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Interview with Bruce Linton, CEO of Canopy Growth

Bruce Linton Canopy Growth

Bruce Linton is the CEO of Canopy Growth. Constellation Brands announced a $3.8 billion investment into Canadian cannabis firm Canopy Growth. Listen in as Bruce compares the differences between the U.S. and Canada’s cannabis market.

Note on this interview:
At the time of this interview, Canopy Growth went by the name Tweed.
Canopy Growth Corp Ticker TSE: CGC

Click Here to Read Full Transcript

Tweed is an Ontario, Canada-based cannabis cultivation company. After applying for and securing a license from Health Canada, Tweed constructed a 315,000 square foot cultivation facility. Tweed recently went public and now has a whopping $100 million market cap. I'm pleased to welcome Bruce Linton to CannaInsider. Welcome, Bruce.

Bruce: Thank you, Matt.

Matthew: Can you tell us a little bit about yourself and how you came to start Tweed?

Bruce: Sure. Canada's had a history of having medical access for more than a decade, but it really pivoted sharply April 1st. And I could see the federal government equivalent of republicans, our conservatives, were going to make this a much controlled system, but also the increase the ease at which patient's could gain access. So in anticipation of that legislation, we began about six or eight months prior to the legislation coming out and sort of had a running start then when that hit the street June 19, 2013.

Matthew: Now you had to take a bit of a risk, I understand, because there was no assurance that they would even review your facility. Can you tell us a little bit about that?

Bruce: Sure. So the regulator came out and defined marijuana and how it would be treated similar to a narcotic. Which meant you had to have a very standard operating procedure-rich application and a very clear security plan. But one of the things that they put into the legislation was that in addition to having a written application that maybe 600 or 700 hundred pages in size, in order to get your license, you should also then build one, so they could come and inspect it and tell you if you did it right. And it was literally that much. Yes, this looks right, but we can't give you a license until you build it. So you can imagine capital markets in the early stages of medical marijuana, new build-out, new sector, and we have to build out the start of a 170,000 platform. That did make for some interesting capital raising.

Matthew: I can imagine. Well, kudos to you for taking that risk. So the cultivation facility is that really 315,000 square feet; did I read that correctly?

Bruce: It's actually bigger than that. So we bought what was the former Hershey plant and began that transformation as our indoor growing area. And so, for the growing area at that facility, while the overall facility is about 460,000 square feet on 40 acres, we're only using for the marijuana portion 180,000 square feet in total, and 168,000 of that is the growing platform.

And then June 19th of this year, we bought - part of it was in the licensing procedure and quickly moved them through to having a license, and that made us the only publicly traded company with two licenses, and to our knowledge, the only company with two licenses in Canada. And that platform we purchased was a 360,000 square foot greenhouse.

Matthew: Okay. And how big a harvest do you feel Tweed can produce annually?

Bruce: Well, it's sort of staged. So each year the government comes in and takes a snapshot of what we've built out, and you keep adding to it. And so, we'll probably produce about 7,000 - maybe 7,500 pounds this year. And I think that probably will go up, but that's the current we've built out and currently have the capacity for.

Matthew: How did you arrive at the size of the cultivation facility you wanted to build? Was it just a matter of having a Hershey facility to move into, or did you have your eye on a particular number?

Bruce: It was more of a function of in Canada we like rules a lot. And that means that we have fairly high compliance costs of any regulated industry. And so, I figured it was going to be $500,000 just to turn the lights on for compliance. And so, if you have a very small grow, fiscally, you're not going to cover that kind of overhead. And so the assumption was we had to have a large platform. And that led us to this building.

Matthew: And what are you seeing is the cost per gram right now that you're able to sell for or at the marketplace in Canada, how much is it for cost per gram in general.

Bruce: Remarkably, the government doesn't prescribe the price, and the price ranges from about $4.50 a gram Canadian, so $4 U.S. up to $12 Canadian. And we can pick any range in there. It's really a function then of quantity and cost of production, but that's the selling price.

Matthew: Do you have any concerns? I mean this is a massive grow operation coming on line here. Do you have any concerns about the market being flooded or do you feel like the dynamics of demand are going to equally match supply?

