where are you in the world today?
James: I'm in Carlsbad, California, beautiful sunny San Diego area.
Matthew: Oh, that is a beautiful town. And I am in Lisbon, Portugal today. Tell me, what is Todaro Robotics at a high level?
James: At a high level, it's automation solutions for laboratories and biotech companies. We are specializing in laboratories that handle cannabis testing.
Matthew: Okay. This is really cool because it's finally we're starting to see some applications of robotics and automation in the cannabis industry. But it sounds like you're also dovetailing with some adjacent industries. I wanna dig into more of that. But first give us a little background on what you've been doing the last few years. I know you have had a run-in with the authorities on something and you've got a deep history in the cannabis industry. So why don't you tell us a little bit about that.
James: Sure. I started back in 2009. I stumbled into the industry and did packaging at popbottles.com and then that morphed into the V-pen business and O-pen and then I was a California licensee for O-pen and Bang and built a large distribution company and had 35 employeesMatthew: Yeah. Let's talk about what you're doing with robotics, and specifically, what's the problem that you're trying to solve with the use of robotics here? Maybe you can frame the discussion for us.
James: Sure. In any other industry in biotech and pharma, they would come up with automated solutions to the most repetitive and time-consuming tasks just because of efficiency and preciseness. Cannabis by its nature has been undercapitalized and as testing protocols have developed, it's been easier to throw say a technician at the sample prep part of testing as opposed to automated.
Matthew: Okay. So for a business owner or someone that might be in need of a system like you have, your automation system, can you describe what it would look like if they were looking over your shoulder and you are showing them how it works?
James: Sure. This is also... we have YouTubes on our website at Todarorobotics.bom. But basically, it is to automate the preparation of the samples. There are many things that are being tested. But if we were gonna talk specifically about flour, which most people are familiar with, it's going to take the sample and it's usually in a 50-milliliter conical tube and it's going to take that. It's going to put in some solution into it. It's going to agitate it with what's called a bead shaker and then it's going to pipette that into a... it's called a 96-hole plate. And then it's gonna barcode that and have that ready to go into the actual testing equipment whether it's a high-pressure liquid chromatography or gas chromatograph. So it's a sample prep system.
Matthew: Okay. Is this being used a lot by... or the idea being welcomed by brands that say, "Hey, wouldn't it be great if we could do some testing preliminary before we even send it out to a lab?" Because a lab is really just something for government officials or for the public to see like, "Hey, we have a third party in between us that verifies." But it's nice to know where you stand just in-house. So is that...or are you seeing labs welcome this where the labs are the ones doing this all day long?
James: The testing is mandated by state law. You have to use the third-party lab. Our systems which start at about $200,000 are more geared for commercial testing labs that are doing large volume of samples. So even a large edible manufacturer, they might be doing a preliminary test to see what things are on potency and so forth. There are other ways to do that to get sort of some preliminary data. Ours is for real sort of high volume and needing very precise measurements. So ours is more geared for the commercial market, which is between Canada and the United States, is probably about 100 testing labs right now.
Matthew: Okay. And for listeners, I'll put a link in the show notes for this video so you can see how this works. But essentially, it's like an articulating arm that's moving around taking samples and putting in places. James, you mentioned about a 200K initial investment. Where's the ROI come in for, the return on investment come in for a business owner or a lab or a brand that's looking to invest in this type of thing? How do they kind of pencil out how they make their money back?
James: Well, that's a great question. And the reason, there's two really sides to it. One is the cost and the other is the time. At best, we can estimate there's gonna be about 350,000 tests needed this year in California. And the license testing labs now in California, which I believe the last time we checked, there were 33 licensed labs but only 21 operating. They only had the capacity to do about 150,000 or a 175,000 tests, so roughly half of what we're projecting or needed to just support the California cannabis industry.
So we went to the regulators and said, "Hey, there's not enough labs and these tests are required. How are they gonna get them?" And they looked at us and they go, "Yeah, we don't know." And so we see that there's a real capacity issue. So a regular technician doing a sample and grinding it up and pipetting it and putting it in a plate and bar coding it and weighing it and doing the steps necessary, you know, they can do maybe about five to seven samples per hour sort of at best. The robot can do about 50 samples an hour.
So just from a capacity standpoint, it's a productivity tool that heretofore the labs have just thrown labor at the issue of getting samples ready because the machines themselves, the actual testing machines, they can handle quite a bit of volume. But getting the sample ready to go into the machine is really the linchpin of capacity. So having 10 guys sitting there on tables grinding samples and putting them in solution and pipetting them into the arrays to be tested has been the...besides the other things, which is it's kind of grunt work so to speak and people get repetitive stress injuries and it's actually they tell me the least desirable part of the lab work that people are least enthusiastic about doing.
Matthew: Yeah. And can this be done then with no humans there like say throughout the night? Can you leave the robot running or how does that work?
James: Yeah. So could you do it? No. The nice thing about it is you would have one person here. You have to sort of load it and you would actually have to take the trays at the end and put them into the next part of the daisy chain. But let's say you're working a dayshift and you had 10 guys working versus having the robot running all night. You could say have one person that was checking it, moving the trays to the HPLC or the other part of the thing or loading the cannabis for the next batch of samples. These things do run 24 hours a day. And as the CFO for one of the lab companies said, "We love the robot because it doesn't call in sick and doesn't mind working weekends and holidays." There is that efficiency side to it. I don't think it's designed to work autonomously. Its procedures are. It needs to be sort of loaded and unloaded.
Matthew: Okay. Yeah, you could probably reduce turnover somewhat here too because people don't see much future in just doing that type of labor. It's kind of grunt work. I remember in high school stuffing envelopes and doing things like that and like you go into like a quasi, like a twilight sleep just doing it because it's so repetitive.
James: And the other thing is that the repetitive side is also where your mistakes and your imprecision come in. The robot does it exactly the same way every single time. There's no variance. And this is used in DNA and all sorts of very precise things. It can do a level of quality and exactness that is really not replicatable by a human. So that allows the protocols and the measurements and the TQM procedures or whatever to be done and documented at a very high level. So this thing doesn't get sleepy and put in an extra half a milliliter of solution or something like that. It's very precise. And as we do these volumes of testing and the results being so critical for sales, you know, if you were to mess up a test and show somebody positive for a pathogen or something under many of the state's laws that the product has to be destroyed. You're really talking about a very high-value product and you wanna be as precise as possible.
Matthew: So how long does it take to get the robotic solution kind of programmed and ready for the specific use case of a lab? I mean, you're already working with some customers so I guess it's just kind of customizing it a little bit. But how long does that take from taking one of these units and putting it into a lab type setting before it's ready to roll?
James: Well, the installation and training part is about seven days. So we usually do like a Monday through Friday. We do what's called a factory acceptance test. We get the unit installed and start running it, that it's getting the measurements that everybody's agreed to and what we call the statement of work, the labs measurements, because what we have found is that everybody does it at least slightly different. And so the way that we actually handle the samples has been different for each person. So it's about a week inside. So from the ordering, it's about four to six weeks for us to assemble and get the various components in. Put it together in our San Diego facility then shipping and then about five to seven days there, which two days would be training of the personnel on site.
Matthew: And what about maintenance? Is there routine maintenance and what does that look like?
James: Yeah. So these system are unbelievably robust. My partner, the technical guy, Tom Todaro is the former chief robotics company for a biotech company here. He's been doing it about 20-25 years. And he tells about robots that he's had that have worked 24 hours a day, seven days a week for eight years without maintenance. So these things are unbelievably robust. Yes, things can happen, but they are not maintenance intensive.
Matthew: Okay. And how about financing because I know for some businesses, that $200,000 is a big chunk to swallow. What do you have to say there?
James: Yeah, that's something that could be done over time. But we still have this issue that when we're going to CannaTech Solutions or whatever, people are reticent to provide financing, banking and all the other problems that we know about cannabis. So right now, we're doing a 50% down, 25% on shipping and 25% on signing off the site acceptance test. So right now, you have to have your own ability to finance, which most of these labs have been doing it with outside investors.
Matthew: Yeah, I was gonna say there's an opportunity there for someone that wants to provide maybe some higher interest rate type of financing. I could see where that would be attractive to certain accredited investors perhaps.
James: I think it is a good idea. We've seen this in the extract business that people will finance, you know, CO2 machines or alcohol extraction machines or qualified companies. And they just provide a higher interest rate sort of private financing for these. And we have seen that going on.
Matthew: Yeah, because it's a little different there because it's collateralized with the robot.
James: Actual machine, yes.
Matthew: Yeah. Okay.
James: Yeah, the machine itself has got a lot of value just in the equipment.
Matthew: Have you tinkered with the idea of like creating a machine that could maybe give you a shoulder rub or something like that?
James: Well, it's certainly a variable machine. So let's just say it does lend itself well to some good joking around the office.
Matthew: Okay. And how do you see the robotic solutions helping the cannabis industry more in the years ahead and even outside of lab testing?
James: Well, there are so many other applications. So whether it's cultivation, we've spoken with some of the big clone manufacturers and then we've also spoken to some of the companies like Phylos Biosciences and Rev Genomics that are doing a lot of genetic research and marker-assisted breeding. These are things that need very precise, very measured tests, and even output. So we expected it to kind of dovetail into the general growth of the cannabis industry and to other scientific applications. Right now, those are in small volumes to where they're only doing 20 a week. They don't need a 2 or $250,000 robot. But once they're doing 200 a week or 2,000 a week, then these type of automation systems, you know, it's just part of the general evolution. When I got into packaging, people were vending their cannabis at dispensaries in baggies or all kinds of stuff. And we came up with professional packaging. And it wasn't really prolific back even 10 years ago. And so just like this industry in general, you're going to see it absorbing the methods of what's gone before them, which is pharma and biotech where they look at an automated solution wherever possible.
Matthew: So I just wanna circle back. You mentioned Phylos Bioscience, and so they do genetic research and also gender or sex, they test the sex of plants, I believe. And so something like that you're saying like perhaps tissue samples of a plant for the cannabis biome type projects and also for perhaps even the sex of a plant. You think that's a possibility?
James: Oh, absolutely. All you have to do is go into the pharma side of the industry or biotech, with San Diego as a big hub for that and you see all of that being done with robotics. We're going to be the same thing as the industry goes from the roughly 7 billion that it is now to the reported 20 billion over the next two or three years, all of those ancillary supportive. A lot of these companies are raising money. A lot of the Canadian pubcos are investing. One of the big lab companies in Canada, Anandia Labs was just purchased by Aurora Cannabis, the second largest public Canadian company. And so they're investing hundreds of millions of dollars into the technical side of cannabis. And so you just see that proliferating, not just in here in North America but also in Europe and South America.
Matthew: I think one of the leaps that might be coming next too is you can create...you can have a camera, a high-fidelity camera and look at flower as it goes by, connect that to an AI algorithm that looks at flowers, looks for patterns of mold ,or even just organizes flower by premium flower versus non-premium flower, over-cured flower, and then the robotic arm moves these things into different batches as they pass by. So it's kind of combining the AI, machine learning, pattern recognition with the robotic arm. I can see those things, that mirroring happen too.
