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What is like to leave a successful career on Wall Street and become both a
dispensary owner and the CEO of one of the most innovative companies
supporting cannabis cultivators, we are going to find out the answer to that
question in our interview with Derek Peterson CEO of Terra Tech.
What is it like to leave a successful career on Wall Street and become a dispensary owner and the CEO of one of the most innovative companies supporting cannabis cultivators? We're going to find out the answer to that to question in our interview today with Derek Peterson, CEO of Terra Tech. Welcome, Derek.
Derek: Hey, thanks for having us, appreciate it.
Matthew: Derek, can you give us some background on how you got into the cannabis industry?
Derek: Well, it was a little bit by accident and a little bit just out of curiosity. I was working, as everybody seems to know, in finance at the time. And I remember watching one of the first GMV specials. Marijuana, Inc. was the first one that came out, and it started discussing a lot about the emerging market in the United States. It was interesting because it was coupled with a time where I was becoming a bit disenfranchised with working on Wall Street and in traditional financing.
I was thinking about some other opportunities, some other directions in my life. I had always wanted to start a company up, but didn't necessarily have a sector in mind that I thought made sense or was congruent with some of my skill sets, and just started digging deeper.
I had a friend that was entering the business and developed a pretty successful medical marijuana dispensary up in Northern California. And he allowed me a little bit of insight in terms of what his operations, and ramp up, and revenue looked like. And the numbers were very considerable. And I started to kind of look at the industry more as an analyst at that time and saw that it had a lot upside potential to it.
I really just kind of made a collective decision to take a risk and spoke to my wife. She thought I was a little bit crazy at first, and then became supportive to give me an opportunity to give it a shot, and here we are today.
Matthew: Cool. Now can you give a high-level overview of what Terra Tech does?
Derek: Yeah. I always tell people were kind of an agricultural company. As far as our backbone is concerned. We as everybody know, have a produce side called Edible Garden where grow in the Dutch style hydroponic, closed- environment, agricultural, lives in green houses produce. So everything from leafy greens to lettuce, basil, oregano, tarragon, those types of things. And we sell through 1,100 - 1,200 retailers throughout the United States.
So on that principle as well as our experience on the medical cannabis side, privately outside of the company, I've been pretty vocal about. I own a medical marijuana dispensary - a pretty high-volume one up in Northern California, and that's an amazing team up there. So we've taken agricultural backbone and combined it with my medical cannabis team and built out a medical cannabis division to complement the produce cultivation side.
The medical cannabis division has been busy around the country building applications for permits. As a matter of fact, we have just successfully passed the City of Las Vegas' approval for our special use permit for a dispensary location within the City of Las Vegas, and we're waiting state permitting here on November 3rd.
Matthew: Great. Congratulations. That's awesome.
Derek: Thank you. We're got the agricultural company on it's backbone. And again, cannabis is an agricultural product. So we're going to be able to use a lot of our skill sets in running food grade quality facilities, but carrying that over to commercial medical cannabis production as well.
Matthew: So you have a focus on creating produce, but as cannabis becomes legal and you get permits, you're going to shift the focus to that to a larger a piece of the pie does it sound like.
Derek: That's the agenda. I mean, if you look at cannabis cultivation nationally right now, it's extremely fragmented. It happens in small indoor facilities that are huge energy sucks, whether it's the air conditioning, the artificial lighting, those types of things. They're not environmentally friendly. The cost of production is anywhere from $600 to $800 a pound depending on the type of facility that you're running and how well you're running - or how efficiently, I should say that you're running it.
So that coupled with our overall ability to operate a large scale facility, we think positions us for where the industry is morphing into. And that's away from fragmentation and into more sustainable cultivation methods. The more transparent and accountable cultivation methods, because right now some of it's happening in people's basements. Some of it is happening in small warehouses. There's no standard operating procedures. There's no protocols. Sure, some of the product is tested by these labs that are popping up here and there, but there's no overall processes that are regulated from an industry standpoint. And that we think is going to change, and we're going to be pushing to help that change over time.
And we do that on the food production. You don't get into a retailer like Wal-Mart without being GFSI certified. And that's the food traceability standard that you have to have employed in your facility. And we think medical cannabis deserves those same set of protocols. If not more so than produce, because everybody is eating produce, but the people that consuming this medicine generally have compromised immune systems. So the standards in these facilities should be a lot higher than what we're experience in food grad facilities. And I think right now, you're seeing that they're far less than what you're seeing from a food production standpoint.
Matthew: Excellent points, I agree. Circling back to your Las Vegas licenses, what will those entitle you to do exactly? Run a dispensary? Do you also get to cultivate or is there vertical integration? How does that work?
Derek: They've broken them up into three different categories in Nevada. So whether you're applying to Reno, or Clark County, of the City of Las Vegas, they've broken them up into cultivation permits, extraction, and production permits, which would be things like extracts, concentrates and edibles, and then dispensary permits. So we've applied for each of the permits throughout the state for a plethora of different options from, again, production, cultivation to dispensaries. At the end of the day, we're thrilled to have been able to move forward in the City of Las Vegas because we absolutely love that location as far as dispensaries are concerned. It's very close to residential, but it's in more of an industrial area away from say a neighbors backyard, but it's close to the strip.
The beauty of Nevada, they've enacted a law that's a lot different than any other state. They utilize multi-state reciprocity. They understand a lot of people travel into the state for whatever reason to the tune of close to 30 to 40 million people a year. So if you have a medical cannabis card from New Jersey or California or Colorado, and you're traveling to Vegas there's a verification process that takes place, but you can buy medical cannabis in the state if you're a patient outside. That's the biggest opportunity and that's why we've applied for dispensaries, cultivation, as well as production to be able to be fully integrated within the state.
Matthew: Can you tell us a little bit about your new research and extraction lab in Oakland?
Derek: Yeah. We've put a lot of capital, a lot of time, and a lot of energy building up what we consider is probably one of the best production extraction facilities in the state of California right now. It's almost the same story as we were just discussing about the agricultural side where a lot of the cultivation is happening in basements and garages. It's the same thing with extractions.
A lot of people are doing very dangerous butane extraction at their homes in these tiny warehouses in California. If you've read the news, you've read that there's been a lot of explosions and house fires, and those things that are taking place. So if we wanted to build a premier lab facility out that was based upon a super critical CO2 extraction machine utilizing equipment that doesn't leave dangerous solvents and residual toxins in these extracts, which a lot of people with compromised immune systems are utilizing. And we wanted to do so in a lab-type of environment with clean floors, clean walls, full ventilation, emergency eye wash stations, all these things that you don't see again in people that are trying to do these things in these home facilities.
So again, it was raising the bar to the next level. We've been able to push out a product that we feel is probably one of the top tier products that we've seen being offered in the state. And again, we run a dispensary there. We serve about 900 to 1,000 patients a day. Which means we have a lot of patient vendors. So we see a lot of product. We buy a lot of product and reimburse a lot of our patients for there products and their developments. We're in that shuffle. We're producing versus what we've seen on a daily basis, and because we're utilizing the standards that we're utilizing, we've been able to push out a top tier product.
Now we've through - we've been going through a testing and formulating and R&D phase for the last couple of months. And we're kind of arranging the product line up that we're going to be offering to patients throughout California that are part of the collective that we're associated with. And I think maybe we're 30 days off from having that full line up selected and being able to move on or graduate from the R&D phase at this point.
Matthew: I've heard that you're creating a CBD supplement. Can you tell us what that is and why you're excited about it?
Derek: Yeah. We teamed up with Energetics or NRTI to do that. And they're actually the ones that have a need for the supplement. We don't have expertise in that. Where we come into the picture is they've been hunting around for CBD, like everybody is these days. It's a hard thing to come by. And not only is it a hard thing to come by, it's a hard thing to come by domestically. There's a lot of people that are bringing CDE in from China, from Europe, and places like that.
And if you've read the news lately you've heard that there's been a handful of providers out there where they found toxins - ethyl toxins, heavy metals, and other residual solvents and those types of things left in there. And as I said before, these things are extremely harmful for people that have compromised immune systems. So to have somebody in a lab grade facility be able to produce CBD extracts locally is a huge benefit. So that's our integration and that's our responsibility to NRT's development of this product is to bring to them and offer them a locally produced CBD Extract they can count on.
They know where it's sourced from because, again, this a company that makes a vitamin line for Martha Stewart. They can't risk having an issue with the core substances. And they put a lot of effort and energy and built a tremendous advisory board around this product. So they're making sure that what the put in there is a top tier product, and we're able to kind of provide that for them through or extraction facility in Northern California.
Matthew: In an interview, you recently said, "I'm ready for states of New Jersey to go from zero to 100 miles per hour." Is New Jersey closer to zero or 100 right now?
Derek: Well, they're at 10 miles per hour right now, but that's a huge byproduct of the governor. So if Christi makes a decision to run for president, which means he has to step down from his governor seat, I think you see a huge acceleration in Jersey, because you have bipartisan support there. You have a legislative body there in general that supports legalization and broadening of the medical program as well. So I think without Christi there you see a ramp up. If he doesn't make a presidential run, then I think it's a 50/50 at this point. Then I think he has a couple years left or so on his term, and it's going to take that amount of time, I think, before we see an explanation in that state. As I said, it's under 10 miles. They could ramp up to 100, but it's really going to be a decision or byproduct of who's at the helm in the state.