Bruce: Well, the key is the mandate. It was very difficult in Canada to gain access to medical marijuana. Until April 1st, it was 20 or 30 pages and involved government bureaucrats. On April 1st, it just became your doctor, yourself, and two pieces of paper. And so, the demand in access is increasing quite rapidly. And bringing it on stream, we all started at the same time. Right now there appears way, way, it appears, under supply for the demand. And so, probably a year from now you'll have a different dynamic, but I don't think it's in the next six to twelve months.

Matthew: How many strains of cannabis is the right amount? I'm sure you started with a certain amount; you have a different amount now. Are there any lessons learned about how many strains you want to have?

Bruce: Probably, you would be better off to start with five or eight. We started with 27. And so, the complexity of supply management is increased when you increase the number of variables. We've swapped a couple out, but I think we'll find ourselves hanging around 30. And you know there's a handful that everybody is familiar with as the main one. So CBD strains or CBD-rich or balanced strains are really quite active in our store.

Matthew: You have a really good handle on U.S. regulation and Canadian regulation of cannabis. Can you just kind of compare and contrast the two for the listeners?

Bruce: Yeah. So this is one of those cases where effectively everything in Canada is completely the opposite of America. And what I mean by that, for example, if I go to my bank account, I can use a drop down to pay for electrical bill or for Tweed. And I'm disallowed from using cash as a transaction here, but use every other form of credit.

We can't have retail, and everything must be delivered by courier. It's federally legal here, and it means our license is for the whole country. We pay taxes at normal tax rate as you would as a normal business deducting all normal business expenses, when you're actually not allowed. So really like on almost every aspect of the business, it is different.

Matthew: Great points. That is very unusual. And being federally legal is a big help. I mean having the banking for one is just an amazing advantage. That's great. Bruce, how many companies do you think Health Canada will give a license to?

Bruce: So there's maybe 13 or 14 currently licensed in Canada. I suspect one of the things that they're contemplating at Health Canada - the regulator is, how many do we need in order to have market price. It appears that we're kind of there now. And if we had too many, how would an event of financial failure be handled. And it appears that the regulations never contemplated that. So I suspect that they're cautious they can have too many. And would rather see the ones that are currently licensed begin to be financially solid. I don't think there's a big pressure now for more.

Matthew: Okay. Canada is in a bit of a transition where people that were allowed to grow their own plants, preserve that right with injunction. However, new people that would like to apply for a license to grow their own plants are not able to. Can you tell us where you think that - what's going to happen there?

Bruce: The driver was that there's a potential that choosing this medicine through this delivery mechanism makes it more costly for the individual than having a different medicine, say opiates or whatever. And in Canada, typically most medicines are free for access to the individual. And so, the crux of the case is why should it cost more to what's probably an equivalently good or better medicine.

So there's a couple of ways that could go. One of which would be to make this a standard schedule product, which makes it free or minimum cost to the patient. I guess that might be - have a feeling that the government is having people growing it all over the place. And we have 36,000 people with the right to have medical marijuana who either have chosen to grow it, have other grow it for them, or occasionally buy from the government. And that wasn't working for a lot of reasons. So I suspect that we're going to find a way this turns into just another medicine product that is on the same schedule as everything else.

Matthew: I understand Tweed is reaching out to doctors and healthcare professions trying to educate them about cannabis. Can you tell us a little bit about that?

Bruce: Yeah. So it's a couple of things. We have what might be deemed like a farmer rep kind of program, where there's a corridor of focus. And there is about 12 million patients or potential patients in that corridor. And it starts off as we're educating or interacting with physicians on the method of prescribing, the method of ingestion because initially most are saying I can't tell people to take something that requires them to smoke. And we have to walk them through why this doesn't require people to smoke. And so, there is a really quickly evolving - but it started at many different points, kind of education process. And now what we're starting to see are initially very reluctant or uncomfortable or uninformed physicians who are being part of the process of patients becoming patients.

Matthew: Now it's illegal to sell cannabis out of a retail store front in Canada. However, I hear it's being done in British Columbia. Can you tell us what's going on there, if you know?

Bruce: I'm no expert. I generally think having been to British Columbia many times that it is quite a surprise to most people who reside there that it's not in fact legal. It is just an ingrained portion of the culture. But as you move eastward, I think you'll find that the country has far fewer of those sorts of operations, and in many areas, zero. And so really, I'm not aiming our opportunity at attacking people in British Columbia nearly as carefully as we're trying to attract people in other parts of the country.

Matthew: Tweed refers to the quality of it's cannabis as premium and unmatched. Can you describe how Tweed strains and cultivation techniques might be different or a premium?