James: Oh, absolutely. The whole AI world, machine learning AI world is changing all of our lives and it's going to do it in this industry as well. That's like almost a whole another discussion to get into where that's gonna go. I mean, I heard yesterday of a grow being done in Canada that's 800,000 square feet. Now you're getting things into the size and scope where you're gonna have to do automation. Some cultivators have already talked to us about sort of robotic systems that will go down sort of from a gantry almost down their line of plants and do things like that, infrared photography of the top of the plants and getting data points and so forth. You know, because of the high value of this crop per square foot, you're gonna see that more and more. I mean, these investments are just unbelievably big. So you're gonna need to support it with the technology.
Matthew: Yeah, it's really fascinating. You're a serial entrepreneur. You started a lot of businesses and had a lot of success. I mean, this is obviously a really interesting project. At the same time, if you had to do anything else in the industry and couldn't be involved in robotics, I'm sure in the back of your mind you're like, "Oh, this would be a good business. This would be a good business." They probably just fall out of your pocket all these ideas all the time because you have a good vantage point on the industry and a very entrepreneurial mindset. What kind of businesses do you think are gonna thrive in the years ahead either ancillary or even touch the plant?
James: Well, I'm involved in other companies and cannabis besides robotics. And one of the areas that I really like now is what we call the special events side. And I'm an investor, an advisor in another company called Regulated Solutions, and it has a special events license and is partnering with concert promoters and music venues to provide sort of the beer garden concept of cannabis. This has now been allowed by a new law here in California called AB 2020 that just passed and is on the governor's desk for signature now. So imagine going to your...say we have this festival coming up here in San Diego called KAABOO this weekend, imagine a tented-off area for 21 and over where instead of having Corona beer, you have say five cannabis brands and you're able to be educated, learn about them, be exposed to them, purchase and consume cannabis products just at a concert venue, so no more sneaking in your joint in your sock. You can just come in and enjoy adult-use cannabis just like regular people in this adult-use legal market.
Matthew: Yeah, I've actually used the shoe technique myself a few times in the past. I'm glad.
James: Who hasn't?
Matthew: Yeah. You think, "Oh, this is such an original idea." It's like, no, it's not original.
Matthew: Well, James, I wanna ask a few personal development questions to help listeners get a better sense of who you are personally. Is there a book that's had a big impact on your life or way of thinking that you'd like to share?
James: Well, I'm a meditator so I picked up the book by Paramahansa Yogananda "Autobiography of a Yogi" many years ago and along with people like George Harrison and The Beatles and so forth that had been transformative to me. That's something that I started meditating and espousing this type of philosophy. So I'd recommend "Autobiography of a Yogi" to anybody that want to sort of look at the other side of life and consciousness.
Matthew: Yeah, that's interesting. Did The Beatles go visit, was it Ramana Maharshi? Do I have that right or it is the one that you just mentioned, the gentleman they want to go visit in India?
James: No, they did go to Ramana Maharishi in India. Yogananda had left his body off when the Beatles were little kids way back in 1952. So he wasn't available to visit with them at that time.
Matthew: Okay. I've, over the years, looked at YouTube clips of Yogi's and see translations where they talk about it. And it almost seems like universally, there's this idea that were this reality or is not. It's like a projection or something like that. These really enlightened beings seem to say that. And then we have Elon Musk on the Joe Rogan podcast recently that said kind of a simulation theory as well. Do you ever get into the deep states of meditation and ponder things like that?
James: Well, I've been meditating for about 30 years. They call it practicing meditation for a reason. It's like the rubber band that can be stretched to infinity so you never go. Certainly, at times, you will get into a state where you really are 100% convinced in the heart of mind and soul that the senses aren't giving us the truth that there is something deep, something eternal, something beyond this physical body and our five senses that maybe some people would call the soul or the inner being and you can actually do techniques and see that light of the spiritual eye. When you see that or you hear the great Om vibration or the Amen in Christian religion, when you do that, then you're pretty convinced that there's something beyond these little bodies and our day-to-day lives.
Matthew: That's cool stuff. Is there a tool you consider vital to your productivity you'd like to share?
James: Well, I'm as low-tech as they come. So the only thing that jumped out at me is that I recently switched over from 18 years of the hell of Verizon to Google Project Fi. So my cell phone, my internet, everything has been switched over and I'm paying $30 a month instead of $180 a month. And I'm getting better service and quality and then last month I got a $20 referral bonus for referring a friend. And so my monthly data phone, everything was 10 bucks. As an entrepreneur, the fact that I'm saving like $2,000 a year and with a better thing, I thought that was kind of...our tech guy here at work said, "Hey, you should try this." And I did and it's been really, really good. So, Google gets another feather in their cap and I was able to tell Verizon to get lost.
Matthew: Yeah. In the circles I run in, that Google Fi is really popular too because you can go anywhere in the world without roaming charges. Did you know that?
James: Well, that's the reason I left Verizon as I went to Canada, and I even had the international plan and they still gave me $397 worth of international charges. I was like, "Wait a minute. This was supposed to be in my regular plan," and took hours and hours on the phone and they wouldn't take the bill off. They just have these duopolies and there's just no other choice. And now Google has given us a choice, and I was very happy to make that switch and it's been working out well.
Matthew: Well, that's great. That's a great suggestion. I encourage more people to do that because we need to give AT&T and Verizon the message that that model is not really friendly anymore.
James: Boy, I'll say.
Matthew: Well, James, thanks so much for coming on the show and telling us about robotics in the cannabis industry. That's really a fascinating subject. And when you have more applications, feel free to come back on the show and tell us more. And before we close, can you tell listeners again how to reach out and connect with you if they're interested in robotic solution for their business.
James: Sure. Just go on to our website Todaro, T-O-D-A-R-O robotics.com and take a look and hit our Contact Us if we could be of any assistance and we're happy to talk to you.
Matthew: Thanks, James. 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 cannainsider.com/iTunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider? Simple us an email at email@example.com. We'd love to hear from you.
Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Promotional consideration may be provided by selected guests, advertisers, or companies featured in CannaInsider. Lastly, the host or guests on CannaInsider may or may not invest in the companies' entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you're still paying attention, this little whistle jingle you're listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye-bye.
Andrew Duffy attended Harvard then went on to work for the most successful hedge fund manager in the world (Ray Dalio). Ready to start his own business Andrew and his co-founder ditched the cold New England winters and moved to Colorado to start Best in Grow, a platform that brings budtenders, brands, and dispensaries together in one place online.
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Getting the word out about your cannabis product to the most important people in the cannabis industry can be a big challenge. Today's guest is working on a platform that brings budtenders, brands, and others together in one place online. I'm pleased to welcome Andrew Duffy from Best in Grow on the show today. Andrew, welcome to "CannaInsider."
Andrew: Matt, it's an absolute pleasure to be here. Thank you so much for having me.
Matthew: Give us a sense of geography, where are you in the world today?
Andrew: I'm coming to you live from beautiful Boulder, Colorado.
Matthew: Great. And I'm in Lisbon, Portugal today. So, tell me, what is Best in Grow, at a high level?
Andrew: At a high level, Best in Grow is one part slack built for dispensaries and employee management tool that helps teams communicate. It's one part Facebook built for cannabis professionals, allowing all those teams to communicate even across businesses, between dispensaries, between brands. And it's one part powerful data analytics engine. We take in data from all the interactions that we see on the platform and the information that users of the platform provide to us, and use it to help brands create better products, sell them more effectively, and market them more efficiently. And it's all rolled into a single web, Android and iOS application, to help all of these businesses succeed.
Matthew: Can you share a bit about your background and journey and what prompted you to start Best in Grow?
Andrew: Absolutely. So I grew up in Washington, D.C. I went to Harvard for undergrad, where I studied behavioral economics, decision science, psychology, and vowed never to spend another winter in the northeast. So after graduating...
Matthew: [inaudible [00:01:52].
Andrew: Yeah, exactly. After graduating, I went on to Bridgewater Associates, which is the world's largest hedge fund, where I was a risk analyst, did some machine learning projects, had a number of roles there. And it was a really unique, awesome, challenging environment, learned a lot. But ultimately, one of my closest friends from Harvard, who was also working in finance and private equity, decided that this was not the life for us. We didn't feel like we were making an impact, and we didn't feel like we were in the right industry to make the type of impact that we wanted to. So we packed up a car, moved to Colorado, and decided we're gonna dive headfirst into cannabis, we're going to figure out exactly what's going on in this industry firsthand from the people who know it the best.
So as you can imagine, that conversation with my parents was a tense one, telling them that I was leaving my job at the world's largest hedge fund to go sell pot. But ultimately, they were really supportive. And I came out to Colorado, and have been so, so happy about that decision.
Matthew: Well, you kind of just glossed over there, but Bridgewater and Associates, you know, arguably the most successful hedge fund in history based in, I think, Westport, Connecticut now, right there on the Long Island Sound, a cute, little town. And Ray Dalio, the founder, is kind of going and making his way around the press right now about his book, "Principles." And he has a very unusual way of conducting businesses. People who have heard of him probably know, like, he wants to flush out the truth or the best idea regardless of how uncomfortable it is or where it comes from. Can you just talk a little bit about that methodology? Because it's a little bit unorthodox but obviously effective.
Andrew: Absolutely. Yeah. So I worked actually directly for Ray on his research team for part of my time there, so I have a very hands-on, in-person experience with how he operates, as well as how the whole company operates. But broadly, what I would say is the defining phrase of that whole methodology is just rip off the band aid. A lot of times in a business environment, a lack of open communication or transparency or willingness to tell people how things really are will result in problems down the road that will make things even worse. Someone who has been stuck at the company for six months who should have left six months prior because no one was willing to tell them they weren't doing a good job. And ultimately, I really, really liked that system of management. I really enjoyed my time there because it taught me to be much more open, it taught me to be much more willing to discuss my own flaws and the flaws of others. And ultimately, that supported everyone around me and it supported me to a significant degree as well.
So, while people from the outside have a lot of fear of that system, once you get used to it, and once you put aside your ego a little bit and get away from the idea that being criticized is a bad thing, you can really make some big strides with yourself and the people around you if you can effectively embrace that. And part of that is what informed what we're doing with Best in Grow, creating a platform that allows people to communicate, give feedback, and effectively make sure that their teams are operating as efficiently as possible all in one place.
Matthew: So, how does this contrast to the, you know, snowflake trigger warning, the right to not be offended group that you had probably at the social-justice-rich Harvard, to coming into Bridgewater where you don't have a right not to be offended and people are gonna talk to you frankly and directly? How did that contrast feel, and did all of your colleagues, were they able to survive that?
Andrew: Absolutely, yes. So survival at Bridgewater really depends on whether you fit at Bridgewater. If you don't fit at Bridgewater, people will tell you, and ultimately you'll know it. So you'll either leave or be fired before it becomes too much of a problem.