Matthew: Now there are some huge pharmaceutical companies in New Jersey. Do you think - I mean, this is conjecture and opinion. But do you feel like that's the reason why he's preventing cannabis from coming into New Jersey?
Derek: I haven't heard anything to that degree. I just think he's opened the medical program there as far as he's willing to open up the medical program. So he's done just enough to - in his opinion, to appease the population. He's unwilling. He's been verbal about his unwillingness to expand it any further. I haven't heard of any correlation or relationship or any concern with the lobbying efforts, and we're heavily ingrained in lobbying in the state through the biotech or pharmaceutical firms that are there.
Matthew: Now you bring up lobbying, and that's a good point. Do you feel like cannabis business owners are getting more savvy at lobbying? How would you grade them overall? Now I know it's different from state to state, but how have you seen lobbying efforts mature for the cannabis industry?
Derek: Well, it's become a necessity. Unfortunately, so. Early entry in competition is really starting to come into play here, and we saw that in Nevada. We saw some huge families with long-standing connections to the state apply for these particular permits and lobbying was an absolute necessity.
Lobbying to make sure that your voice is heard and then prior to developments of amendments getting in there to teach legislative - that's the most import piece of the puzzle is making sure that legislative bodies put out rules and regulations and build their programs that are very conducive to entrepreneurism. And what we spend a lot of time doing is making sure that we discuss with local governments that are going through this process, listen, it's okay to develop a program that's economically and entrepreneurially friendly because if you do, you're going to invite capital infusions into the program. You're going to have people that will come and they'll spend a lot of money building out there facilities. They'll bring in the best products, and ultimately, who benefits from that - the patient.
The patient gets a better product at the end of the day because they've created an environment where people can come and they make money. They can make a profit. Which is okay. It's a great business because you can actually do something that helps patients and needy people that have health issues and ailments that aren't being serviced by other prescription drugs, and also guess what, make money off of it at the same time.
States that haven't done a good job, and Jersey's a decent example of that. They haven't created an economically friendly environment. Because of that we've seen a program that's been a relative non-starter there. And who's suffered because of that? Ultimately, the patient. So a lot of the lobbying efforts start as these legislative bodies are going through the adaption and adoption process with these programs. And then obviously, when you're competing for the programs whether it's RFP response or some sort of another application effort, lobbying is an absolute necessity to go through that. So it's just been a byproduct of the maturation of the industry.
Matthew: I'm glad you're out there lobbying versus Monsanto. It's a good thing you're lobbying.
Derek: Well, they may not be far behind. It's hard to say.
Matthew: So what's the thing that excites you the most about the cannabis industry right now other than - I mean, that's huge that you got the Nevada or Las Vegas application in, and you got the approval. I mean, that's monstrous. But what else do you see on the horizon, where you're saying this is really interesting, and I want to learn more about it?
Derek: Well, I've seen more progress in the industry from say a legalization standpoint in the last 12 months than we've seen in the last 12 years. And a lot of that is just due to the momentum that's taking place. Through this legislation and these votes coming up, whether it's Oregon, or D.C., Alaska, or Florida, we're starting to get to that range where we're over 50 percent of the states are going to have some level of decriminalization or legalization. That's where we really where we start to see the snowball effect that takes place. The momentum to begin to accelerate again for some reclassification or federal adjustment.
I don't think it's too far away if we continue this momentum on a state-by- state level. Florida right now is what excites us more than anything else, and then too there is about 50/50, it's a coin flip at this point in terms of whether or not it passes. Florida is an extremely pivotal state not only due to it's size, but it's demographic. It has some of the harshest drug laws historically. And for them to go from that to broadening out to have some sort of legalized medical program, is revolutionary.
So successes like that are what excite us, because it's extremely important for the industry as a whole to be able to graduate to the next level. So we certainly see the protectionists out there - the empty drug legalization protectionists out there trying to stop these initiatives from coming forward by using smear tactics and campaigns, and making people think it's going to be anarchy in the residential communities if these businesses come to town.
And we've seen from Colorado and California and Oregon and Washington, and places like that it's just not true. We're actually seeing the opposite effect. We're seeing crime go down. We're seeing school systems get funded. We're seeing jobs created. We've seeing economies and areas of cities become revitalized. It's the exact opposite of what's being perpetrated out there by the anti-groups. So that's what excites us more than anything is watching these initiatives and these amendments go through and the battles that are ensuing. We get involved when and were we can.
Matthew: Great. You know you have kind of an interesting mindset as far as understanding cannabis yield and other produce yield. Can you just give us a picture of when you think about growing something like growing oregano or basil versus a cannabis plant? In your mind, how do you compare and contrast those two in terms of yield, how to grow? I know it's more stringent for the food it sounds like, but what else can you tell us? What else do you think about when you compare and contrast produce and cannabis like that?
Derek: I'd love to tell you I'm an expert in that area. I have a hard enough time keeping my office plants alive. But our Dutch farming partners have been doing this for generations. And my team on the cannabis side are cannabis top winners and they've been producing some of the top tier product consistently, year over year over year.
Controlling the environment regardless of whether you're growing basil or cannabis or what have you is the biggest factor. Controlling humidity levels, controlling you temperature levels, avoiding the fluctuations, introducing the correct nutrient blends at the correct times, those are the things that are most important despite what you're growing, regardless again, whether it's cannabis or basil.
Cannabis because it flowers and you take it not only from a vegetative state, taking it to a flowering state requires a lot more time, effort, and energy. But if you're talking about yield - an economic yield, in one acre of greenhouse, we're growing basil that estimates between 800,000 and one 1.1 million depending on current market rates. To look at cannabis in that same footprint at a wholesale price, you're looking at anywhere from $15 to $20 million dollars depending again on market rates of what demographic you happen to be in.
So the economics are extremely viable when you're talking about cannabis cultivation in doors. But the beauty of growing cannabis in a greenhouse using mother natures sunlight combined with technology - we always like to say it's technology and nature in perfect harmony, using these controlled environment systems but utilizing sunlight and not using artificial lighting, you're dropping your cost of production from $600 to $800 a pound down the $60 to $80 a pound, which is a huge saving that can be passed on to patients ultimately.
Matthew: Wow. That is massive. Derek, as we close how can people learn more about Terra Tech?
Derek: They can log on to our website. They can read about us. We've been covered by a tremendous amount of media over the last few years. There's a significant amount of information online if you just Google our name and read the different stories about where we started, where we're at today, what our current plans are.
We try to be pretty consistent to put out core product dates so people understand all the irons we have in the fire and the progress points. We just put one out this morning, which was an update on what's going on in the city of Las Vegas. And we'll have another one next week, because November 3rd, which is Monday, is when we find out if we get the industry permits for Nevada, if we can begin operations there. So online's a good store for information. Again, we try to update shareholders and interested investors at any opportunity that we get.
Matthew: Great. Thanks so much, Derek, for coming on CannaInsider. We really appreciate it.
Derek: Thanks for having us. Anytime.
What you will learn in this interview:
- How to present your cannabis deal so it is attractive to investors
- How to become an investor in Troy’s network, The ArcView Group
- How some investors are making 16+% loaning money to cannabis businesses
- Where the cannabis industry will be in five years
Whether you are an investor looking to allocate funds to promising cannabis startups or you are a cannabis-focused entrepreneur, this interview is for you.
Troy Dayton, CEO of The ArcView Group, helps us understand where the cannabis investment market is right now. He provides examples of several entrepreneurs that pitched to his investor network recently. Troy also describes some opportunities that are not being full taken of advantage by entrepreneurs where there is tremendous need. Lastly, Troy provides his prediction of when cannabis will no longer be federally illegal. You won’t want to miss this episode.
Matthew: Hi, I'm Matthew Kind. Each week I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at CannaInsider.com. That's C-A-N-N-A Insider.com.
What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at CannaInsider.com/trends. That's C-A-N-N-A insider.com/trends
Now here's your program.
What is like to have cannabis entrepreneurs beating down your door everyday vying for one of a handful of opportunities to present to the most qualified cannabis investors in the world? we are going to find out the answer that question to day with Troy Dayton, CEO of the ArcView Group. Troy sits at the crossroads of cannabis investors and cannabis entrepreneurs. His vantage point and visibility into the business of cannabis is renown. we are very fortunate to have Troy with us to day. Welcome, Troy.
Troy: Thanks for having me, Matt.
Matthew: Troy, can you tell us a little bit about your background and how you got started in the cannabis industry before founding ArcView?
Troy: Yeah. I've been involved since I was 18. I've been an activist looking to change the cannabis laws for as long as I can remember. And I went on to found Students for Sensible Drug Policy, which is now one of the largest student political groups in the country, and just really was also really excited about entrepreneurship and went and started a dot.com digital video/media company during the dot com boom. When that went dot bust with the rest of them, a number of us peeled off and started a renewable energy company in Colorado called Renewable Choice Energy, which is still doing really well.