Bruce: I think in reality any company that is starting in this has to have aspirational statements. Everybody started off with seeds from multiple locations, and the best then practices. The real question is how quickly is everybody evolving the phenotypes? How quickly are they advancing their internal controls? Because in Canada you're disallowed from using any form of pesticide, fungicide, or herbicide, and everything that goes onto these plants is natural. And so, what you're really looking at is how do you do the best evolutionary process in a very, very - I'll call it moderate controlled environment. And so, I think what we have is good product that is getting better each cycle. But you do need to recognize we all start in that sort of similar place, and it's game to constantly advance.

Matthew: Bruce, as we close, how can listeners learn more about Tweed?

Bruce: So, which we thought was a nice name and natural, has a lot of information. We trade on a website, which is the Toronto stock exchange venture division listed as, and our ticker symbol is TWD. Those two sources kind of correlate who we are and how we present ourselves in a fully exposed basis.

Matthew: Great. Thanks so much for being on CannaInsider, Bruce. We really appreciate it.

Bruce: Thank you.

Brian Vicente – The Marijuana Lawyer Helping Businesses

Attorney Brian Vicente

Brian Vicente is an attorney and founding partner of the firm Vicente Sederberg in Denver, Colorado.

Brian works in the dead center of the cannabis industry and its fast moving and constantly changing cannabis laws and regulations.  Brian not only advises clients how to profitably work with the existing framework of cannabis laws, but is working to help shape the laws that will effect the cannabis industry for years to come.

In 2010 Brian was elected the first-ever chair of the National Cannabis Industry Association. Learn more at:

Click Here to Read Full Transcript

Brian Vicente is an attorney and founding partner of the firm Vicente Sederberg in Denver, Colorado. Brian works in the dead center of the cannabis industry in its fast moving and constantly changing cannabis laws and regulations. Brian not only advises clients how to profitably work within the existing framework of cannabis laws, but is working to help shape the laws that will effect cannabis industry for years to come.

In 2010, Brian was elected the first ever chair of the national cannabis industry association. I'm please to welcome Brian to the show today. Welcome, Brian.

Brian: Thanks so much.

Matthew: Brian, can you tell us a little bit about yourself and how you came to specialize in the practice of cannabis law?

Brian: Sure. I'm a little bit of a unique animal on that I've practiced primarily in cannabis law for my entire legal career. So for the last 10 years or so. When I was a law student, I founded the non-profit Sensible Colorado, which is sort of a lead advocacy group that works on behalf of medical marijuana patients. I've been running that ever since. And at the law firm Vicente Sederberg, we represent a lot of marijuana businesses. So I've been heavily involved in this area full time for about a decade.

Matthew: What questions do you get asked the most by new and prospective clients who are trying to orient themselves within the context of the cannabis industry?

Brian: Sure. Well, you know everyone is sort of curious about the risk associated with entering this industry, marijuana still being illegal federally. What is their sort of risk tolerance, right? I tend to think the risks are a lot lower than they were previously based on the firm federal guidance we have about what law enforcement priorities whether they're going to shut these guys down or not. So that's always an area.

But then people are really interested in how do they invest. A lot of folks see this as the next big thing. It could be this billion dollar industry in no time, and how do they sort of invest in this now. So we help people kind of structure those investments or start those businesses.

Matthew: Okay. So what are the big practice areas that - the big categories that you provide services in?

Brian: Well, we do a lot of - our law firm is kind of broken into two pieces. One is policy work. We do a lot of lobbying, writing initiatives. I was one of the two authors of Amendment 64, which made marijuana legal in Colorado. We helped with the campaigns to legalize marijuana or medical marijuana. So that's a good chunk of what we do. But then we also provide just general business legal services to marijuana business, and as such represent hundreds of marijuana businesses. And we help guide them with anything from compliance with current laws to your more traditional business legal services, such as your mergers and acquisitions, and real estate assistance, things like that.

Matthew: There's a lot of investors or potential investors out there that say maybe I want to create a grow facility and lease that out to a cultivator, but they're worried about the risks, and they try to balance those risks because we're still in a federally illegal market place for cannabis, but it's legal in Colorado, Oregon, Washington, Washington D.C. How do you reconcile these things? And even in the states where the medical marijuana is legal, how do you reconcile these things in even the states where medical marijuana is legal. How do you reconcile these things for potential investors to help them come to terms with this risk and balancing that risk?