In terms of the sort of snowflake mentality and the right to be offended, there are a lot of really intelligent people at Bridgewater and very reasonable people at Bridgewater, and I think that's the key. If you're operating with people who are intelligent and reasonable, and with whom you can have a great discussion, there is really no need to be offended at any time. Anything that someone says, you can always counter with a logical argument. If you give them a good argument for why you believe the thing that you believe, then they'll be willing to believe it too. That's the whole idea of the idea of meritocracy, is that the best ideas rise to the top, but you are required to tell people why your idea is the best. And so I think how it really differs from that mentality of, "I have the right to be offended and believe whatever I want," is that you have to justify every belief that you hold. And that's a way of being that I like to espouse in my life, and I think everyone should espouse in their lives because taking a real hard, solid look at what you believe and why is the only way to make sure that you believe the things that you truly believe. It's very easy to get caught up in ideas that you don't necessarily feel to your core if you can't even explain them to yourself. So Bridgewater really brings that out in people.
Matthew: Yeah. And there's a famous quote around the man that has or a woman that has principles doesn't need tactics, because principles are adaptive where tactics can, you know, be destroyed and overturned. So Ray's founding idea of having principles is pretty interesting and one that I've been attracted to and kind of heard him on a few different podcasts and watched his 30-minute [inaudible 00:07:28]. But we'll jump off this idea. I'll include in the show notes like a 30-minute YouTube overview of his ideology and methodology. And he has such incredible results that speak for themselves. It's worth looking at.
Andrew: Absolutely. Yeah, I'd recommend to anybody listening to give "Principles" a read. It's a really interesting book and can help you, even if you don't agree with all the things that Ray has to say, find what your principles are and determine how you wanna live your life as a result.
Matthew: So tell us a little bit about the problems that you're trying to solve for each group of people, budtenders, influencers, dispensaries, and brands with your platform.
Andrew: Absolutely. So with budtenders, our goal is just to make their lives easier. They work hectic jobs, they work long hours, they get paid low wages, and they need a massive amount of information at their fingertips daily to be effective. They need to know how to be compliant with the regulatory restrictions that they operate under. They need to know a huge swath of products and all the information about those products so they can recommend them effectively. And they need to have great customer service skills. They need to be able to help people find the products that they want, even if those people don't understand cannabis or haven't tried cannabis before. So our platform is designed to do just that. It gets them all that information right at their fingertips, both by aggregating information that the dispensary has about any of those products or any of those techniques, or allowing them to communicate directly with brands at the point of sale. They can just type in a question to a brand if a consumer has a question for them that they don't have the answer to.
And we really see budtenders as the biggest influencers in the industry. Ninety-two percent of consumers take the exact recommendation of the budtender when they walk into a dispensary and make a purchase. Ninety-two percent, that is a massive, massive number.
Matthew: Yeah, it's your trusted friend. It's your cannabis Sherpa.
Andrew: Exactly. It's your spirit guide. It's telling you exactly what you need to do to have this highly, highly experiential product be the right one for you. So managing that whole process and helping budtenders solve the problem of their very difficult job is a huge part of what our platform does.
And then taking that up a level to the dispensary, we solve the problem of workforce managing. Managing budtenders, given how difficult their jobs are, is a difficult task in and of itself. Dispensaries have to train new budtenders all the time, turnover is very high, they need to make sure that budtenders at different dispensaries are on the same page and able to provide the same customer experiences. And right now, they need to use 10 different software platforms to do that, be that Slack, email, text, or any number of other cannabis ancillary software platforms that they're using in their dispensary at any given time. So what we do is help the tip of the spear, the manager of multiple dispensaries or even just one dispensary, manage their entire workforce in a totally effective way while also allowing them to integrate multiple software platforms into Best in Grow. So we have a very, very open and easy API to allow other software platforms to integrate and display right in our platform, making a single sign-in for dispensaries that are tired of using 10 different products every single day.
Matthew: Okay. So consolidating different communications channels, influencers. What about the data you collect? What kind of data is gonna be collected?
Matthew: And why is it important?
Andrew: Yup. So that data is really how we solve the problem for the brand. The brand's problem is the budtender. Brands see budtenders as obstacles, as people who are potentially misrepresenting their brand or not necessarily pushing their product when they think it would be perfect for a particular consumer. But we see budtenders as potential advocates, people who can provide information to brands to improve their products and make those products the things that budtenders want to sell and want to recommend. So a big piece of the data that we gather is feedback from budtenders about the products that they are or aren't recommending, giving brands information about why they aren't recommending them or are recommending them, meaning that brands can improve their ability to make products, can improve their ability to communicate with budtenders, and any number of other things that are important to their operations.
But more broadly, we really care about collecting data that makes products more understandable. We want to know all of the attributes of a given product and whether those attributes are positive or negative. Right now, the only data sets in the cannabis industry are ones telling you how much this brand has sold or how much this particular skew has sold, but what we wanna know is why. We don't want to have just a trailing indicator of what sales were. We want to have a leading indicator of what sales will be, based on what attributes you build into these products. So by gathering information from the point of sale and from budtenders and from the internal operations of dispensaries, we're not only able to improve the efficiencies that happen in the retail environment itself but we're also able to make sure that brands have total visibility into that process so that the differentiation that's enforced by the regulatory barrier between brands and dispensaries is limited, and can be a much, much lower fence to allow everyone in the industry to communicate and everyone to kind of raise all boats with a rising tide.
Matthew: Okay, and who pays for the platform, and how much do they pay?
Andrew: Yup. So dispensaries pay a nominal monthly fee, works out to probably two or three dollars a day. We know that dispensaries are cash-strapped, they have tiny margins, so we don't really wanna put any more financial burden on them. Brands are primarily our monetization stream. They pay $300 a month and up, depending on the feature set they want and the swath of data that they're looking for. But right now, we're actually offering the platform as a free trial for the rest of the year through December, to help brands and dispensaries get a little bit of a look at it without too much risk to them.
Matthew: Okay. And so, you're right, budtenders are huge influencers, and they can be like your sales team if they understand your product and speak about it intelligently and recommend it. So how do you get samples in front of budtenders so they can play with it and give you feedback and let you know what they like and how they're gonna position it?
Andrew: Absolutely. So, an effective sample process is all about the method of intake of the information, creating accountability after that intake, and then creating habits after you've created that accountability. So, first is intake. You want to minimize the barrier to entry for a budtender to give you feedback on any given product, be it a sample that has been sent to the dispensary by a brand managed by us or any product that they consume at any time. We wanna make sure that. And they can, through our application, upload their feedback as easily and quickly as possible, be that through a standard survey or uploading a short video review or simply typing in their thoughts as they consume it. So we make it as easy as possible for them to provide feedback and give the information that brands really wanna hear and need to hear to understand why budtenders do or don't like their products.
And then beyond that, we create accountability. So right now, there is no accountability in the sampling processes that we see in brands and dispensaries. So brands will send out 10 units of product to a particular dispensary and then they have no visibility into what happens after that. It could be diverted by the manager to have a little bit of a treat for their friends. It could be distributed to the budtender and get no feedback, or it could just go straight into the trash. They have no idea what happens. So we create a tiered system where at every step in the process of the sample being distributed to the dispensary, distributed to the budtender and consumed by the budtender, there are points at which they have to confirm that they have received that product or consumed that product. And if they don't do that, then they aren't allowed to receive samples into the future. So creating that sort of accountability loop, where the brands can see ROI on the products that they push out and can push out more products to the people who are actually trying and reviewing them, allows them to know that their sample process is actually working.
And then once you can effectively lower that barrier to entry for intaking information, increase the accountability of the whole system, then you're creating a habit. Then budtenders are constantly in the habit of every time they consume a product thinking about, why did I like this product? Why would I recommend this to someone? Would I recommend this to someone? And then putting in that information. And so, once you've created that behavioral habit, you have a really strong system of feedback where the people at one end of the spectrum are receiving all the information they need from the people at the other end of the spectrum with as little effort as possible for everybody involved.
Matthew: And how do budtenders get rewarded here? Is there like a gamification or something going on inside the platform?
Andrew: Yeah, absolutely. So they can get rewarded in a number of ways. The most obvious one is through free and reduced-price products. So budtenders who consistently provide reviews on our platform will have more samples routed to them by dispensaries and brands, and they can also redeem codes that we provide them based on the number of points or rewards that they aggregate through our system for free products at dispensaries. And of course, we're building out a number of other reward functionalities, VIP events for our most consistent and high-quality reviewers, features on our social media, any number of ways to provide value to these budtenders and help them get what it is that they want.
And every budtender wants something a little bit different, obviously. They're all different people, they're not a monolith. So we are constantly testing and adding new ways to reward budtenders. And we're asking them how they want to be rewarded because they are, by and large, the best people to tell us how to get them engaged in our platform.
Matthew: And how has your background in behavioral science helped you to shape your company?
Andrew: Absolutely. Well, I mean, first off, my background in behavioral science informs pretty much everything I do on a daily basis, particularly as it pertains to people. It helps immensely in understanding, with the platform in particular, how to get budtenders engaged, like we just said. They're a complex and interesting group, they're underpaid, overworked, but incredibly dedicated to cannabis and the industry that they're operating in. And a lot of them have moved to states that legalized cannabis specifically to work in cannabis. So they're very devoted to the process. But that form of value that they're receiving is often limited. So, what we wanna do, as sort of behavioral scientists, people trying to influence behavior, is to provide value.
Fundamentally, people are driven by a desire to receive value. That can be monetary value, it can be in kind value via products, it can be relationships, it could be affirmation. It can be any number of things. But as a species, our ability to forecast what will bring us value is extremely underdeveloped. There are a ton of biases associated with the human ability to predict what will happen or what will make them happy, and that contrasts significantly from the totally rational unthinking automaton that classic economics paint us as.
So understanding how I can give a person what they want or reduce the barrier to them getting what they want, means that I will understand exactly how I can enforce behaviors that I wanna see in that person, be that an individual or a group at large. So ultimately, it's all about creating win-wins by using our understanding of how humans perceive and chase value to ensure that we're reinforcing the right behaviors.
Matthew: So getting your product out or your prototype out early can get you some great feedback and shorten the product development cycle. But is there a sense on how much it might change or shorten the product development cycle and what kind of impact that has for brands?
Andrew: Yeah, absolutely. It's a game changer. The product development life cycle, particularly for cannabis, which is complicated not only chemically as something that you need to actually get to work and you need to fit into the style of product that you're creating, be it an infused beverage, an infused, you know, edible, a topical, any number of different forms of product that you could be developing, there's almost a pharmaceutical level of development that goes into that, which is expensive and takes a very long time. But in addition to that, unlike pharmaceuticals, you need to make it taste good and be attractive. You need to make your product something that people want to consume rather than other products. And that is an extremely complicated process, which is not only very expensive, but it takes a long time, and it is very difficult to receive feedback on right now. There is very little optionality for brands to sample out their products and get feedback from budtenders or consumers because they're restricted from a regulatory perspective in a very significant way.
So what we want to do is make their go-to-market much more quick. We wanna make their products much better. We want to make it cheaper for them to develop those products, and we want to make sure that the products that they create are of a much higher likelihood of being successful. That's the real thing here. We wanna reduce the risk of any given product that they produce at high cost. And at high time cost, we wanna make sure that that's not a failure, that it works.