But I was always called back to change the laws, and always thought I was choosing between a life of poverty and satisfaction of changing the world or going after the next big startup boom. And I never for a million years did I think that my efforts to change the world would lead to the next business boom.
But low and behold, there I was in 2009. I was the lead fundraiser for the Marijuana Policy Project, which is to put a good portion of the ballot initiatives and changed a good portion of the laws. And I was raising money from high net worth individuals as well as people who were running businesses in the newly legal cannabis industry. I noticed that these people needed to know each other. These really wealthy people who had made their money in other vestments, who were now looking at this industry that they were inadvertently creating. And then people on the business side who were wanting to grow their businesses, wanting to take on capital but didn't know the right people. And so, in 2010, I teamed up with Steve DeAngelo, who had seen some of the same problems. He runs Harborside Health Center in Oakland, considered the largest retailer of cannabis in the world. And we teamed up and started ArcView in 2010.
Matthew: So ArcView brings investors and entrepreneurs together. what is the vetting process? How do the entrepreneurs apply?
Troy: So they can apply through our website. We usually hear from about a dozen companies a week. We choose the top three or four, ones that are ready that we think investors might be interested in, and we put them on a webinar. We have a webinar every week with about four companies. We usually have about 30 to 50 of our investor members on there. Then they give feedback, they rate the companies, they often times will find mentors there or maybe some times even investors right off of the webinar.
Then every 10 weeks or so, we go through all the people who have been on webinars and a subsection of the investor members select the top dozen companies out of that mix and then put them on stage. We have these big meetings where we have a few hundred high-net-worth investors. Usually CNBC is there, and major news outlets are there, and they pitch from stage. Before that though they get paired up with a mentor, who helps them really put their first ñ their best foot forward in front of the group.
Matthew: that is great. So a little bit about the mentorship, is that they kind of listen to the pitch, help them refine it and give them ñ lend their business acumen?
Troy: Exactly. I mean generally speaking these mentors are paired up with them two or three weeks before they are about to pitch, so they are not going to change their business plan in that timeframe. But they can help them talk about which things they should accentuate, and how they can present themselves in a way and also maybe help them clarify their deal. that is probably one of the biggest challenges is companies come with either no idea of what kind of deal they actually want to strike with investors, or they come with a deal that is just, for whatever reason, not something anyone is likely to bite on.
Matthew: Got it. Here in Colorado we see a lot of people ñ everywhere, but in Colorado in particular, a lot of people with money coming into the state kind of spending it willy-nilly and not really understanding the cannabis business. In your experience, what kind of mix of cannabis business at least have the spark where you think, hey, this might be something versus this doesn't even have the minimum. What do you look for?
Troy: Yeah. Well, I think you raised the key problem in need of solution, which is that investors that aren't getting to know other investors, and other key players in the industry, and aren't able to look at pitches next to other pitches, and get to really meet the all of the entrepreneurs are really investing into without knowledge and with a limited understanding of what is available out there. And so, yeah, a lot of people are making bad investments because they just want to be part of the rush. I mean, that is one of the things we really try to ñ one of the big reasons we started ArcView was because rather than saying I'm the expert, or you should let ArcView tell you what is a good company to choose from, we figured lets utilize the crowd we know. lets bring the top people together, and through that, it is a lot easier for people to get a clearer sense as to who is a good bet and who is not because I think more heads are better than one. So I think that is really common.
But I think one of the key things that investors need to watch out for is a couple of things. I'd say the biggest one is that you have got really awesome amazing entrepreneurs super excited, a great business plan, but they are wildly over estimating the size of the market for a given product. This is something that I've seen with a lot of the vaporizers as well as any sort of novelty consumption device. No one is going to make a billion dollars out of some new way to consume cannabis out of some new fangled device. I just don't think that that is likely going to happen.
The other big think I see is people that are addressing a huge problem. they have got the idea that the marketplace is amazing, right? So CBD is a great example. Everybody is so excited about CBD. It could be a huge, huge market. But often times it is not the right business plan, or it is not the right team. And so even if it is a big market, you have just got to make sure that all those pieces are there.
And then the other big challenge I see is that people are waiting for the perfect investment, and that is sort of on the other side where they want it to hit on all cylinders. They want a big market. They want the right team. They want to have the this, they want to have that, and they want to get a good deal on it, right? And that is not going to happen in an exciting market like this. If you have a team that is got all of those pieces together, great plan, great business, great investors, great traction already, you are going to pay a lot for that company. The multiples are going to be huge, which is fine. A lot of investors are saying, look, I'm willing to overpay for a company right now because I think that if I back the right team, the amount that I overpay is going to be pocket change compared to the opportunity and the success if it succeeds. So when you are in a boom, your options change, and in a lot of ways it is an entrepreneurs market right now. If you have a good plan, a good business, and a good pitch, the chances of raising money at a reasonable valuation are very, very high.
Matthew: What is the typical amount that you see raised on average for an entrepreneur making a pitch? What could they expect?
Troy: Well, it really runs the gamut. And then I think the key thing to understand in the cannabis industry, in particular, is that the past is a terrible prediction of the future because this is moving so fast. I mean even from one quarter to the next at our meetings, we see significant shifts in both who is there, the size of investments people are talking about, the types of companies they are investing in et cetera. So what I would say is that so far we've seen in our group that we know of about 30 companies raise about $15 million in funding. And the biggest one was ñ we had a couple right around $2 million, and then we got a bunch who have raised around 100 or 150. And so, generally speaking the ancillary businesses, the businesses that don't touch cannabis directly, they tend to be raising smaller amounts, but it is easier for them to raise money. And the ones that are dealing directly with the plants, tend to be raising larger amounts of money, but it is often the competition for that money is more stringent.
Matthew: And from an investors point of view, if they come to an ArcView event, is there opportunity to invest only in equity, or is there fixed income, or what options are on the table?
Troy: it is a wide range. We don't police the deals. we've seen a wide range of things. Some investors will invest in a startup for equity or even a company that is further down the line for equity. We also see a lot of convertible notes for businesses particularly before they have gotten a chance to really establish their valuation, they will often do ñ a convertible note structure seems pretty popular. The other thing that is really popular particularly when you are dealing with businesses that deal directly with the plant is high-interest loans because a lot of states require anybody that touches the plant to be non-profit ñ not for profit, or they require them to ñ the investor needs to be from the state in order to invest.
And so, as a result people have found other ways to fund their businesses through loans as opposed to investments. So we are seeing high-interest loans. Anywhere from 17% to 22%, I've seen loans. And these businesses are happy to do it because, look, if you have got a license in a state where the market is already there, and as soon as the market comes online, or you are allowed to go, you are going to have a line out your door. it is worth it for you to invest that kind of money into something even if it is at high interest rate because the margins on cannabis, particularly in a market where there are limited licenses, is remarkable. And so, people are willing to do that all day long, especially considering that they aren't able to get money from banks.
Matthew: Are the loans typically unsecured with no collateral?
Troy: Usually unsecured. I mean, the higher ones, of course, the higher ones are unsecured, and the lower ones are secured. But there is also some rules there too. So I believe currently in Colorado, it can't be secured. But also the other thing we are seeing a lot of is investments in real estate. And so, because the great thing about real estate is that you have got a hard asset. If the whole cannabis thing doesn't work out, you still have this building that is worth something. And so, what you are seeing a lot of investments in is, it is also a way for people to be one step removed from investing in the plant and having to deal with all of the regulations.
So what you'll see often is people will buy buildings. They will outfit them, and make it perfect for the cultivators that have licenses to come in and set up. Then they charge a real premium, not just because it is cannabis. But because they have set it up so all the grower needs to do is come in and start working. You get better ñ so that is one way that investors are looking to really benefit. it is also something investors tend to invest in things that they know or with people who have a track record of returning investment back to investors in a given sector. Neither of those things really exist.
And so, that is why you see a lot of people investing in ancillary businesses. Look, if you are a real estate investor, and you want to get into the cannabis industry, well, lets see. where is the intersection between cannabis and real estate? If you invest in software and you want to get into the cannabis industry, okay, what are the options to invest in software companies that are solving problems in the cannabis industry? If you are an investor in service businesses, what are the service businesses that are starting up around here? And so, that is what helps to provide the bridge for a lot of investors into this sector. But there are very few agriculture investors out there. And so when it comes to investing directly into the plant, you have got a lot of people for whom this is the first agriculture product that they are investing in. But of course, this looks totally different than most agricultural business because of the way the regulations are working.
Matthew: Can you give us an example of an entrepreneur that you saw present recently in person or on a webinar that had a great idea and just did a great job of communicating that clearly in a way that investors really appreciate it?
Troy: I can give you a couple. One that is really won over a lot of our investors is Aunty Delores. Loren Frasier, and Julianna Carella have a great business out of California with cannabis edibles and really great branding. And they are now bringing that brand to other states. And so, the opportunity was to invest in essentially a licensing company where they would license their brand and their recipes et cetera and know how out to other places where they can launch the product in those states. And really sharp entrepreneurs, and they were able to raise a pretty significant amount of capital. I think they raised over half a million dollars out of our group. We also have another example would be Mass Roots. they are sort of like a social network for the cannabis industry. And they have now done multiple rounds through ArcView. I think they are up to close to $1 million from ArcView investors at different rounds where they took on a little bit of capital. Then they proved what they said they were going to do in terms of growth of number of customers, and then they came back and pitched again, and they got more money et cetera. So that represents a kind of a unique way to go about it.