Brian: The most important kind of threshold question is what state are you looking at going into. We have 23 medical marijuana states, and we have four legal marijuana states, and we also have D.C. now. But each one of those laws is different. So in terms of the law enforcement priorities in that area, in terms of the investment opportunities, in terms of the level of complexity of the state and local laws, they're all different. So we have to sort of do an examination of are you looking at Oregon? Are you looking at Colorado, what have you. A lot of folks get in touch with us because they want to go into Colorado, although we have offices across the country to help people in a lot of different states. But Colorado is still viewed as the main market right now or perhaps the state that is doing a very comprehensive job.

So in terms of your various opportunities to invest, I believe it was a real estate play that you were discussing renting out or purchasing a warehouse and then renting to someone who's growing marijuana, who has a license to do so under state law, is actually pretty safe investment at least in Colorado. There's other sort of investments that folks can look at such as loaning money to businesses or loaning money to the principles starting their own marijuana businesses in states that don't have residency requirements. Any sort of direct handling of marijuana is always more dangerous in some ways that the federal government could become interested in those activities, but real estate play itself, I think, is fairly safe.

Matthew: You touched on residency requirements. Can you talk about that a little bit maybe in Colorado and Washington, what that means, and who is included and excluded?

Brian: This is interesting because, again, because every state sort of used this differently. In Colorado there's a degree of protectionism essentially of the current medical marijuana licensed businesses. We've got a state law that says that in order to have any equity in a marijuana business - this is not an ancillary business like grow lights or something, this is direct marijuana business. In order to have any equity in a marijuana business, you have to have two years residency in the state of Colorado. So that's a major hurdle that prevents people from just starting a business if they're from New York or what have you in Colorado. So that's one that will probably change in the legislature in the next year or two, but currently it does prevent that sort of direct traditional equity investment that we see in other areas.

Washington State has a three-months residency requirement. So it's not quite as onerous as Colorado's two-year. But then you have places like Oregon, Illinois, Nevada really have no residency requirement for ownership in marijuana businesses as all. Now often it does help to have a local component to what you're doing, and that certainly can help you get ahead in a competitive licensing process by demonstrating you have these local ties. In Oregon, you have to have a sort of manager that's a local resident, but again, each state kind of takes it differently. And really, I think in terms of investors sitting back and analyzing where to put money, if they're interested in direct investment, they have to look at these places that don't have residency or else move somewhere and establish residency where you want to set up shop.

Matthew: Great point. Gosh, I didn't realize Colorado's was - two years is quite long.

Brian: Yeah. It's pretty wild. I mean a lot of people try to look for ways to get around that. And our view point on this is we have a very close relationship with the state regulators, and we don't believe in pulling the wool over their eyes, and I think they respect that. So if you own equity in Colorado, you have to be a two-year resident.

Matthew: So let's say I'm a dispensary owner, a cultivator, or even perhaps an infused product company, is there some ways that I may be exposed to laws, either state or federal generally speaking that I might now be aware of that I want to do something to mitigate my risk that you see occasionally over and over again, where this is something that should be top-of-mind for you if you were in one of these cannabis businesses?

Brian: Yeah. Certainly, again, everyone needs to have an understanding that what they are doing is illegal federally, and sort of come to terms with that and decide whether they want to be for it or not. But then a lot of folks don't understand the tax implications. We have a provision of the IRS Code called 280E that prevents particularly dispensers from making a lot of the traditional tax deductions other retail businesses may get. And some folks don't know about that and are conducting business, and are probably going to get audited and probably get a pretty nasty tax bill. So that's certainly one to keep in mind.

Generally, we also have pretty strict advertising restrictions in this area in Colorado, and also in other states. Often those advertising restrictions are at the state level and the local levels. So there's kind of different hoops you need to jump through. We don't have a ton of enforcement in this area, but I could see this being something that government officials crack down on eventually. So I really encourage any prospective businesses to really pay close attention to how they can and can't advertise.

Matthew: Now banking for cannabis businesses, particularly those that touch the plant, is just a quagmire. Can you explain a little bit why it's so difficult for cannabis businesses to get a banking account, banking relationship, and to keep that, and then where you see it going?