And we can reveal problems through our process that they may have no idea existed. So, for example, we were working with an infused beverage company that was having a lot of trouble selling one of their new products that was a low-sugar product that was aimed at women and athletes, people who would wanna have kind of a healthier option. But it really wasn't performing well with women. And they thought it was because of the taste or they thought it was because of the marketing or they thought it was because of the budtenders not wanting to recommend it. So we went in, received some feedback from a couple of dispensaries in our network. And we found that the biggest problem amongst female budtenders and the reason why they weren't recommending it to other female consumer is that they couldn't get the top of the bottle open. It was really hard to open. It was like locked up. It was this crazy kind of childproofing thing that just took a huge amount of wrist strength to get open. So they could have gone back to the drawing board and created a whole new product with a whole new taste, a whole new ingredient profile, an entirely different marketing or branding swap, but ultimately, all they had to do was change one little thing about their manufacturing process. So we saved them a ton of money, and we allowed them to launch their product to much greater success in their other markets in addition to Colorado. So broadly, what we wanna do there with our product is get that feedback quickly so they don't make expensive decisions that they can't take back.
Matthew: Now, you're a graduate of the CanopyBoulder Accelerator Program, where I'm a mentor, and also you pitched at the Arcview Group, which is an angel-investing group for the cannabis industry. Can you tell us a little about those experiences?
Andrew: Absolutely. So CanopyBoulder is a place to which we owe a lot of our success as a company. We came into CanopyBoulder with just an idea, pretty much, you know, a spreadsheet with some thoughts about how we would maybe execute on this. And Patrick Rea and Micah Tapman, who are the two managing directors there, were incredible mentors. They provided us a massive amount of information, a plug into an incredibly professional network of industry insiders in cannabis and all of the tools and knowledge that we needed to effectively build a business. And that process, I don't think I can oversell. It was incredibly valuable for us, and I think it'd be valuable for any entrepreneur to at least think about it. It depends on the stage of your business and what it is that you really need as an entrepreneur, be that, you know, a gap in financial knowledge or a gap in go-to-market knowledge or a gap in cannabis knowledge. Any number of those things could be beneficial to you, but I could not recommend Canopy more highly.
And Arcview is very tied to Canopy for me. Our whole Arcview experience was defined by the fact that we spent the four months of CanopyBoulder preparing to pitch at Arcview. And really thinking about the pitch hard and working on it and showing it to people and having them criticize you into the ground and then showing it to them again, having them criticize that into the ground, and then having them show it to you a third time and saying, "Okay, this is kind of good, maybe now you can pitch at Arcview." Like, having that feedback process, honestly, felt a lot like my time at Bridgewater, where I was being constantly criticized but had the understanding that what I needed to do is take this criticism and turn it into something more valuable, helped us to hone our business even more than it helped us hone our pitch. We understood what our message was, we understood what our value prop was, and ultimately, our time at Arcview was very successful. We were able to close our funding round very quickly. We raised almost double what we had set out to raise and a pretty big oversubscription. And that funding process went really well, in large part due to the preparation that CanopyBoulder helped us do.
Matthew: Oh, that's great. So you're oversubscribed now. If there's accredited investors that are listening that are interested in investing, is it worth reaching out to you? And if so, how do they do that?
Andrew: Absolutely. Please reach out. I'm always interested in talking to investors, be that as advisors or actual sources of capital. I've found that investors are some of the smartest people that I talk to. They can reach out to me at firstname.lastname@example.org, or by our website, bestingrow.io. And, you know, I'm always trying to up my LinkedIn cloud, so feel free to give me a shout on LinkedIn and I would love to connect with you.
Matthew: I'd like to pivot to a few personal development questions to help listeners get a better sense of who you are, personally. Is there a book that's had a big impact on your life or way of thinking that you'd like to share?
Andrew: Absolutely. This is tough because I have so many books that I think I could point to here. I think that reading is probably one of the most important things I do as an entrepreneur, constantly trying to gather new information and see new points of view. So I think I'll say two books. The first one is a book called "Influence" by Robert Cialdini. That was something that I read at Harvard as part of one of my behavioral science classes. It is probably the best book about understanding what influences people, why they make decisions, and how you can use that to more effectively create either a business or, you know, a government program or a nonprofit. Any number of ways that you need to involve people in something that you care about and you want to influence their behavior, this will teach you exactly how to do that. And it's informed pretty much every single interaction that I've had since I read that book.
And then on a more personal note, I'd say a book called "The Rise of Theodore Roosevelt." It's a biography by Edmund Morris. It's actually the first in a three-part biography. The whole trilogy is like, you know, 3,000 pages. So if you don't have time for that, I'd say just go for the first one. But Theodore Roosevelt is probably the most interesting person I've ever read anything about. He was a polyglot, he was a genius, and an athlete, was an incredibly successful person. And just being able to observe in a really close way based on his correspondence and the way he was constantly journaling, how he was thinking and why he did the things he did, has informed a lot about how I make decisions and how I think about what it is that I want to accomplish in my life, because it's very easy as an entrepreneur to go into a really big world and feel dwarfed by everyone else around you when you're first starting out.
But Theodore Roosevelt started as an asthmatic, unhealthy child who people thought was gonna die before the age of 10. But he started lifting weights and became an absolute behemoth, and ultimately, one of the greatest statesmen in the history of the world. So it's a great story about believing in yourself and understanding that you have the power to change your reality no matter what.
Matthew: Yeah. You know, I read about these figures throughout history sometimes and I just feel like a total wuss because they were so mentally disciplined and strong and always looking to be stronger, and challenge themselves, and getting up early and doing all this stuff. And I'm just like, "Wow, I am so soft compared to these guys."
Andrew: And it was a time where...and I'll bring it back again to principles. It was a time where everyone had principles. Everyone believed in something that was at the core of their being and they drove towards that with all of their might. And I think that's something that we've lost nowadays in sort of a postmodern world of Instagram and Facebook and constantly comparing yourself to others. But kind of calling back to that time, and thinking a lot harder about what it is that makes you you and why you do the things that you do is incredibly important, and it's the best way to be a successful entrepreneur.
Matthew: How about a tool? Is there a tool, web-based or otherwise, that you consider vital to your productivity?
Andrew: Absolutely. I use probably three tools...besides the basic slate of, you know, email, cell phone, all that kind of stuff, I use probably three tools that are really important to me that I wouldn't want to go without. The first is a project management tool. It's called Asana. My team uses that every single day. We use it for tracking all of our tasks, all of our KPIs, everything that we're shooting towards. It's a great place to track all that information, and have discussions, and create sort of a good project map for a team that has to do a lot of things all at once.
From a market development perspective, business development, sales, we use a CRM called HubSpot, which I'm sure a lot of people have heard of. We think it's really, really valuable. It not only can automate your sales process and turn one salesperson into the equivalent of 10 sales people but can also give you a lot of analytics about how your sales process is working. Are you losing people at this stage in the process or that stage in the process? Where is it that you need to tweak things to make sure you can close more deals?
And then, probably the best one that I've started using recently is called Timely. It integrates with your calendar, and it tracks everything that you do throughout the day and allows you to make sure that you're using your time productively. The first time that I used it during a day, I was honestly horrified. I had no idea that I was spending, you know, 45 minutes on Facebook or 30 minutes on Instagram, just because I would flip it open and, you know, look at it and then turn it back off again. So you really get an idea of how much time you're wasting, as well as how much time you're using effectively, and being able to see your progress from, I'm doing 30 different things a day and half of them are productive, to I'm doing 15 things a day, all of them are productive and I accomplished all the things I wanted is such a great feeling, and it's really, really a great way to get yourself into better habits and a better pattern.
Matthew: Yeah. You know, I find, like, going to a new site or social media or something is kind of like a mental break after doing something intensive. You know, when you transition from, you know, being somewhat unproductive with that filler time of social media, news or research that's not productive, and then you transition to full-beast mode of always productive, do you feel, like, more tired at the end of the day? I mean, do you feel like you had two days in one? I mean, what does it feel like after that?
Andrew: So the way I think about that, sort of jump off what you're doing and look at the news, it's kinda like a Millennial smoke break. Like, cigarettes aren't cool anymore, but Instagram's cool and the news is cool and, you know, the internet is really cool. But it ultimately is something just like a smoke break that you really don't need. It's just a habit. It's just an addiction to the dopamine surge that you get when you look at this piece of news or you look at this picture that your friend posted. So when you're able to remove those things from your life, I actually feel like I have more energy because I am not constantly fighting the urge to be on social media sites or fighting the urge to be doing something entertaining online. I've just created a habit where I'm now addicted to the hard work that I do and all of the things that are associated with that. And I feel more closely tied to the rewards after doing that work rather than feeling like I just sort of begrudgingly did it and had to do it.
So I'd say it has made me feel a lot better. It's made me feel way more productive, as well as just less beholden to the internet and my phone and all these different distractions that I feel like can really take you out of the present moment.
Matthew: That's great. You know, one thing I just like to point out is that, it was kind of a thread throughout this interview, is that, you know, what do you do with feedback? I mean, I noticed one trend and one trait among entrepreneurs that are successful, is that they don't take feedback as they themselves...or I say, constructive feedback from the market or individuals as they themselves are personally a failure. They say, "That what I did wasn't successful, it's feedback and now I have to do this, try something else." And I notice when people give up, it's they say, "I am a failure. They attacked me." And you almost externalize it as if it's outside of you and it's something you're looking at and you're just like, "I'm just gonna take that and now I'm gonna move it over here and try that." And that is, I think, a really important thing. You know, if you just make a distinction and understanding, like, "Hey, it's not me. Failures are events, they're not people."
Andrew: Exactly. That's a great phrase. I loved to hear that, failures are events, not people. And oftentimes, even beyond that, failures are habits, not people. And the habits that you have that create failure are the things that you need to address and change. And they're not things that you immediately need to change about yourself today. It's just like quitting smoking. Like quitting smoking takes people months or years because you have to slowly change the habits in yourself that produce that behavior.
In the same way, you have to slowly change the habits in yourself that produced a bad outcome when you try to start your own business. And the more you can read about other entrepreneurs and people throughout history who have failed massively and embarrassingly and in ways that feel like they're so central to who they are and their being, the more you realize, "I'm just a person, and ultimately, the things that I do can either get better or they can get worse." And there's no stasis. There's no world in which I'm just gonna stay exactly the same, because change is the only constant. So I should constantly be driving myself towards getting better.
And the first habit that you have to change is the habit of being offended when people tell you that you're bad at something. That's a gift. They've given you a gift. They've done something difficult for them. It's hard to tell people that they're bad at something. But when they did that, they did it because they want you to know that you're bad at something so that you can then change that thing. You'd much rather know that you're bad at something and become good at that thing than just blissfully be bad at it forever. So the more you can, just like you said, externalize it from yourself, step away from it and imagine that you are just a third person observing the scenario, the more you'll be able to create effective patterns, effective habits, effective strategies and ways to move forward and be more successful at whatever you're doing. It doesn't have to be entrepreneurship. It could be literally anything. But that mindset of constant self-improvement and willingness to accept yourself as you are, but driving yourself a little bit harder every single day to be better, that's just a much more healthy mental state to exist in and is a much more successful lifestyle to lead.