And then what would be another example? Well, packaging is interesting. we've had three or four packaging companies present and do really well. One that really stands out is a company called FunkSac because there is an interesting thing happening in the cannabis industry right now where in the criminal market the last thing you want is your name to be on a package. But in the legal market, you definitely want your name on your package.
You also have the additional challenge of the regulations and making really safe packaging that meets with the regulations but also meets with the publics needs and also meets with the merchandizing. Well, this packaging just doesn't exist. And so, there is enterprising companies that are out there working to make solutions to those problems, and they stand to do very, very well because if they are first out the gate, look, everybody that is going to buy cannabis, it is all going to need to be in a package. What package is it going to be? What are customers going to prefer? What are regulators going to prefer? The people who are in a very nuanced way figuring out how to solve those problems in these early phases of the industry stand to benefit in a large way.
Matthew: that is really interesting. A lot of people probably aren't thinking about packaging. That makes a lot of sense. Where do you think the cannabis industry will be in five years? there is hundreds of small companies that are small right now, but they will grow up. Where are we going to be in five years?
Troy: Most of them will be out of business in five years. And a few of them will be wildly successful. You look back at the dot com boom or the social networking boom. I live here in San Francisco and everyday I hear about a new startup, a new brand, a new thing, a new service, and six months later half of these things are done. They don't work, right? So I think even though we are in a green rush, it is going to be a little while before we figure out which things are actually going to be successful and which things aren't. But I think five years from now where we will be is I think that there will have been a number of exits for ancillary business companies. I think you are going to see some big companies that would otherwise have been in whether it be security or point of sale, or advertising, or media, I think you are going to see traditional companies come in and buy these folks out. And so, I think we are going to see some exits in the next five years.
I think that in five years from now, it will be 2019, and I believe that that is the year ñ either 2019 or 2020, that Congress will change federal law and make cannabis legal nationwide. Well, it wouldn’t make it nationwide, but it would leave it up to the states to decide what they want to do. And when that happens, that is when the big multinational companies will come in. And you'll start to see exits ñ you'll start to see people in the New York Stock Exchange and NASDAQ, and real serious companies coming in and making acquisitions of not just ancillary businesses but of the more direct and more profitable businesses that deal directly with the plant. that is what I think we are going to see in five years.
And that is why people are investing right now whether it be their time as an entrepreneur, or their money as an investor now, because I think anything we are talking about right now is pocket change compared to what is possible upon legalization. And it is unique to be in a situation where you have got a multi-billion dollar industry that is ñ where there is no big players. there is not a single player in this industry that is doing over $100 million in sales. there is only one or two that are in the dozens of millions in sales. And so, it is a very, very rare opportunity for the little guy to get an opportunity to make it big in a business. And so, I think that is part of the reason why you are seeing just such an amazing flurry of activity.
Unlike previous booms that relied upon customer adoption and changing ways in which people act in order for those things to be successful like in the dot com, the social networking boom, or even the green tech boom. The difference here is the customers are already there. Cannabis is widely used. And so, when we move it out of the criminal market and into a licit market, not only are the customers already there, but attendant benefits to society are just enormous.
And so, I think we are also not just building a new industry, but I think we are building a new kind of industry. Particularly, because so many of the people that are at the helm of this industry right now got to it in part because they really wanted to see a day when nobody was punished for this plant. And so, I think there is some real core values. And I think ñ my hope is that this industry grows into an industry that looks a lot more like the renewable energy industry and the organic foods industry. Industries that started out of a social justice goal, and then the business models ñ profitable business models spread that social goal far and wide.
Matthew: What a great vision. That is awesome. I know you are passionate for Burning Man Festival. For our listeners that may not know what Burning Man is, can you give us a little overview, and why you are so passionate about it?
Troy: Yeah. Well, obviously, this is more my personal life, and not my ñ yeah, Burning Man really changed my life. I've always been pretty outside the box kind of guy. And when went to Burning Man for the first time about 14 years ago, it was really the first time that I realized that there were other sane people, who had a good dose of insanity and were willing to be really creative. So I mean Burning Man is sort of this experiment in community, experiment in radical self-expression, experiment in art. Some of the most amazing art ñ I mean, the thing is that ñ hereís the big reason why I love Burning Man, why I think people are drawn to this idea they should go is we spend all year being whoever we are. Like I'm Troy Dayton. I'm CEO of the ArcView Group, and I am dah ta dah. Everyone is so busy trying to hold on so hard to whatever identity they work on all year long. And it is great for a week to go out into the middle of the desert and just totally shed that in an environment where you can find out what is really inside of you other than the role that you usually play in the usual society.
Matthew: that is a great summary. And there is no faster way to show that you don't know anything about Burning Man than to say ìtheî Burning Man Festival, as I've noticed because everybody just says Burning Man.
Troy: Have you been:
Matthew: I haven't been. I'd love to go sometime. I've seen some pictures. Do you have a blog or something that ñ
Troy: Yeah. If you go to burnerlove.com, you'll see it is not just me writing on there, but you'll see some articles that I wrote on there. I wrote one that says Five Ways to Make Your Life More Like Burning Man that I co-wrote with Steve Bierman, and a couple of other ones that people might find fun.
Matthew: Troy, as we close how listeners can find out more about ArcView?
Troy: Well, we have a website called arcviewgroup.com. And our next big event is going to be on November 11th in Las Vegas right ahead of the big MJ Business Daily Conference. And it is important to note that with ArcView, there are really only - there is three ways to be involved. The first one is if you are an accredited investor, you can join ArcView as a member. If you are a company that is looking to reach this audience, we do have some sponsorships available. And then we also have if you are an entrepreneur looking to raise capital, you can apply to pitch. And so, everybody in an ArcView meeting has been especially invited to be there. And so, that is what makes it the highest concentrated group of key players in the industry. And all the entrepreneur and sponsor slots are already taken for the November 11th thing, but we do have some investor spots available.
And then we are coming to San Francisco in late January. it is going to be our next big event, and we'll have the exact date probably in a couple of days, but there will be lots of room for applications leading up to that event. So that is how people can get involved.
Matthew: Troy, thanks so much for coming on CannaInsider today. We really appreciate it.
Troy: Thanks for having me, Matt.
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Becky DeKeuster, M.Ed is co-founder and Director of Community & Education at Wellness Connection of Maine(mainewellness.org), the largest state-licensed medical cannabis dispensary in New England.
Becky has over a decade of experience in all aspects of the medical cannabis industry on both the West and East Coasts, with extensive focus on crafting successful policy and regulation at the local and state levels.
A former director of Berkeley Patients Group in California, Becky co-chaired the Measure JJ campaign which codified city dispensary regulations and created the nation’s first Medical Cannabis Commission in Berkeley.
She advised the Maine Governor’s Task Force as they drafted dispensary regulations in 2010. Becky has deep experience in operational best practices in both vertically-integrated and distributed cannabusiness models. A former high school teacher and administrator, she is an author and public speaker who uses her extensive knowledge of the industry to educate community leaders, health care professionals, legislators and others about medical cannabis.
Matthew: Hi, I'm Matthew Kind. Each week I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving legal marijuana industry. Learn more at CannaInsider.com. That's C-A-N-N-A Insider.com.
What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at CannaInsider.com/trends. That's C-A-N-N-A insider.com/trends.
Now here's your program.
Matthew: Becky DeKeuster is co-founder and director of community and education at Wellness Connection of Maine, the largest state licensed medical cannabis dispensary in New England. Becky has over a decade of experience in all aspects of the medical cannabis industry on both the west and the east coasts with extensive focus on crafting successful policy and regulation at the local and state levels. Welcome, Becky.
Becky: Thank you so much for having me, Matthew:.
Matthew: Becky, can you give listeners on yourself and how you got started in the cannabis industry?
Becky: I sure can. I guess I'll get this on the table first. I was a Catholic high school teacher for many years. And I mean as soon as I got past wanting to be a veterinarian, I wanted to be a teacher. And so, I was born in St. Louis, Missouri and was teaching around the turn of the century in California. I got a call from my family. My father was diagnosed with lung cancer, and I got a call from the family that said come home and buy a one- way ticket because we don't know, but this is it.
And I did not have very much personal experience with cannabis. And yet, I had met some folks in California who worked in dispensaries. And they said, Becky, when you go home to be with your dad, you should take him some tincture, just a little bottle of liquid, put it in your carry on and provide that to him. And given my background, and this was right after 911, and again I didn't really know much about cannabis; and so, I said, no, I was too afraid. I said no thank you, I'm fine. And so, I went home to be with him. And over the two weeks or so that it took for him to leave, there was not a day that went buy that I didn't kick myself for not having the guts to put that little bottle of tincture in in my carry-on.