Brian: Sure. And this is absolutely one of the biggest issues that we have in terms of a hurdle for this industry is the lack of access to banking solutions. This has been going on for years. As we know, the marijuana was illegal for 80 years or so in our country, and then became legal for medical purposes starting in ë96 in California. And then it's been legal for recreational purposes in some states in 2012, and sort of slowly unfolding industry.

And banks just sort of being conservative by nature, and they have a lot on the line in terms of not wanting to irk the federal regulators that oversee the banking industry have been very hesitant to openly bank marijuana businesses. At the same time we've seen direct guidance from FinCEN, and federal regulators saying we don't really care if you bank marijuana businesses. We just want there to be a degree of transparency, and auditing of these businesses to be make sure that they are operating in a compliant fashion. But it's almost like that memo hasn't reached the banks yet. They're looking for an actual change in law to protect them from liability.

So this is a major problem. And I probably have a client a week that gets kicked out of their bank. It's humiliating for them. They're being discriminated against because of their business type, and also obviously it creates all sorts of problems for the business. They have to find a new bank or deal with cash or what have you. So we probably get a call a week from banks that are interested in working in this field. And I think we're going to see some banking solutions come on board fairly soon. My prediction is we'll have one or two banks that say, hey, we're going to do this. The industry will flock to them, and they'll make a bunch of money. And then once they don't get in trouble after six months or a year, then most other banks will start working in the industry as well.

Matthew: It's a shame that the state or even counties or community banks can't be created that can then reinvest the profits locally. That seems like a huge opportunity.

Brian: Yeah. That's a great point, and believe me we've examined many options for banking. It's such a public safety issue to have our clients and their customers exposed to these cash intensive places. They don't have banking. And it often leads to a lack of transparency. So we've looked at coops and various different sort of forms to push for banking solutions. But a lot of it comes down to the fact that any bank needs to be insured by the federal government, so you need to have a degree of federal involvement in the bank. And the feds are kind of dragging their feet in terms of providing guidance. And again, the banks themselves fear the federal government and don't necessarily want to jump into this realm.

Matthew: You talked a little bit about taxes and that, for example, a dispensary owner might not understand that there's certain deductions they cannot take that a traditional business can. Is there anything else in the tax arena that are kind of gotchas or things to watch? I've heard that dispensary owners are taxed in a different way as well as far as the profit they make. Is there anything else you could touch on there?

Brian: Well, get a good accountant and get a good tax lawyer. I mean, it is a complicated field for a typical business. For a marijuana business it's even more complicated. It comes down to a series of court cases mostly out of California, and sort of explain how the IRS deals with marijuana. And in a nutshell, they allow write offs related to the cost of goods sold. So largely the production side you can write off expenses there, but not the actual retail side. And so, it's confusing because that's not how typically businesses work. The other piece is just to keep an eye on - it's difficult without having comprehensive access to banking, but making sure state and local taxes, the excise tax, and in Colorado there's several levels of taxes these businesses have to pay are really being followed in a transparent fashion. So you can document that to both the state and federal regulators.

Matthew: Now let's talk a little bit about licensing because there may be a brand, for example, here in Colorado or perhaps in Washington or in some other states where medical marijuana is legal, and they have a brand, and they want to extend the brand beyond the state they operate in, but they may not necessarily want to get a license in those other states or a license from the state. How could they create a licensing arrangement that works for them in other states? Are you seeing this type of thing going on?

Brian: We are. I think this is an issue that we will continue to deal with in the future. I think it's a growth area. What you're basically talking about is intellectual property. I've developed a brand in Colorado. I have this wonderfully successful dispensary or what have you. How can I then carry that brand to other states? And we've actually structured quite a few of these. It comes down to basically creating a separate company that's really an intellectual property holding company. So I can sell that intellectual property to this new company that I've created. That new company can then set up in another state. We're really just using the brand and the intellectual property or sell the intellectual property to a manufacturer in another state.

So it's a way to carry a brand across state lines without actually carrying the product itself. In marijuana, again, you can't cross state lines with it. We see quite a bit of this, and in Colorado, for instance, I could produce 99 percent of my marijuana soda, including the label, and then I ship it to California, and then we infuse the marijuana in a factory in California. So the product and everything can cross states lines. It's just the marijuana that can't.

Matthew: It sounds very similar to how Coca-Cola does it. They have their trade secrets centralized. Then they push it out to the outer areas to actually have the water put in it and so forth. That's an interesting subject area.