Matthew: Well said, Andrew. As we close, how can listeners find you again? Can you give out your website so they can reach out and any of your social media channels that we don't waste time on?
Andrew: Absolutely. So you can find out a bit more about Best in Grow at our website, bestingrow.io. You can reach me via email directly at email@example.com. I love hearing from people, love answering questions, love talking. And obviously, like I mentioned earlier, love networking. Hit me up on LinkedIn, Andrew Duffy. And yeah, I would love to hear from any potential customers, any budtenders who have suggestions or wanna try out the platform, anybody who just has a cool idea about what they think we could do. I'm happy to hear from anyone, really would love to have your feedback and input.
Matthew: Andrew, thanks so much. Good luck to you, and keep us updated.
Andrew: Yeah, absolutely will do. Thank you so much, Matt. I really appreciate your time today.
Jonah Barber is the co-founder of MRX Xtractors. Learn how profitable cannabis oil extraction can be and the different business models available to those in the business or entering this business.
– From lab testing flower to extraction company
– A lot of oil on the market is not good, here’s why
– The profit margin on a gram of extracted cannabis oil
– Throughput from different extraction machines
– The different business models in extraction
Learn more at
What are the five trends disrupting the cannabis industry?
Find out with your free cheat sheet at https://www.cannainsider.com/trends
Hi. I'm Matthew Kind. Every Monday 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 cannainsider.com. That's cannainsider.com. Now, here's your program. As the cannabis market continues to grow around the world, there's an increased focus on extraction, and for good reason. Extracted cannabis oil is arguably the most profitable and integral ingredient for cannabis companies. Here to tell us more about the extraction industry and his extraction solutions is Jonah Barber from MRX Xtractors. Jonah, welcome to CannaInsider.
Jonah: Thanks, Matt. It's great to be here. Really excited to speak with you today.
Matthew: Give us a sense of geography. Where are you in the world today?
Jonah: In the beautiful green state of Oregon. Specifically, Canby, Oregon, which is located about 20 miles south of Downtown Portland.
Matthew: Okay. And I'm in Krakow, Poland today. So thanks for getting up so early to do this interview. I should tell everybody, it's about [7:00] your time. So thank you.
Jonah: Absolutely. Glad to do it.
Matthew: So what is MRX at a high level?
Jonah: So MRX is an OEM that makes super-critical CO2 and ethanol extraction systems, and we bring kinda complete turnkey solutions for our customers all the way through the whole entire extraction process.
Matthew: Okay. And give us a little bit of a sense about your background and journey, and how you got to this point, and why you started MRX?
Jonah: You know, the cannabis and hemp industry is something I've always been incredibly passionate about. You know, they always say, "Do what you love," which I always thought was cliché until I actually got to work in this industry. And, you know, how we actually got started was, you know, we looked...You know, Oregon's always been a leading state, as far as a medical cannabis program, you know, having a strong medical program for over 20 years. And when we saw that Colorado went legal, you know, Oregon had almost passed a couple times going legal, and we knew it'd be a matter of time. And we wanted to get in the industry, but we wanted to get into it in a way we thought would utilize our skill sets. We weren't, you know, master growers like a lot of your listeners are and we didn't have any retail experience, and so our background is very technology. And so we wanted to fit in on the technology side on cannabis, and we saw that there was gonna be the need for standardization and quality control when it came to analytical testing laboratories. And when we looked at the landscape about 4 years, we didn't see a lot of that.
And so we felt like we had the opportunity to kinda set the standard for what an analytical testing laboratory should be with quality controls, transparency, new state-of-the-art equipment, qualified staff with degrees. It was really kind of the Wild West there for a while, with a lot of people just pumping out high-potency numbers and kinda everything getting a pass for pesticides. And then we really wanted to help set the standard, so we opened up...MRX Labs is actually how we started in the industry.
Matthew: Okay. Yeah. It's almost, it can be a huge advantage sometimes to just come in as an outsider because you don't have any concept of the way things should be done. And if you come to the market with skills, you can just start fresh. Whereas people in the industry already can only make kind of iterative changes, where you can start where you wanna start and not have to worry about any kinda legacy. Is that how you felt when you were getting into it?
Jonah: We did. We really felt like we had the opportunity to really, I mean, develop a lot of the new methods and technologies, and stuff that just hadn't been developed before. And a lot of that wasn't because someone necessarily couldn't do it, you know, skill set-wise. But it was just because they really didn't have the access or ability to freely work with, you know, cannabis in a research and development capacity. And so we felt very fortunate to be kind of the forefront, to help develop a lot of those, you know, methodologies and things like that, when it came to standardizing testing.
Matthew: Okay. Okay. And how many customers have you helped so far?
Jonah: You know, from the...Well, there's two different answers. I guess, you know, when we started the lab in 2014, we grew to one of the largest cannabis/hemp testing labs in the U.S. And we ended up working with, you know, thousands of customers here in Oregon. And then on the MRX Xtractors side, where we're the OEM and build all the equipment, we've helped place about 80 different machines in about 10 different states and a couple different countries now. Yeah. So we have about 80 different customers on the extraction side.
Matthew: Okay. Okay. Now, the thing I kinda wanna help listeners understand is how you and your partner approach the extraction business. I guess, perhaps, maybe if you could just talk about, you know, frame how other extraction companies look at extraction and how to provide extraction solutions, and then how you and your partner approach it and perhaps how it's a little bit different or better?
Jonah: Yeah. So, you know, we do approach it quite differently, how we even came into the extraction industry. And with my partner's background, we've always looked at industries and found deficiencies or bottlenecks and came up with, you know, a better mousetrap, if you will. And so how we got really started on the extraction side was actually based off analytical test results. And so, you know, we started testing everything coming into our lab, and we started seeing all this oil about really flood into our lab. It was really almost overnight. You know, it went from like a lot of flower, then about 3 1/2 years ago, it just started flooding into our lab. And at the time, it was still all medical. And so when we looked at the quality of the oil, you know, it didn't look good, it didn't smell good from an analytical standpoint. When we did, like, a terpene test, it was nonexistent. When we did a solvents test, a lot of it still either had some hydrocarbons left in it or there was a lot of ethanol left in the oil. We actually saw a lot of products coming in in [sounds like] propylene glycol as well.
And, you know, it was really concerning from our standpoint. You know, being an analytical testing laboratory, our job is to keep the public safe. And a lot of the products and a lot of the stuff we saw in the products, what people were using for medical purposes, were concerning in the fact that they could potentially cause, you know, some additional damage to whatever ailments they were treating. And I even remember the very first time, you know, I tried CO2 oil. I so badly wanted to like it because I loved the concept, I loved the fact that CO2 was used as the solvent. And to be honest, I absolutely hated it when I first tried it. It tasted kinda like a burnt popcorn to me. And also, after the fact, when I looked at the test results, which it wasn't tested by us, it was like 35% cannabinoids, which meant 50% of it was propylene glycol as well.
Jonah: Yeah. And it just wasn't a pleasant experience. But at the same time, it was flying off the shelves. Like people could not make enough of it. You know, people really like the accessibility and discreteness of vape pens. But at the same time, it was like, "Okay, there's a market for this. But this isn't what we'd consider safe or a high-quality product."
Matthew: So Jonah, it sounds like being in kinda the testing part of the cannabis industry, you're in a unique vantage point. You're kind of like the hub where companies that are sending you extracted material or flower are coming to you and talking to you, and you're kinda getting the lay of the land of how this whole extraction business works. Can you talk a little bit about that and what you learned?
Jonah: Yeah. We really had a unique perspective because, coming from the testing side, we're kinda like Switzerland. We worked with everybody in the industry. And so we got a chance to talk to all of our customers that were using other extraction technologies and techniques, and kinda got together a list of what they didn't like, what could be improved. And really, kind of our three hallmarks that we came up with was that there was really no repeatability. And so a lot of people were relying upon an extraction artist or the one person that knew how to make the secret sauce or, you know, someone that knew how to stand in front of a machine and adjust 12 different knobs and try to keep it in a tight zone for temperature and pressure. And we just knew that wasn't commercially scalable from that side. You know, we knew that the industry, the way it was growing, had to have repeatability, no matter who ran the machine, that they could follow SLPs, and put the same product in there and get the same high-quality oil coming out. And we just weren't seeing that.
And just because they also didn't have control over their process, a lot of people were destroying terpenes. And that's actually where CO2 had gotten the knock on it about 4 or 5 years ago. That just kinda produced an inferior product because it stripped the product of the terpenes. And I'd say, rightfully so, at the time, it got that knock because, you know, people were destroying a lot of the terpenes.
Jonah: And then the third thing is the engineering, and a lot of the equipment we saw just wasn't safe and it would never be permitted and approved by fire marshals in a regulated market. And so that was kind of our three hallmarks was we wanted repeatability, we wanted control of your process to produce the highest quality product, and we wanted safe equipment that would be permitted by fire marshals. And that's how we set out to build Xtractors from that side.
Matthew: Okay. That makes sense. Yeah. I could see why being dependent on an extraction artist would be...you know, it's problem. Because then, you're at the whims of that person instead of having a process or, you know, some kind of standard mode with your equipment where you can just repeat it over and over again independent of different people or personalities. And actually, I've met a lot of people that are in that exact case, where they're dependent on a specific employee and they really don't know how the sausage is made. So I'm glad you brought that up. Okay. So let's get into a little bit about throughput and what people talk about with throughput. Actually, before we talk about throughput, can you mention why you didn't like the flavor of the CO2 oil when you first tried it? Did you prefer, like, butane extraction or something?
Jonah: You know, it wasn't so much that I preferred something over the other. It was really just, the primary reason was that the people, or the equipment that was making that extract, they didn't have control over their process and they destroyed a lot of the terpenes and overcooked the product in there. And so it almost had like, the best way I could describe it was like a burnt popcorn kinda taste. And it just wasn't even a really pleasant experience, just even like kinda agitating the throat and things like that too.
Matthew: Okay. Actually, before we talk about throughput, let's talk a little bit about what the different kind of outputs are from the MRX machines, what you can actually extract and make and do.
Jonah: Yeah. So, you know, about 90% of all of our customers wanna make as many full-spectrum vape oil pens as they can. They just cannot make enough to satisfy the market.
Jonah: And so that's what the majority of our customers wanna do. However, the more we've gotten into the industry here, the more diverse kinda the product lines are, and the more specialized and unique they are. And people have some really interesting ideas that they like to make. And so one of the things we always do is like talk to our customers about, "Okay, what's your goals? What's your throughput, and how much do you wanna do a day? What kind of products do you wanna make?" Then, we're able to actually bring kind of a complete turnkey solution.
Matthew: Jonah, tell us, just give us a sense of what kind of products can be created, what the most popular ones are, and what customers are asking for. So we can get a sense of the different things that your extraction equipment can do and just where the extraction market is at, in general.