That really stuck with me. It was something when I came back to California and was dealing with my grief and processing all of that, this was another piece of it. There was something very unjust about a society where my dad can't access this natural plant medicine because he lives in this box on a map and not this other box on a map. And so, I was sharing some of - I was venting, I guess, sharing some of these feelings with my dispensary friends. And they said that it would be a big career shift for you, but we're hiring, if you would be interested in working in the dispensary and seeing what this is all about.
I thought about it not very long at all. I thought I don't like this feeling of "what it I had" or "I should have." And so, I left my teaching career and started work at Berkley Patients Group, and that was, gosh, over 10 years ago now.
Matthew: Wow. I could imagine that frustration has got to be huge.
Becky: Oh, it was. You could still see it today in these families that are moving to Colorado and other states to access medicine for their children. As long as that is in place in this country, there's an injustice that we need to fix.
Matthew: You talk a little bit about transitioning from being a high school teacher to the cannabis industry, but can you turn back the clock to 2002, and the Berkeley Patients Group, and what exactly was going on there, and what you were doing?
Becky: Oh, yes. Actually, this is remarkable timing. Berkeley Patients Group is actually celebrating its 15th anniversary this Friday. So yeah, they started in 1999, and they grew out of - as did many of the older California dispensaries, they grew out of the patient collective that founded a commercial site. And they've certainly fought many battles along the way.
When I started there they didn't let me anywhere near the plants or the medicine because I didn't know enough about it. So I was working in the hemp store. So we had books and vaporizers and magazines and stuff. And it's important also to remember that at that point BPG had on onsite consumption lounge. So they were kind of grand-fathered in. Patients could come and use their medicine on site, which was just an amazing community building aspect of being there. And I think starting off in the front and helping patients, lending out a vaporizer kit to them or talking to them about what pipe might work better was really important informing how I approach this industry. I started with a very-patient focused experience, and I'm trying to maintain that.
Matthew: The club or organization aspect where people can consume cannabis together seems really important. I've talked to a lot of people recently in Europe, Spain and Amsterdam in particular, and they say wow, that's really a huge aspect that builds a sense of community around the cannabis and patients. So I hope that idea spreads more here.
Becky: I can't agree with you more. What came out of that experience, and I understand that now they moved, and they no longer allow that onsite consumption. But what we saw was people making friendships. We were able to provide services like acupuncture and other education and entertainment events, and it was a very tight knit-community.
There is the hospice program I was fortunate enough to assist in starting that. So that began when we noticed that one of our regulars had not been around for a while. And so, we started looking into it. It turned out that he was in hospital. And so, we were able to go out and visit him in (indiscernible [0:06:37]) and help him medicate. So I mean just some real amazing things came out of that experience. And I understand that certainly for somebody who is maybe coming to this from a naive - cannabis naive standpoint, that might seem very threatening or scary or dangerous.
There's going to be all kinds of car accidents. The truth is that in all my time in BPG, I can remember maybe two fender benders happening. And surprisingly they were from people slowing down to pull into the parking lot and then getting rear-ended out on the street. So it was a remarkably friendly and safe environment. And we also could do a lot of education on responsible consumption. And if you tell me that you're not capable of driving, we'll either let you sit here and here are some free healthy snacks, or if you really need to go to an appointment or something we'll get you a taxi. So it was a beautiful thing.
Matthew: How have you seen the medical marijuana market evolve and grow since 2002?
It's like watching a child grow up. I mean there's these rapid advances in every aspect from patient care to the science to the regulatory environment. And it's pretty - I mean, to use a teaching phrase, you might call it mainstreaming. And I think that some negatives come with that. One example being that I don't see the U.S. moving towards embracing an onsite consumption policy or offering, not that it's impossible, but it's grown by leaps and bounds. It's a movement that is evolving into an industry, I think.
Matthew: Now you've helped to shape some cannabis public policies in both California and Maine. What are some of the key policies that you've helped shape?
Becky: Well, I want to preface this by saying it's super important to remember that any policy, any advances, are always the work of many, many dedicated people. And to recognize that we are just continuing work that was being begun by our ancestors in the movement and many of them haven't lived to see the flowering of the seeds that they planted. So it's important to keep that in mind. No one of us is responsible for any piece of this alone.
Going back to Berkeley, we worked very hard on self-regulation with city officials. It became apparent to us that statewide regulation for a number of reasons was not likely going to happen. And we were fortunate that Berkeley city officials were willing to listen and to work with us to create city-wide regulations and standards for dispensing. I'm very proud that I assisted in passing a citizens initiative that created the Berkeley Medical Cannabis Commission, which is in existence to this day. And so, that was a big piece of what we did there.
Here in Maine, regulators as they were building the dispensary program, now Maine also has had medical cannabis since ë99, but not dispensaries until 2009. And regulators were very interested in what had and had not worked in other medical states. And so, I think that being able to share the story of successful regulation in the City of Berkeley helped them see past a perception that all of California was just the wild west and there was no lesson to be learned from that state. And they created a good regulatory model, a stringent regulatory model for dispensaries, and we continue to work on legislation to refine those regulations today.
Matthew: I've heard that Maine is a little more functional and reasonable than California in it's regulation of medical marijuana. Would you say that's true.
Becky: I think that's going to depend on what you define as functional. It is definitely more stringent. We have a very - a fairly short list of qualifying conditions. We don't have any kind of a catch all, you know, "any other conditions which marijuana provides relief" clause. We are limited to only eight dispensaries around the state.
Also important to remember is that Maine's population is 1.3 million. So we're not a very big state, but there are only eight dispensaries. We are required to be vertically integrated. So I think that in the sense of being more stringent, yes, Maine is a little more stringent.
I also think it's interesting to see that the signals that DOJ is giving us, they essentially very recently said, California, get your state-wide regs in order, or we're going to keep raiding. And I think that the willingness of DHHS here in Maine to create what some see as an overly restrictive regulatory system has actually helped. We are very well regulated here, and I hope that helps make us less interesting to any sort of Federal agency.
Matthew: Now is a doctor the only person that can help a patient get a medical marijuana card in Maine?
Becky: No. Actually, MDs and DOs can certify patients, and then just this year starting August 1st, nurse practitioners are now able to certify patients as well.
Matthew: Now what's a DO?
Becky: A doctor of osteopathy. So they are typically educated in both Western and more Eastern holistic forms of medicine.
Matthew: Do the doctors, Dos, and soon the nurse practitioners, are they pretty receptive to the message in benefits of medical marijuana?
Becky: Many of them are, and I think that as the program ages and we do more work on education specifically to help providers and also just the general public, I hope to see more acceptance. We still hear a lot of "there's not enough science backing it up." And of course, we know that is a frustrating thing to here because it's a Schedule 1 drug, and all of that. But there is a growing acceptance here in the state especially among oncologists. I think they've been very receptive to this as an option for their patients.
Matthew: So would you say it's difficult to get a medical marijuana card then given some of the MDs, the DOs?
Becky: It is. We do hear from patients who say I talked to my doctor about this and even though she personally thinks this is a worthwhile thing to try, the practice that she works for dissuades, frowns upon, or just completely disallows their physicians from certifying patients. So that's frustrating.
And again, there's also the fact that our list of qualifying conditions is a little more limited. So for example, Parkinson's is not listed as a standalone qualifying condition, but some of it's symptoms can fall into our list, for example, pain or muscle spasms. And so, we actually did a survey of our members this spring and found that many, many of them have comorbid conditions that benefit from marijuana but do not fall under our qualifying conditions list. So lots of folks suffer from depression. If you're seriously ill, depression is not an uncommon comorbidity with that. But depression is not a standalone diagnosis here. So if you are depressed because you have been diagnosed with cancer, you'll qualify with the cancer diagnosis. But if you are depressed, because you have that as a qualifying condition, you don't technically fit in the list.
Matthew: Unfortunately, there's still a stigma in many areas in communities about cannabis. For people that are having a hard time discussing their desire to become a medical marijuana patient, do you have any suggestions on how to broach that topic?
Becky: We often hear that not infrequently from our members too. And I think first we hear I want to bring this up to my doctor, but I don't know how to do it. And then we also hear I want to bring this up with my parents or my partner, my ex-wife who I share custody with, but I'm not sure how to do it. And I think the advice to any of those groups is the same, and the first step is to educate yourself. There's so much science out there. There are so many good resources. We direct a lot of folks to PubMed, which is a government sponsored clearing house of recent science. If you go to PubMed.com or gov and type in cannabis and Alzheimer's, you'll come up with a number of studies.
I think that going into a conversation armed with some facts is helpful. And we are certainly - WCM does our best to help by doing outreach in the community, doing public medical cannabis 101 events and talking to physician groups and patient support groups about the benefits.
Matthew: One of the things, I think - we recently had on a film maker, Adam Scorgie, who made the documentary, The Union - The Business Behind Getting High, and also a documentary just released this month called the culture high. And that is another excellent resource for people that aren't sure how to broach the topic with their family. They have Harvard MDs. They have Sir Richard Branson, and it really might help to open some minds a little bit. So that's a great one to suggest it.