In terms of shaping future legislation and being a thought leader in the industry, what is your firm doing right now at a boots-on-the-ground level trying to change or influence?

Brian: Sure. Well, our number one goal is to make sure that Colorado continues to be the gold standard for marijuana regulations. So as such, we're very active on a number of government panels. We have an active presence at the capital and lobbyists that we hire to make sure that Colorado continues to do a thoughtful and sort of comprehensive job of regulating marijuana. We really think that the eyes of the world are still on us.

Having said that, when we legalized marijuana in 2012, really ever since then, we've been approached weekly from folks from other states and other countries that are interested in potentially adopting a Colorado-style model. So in this past election we were involved to some extent in having Florida, Oregon, and Alaska to help the efforts there to legal marijuana, or legalize medical marijuana. Two of those were successful in 2016. We really hope to be involved in six states that are pushing to legalize marijuana then. And I think a lot of them will be successful. We're looking at California, which obviously is a giant market. We're looking at Nevada, Arizona, Massachusetts, and then perhaps some other states as well.

Matthew: You mentioned California. Do you really see that as when the dam breaks, because it is such a large state. The population in general is pretty receptive to it. There's a lot of growers, technology, infrastructure, and capital there. Is that where it's going to really just break away?

Brian: Yeah. I think that will be a bit of a tipping point game changer for the reasons you laid out, but also because there's simply so many Congress people from California. When those Congress people go back to D.C., it's different than the six Congress people from Colorado. You have 20 some from California. I think it makes a pretty big difference to have them there, being in Washington D.C. and saying, listen, I don't want to criminalize people in my state, and now we have eight or ten states that legalized marijuana, and the other 16 - let's do something about this. And I'm hoping that will the main thing that pushes towards change at the federal level.

Matthew: There's just been a lot of good news, legalization happening, the conversation moving forward, people changing their mind, the stigma going away to some extent where there's less of a stigma around cannabis. Are there any threats on the horizon where this could derail the whole movement, or is the genie so far out of the bottle that you don't see any big threats?

Brian: No, I think we need to stay vigilante, absolutely. We certainly have seen some major changes in how the American public feels about legalizing marijuana and growing support for medical marijuana, which is phenomenal. I mean we've had massive social change on this in the last 10 or 15 years. But I think there's the opportunity for the pendulum to swing back.

And so, again, we need to be very vigilant about how we are regulating marijuana. When problems come along such as people perhaps making hash at that house and blowing it up, or folks maybe having an unfortunate experiences with edibles, we really need to be thoughtful about then coming up with pro- active solutions and not sort of hide and say, oh, legalization is perfect. It's the answer to everything. Well, I think we need to have a very robust discussion about how to address issues and inform them, and if we do that, I think we're pretty safe.

Matthew: Do you see cannabis being removed from the Schedule I list of drugs; and if so, when? I mean, it's a bold prediction, but I'm going to ask you.

Brian: I'm not afraid of bold predictions yet. I see it happening in 2017, and here's why. We've seen massive, again, cultural shifts on the public views marijuana. We also will probably see four to six more states legalize marijuana in 2016. I think that's going to create the wave that forces Congress to address this issue.

You're also going to have a bunch of freshman Congress people come in in 2017. That are voted in in 2016, the same time marijuana gets legalized in their states or what have you. And I think that's going to be the appropriate time that I think we could see some Congressional push.

And it's also becoming increasingly clear and you see this in editorials from the Denver Post, and other thought leaders about the fact that marijuana categorization as a Schedule I controlled substances is just flatly absurd. It's just absurd to put it in the same schedule as heroin and label it one of the most addictive dangerous drugs known to man that has no medical value. When you have those sort of laws on the books, that really just breeds mistrust in the government. And I think the government is starting to understand that they just got this one wrong. There's a rebellion happening in all these states, and they need to really need to save face by removing it from schedule I.

Matthew: Gosh. I'm really - that's great prediction. I'm so happy to hear that. As far as there are so many entrepreneurs doing cool things in the industry, and it seems like it's changing every day. Do you see any entrepreneurs doing stuff that's just really interesting that you'd like to share?

Brian: Wow. We have people in our office every day that just have marvelous ideas, some of which are going to make them a million dollars, some of which will never go anywhere. But I mean that's one of the neat things about working in the cannabis field is there's so many creative people, and they're really starting to apply their creativity to these various business or activism opportunities.