Jonah: Yeah. Well, the majority of our customers are really going after one of the largest market segments, which really is the vape pens, the cartridges for the vape pens, and making some full-spectrum oil, which is a very high desirable product for that. And so that's about 90% of our customers just make as many vape pens as they can. But what's been interesting is there's been a lot more, you know, development, product development as well, too, with all of our customers coming with really unique products. And so, you know, what we usually always like to do is actually talk to our customers and identify, before they even start, you know, "What kind of products do you wanna make? What kind of throughput do you want to do per day?" And then put together a kind of complete and tailored package with all the equipment they need to achieve their goals.
And so what's unique about the CO2 side is that you can really stop it just about anywhere along the way. And so, you know, from going to a full-spectrum oil, or you can do further refinement or post-processing into like a distillate or then [inaudible [00:14:06] distillate, you can turn it into an isolate. And so you really have a lot of variety in [inaudible [00:14:15] different products you can make with it, is how we approach it and what a lot of our customers are making.
Matthew: Okay. So just to review, can you review, and can you just tell us what you mean when you say "full-spectrum oil," "isolate," and "distillate," so everybody's on the same page?
Jonah: Yeah. So full-spectrum oil is going to be an oil that preserves the majority of the original plant. Obviously, you're not pulling out, like, the plant material and the chlorophylls, and you're removing all the waxes and fats and lipids. So what you're left with is a cannabinoid oil that has, not just your THC or your CBD, but also minor cannabinoids as well. And then, also having good terpene preservation, and that's where all that kinda works together, is what a lot of people call or is known as like the "entourage effect." Which those cannabinoids and terpenes working together make for a much more pleasant high, or a lot more therapeutic or medicinal benefits, all that stuff working together in, like, a full-spectrum oil. And that's a very desirable product for a vape pen. And something like that, if you're doing a cannabinoid potency percentage, would test typically somewhere in like the 60% to 75% cannabinoids.
And then [what a lot of our customers will do] then too is, you know, distillate is a popular product as well too, for...It's very popular such as like the edible makers. Because with edibles, you typically don't want to taste the terpenes. And it's a more higher concentrated dosage, and so that is easier to control in your quality control for your recipes and things like that, hitting your certain dosing for your THC or your CBD.
Jonah: And so that's what they call "distillate." And that's what that is, is just further post-processing or refinement. And typically, people will use either like a short-path or wiped-film technology. And what that does is further concentrate your THC or CBD, and it pulls out and separates, like, a lot of your terpenes and some of your minor cannabinoids as well. And so that same full-spectrum oil, if you ran it through a short-path or wiped-film would probably end up testing closer to like that 80% to low 90% THC or CBD. And then from there, you can do further post-processing and take the product into isolate as well, which can be more like a powder or a crystal. And that's removing everything except the cannabinoid that you're looking to concentrate. And so one of the biggest and most popular things right now on the market [inaudible 00:17:03] like, CBD isolate. And so we've also developed some new technology to do CBD isolate at a high throughput as well.
Matthew: Okay. That's a good...Well, you know, let's just talk about vape cartridges for a minute there. They were wildly popular a couple years ago, and they still are. And they've just gotten better and better. Now, you know, you mentioned full-spectrum, is you can get a lot more out of a vape cartridge than you used to be able to. Is there any sense that the market's starting to stabilize and there's enough supply? Because it's something I've been hearing for years is just like the demand for vape cartridges is just insane. What's your thoughts [sounds like]?
Jonah: I'll say, it's still not there yet. You can't really make enough to support the market right now. Because if you actually look at, too, a lot of the...especially in the states that have now gone recreational, if you look at a lot of the economic data on the products that are really moving, you know, there's a lot of new social users coming on and trying things that maybe hadn't in the past. And a lot of these people just don't wanna feel that they're doing a drug, or they don't have the where for all, they don't have a dab rig, they don't have a bong, they don't know how to roll a joint. And they just want ease and discretion. And so that's where if you look at, you know, all the economic data, all the new social users or people that are kind of, you know, sitting back and not really partaking much, but now that it's legal, saying, "Oh, I wanna try that," they're really drawn to the vape pens, and also edibles from that side.
And, you know, what's I think also desirable about the vape pens is that you can really control your dosing, in a sense, too. Like, you know, if someone wanted to take a little puff here, [inaudible 00:18:49] pretty much know, you know, how that's gonna affect them. And they can control, you know, how high or how medicated that they would like to get.
Jonah: And so that's where I think a lot of people are more drawn. And then, now you just kinda see them everywhere now, too. You know, people don't typically know if it's a nicotine or a cannabis, or hemp cartridge that people have.
Matthew: Yeah. I'm sure there's gonna be some novel use of cannabis oil that might displace vape cartridges in the future. But it'll still be some form of extracted oil. And it's gonna, you know, come in some product form or drink. For me, I feel like kinda what's gonna happen is there's gonna be some company that come along that can consistently deliver the same mood over and over again, and they're available widely. And they're really gonna capture a lot of the market because right now it's just so fragmented, which is good. And I think there's always gonna be the equivalent of microbreweries, you know, doing really well. But, you know, it's nice to be able to be in California, then Oregon, then Illinois, then, you know, New York, and get maybe one vape cartridge that's the exact same everywhere I go, or one drink or one edible that is exact same.
Maybe that'll be done with like an intel-inside model, where it's gonna be like, "Hey, this extract, this contains, you know, this many milligrams of this kind of extracted oil with terpenes." But I feel like it's gotta move from that direction. Am I totally off base on that? Or where do you think it's going?
Jonah: I would say you're 100% correct. You know, when we first started too, there was really no repeatability. There was really no, even, specific product lines. And people would just run whatever trim or material they had that day and put a label on it, and sometimes it wasn't always even what it might have been labeled as, because people didn't know, you know, when they bought trim. And as the markets become more standard and more tracking, you're really dialing in specific strains. And now, with the amount of testing you can do and even the separation, with different equipment and stuff like we have too, you can separate different cannabinoids. And you can really dial in your dosing and have a repeatable product.
And that's absolutely where it's going. Especially, as you see, it's gonna become more of a nationwide product at some point. And that's what people are gonna expect is, you know, going into one state and buying a product, and then going into the other one and having the same thing. And so you're absolutely correct in that standpoint. We're already starting to see it go that direction. And it'll just continue to do so, I think, more so in the next 5 years.
Matthew: Now, we touched on throughput there. And maybe you can dive into that a little bit by telling us, you know, how we should think about throughput? Because you say you have clients coming to you and you ask them, you know, how much do they need. And aren't they just gonna say, "I wanna produce as much as I can?" Or where are kinda the limitation breakpoints with each of your extraction solutions? Or how should they be thinking about that, in terms of running 24/7 or how much throughput they need? What can you tell us about throughput?
Jonah: Yeah. It's really been amazing too, how far the industry has grown even in the last 3 years. You know, when we first started the extraction site about 3 years ago, we started building a 20-liter extractor, which was about the largest anybody was building that I'm aware of. You know, most people were building a 5 or 10-liter, so we said, "We're gonna build a 20-liter, you know, because that's gonna be a larger commercial system." And typically, on a 20-liter, a lot of your [inaudible 00:22:35] customers run about 6 to 10 pounds at a time. There's ways to kinda engineer the material to put 20 to 30 pounds in there. But, you know, most people are doing 6 to 10-pound strain-specific runs at a time, which is great. You know, it's great to be able to...And at the time, you know, a lot of people would sometimes only have, you know, 6 to 20 pounds of the same strain.
Jonah: But now, some of these grows are, you know, 100,000-square foot grows, and they have thousands of pounds of the same strain. And on top of it too just, you know, we do a lot of stuff on the hemp side as well. And, you know, Oregon has been kind of a leader in the U.S. here in hemp as well, having the ninth biggest hemp program over the last 4 years. And when we first started with the hemp farmers 4 years ago, if you had 5 acres, that was a lot. You know, that was...You know, 2,000 pounds an acre, that's 10,000 pounds, that's a lot of biomass.
Jonah: And then, 3 years ago, it was like, "Okay, 20 acres, wow." And then, 2 years ago, it was 50 acres. And then, last year, it was 100 acres. And now, we know some farms are a few hundred acres, and you're talking about millions of pounds of biomass. And so it's pretty amazing how fast everything has scaled. And so that's where we've also developed additional new technology to keep up with the market's demands for a higher throughput, bat the same time, not sacrificing quality. And that's where there might be a lot of manufacturers who will sacrifice quality with throughput by just saying, "Okay, you know, we're just gonna hit it at 5,000 psi and pull more plant material out." But, you know, you destroy a lot of the good cannabinoids and terpenes doing that. And we don't believe in sacrificing the quality with throughput. And so with some of our new equipment here, we have really game-changing CO2 equipment, [pumps] like 100C, which is 2 50-liter vessels that cycle back and forth between each vessel, designed to never stop. And so, as soon as one vessel is done, it switches, and then that person can load the next one.
And you know, people can get tricky sometimes when you talk about throughput, and sometimes people [sounds like] can give you the very best throughput on the very best day with the very best material. And, you know, we like to give real numbers, [inaudible 00:24:50] historical averages. And a lot of it too, depends on your starting cannabinoid percentage when it comes to CO2. If you have something that has, you know, like 6% CBD or THC versus 12%, it's gonna take longer to pull that 12% out versus that 6%. But a lot of our throughput now, in like the CO2, can be, you know, upwards from 100 to 300 pounds a day. And then we've also developed full ethanol processing centers that are desired to, not batch, but to be continuous extraction, that are looking at doing more in that 500 to 1,000-plus pounds a day as well.
Matthew: That's crazy.
Jonah: So we kinda have anything and everything in between, as far as if customers wanna do small batch stuff or if they wanna do full acres that weekend [inaudible [00:25:42].
Matthew: Okay. So you can pretty much do whatever the customer wants within reason, it sounds like. So with the two vessels, you can operate 24/7. So if you have one vessel full, or you have both vessels full, and the extraction machine is running, when it finishes with the first vessel, how long does it take to finish the second one, assuming it's full and your typical extraction machine? Like how many hours do they have before they have to fill it again?
Jonah: Yeah. Like on the 100C, we're looking at closer like to that 2 to 4 hours per kinda 15, 20 pounds per vessel.
Matthew: Okay. So I'm a businessowner. I'm thinking about buying an extraction machine. And the first question you would ask me is, "How many pounds do you want to do per run?" Is that kinda the first question?
Jonah: Yeah. Actually, the question I'd more probably ask is, "How much throughput do you wanna do per day or per week?" is typically what we would ask them. And then, "What kinda products do you wanna make?"
Matthew: Okay. Okay. I wanna kinda dive into some business models here and looking at return on investment and things, because extraction is really, as I said in the intro, becoming a bigger and bigger part of the business. And it's also gonna be an ingredient to all of this, amazing products that are being created. But the people that are gonna buy your machines are like, "Hey, what can I do with that? How much money can I make? What should my business model be?" When a customer or a potential customer, or a friend says, "Hey, what can I expect to make with an extraction machine?" I've heard a lot of great scenarios, but how do you kind of describe, like, the ROI on an extraction machine?