Becky: Absolutely. I'm glad you thought to bring that up. Definitely. And again, there are just so many people doing so much good work. And also, another thing that we suggest is that if people are on Facebook, they look for - there's all kinds of groups. There's veterans cannabis support groups. There's cannabis for alcohol recovery. So making connections with people who are in a similar situation with you is also empowering.
Matthew: Now you're really good at the community outreach part, and they'll be people listening in different parts of the country where they feel like the community is not open to medical marijuana, or there might be some sort of elder tribes people that don't want to see that happen, let's say. Do you have any specific recommendations to try so they can make their community a little bit more open to the idea?
Becky: Yes. And we work on that all the time. I mean, it dose require - you can't do your community outreach at the end of the day after everything else is done. You need to be present in your communities. And I would recommend sorting the categories kind of in a bucket. So you definitely want to have a presence with your local government and local law enforcement. You want to look at charities in the community that are going to serve a similar population to you. And so, that might be a cancer research group. It might be the United Way. It might be HIV/AIDS resource groups, but do your homework. Look at who is active in your community and be present with them.
I say you have to be patiently, persistently, politely present because some of these folks are going to have kind of a knee jerk, "oh, I can't even meet with you" reaction. And you've just got to keep trying. You've got to send a letter of inquiry. You have to make a phone call and not take that, no, I can't fit you in my schedule as a final no. And we have found a lot of success especially in working with charities that support our patient base. So here in Maine, there is a group that's affiliated with a local hospital. It's called the Dempsey for Cancer Hope and Healing.
Matthew: I've heard that cannabis is available in hospice facilities. Can you tell us a little bit about that?
Becky: Yes. The rules around that have recently changed. So there are two categories. There are in-patient hospice and nursing facilities, which are affiliated with the hospital, and then there are private hospice facilities - home hospice. There's things like that.
The rules have just changed again this past year. We had a regulatory change through the legislature that made it more - it improved the access of patients who live in in-patient facilities to use their medicine. Previously they had to designate - a staff member had to be willing to be designated as a caregiver. And there were - two staff members had to be present at the administration of the product. And so, that has just opened up giving those facilities much more leeway to set their own policies on storage, dosing, things like that. And again, with the outreach, that happened. This is one little regulatory change that an in-patient facility is not necessarily even going to know about, right?
So we have been doing presentations to help staff and administrators understand, again, MMJ 101. The variety of products, the different strains, let's talk about what might be a reasonable policy around storage. If somebody is in a facility and they have a lockbox that will fit in their night stand, can they keep their medicine bedside? So we're definitely part of those conversations.
Private facilities again set their own policies. We just came back from tabling and presenting at the Maine Healthcare Association, which is kind of a trade association for these facilities. And there was a great deal of interest. And not so much from the administrators, but certainly from the staff and the nursing folks who work one on one with the patients. They see people come in who have been using before they enter the facility and are now very concerned that they can't bring their - the policy says I can't bring my stuff in. And I see people whose families are coming in and saying, hey, I would like to try this with my mom or my dad. So it's really encouraging to be engaged in those conversations.
Matthew: Can you give us an overview of some of the symptoms it helps some of the pain it alleviates for the people in the hospice?
Becky: Well, certainly with pain, just the general arthritic pain, things like that. We have also had anecdotal very positive results with sundowning, which is something that happens in patients with dementia or Alzheimer's where there tends to be more agitation towards the end of the day. A tincture especially seems to be very helpful for calming that agitation.
Another very interesting and we all know that one of the supposed negative side effects of cannabis is dry mouth. Nobody wants to get cotton mouth. Well, I'll tell you who does want to get cotton mouth, somebody who is living with Lou Gehrig's Disease because eventually they will get to a point where they can't control the production off their saliva. So we actually have a couple of members fairly young, in their 50s, with ALS, and they really appreciate that supposedly negative side effect. As one guy said I don't have to walk around with a wash cloth in my pocket anymore because I'm not drooling all the time.
So it's really - it's amazing. It's such an honor to see all the different ways that this one little plant can benefit so, so many people.
Matthew: Is there any specific strain that you see helping more than another for people with ALS and that excess saliva that actually causes the most cotton mouth?
Becky: Not that I am aware of. And that's the part that has just recently come to my attention, and we haven't dug into any sort of study or a survey on that. I'm trying to think of what these gentleman preferred. I think they both prefer (indiscernible 0:25:11). I think both of them mix it up with Sativa. It's not strain-specific for that specific symptom.
Now in terms of other ailments, we certainly just like everywhere else in the nation, there's tons of interest in high CBD strains for pain, and for seizures and tremors and things. Here in Maine, we've got Harlequin, Shark Shock. I think there's Chalice Tsunami (ph) is getting good reviews here. We have a strain called Chockalope (ph), which is a Sativa, which is fantastic for appetite stimulation, but also depression and sort of apathy. I actually had a member tell me, Becky, I have no idea how bathrooms ever got clean before I found Chockalope. That's a fact.
And there is also a Maine grown strain called MOB, and depending on who you ask, MOB either means mother of berries or Maine's own berries, but it is an absolute champ. It is fantastic certainly for pain and insomnia.
Matthew: Now in Maine, a caregiver can be selected by a patient to grow on the patient's behalf. What are the rules around that? What does that look like?
Becky: So a patient in Maine has three options. You can grow your own up to six plants flowering. You can choose a dispensary to grow those plants for you, or you can designate an individual that here in Maine we call caregivers, again to grow up six plants for you. And that is a very - that side is not state regulated. For example, if I was sick and I know that you have a really good green thumb, I could say, hey, Matthew:, I would like to designate you as my caregiver, and do a little bit of paperwork and you can grow for me. Caregivers are allowed to serve up to five individual patients. So if they them selves are a patient that adds up to a total of 36 flowering plants at any one time. And then patients, no matter where they're sourcing their medicine, patients are allowed to 2.5 ounces of finished product every 15 days.
Matthew: Can you tell us a little bit about your main wellness facilities? How big they are? Where they are? What they do? How patients access there? I know it's a big question, but I just want to give people an overview.
Becky: It would help if we could do a radio version of a map of Maine, but - so we operate four of the eight dispensaries. So we're in Portland, which is Maine's largest city with about 60, 000 residents. We are in Hallowell, which is a small town just outside of our capital, Augusta, in the middle of the state. We have one in Thomaston, which is along the mid- coast. And we have one in Brewer, which is right outside of Bangor. And then there are four others around the state. Our facilities range from about 2,000 to about 6,000 square feet.
Matthew: You said they're vertically integrated. So you grow everything that patients consume?
Becky: We do. Yes, we do. We have a separate cultivation facility that supplies all four of the dispensaries. So we don't actually grow in any of the dispensing facilities.
Matthew: So for infused products like if someone wanted some chocolate or something infused, do you have to make that then? You can't have anybody that's not an employee of Maine Wellness help you with that at all?
Becky: That's correct.
Matthew: Do you see that being liberated, a little bit at anytime in the future or not talk of that?
Becky: Okay. So currently we do have one tiny little way around that. Recently there was again a legislative regulatory change that allowed these individual unlicensed caregivers to sell up to two pounds per year to dispensaries. So if you had excess as a caregiver, you could come to one of us and say, hey, I've got this. There are two hurdles to that. One is that we have - one of the things that we want to do is provide a consistent supply to our patients. I mean, it's pretty rewarding to help a patient find the strain that really works for them and then continue to be able to provide them that to them.
And so with a limit of two pounds, if you're the caregiver, and we purchase two pounds of really fantastic high CBD meds, that two pounds is going to come to an end at some point, and I can't purchase another two pounds from you for a year, which is extremely frustrating.
And then the other hurdle is with regulation. Again, there is not sort of middle tier where a caregiver could be regulated and inspected by the state. And so, the state does not inspect anything the caregiver grows. The dispensaries don't have the man width to do that. And so, it's a door that I don't know that a whole lot of people are able to use right now.
In terms of whether that's going to change in the future, I know that when the initial bill was put forth, the quantity was not two pounds, but I want to say 12 maybe that we started with or ten. And that quantity just kept getting whittled down by legislators. And so I don't know if that's something that's going to be fixed in the near term. I would hope that as Maine looks at ways to legalize for the responsible adult use market that we would look at that piece of the medical regulations and see that it was not ideal.
Matthew: Is there any trends or technologies that you see having a real impact in the cannabis industry in Maine, but also elsewhere that you're excited about?
Becky: I think the move towards concentrates is very interesting. Maine is a little late coming to the game on the regulated side with the concentrates. This is not to say that they don't exist, but I think that the things that you can do with some of these extractions and the ways that you can sort of create a very potent medicine to order almost with your ratios of the different cannabinoids, I think that's very promising certainly for the medical side. It's interesting. It's very different. Here in Maine the medical culture is very different. Again, we just clarified with our regulators that, yes, we can sell concentrates. We can create those and provide them to our patients. So in that way, we are little behind.
Another thing that I think is very important, very necessary, should probably have gotten more attention earlier than it did in this industry is the need for the lab testing. Whether you're a patient or an adult use consumer, I think that's a really significant piece of the puzzle. You deserve to know that first there's no contaminants in your product, and second, you pick up a beer, you know what the alcohol content is. You deserve to know the cannabinoid profile of what's working for you.