Yes, I guess a couple of things. I've been surprised sort of pleasantly by the growth in vaporizer market, particularly the vape pens that you see. I didn't really foresee those being as popular as they are. But having become familiar with them, I understand it now. It's sort of a smooth and classy way to consume marijuana. And you also now have new states that are just passing vaporizer only laws. New York and Minnesota are essentially hash oil only as opposed to flower. And I just think that's remarkable. Another group that we've started doing some work with is Women Grow, which is just sort of a women's organization that is attempting to sort of foster the role of professional women in the cannabis field. Jane West is in Colorado and does a lot events and runs that organization and a number of our attorneys belong to that group. I just think it's sort of important that we embrace the diversity that is present in the field.

Matthew: Great point. Jane is doing a lot of interesting things. And we're having her on the show later this week, so I'm glad that you said that.

Brian: That's great.

Matthew: Brian, in closing how can listeners learn more about you and your firm?

Brian: Sure. Well, I'd encourage listeners to check out web page, which is very simple. It's And we really think that we're leading the country in terms of being a law firm that pushes for policy changes in marijuana as well as providing good guidance to businesses. So we have an office in Boston, a couple of offices in Colorado, and we're just eager to help people become sustainable businesses and good community members. So check us out at

Matthew: And I would like to thank you for your service in helping to shape the laws into a sensible way that works for both government and recreational and medical users. That's really a great help, and I'm glad you're one of the leaders in the industry.

Brian: Thanks so much. I really appreciate the opportunity to talk with you.

Find the Perfect Strain of Cannabis Near you with Leafly

Cy Scott Co-Founder of Leafly

Interview with Cy Scott co-founder of Leafly.  Leafly is an application that allows you to learn and explore the universe of available cannabis strains to optimize your medicinal or recreational experience. Once you have dialed in on the strain of cannabis you want, Leafly helps you find the best local dispensary to fit your needs based on reviews from residents of your community. The Leafly App is very easy and fun to use to explore strains near you. Learn more at

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Leafly is an application that allows you to learn and explore the universe of available cannabis strains to optimize your medicinal recreational experience. Once you have dialed in on the strain of cannabis you want, Leafly helps you find the best local dispensary to fit your needs based on reviews from residents of your community. I'm pleased to have Cy Scott, co-founder of Leafly on CannaInsider today. Welcome, Cy.

Cy: Hi, Matt. Thanks for having me.

Matthew: So listeners can get a sense of your geography, can you tell us a little bit about where you're located?

Cy: Sure thing. Leafly is located in Seattle, Washington. We're actually pretty recent transplants here by way of California about a year ago now.

Matthew: How do you like Seattle compared to California apart from no state income tax.

Cy: Yeah. That's really nice. Miss the sun a little bit here and there, especially in the winter, but the rain is not as bad as they claim.

Matthew: Especially in the summertime it's not that bad.

Cy: It's beautiful.

Matthew: Can you tell us a little bit about yourself and why you co-founded Leafly?

Cy: Sure. So I'm basically a serial entrepreneur. I've got a real tech background doing app and web development. I co-founded Leafly with Scott Vicerks and Brian Wonslegdge. So the three of us put it together. We were actually working together at the time at Kelly Blue Book, and it so it was kind of a nights and weekends bootstrap project.

Scott was the one with the original idea. He thought it would be great to have some sort of location where people could track the different strains and their effects and what they like and didn't like. The market - this is about four and a half years ago now. So in California the market was growing. A lot of dispensaries were popping up in strictly medical. It made a lot of sense that there was a real need for a service like Leafly. And at the time, everybody really targeted pretty much the common stereotype for cannabis consumers, so we really wanted to go with something a little more mainstream, better design, something that medical patients could look to for information and feel safe and welcome there.

Matthew: Now you mentioned strains. Can you just give us an idea of how diverse the spectrum is of available strains for cannabis?

Cy: Yeah. There's quite a number of strains. Right now we track well over 1,000 strains. Of those strains, we have over 100,000 different individual reviews. So Leafly is all user contributed content, so people use it to journal what they like and don't like and tag strains on the different effects or what conditions or symptoms they might be using it for. Then we take that data, we aggregate it, give people kind of a general idea. The number is pretty large though with 1,000 strains. And that's across three primary categories: the Sativa, Indica, and hybrid.

Matthew: And what's your favorite strain?