Jonah: So, you know, we always like to look at, you know, your gross margin. Or it doesn't necessarily even, you know, potentially matter what your gross is, you know, as far as your gross sales. But, you know, what kind of gross margin are you looking at? And also too, just how big of a company they want to have versus maybe a smaller company that can make similar margins, but not have as many people. And so, you know, some people want to be the biggest and best, you know, vape company in their state, or launched from state to state, and that's a big business. I mean, you have, you know, your material acquisition, your new supply chain. You have your compliance, your testing, your cartridges, your consumables, you know, your sales, marketing, packaging, distribution. That can quickly, you know, go from a small scale of, you know, 10 people up to hundreds of people from that side.
And, you know, the other side being is, or, "I wanna be, you know, an oil house or a toll processer," or you actually are just making bulk oil and/or doing contract processing to hire. That's a much simpler business model, and it's a very needed businesses model for a lot of either...You know, there's a lot of great farmers that wanna have their own product lines, but they don't want to be an extractor.
Jonah: And so they look to some of these third parties to use their award-winning flowers and strains to make oil that complements that. Or there are some companies that want to have end products, but don't want to make the oil, and they want someone to make oil to their specifications. That's a much simpler, smaller business model, but it's also still very profitable and you can still make a lot of the same margins that you'd be making, you know, versus going to a full-scale cartridge line as well, too. And so there's needs from both those sides. That's kinda where we wanna talk to people and see what their goals are, what they want to do. And some of it too, just comes down to what's gonna be the most profitable for them and the least amount of headache potentially too?
Matthew: Okay. And let's talk, what's the typical cost for a gram of oil right now?
Jonah: So I guess, I can answer that three ways, is, you know, if you look at the retail side, you know, with compliance and testing now and everything too, in Oregon...I'll use Oregon and California right now, as kinda the metrics for that. But typically, a gram of oil is gonna end up costing somewhere typically between probably $50 to $80 a gram, typically, is what that would sell at a dispensary to the end consumer.
Matthew: Okay. And if you were to say, "Hey, my average client, they're..." I mean, I'm sure it ranges wildly, but kinda the middle of the bell curve, it's being sold at $80 a gram at the dispensary. What does it cost to make that same gram on average?
Jonah: You know, so as it goes through the supply chain, you know, from your side as an extractor, a lot of it depends on how much you're getting your biomass for. And that's where it's incredibly important to be able to do your own quality control testing before you even buy products, buy biomass to extract, if you're buying it. Because, you know, you can't just have a blanket price like, "Okay, I'm gonna get everything at $100 a pound, or $200 a pound." There's a big difference between something that tests at, you know, 8% THC trim or kind of B-buds, versus something that's like 12% or 15%. And that's directly gonna affect your yield primarily. It won't so much affect the quality of the end product. You'll still have a great product. It's just, "How much yield are you gonna have come out of there?" is gonna be directly dependent upon your starting cannabinoid percentages. And so if you're buying product at $200 a pound, it typically costs about $5 to $6 to produce a gram of full-spectrum oil.
Matthew: [inaudible [00:32:27]
Jonah: Yeah. If you're closer at buying trim, you know, at the $100 a pound, you're closer to that kinda $3 to $4 a gram, is what it costs. And then what a lot of these companies do is they will actually then sell to other distributors or people that wanna make their products, and they'll typically sell that, you know, between $8 to $10 a gram. And so that gets sold to then someone that's gonna take that oil, and that's bulk oil. And that's where people are moving a lot of kilos or pounds doing that. And then other companies will then take that oil and put it in a cartridge, package it, brand it, market it. And then, you know, that will typically then go to a dispensary or a distributor, depending on, you know, what state you're in. And then that will typically then get sold, you know, in that $20 to $40 a gram. And then, so once it gets in the dispensary, then that's where then, it goes to, you know, that maybe $50 to $80 a gram, is typically how that works.
Michael: Okay. And how do you preserve terpenes as you go through this process? I mean, is it a matter of temperature and pressure? 'Cuz I'm kinda boomeranging all over the place here but, you know, you talked about how critical it is for the experience and for the end product. And also, end customers are getting much more savvy about this and they talk to each other, and you really wanna make sure you maintain terpenes. What's the art and the science of doing that just right?
Jonah: So the biggest thing is having control over your process. And you hit pretty much two of the most important parts when it comes from a CO2 site is terpene preservation is maintained primarily per your temperature control and control over your pressure. And so temperature is so critical to your extraction process. And I feel like sometimes that's an afterthought. Sometimes people will just use an off-the-market kinda chiller or hot water bath. And, you know, if you look at the specifications on some of those, you know, off-the-shelf kinda chillers, sometimes they're +/-5 degrees. And we have built for us, heater/chiller combinations that are exactly specified per machine specifications. So when we set our temperature, this stays typically about 1 degree. And so we have really tight control over our temperature.
And then from the pressure standpoint, see, a lot of times people will just want...they'll try to do more throughput. And they can achieve more throughput if they go through 3,000, 4,000, or 5,000 psi. But what happens is, at those higher levels, if you look at, you know, like a whitepaper, typically anything over 1,800 psi, you start to degrade some of the cannabinoids, the terpenes, you pull on additional plant material and chlorophylls. And so you really start to degrade a lot of the great therapeutic benefits of some of those things. And then you have to spend a lot of time in your post-processing and cleaning up. And so where we increase throughput without sacrificing the quality is with temperature and then also what we call "flow rate," which is, you know, essentially, how fast CO2 or a solvent moves through your product. And so that's how we're able to preserve, you know, the majority of our terpenes through the extraction process.
Jonah: I will say too, you also do have the ability, terpenes you can actually run very low, like almost like a subcritical, in the very beginning of your extraction run. But some customers like to try to pull those terpenes in like that first half-hour to hour, and then they'll just change the settings. You don't have the stop the machine to change the settings. And they'll take a pull and pull those...Especially, if their goal is to go to distillate later, they'll just pull those terpenes, and then set them aside and use them later, either reintroduce them or use them for a different product, because they're very valuable.
Matthew: Now, we touched on this briefly, but I just want to be really clear for listeners about the most common business paths for people buying extraction machines. So you get to create your own brand or line of products, there's a toll processer, which you mentioned, and then there's the bulk oil house. Are those kinda the big buckets you would say exist?
Jonah: Yes. Those are the three that our customers really focus on. There's incredible opportunities to be a toll processor or kind of a bulk oil house. And primarily that's because the extraction site, you know, there's a capital investment that comes with it, and also I think sometimes people are just like, "Well, I don't know anything about extraction." You know? Even amazing growers that are great growers that know cannabis better than [inaudible 00:37:16] anyone, they sometimes are just like, "Well, I just don't know about extraction or what to do."
Jonah: So I think some people are kind of, maybe [sounds like] a little nervous just thinking of, "Can I do that?" You know? And so a lot of times there's not enough processors, or toll processors to handle the amount of extraction that needs to take place. And so that's where there's been these industries that have stepped up to where, I had one customer here in Oregon, a company called "Tosmos" [sp], that was initially gonna do their own cartridge line. And then they got offered a pretty lucrative contract to do toll processing for one of the biggest cannabis companies out there that just wanted them to toll process. And so they did that and they started with a 20-liter. They added a second 20-liter, and then a third 20-liter, and then a 100-liter, and they just kept adding more equipment. And they've really found their niche in doing toll processing extractions.
Matthew: So toll processing, again, is just taking other people's trim or your own trim and extracting it, and then selling it to another business, not a...
Jonah: That's correct.
Matthew: ...retail operation? Okay.
Jonah: Yes. But now, on the toll processing, it's more you're specifically extracting it to that customer's needs and specifications and wants. And that's where you have to have good quality control and repeatability to satisfy the customer there. And so, yes, a lot of times, they'll provide their trim or product, and then you extract it and turn it into, you know, a full-spectrum oil or a distillate.
Jonah: And then, the bulk oil side...And a lot of our customers will do a combinate of one, two, or all three of these businesses too. Because when you're doing the toll processing, it's also just natural that you could be almost like a bulk oil, like a Cisco, that kind of thing, to where you're even sourcing your own trim or your own...And here in Oregon, too, I mean, now with the cost of flower, the overproduction, a lot of the extraction companies are now running flower because they can get outdoor really good A, B-buds, or $200, $300 a pound, which really change the...
Matthew: I've heard about the overproduction. It was overproduction. It was kind of a subjective term. But I've heard that there's a big supply in Oregon. So that's amazing, $200 or $300 a pound.
Jonah: Oh, it is. And it's really changed even the whole quality of your yields. You know, so now instead of maybe historically getting a 10% to 12% yield, you know, of full-spectrum oil, now some of our customers are getting closer to, you know, 13%, 15%, which really changes your financials modeling, when you're getting that kinda return in yields. And so a lot of the customers will also then just make bulk oil and just sell that to edible companies, you know, sell it in pounds or kilos at a time to edible companies or vape companies that don't wanna do their own processing, but wanna have oil made that meets their standards and quality.
Matthew: Okay. So the toll processor already has in mind exactly what they need, and they have specifications. And when a company comes to a toll processor, they say, "Make x, y, and z for me with these specifications." A bulk oil house has like a menu you can pick from of extracted oils and products. Is that right?
Jonah: That's a great analogy. Yes. You got it.
Matthew: Okay. And then, of course, before that we mentioned creating your own brand. So we just went through creating your own brand, the toll processor, and a bulk oil house. I think it's amazing how these niches are kind of evolving. They overlap, but its kind of fragmentation with industry is we're starting to see specialization. So that is really amazing. And just to review those numbers again Jonah said...And we won't quote you on that, Jonah, just because, you know, the market's always a moving target. But you said sometimes...
Jonah: It is. Yeah.
Matthew: ...the input costs were $1 a gram or $3 or $4 a gram, but oil was selling for $80 a gram at a dispensary. So you can get a sense of how profitable this can be for a mass that's very small. I mean, a gram is a tiny, tiny amount of a mass. So that's really just incredible. And one of the reasons I'm so excited about it, it's also exciting too because compared to cultivating, extraction is kind of an esoteric thing still. People really, they don't know how to get into it. It seems really opaque. It's just, you know, "What do I do?" There's all these insiders, and they don't wanna really talk about it because it's going so well from them. Not uncommon to hear from people to pay for their extraction machines in a week, and these are expensive machines. So it's really something that's just remarkable. We're in a remarkable spot in history here. And actually, it was 2 or 3 years ago, I was talking about this, but this opportunity still exists.
So I want to just move forward with some other topics here. So we've talked about the three different types of businesses most of your clients operate under. We talked about preserving terpenes. But I want to talk a little bit about your partner's background and what he's brought to the business. Because in talking to you earlier, he sounds like an interesting character and has brought a lot of cool things, just kinda cool skills to the extraction realm. So if you can talk about him a little bit?
Jonah: Yeah. I'm very blessed. I couldn't ask for a better partner. His name is Paul Tomaso. He's my partner and our CEO of our company here. And when we decided that we were gonna set up an analytical testing laboratory, he was back on the East Coast doing some of the largest solar rooftop and fuel cell installations in North America. And he was the very first call because we knew with his background that, once he got into the cannabis and hemp industry, not only would he help us set up the most professional lab with quality controls and standardization, and new methods, but we knew once he got in the industry, he would identify bottlenecks and deficiencies and come up with better solutions. And that's exactly what he did. And his background is really unique in the sense that, it's like his whole life culmination has come together to develop the best extraction equipment, which he never, ever would have expected. You know?