Matthew: Yeah. We see lot of the dosage issues here in Colorado with people eating whole candy bars not realizing that 10 milligrams is all they probably want to start with.
Becky: Right. Actually, I have a question for you. Do you see Colorado moving towards individual dose edibles only? I know that you were on the brink of let's pull them all off of the shelves. Do you see a time when you will only be able to buy and individual serving of the chocolate rather than a chocolate bar?
Matthew: You know, it's funny you mention that. Just this week - or was it last week, there was kind of a - there was some politicians that said we've got to change this whole edible thing. And there was immediately an overwhelming backlash that seemed to be bigger than what the politicians and bureaucrats brought - their suggestions. So I think the dust has not settled on that. But in the end everybody is seeing such a positive impact from legalization and allowing businesses to help patients and adult users that I think we're going to have a really - perhaps the largest spectrum of available options that I can see anywhere maybe excluding Washington. So I'm really optimistic and excited about that.
Becky: Good. Well, all eyes are on you guys, and you know that. We're way over here taking notes furiously.
Matthew: So you have four wellness centers. There are a lot of people that are listening that have either applied for a license or at some point may consider that. What kind of, if you were their mentor for day, what would you tell them to steer away from or to focus on?
Becky: Oh, my heavens. That was a big question. I have friend who would say run away. Don't do t that. We wouldn't get far if that was the case.
I would say be sure that - one of the things that's amazing about this industry and probably would surprise people who aren't very familiar with it is how tediously normal it is when you get right down to it. I mean this is just like any other business in terms of a whole lot of stuff. But be ready for the complex, every shifting layers of regulation that you're going to need to deal with. Be ready. This is not like making widgets. You're producing a product, if you're in a medical state, that people are going to be using therapeutically.
If you're in an adult use state, you're going to be creating products that adults want to rely on that need to be consistent. And really the eyes the U.S. and the world are on us here as we move forward. So better - be 10 times better than you think you need to be in terms of ethics, in terms of transparency with your communities. We don't have room to make mistakes here.
I think that if you've got a good business plan, if you've got investors who you can trust, the next step is to hire wisely. And I think - really I'm thinking of cultivation here because I've seen and heard from a lot of folks, who have run into trouble with getting their groves up and running. And I think on the cultivation side, you don't want to hire a full staff of people who have been farming cannabis for the last 10 - 20 years because they each have their own methodology. They each are - you know, my way is the - I've done this, and I do it well, and this is how we should do it.
I think in some instances, and again, this is based on experiences that I and some colleagues have had. It's best to start with one or two master growers who see eye to eye. And then hire just plenty of smart eager people who like plants. I don't care if you've ever tended or cultivated a cannabis plant. If you like plants and you care about helping people, those are two good things for me to see in an interview.
And I think also - this actually goes back to something I think I said at the beginning - respect your elders. You may be fresh on this new idea and sure that you have the answers and you're going to come into this industry and blaze a new trail. And that is as maybe and please do and do it well, but also remember that you wouldn't be here.
I wouldn't be here without the work of thousands of activists who came before us. People who lived through raids, who lost their homes, who went to jail, whose families broke up over their fight to increase access to this plant. People have died without ever seeing the final fruition of what they have been fighting for. I think that level of respect and understanding. Again, it's a movement that's moving into an industry. We can't forget our movement roots. We can't forget the people who got us where we are today because we wouldn't be here without them.
Matthew: Becky, as we close how can listeners follow your work and your dispensaries?
Becky: Wow. Well, you can find us online. We have a website at www.mainewellness.org. And that's Maine all spelled out M-A-I-N-E Wellness.org. We're on Twitter at @wellconnectme. We have a Facebook page. Just type in wellness connection of Maine and you'll see us there. We also publish a couple of times a month. We have a blog that appears in the Bangor Daily News, which is the largest newspaper here in Maine, and you can find that by just Googling Cannabis today or Bangor Daily News cannabis today. That's it.
Matthew: Thanks so much to Becky DeKeuster, Co-founder and Director of Community and Education at Wellness Connection of Maine.
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Tom Bollich was the co-founder of Zynga which created some of the most famous Facebook games to date, including Farmville which had ten million daily users at its peak. After leaving Zynga, Tom saw the opportunity in cannnabis and founded Surna in Boulder Colorado. Surna is solving the biggest technical and engineering problems in cannabis cultivation. Surna’s chillers and air handlers are arguably the most efficient at removing heat from grow rooms, they do this by removing heat via water instead of air. Listen in as Tom describes how he is bringing Silicon Valley’s best technology to the cannabis industry.
Matthew Kind: What is it like to be one of the creators of Silicon Valley's most successful online games and then peeved to the cannabis industry and take on its biggest technical challenges. We are going to find out the answer to that question today in our interview with Tom Bollich, CEO of Surna in Boulder, Colorado. Welcome, Tom.
Tom Bollich: Thanks, Matt.
Matthew Kind: Tom, for people that aren't familiar with you and your background, can you give us a little background of yourself in Silicon Valley and then how you transition to the Cannabis industry in Colorado?
Tom Bollich: Sure. Well, I guess in the beginning, I use to work on AI for robotics. I actually did work in some online casino stuff for a while -- I was one of the co-founders of Zynga -- and then decided to jump into cannabis not too long after that. I guess I really don't like to sleep very much.
Mathew Kind: Yeah, Zynga is, I mean for many people out there, most have heard of Zynga but almost all people out there got a invite for Farmville one time or another or some of the other games, but I remember distinctly Zynga so that's well done, congratulations.
Tom Bollich: Thank you.
Matthew Kind: And you're totally done with Zynga now and have moved on to Cannabis industry.
Tom Bollich: All hands on this one, that's for sure.
Matthew Kind: And how about a little background on what Surna does in the space?
Tom Bollich: Well, I mean Surna, the way we positioned it is that it is an engineering and manufacturing firm. I mean there is a lot of stuff that is missing on this industry right now; a lot it has been in the underground for so long. There is not a lot of science. There is almost no real engineering so were focused on that. I'm pretty positive we spend more of engineering hours on this industry than anyone else has. We're about to see the fruits of that labor soon.
Matthew Kind: For the growers that are listening to the show, what can you tell them about the chillers and air handlers so they can understand what Surna does for technical specs standpoint.
Tom Bollich: Yeah, because one of our key stones right now is climate control so we deal with the thermodynamics inside of a grow, and our first product was kind of a small scale, very affordable water chillers. Water Chillers tend to be very expensive and as a system, there are two or three times a cost of H pack. We've brought the price down considerably. In fact, we're probably in line with regular H pack. Because at the end of the day, if you remember, is that a grow has to be treated more like a server farm than like a comfort cooling which is what H pack is good at. So we are able to provide a lot of cooling for a lot less energy.
Matthew Kind: I like the way you frame that there. It is . . . I can see that the Silicon Valley coming into at it. It is like a server farm. That's a very great point.
Tom Bollich: You have to remember like every thousand watt bulb, it's kind of a weird term but it's about half a ton of heat. And then for instance, if you have 1,000 lights, that's 500 tons of heat you have to deal with. We're normally, let's say you're in the middle of Nevada, the heat from being in the desert is about 20 tons so you can kind of get mentally the scale of things when you're dealing with this much heat. So the most efficient way to process this is with water. It's not with like a swamp cooler. What we have is like a closed loop chilled water system.
Matthew Kind: Very interesting. Now people . . . The chiller technology is just something that not everybody has their head 100% around. Can you just give us a brief overview of how chillers actually operate?
Tom Bollich: Sure, so what we will do is we are going to take like a thousand light system and what we'll do is we'll install the chillers system outside of the building. It has a loop that goes through all the chillers. It's usually built in redundancy. We're very careful about power usage and what we'll do is we will pipe that cooling system across the entire building. And then we can tap into this loop wherever we want control the temperature and humidity. So that's why it's very efficient. The thermal conductivity of water is 20 times that of air so you can just do so much more with it and that's why we are growing so quickly right now.
Matthew Kind; Yes, I learned that lesson when I got my scuba diving certification. They said that water takes away your body heat so much faster than air. It's really even hard to comprehend so keep that in mind that . . .
Tom Bollich: You can die in 65-degree water. You cannot die in 65-degree air.
Matthew Kind: Yes, yes, it just pulls it out. That's a great way of looking at it, just pulls it out so much more efficiently and faster. Now, I understand you have a new product that will be available soon. Can you give us a little background on that, an idea of how it's going to help growers?
Tom Bollich: Sure. What we've done is kind of evolve all of this into something more cohesive. It's almost essentially like a water cool platform that we have an entire system running on. One part of this, one of the keystone parts of it is we actually have a water cool reflector so that we actually do the heat exchange within the reflector as opposed to the way you're currently designing a grow is you have a light that puts half a ton of heat into air and then you have a cooling system that puts half a ton of cooling into the air.
There is an insulate. It's very inefficient so we've actually designed a reflector that does all that heat exchange locally. It's way more efficient. We've spent so much engineering on this. It's really incredible but it looks like this will be the most efficient system on the planet for cooling lights. So the light will plug into this water-based platform. We're going to have a new trend chiller that plugs into it. We're going to have a system that dehumidifies. We are going to have a system that does the drying process maturing, so all this stuff is just going to run together.
It's going to be way more energy efficient. Some of the buildings we are looking at, putting this into, I believe we saved about 1,000 amperes on their service. So that cost alone saved the company I think almost a million dollars, and we are trying to keep this very price sensitive so it's not going to cost an arm or a leg.
Matthew Kind; Sure, that's incredible. Is there any ROI calculators or anything that customers ask for? How do you frame the cost savings for them so they can get an idea, "Okay, if I put this system in, this is what I am looking at on my ROI?"
Tom Bollich: This platform could . . . Well, I mean at the end of the day, you have to have lighting. You have to have some form of temperature control and you have to run power to the building. The amount of savings we can do on [inaudible [00:09:04] because you have to remember if you have this water cool reflector, then you need far less cooling before you need far less power to the building so you ROI could be as quick as a year, sometimes two.
Matthew Kind: Apart from just the ROI, there is a comfort factor too that's different. I mean, you have a more comfortable room I imagine, as well.
Tom Bollich: Well, the cooling is more evenly distributed so you don't have a centralized system that trying to cool all these lights. Each individual light is cooled by itself. It's highly redundant, it's highly efficient, and the photometrics on our light are incredible because what we did is we mathematically prove what's the best way of getting light to the plain canopy and then we were able to engineer a solution to that.
Matthew Kind: That's incredible. How many customers are using a Surna chiller or air handler right now?
Tom Bollich: Well right now, the chiller we've been selling, I believe we're in over 20 very large grows that stretch all the way from Canada to all across United States but a lot of this chillers we've been selling for home use for like five years. It's a very well proven product and it's very cost effective.
Matthew Kind: That's a very good point you bring up, home use. Do you have some customers that are saying, "Can I use this for my home?"
Tom Bollich: Sure, yeah. There're several people that've been using over the years for their home so typically you'll see people doing 5 to 10 lights at home. It's pretty popular here in Colorado because legally, you can have a home grow. It's proven to be a good update.
Matthew Kind: Does Surna have any competitors right now and everything is so new that I have no idea? Is there anybody on the horizon that looks like they're going to be a challenge?
Tom Bollich: No.
Matthew Kind: Good, that's what you want.
Tom Bollich: Frankly, we're so far ahead of the curve especially when this new platform's rolling. That even when federally legal and train was going after this market very heavily, even they wouldn't have this system. It's very unique. The engineering behind it is pretty incredible. Our head of engineering did the thermodynamics on the Mars rovers so I believe he can do a grow.
Matthew Kind: Let's go to market strategy especially with so much change going on. November 4, we have the potential for Oregon and Alaska to go fully legal at adult use, and then now Florida as well for medical, and possibly for adult use in Washington DC. I mean it's a changing landscape. How do you adapt your marketing strategy as all this different landscape changes?
Tom Bollich: Well, I mean the heart of our strategy is to have the system you have to have. That's the keystone to the whole thing is that if you're using our system and your competitor isn't, there's a good chance you're going to put them completely out of business because the cost of your product would be so much cheaper because we can save your energy, we can save water, we are getting more light more efficiently. It's just having the go-to product is key to it. And then after that, it's mostly some traditional marketing. It's [inaudible 00:13:23]. There's a few other things we have in the works but I think that's the key to it all.
Matthew Kind: And can you tell us a little bit about your recent acquisitions and how they play into your strategy?
Tom Bollich: Where a lot of this product came from was Hydro innovation, which was a small company that made chillers. And then we kind of took that and grew it. We're still kind of looking around, seeing what other technology we can bring into the fold. I love this stuff. We think we are either going to JV with the other companies, train new products to the Cannabis market or just build it ourselves.
Matthew Kind: I read somewhere that Surna's acquiring some intellectual property in the cannabis space apart from the acquisitions, but is that true and what's the strategy there?
Tom Bollich: No, that's mostly with the Hydro innovations, was the IP.
Matthew Kind: And with your background in robotics engineering and working with artificial intelligence, do you see any opportunity to bring the technology to the cannabis industry? You talked a little bit about a server farm. I mean I think a little bit about what VMware is doing in the virtualization space where they're making servers so much efficient. Is there an opportunity to have lighting or different energy resources move around to where it's needed, when it's needed?
Tom Bollich: Yes, it's a very long and complicated process but yeah, I plan on bringing what I know. I know software in a level that no one in this industry does so I plan on bringing that to bare very soon.
Matthew Kind: Now Zynga, I don't know how much overlap there is here but I would love to hear your opinion. I mean one of the key things about the games with Zynga is that they are more fun to play when your friend's with you and there's incentives to get your friends involve and there is kind of viral growth aspect to it. I mean is there . . . We're not dealing in the world of bits here but matter now. Is there a way or anything you learned from Zynga you can carry over into Surna as far as, you know, getting more people on board faster or is just that impossible on the world of matter?
Tom Bollich: I mean that's more of a B2C play. We're more of a B2B. I mean there are a few ideas we're working on. I mean one of the things we definitely learned at Zynga is how to make something that's usable and that's why C is we're bringing to Surna.
Matthew Kind: And where do you see Surna in five years? What's your vision?
Tom Bollich: Hell, there's no way of telling that. I mean no one can tell you where this industry is going to be in five years. I mean it almost feels like the entire industry changes every six months.
Matthew Kind: It does.
Tom Bollich: Yeah, because it is a very similar feel to when I was at Zynga. It was kind of a wild, wild west. No one really knows what's going on but everyone knows something going on but they don't know what.
Matthew Kind: Right. That feels like there's a huge opportunity though.
Tom Bollich: Yeah, I mean there is huge opportunity but you've got to be careful because this industry is . . . You can think of this as being a bubble. If anything it's like a hobble bubble because you can have a product like if it's Cannabis-based, you actually can't have a product cross the state border so each day is its own private little bubble and it's going to do its own thing.
Matthew Kind: Yeah, that's why it's smart to be in the ancillary part of the business. I see your strategy there, that's great. I see grower's kind of fall into two buckets; maybe you disagree but let me know. There's the growers that are just totally onbored with technological change, "This is what I am doing." And then there is another bucket where there is a total resistance and I don't seem to see like a middle bucket where there is, "You know, I'm open to some change." Are those the group that's in the bucket where they're not adopting change? Are they going to be left behind? And if so, how quick?
Tom Bollich: For sure. Honestly, if you can't get your head wrap around the new stuff that's coming out, you're going to get left behind almost immediately now. I mean the scale of things first seen happening at Colorado is pretty massive. I mean there are growers online here, there're 1.2 million square feet. So if the way you are thinking of things is small little rooms with 10 lights or so, then you're just going to be left behind.
Matthew Kind: How do you feel like LEDs come into the picture versus traditional grow light? How do you feel about those?
Tom Bollich: They're tough. I mean it's . . . The problem with LEDs' they've had a very mixed history in this industry. You have to remember is that they came out probably 8, 10 years ago. It's the new way to grow. People spend several million dollars on them and then they didn't do anything so there is still that kind of a bad taste in everyone's mouth that got those. But there are product coming online, they're LED-based. They seem to be working and we are looking to incorporate those into our system.
Matthew Kind: Okay. As you look into the future, what aspect of the technology is the most exciting to you?
Tom Bollich: Well, I mean at some point you know, this is going to be a big data play. At some point, you're going to have one grower able to manipulate massive grows without a bunch of hands-on.
Matthew Kind: So robotics?
Tom Bollich: Robotics, I mean there is a lot of thing you can do with algorithms based on just what's happening on the grow and analyzing that . . . I mean there's a lot to bring into play.
Matthew Kind: So you are seeing something where all the variables of a grow room and plant are parsed by some software and you get a sense of the health of the operations from that and then optimize from there?
Tom Bollich: Yup, I mean that's kind of it in that show. The problem is if you have an investor who is putting a ton of money in a grow, he may or may not know how to grow, most likely not; hires a consultant group or brings on his own growers and he has really no visibility in to how well this thing is doing because the grow can look fine for a long of time and then suddenly it's not.
Matthew Kind: Right, good point. Some people say that we're entering period of exponential technological change that may be difficult for the human brain to fully grasp what's happening and I think with you background with AI and robotics, you might be able to understand this little better and learn some insight. Do you see technology in an exponential growth curve anywhere that might not be obvious to other people?
Tom Bollich: Yes, there is a lot of stuff happening on periphery especially in Silicon Valley that really needs to get, brought into this industry more.
Matthew Kind: I agree. That'll be exciting. As that happens, it sounds like you're on the bi-way of making that happen so best of luck. As we close, what's the best way for people to follow Surna and learn more about Surna?
Tom Bollich: We have a new website out and that's probably the best way to know what's going on. We always have Surna Inc. on twitter so . . .
Matthew Kind: And just for everybody listening, Surna is S-U-R-N-A.com. Okay. Well, thanks so much to Tom Bollich. I really appreciate it. If you have any questions or comments, just please put them in the show notes in the comment section. We'll try to address those. Thanks so much, Tom.
Tom Bollich: Great. Thanks, Matt.