And so, you know, he came from actually a military background, joining the military when he was 17. And then he actually ended up working for John Fluke, doing Fluke multimeters up there in Seattle area. And then he did, like, the TERCOM [sounds like] section of the Tomahawk Missile, the layout for that. He did some stuff on the NASA space shuttle, some contract work. And then he developed some of the fastest laser technology in the world for laser marking and engraving. And then he even developed some robotic pick-and-place equipment that you could take any image, any photograph, any customer logo, and it would pixelate it into, you know, 1/2-inch by 1/2-inch or 1-inch by 1-inch tiles. And it would robotically go grab those tiles, place them, and then you'd have like a beautiful mural. Like he did the D-Day Map in the Eisenhower Building, back in Washington as well.
And so he's had all these...Everything he's ever done, he's developed new technology. And I don't know. When it comes to extraction, you know, and the fact that we do automation on everything which is unusual, a lot of equipment's just not automated, whether it be CO2 or ethanol, or butane, and we automate everything to have control over your process and also, you know, reduce the cost of labor. And so the fact that I don't know of any other person that has the electrical, the mechanical, the controls, the pressure to have all those knowledges over his life experience to bring them together to build extraction equipment. Yeah. So I've very, very fortunate to have someone like that as a partner, because he's really the driving force and the genius kinda behind all the technology that we build here.
Matthew: That's great. Now, he went from military applications to cannabis. That's a huge divergence.
Jonah: Oh. Yeah. But, you know, Paul, he's a big believer in the medicinal benefits. You know, he's even seen that himself in a sense, where he loves CBD, in particular. You know, his mind never stops, and also he always has to be very alert. And so he doesn't really partake so much on the THC side. But the CBD side, he's a big believer on. And, you know, he's taken some full-spectrum CBD capsules, just goes to bed, you know, let's the mind shut off for a little bit, and just wakes up refreshed. And that was one of the biggest changes for him is realizing, "Wow, this stuff really, really works."
Jonah: And so he's just incredibly passionate about helping people. You know, and him being a veteran too, you know, he really likes to help a lot of the veterans. And that's been one of the biggest things, we've enjoyed helping and seeing how many veterans that cannabis has really helped and saved their lives even. And we also like to hire a lot of veterans as well. And so anyways, that's been special to him as well, from that side.
Matthew: How do you see the extraction business changing and morphing, evolving, in the next 3 to 5 years as the industry just...I mean, there's more and more demand. There's gonna be more and more biomass coming in. Where do you see it going?
Jonah: Yeah. It's gonna be higher, faster, more efficient throughput with maintaining the best, highest quality, and repeatability is really where it's gonna go. And you'd hit on part of that, is it's gonna become even more standardized to where your product lines, even by a state-by-state basis, are gonna be repeatable. And so there's gonna be just more and more quality control. There's probably gonna end up being more requirements for good, you know, GNP kinda stuff too, for good practices for manufacturing. It's really gonna turn more, I think, into somewhat of a pharmaceutical environment with some of the production of stuff, whether it be edibles and oils. But just having that repeatability and quality control over your product.
Matthew: Yeah. It's funny because, you know, I've met some people from the pharmaceutical industry that have come over to the cannabis industry, and they're kinda bringing their best practices. But I don't think it'll be long before the cannabis industry is giving other industries their best practices. Because so much capital is moving into cannabis, and there's not any legacy architecture or systems. So it's all being built fresh. So we don't have to, you know, rely on kind of sclerotic processes. But with that, talk a little bit about your ISO-certified processing center. What is ISO? Why should we care about that? And what's important to know about it?
Jonah: Yeah. Well, you know, ISO is actually International Organization of Standards, who publishes quality standards or just good manufacturing processes.
Jonah: And it's really important because it helps, you know, answer the question, "You know, what is the best way to do this when it comes to manufacturing and to uphold certain standards as well?" And, you know, our background is in engineering, and you'll find that we created a lot of the standards to achieve, you know, high-quality extracts. And also, too, it's going into different jurisdictions, or even countries for that matter, or different states. You know, they all have different standards, but things like ISO or CE and things like that, those are all accepted. And so it's important for our customers in whatever jurisdictions or states, or cities, or countries we go into, that we have really high-quality engineering and documentation so that they can get through a permitting process as well, too. And so that's been incredibly important from our customer side.
Matthew: Okay. And so how long does it take? If someone's listening and they're like, "Hey, I want to reach out to MRX and find out if they have an extraction machine that works for me," how long does the whole process take from initial order to completion? And is there any sense on cost that you can give us, so we can kinda get an idea about this?
Jonah: Yes. So typically, you know, we build everything to order.
Jonah: And, you know, we require a 50% deposit, and we start building. And, you know, we have machines priced anywhere from the $150,000 up to $850,000, and then kinda anywhere and everywhere in between. And so typically, you know, on some of our smaller systems, a 6 to 8-week build time is fairly typical. Then, some of our bigger systems, like our 100C or our ethanol processing center, those are typically gonna be closer to the 12 to 16 weeks. But it usually works out really well timing-wise. Of course, every once in a while, we get the guys or existing customers that need another machine right away. And we're usually able to accommodate that in some way. But typically, that lead time is the right lead time in the sense that, once they put their deposit down, we start working with their team, helping with facility layout and design. And because what we see with a lot of our customers too, is not just their needs right now, like, "Okay, I need, you know, two 20-liters." "Okay. But what about your second phase or your third phase?"
And you can do a lot of infrastructure stuff up front with not a lot of additional capital but make it a lot easier to win. Because we've seen it over and over, where every 3 months, 6 months, our customers who start from a machine, and then they need more equipment. And then if they don't prepare for that on the front end, you know, they're moving things around, trying to bring more electrical in. And so we try to help in the beginning with a lot of their facility layout and design. That's not something we charge extra for. That's just part of kinda the value-added working with us. And we just kinda help them through their facility readiness, as well, making sure their facility is ready so when the equipment arrives. And a lot of times, too, we'll even have our customers come in and do training. We always go do training onsite, as well.
But a lot of times, we'll invite our customers to come in before their equipment even ships and come spend, you know, a few days here at our facility, learning about the equipment, you know, learning the extraction process. And that way, they have a good foundation, and it really shortens the learning curve when their equipment arrives.
Matthew: Well, that's good. Those are helpful services. I mean, just quickly, when's the most appropriate time to...When you're designing an extraction facility, maybe it's adjacent to a grow or part of some business planning, when is the ideal time to bring in you? Like when the architect and the general contractor have kinda been picked and blueprints are being drawn, be like, "Hey, we wanna bring in, you know, MRX to talk a little bit about this facility and just to make sure that we're implementing the best practices?" 'Cuz I've seen a lot of people and a lot of businesses doing that, like wondering when to pull in who in the planning process.
Jonah: That's exactly it, is we like to typically be involved in that at least at 4 to 6 out before you want to be processing. And we work more and more now with architects, designers, engineering firms, from the very beginning, just helping spec in the equipment, and then also with, like I said, the facility layout and stuff. And so, yeah. You know, that 4 to 6 months is usually when we get involved.
Matthew: Okay. Well, Jonah, I'd like to ask some personal development questions to help listeners get a better sense of who you are personally. With that, is there a book that's had a big impact on your life or way of thinking that you'd like to share?
Jonah: You know, the one book that I really took a lot from was a book called "From Good to Great," I think the author is Jim Collins.
Jonah: And as an entrepreneur, you know, when you start a company, you know, it's usually you and two or three other crazy partners that start to build that company. And there's only, you know, so much you can do and keep taking it in yourself and pushing forward. And, you know, I can't stress the importance and need of getting good, quality people in building your team. And what I reference about that book is that it took a bunch of case studies from different companies that were good companies, and built to a certain part, and then took them to the next level. And one of the things I really took out of that was identifying the right people to kinda hire. And a lot of times though, too, you don't always sometimes just hire for a very specific position, which is common. It's what you usually do, like, "I need this position." And we still do that a lot of times. But a lot of times, you know, I'll just meet somebody or talk with them, or have some informational interviews, and you'll find someone with a really good work ethic, hungry, they want to learn, and they have unique skill sets, and you kinda almost find a position for them. And that's one of the things...
Matthew: Get them on the bus, right? Is that what they call that?
Jonah: Yeah. Yeah.
Matthew: Get them on the bus.
Jonah: Yep. Exactly. And so that's one of the things I really took from that book and I thought was really helpful to me, as far as a book like that.
Matthew: Okay. I should also ask, you know, you're a growing business, what's the type of skill set, like degree, are you looking for chemists, mechanical engineers, electrical engineers...I mean, what's the type of skill set for the employees of your company now? Like what does it look like? So I wanna, A, give young people listening or people looking to make a career transition, looking for what skills are, like, in demand. What would you say is in demand?
Jonah: Yep. You hit two of my top ones right there, is kinda that chemistry background and then that mechanical engineer side. You know, people with kinda [inaudible [00:56:46] HVAC kind of experience or refrigeration experience is very helpful to us from that side.
Jonah: But, you know, we're always just looking for just good, talented people that are hard workers, that are not afraid to get their hands dirty and work hard. And, you know, we do a lot of training in-house too. And so we don't necessarily have to have a degree, but those are two degrees that we do tend to hire a lot of.
Matthew: Yeah. And one more personal development question. Is there a tool, web-based or otherwise, that you consider vital to your business or productivity individually??
Jonah: Yeah. You know, one is something that everybody already knows, but it's amazing the amount of texting that now happens in this industry. And just being able to use, like, voice text, I use that. I never thought I would use something like that to that level, but the amount of texts you get in a day can be 50, 100 texts.
Jonah: And so that's something I use a lot of. But then, more on our side, specifically, we use a program called like, "Vtiger," which it's a little more than just a CRM, which is a, you know, customer relationship manager. And from our side, it's incredibly important to have to keep track of the data and your customers. I'm not just talking about sales leads, per se, but your existing customers. And we even have a whole customer portal built in for when our customers get equipment. You know, they have their own login, their own [inaudible [00:58:25]. So we can communicate with them through that...
Matthew: Well, that's cool.
Jonah: ...and track everything through the whole entire process.
Jonah: And so that's been a very valuable tool for us, Vtiger, because it kinda ties in the potential new sales opportunities, it ties in our existing customers, and it also kinda syncs and manages all the calendars and stuff too, with visits and things like that. So that's been a pretty good tool that we use a lot.
Matthew: And how do you spell that?
Jonah: V as in Victor, and then just tiger.
Matthew: Okay. Cool. I've never heard of that one. Well, Jonah, this has been very educational. Thanks so much for coming on the show and teaching us about everything you're doing. This sounds like just an incredible business opportunity, not just for you, but for also your clients. And so I wish you all the best, and I hope you come back on and tell us how the industry is evolving.
Jonah: Oh, I'd be happy to do that. I really appreciate you taking the time. And I sure enjoyed getting a chance to speak with you.