Cy: Yeah. That's a tough one. There's just too many to choose from. I enjoy cannabis in the evenings to help with sleep, so I like the Indicas a lot. Some good Indicas, L.A. Confidential and Northern Lights, are my go to. For the daytime, when I get a chance, a good Sativa like Sour Diesel, I enjoy as well.

Matthew: What are some emerging strains that are popular on Leafly?

Cy: Yeah. We're noticing a lot with the recreational up here in Washington, a lot of the producer/processors coming up with some strains that are interesting crosses and gaining a lot of popularity, and that's due a lot to the retail stores opening up. And we're getting more and more here in Washington. So we see a lot of that like strains like Copper Cush that kind of came out of nowhere. Historically, a real good one was Girl Scout Cookies, whcih everyone is probably very aware of now, but we really saw that on Leafy kind of go from nothing to in our top ten most popular strains in the matter of six months.

Matthew: In fact that is the strain that I - I went into Leafly. I put in what I wanted. I didn't want to be paranoid and then all the other things I did want, and that's what came up for me. Thin Mint Girl Scout Cookies, I think it's called.

Cy: Yeah. There's a couple of variations, but it's absolutely a popular strain.

Matthew: Can you explain a little bit of what body high and mind high mean for people that aren't familiar?

Cy: Sure.

Matthew: How those interact - those two ideas.

Cy: Right. So at Leafly when you review a strain, you can tag it with different effects. We have the kind of head high effects like euphoric and uplifted. So that's more of a mental effect. And then the body would be things like relaxed, tingly, just what you would actually feel in your body. And then kind of both mixed together, that's what you're really getting. So you'll see a lot of strains tagged with things like euphoria and relaxed. So that's kind of the head high/body high, and they definitely play off of each other.

Matthew: So let's get into a practical example here. Let's say I just got off of work on a Friday afternoon, and I pull out Leafly and kind of want to dial in how I feel and get a strain for that. How would I do that?

Cy: Yeah. A particular strain - we have an explorer. A strain infused product explorer where you can go in and actually filter the exact type of effect that you're looking for. So in your scenario, if you're looking for something that would leave you feeling upbeat, you just would dial that in. Include effects, uplifted, and then you can actually exclude things like making you hungry. So you can look for strains that include certain attributes and exclude others to really dial in that perfect strain. And then once you find it, Girl Scout Cookies you mentioned earlier, we also have an availability section so you can find out right where to get that. So it uses your geo-location, knows right the best area, or you can enter a city so if you're in Seattle, you can type in Seattle and find the top locations that would carry that particular strain.

We also have a dispensary finder, so if you're just looking to find locations right around your area, you can go directly there, and then start browing the different dispensary menus. And on the menus, when they're linked to strains in our inventory, you can actually get a good idea of the strains different effects and really find the one that's perfect for you.

Matthew: So how many people are currently using the app? I'm sure it fluctuates, but could you give us a rough idea?

Cy: We do about four million sessions a day - a month. We do about four million sessions a month. Four million a day would be nice, but it's still a pretty sizeable number. And that's between the web and the app. So it's pretty good. We've really seen the site and the app grow in adoption as different states come online. So new states adopting medical laws or your recreational states like Oregon, Alaska, and even D.C. We're seeing a lot of interest in Leafly when those laws passed. So as the United States continues to adopt cannabis - and the world, for that matter, we see increased interest. So that's really great for us.

Also, some of the trends, one of the most interesting things starting four years ago and where we are now, a lot of the branding is starting to happen. You're actually able to see different products and consistent brands across the industry where previously it was just dried flour in a jar at a dispensary. So that's a pretty interesting trend, and with that comes a lot of the rise of the concentrates in popularity there, whether it's the waxes or the little clearomizer cartridges for vape pens. We're seeing a lot of growth in that sector as well.

Matthew: Yes, the liquid in the vap pens. That's very interesting. Is that what kind of jumped out at you and surprized you the most about about the data, because I imagine you have just a ton of data if you have four sessions a month. Is there any data that is jumping out at you and saying wow, we did not expect to see this like - one thing that I thought of when I was using the mobile app for Leafly was why would anybody want dry mouuth? But then there are some reasons why someone would want dry mouth; isn't there?

Cy: Sure. I mean, we actually add that as negative so you could tag negatives from strain. Things like dry mouth or dry eyes, and you can actually exclude that, but you never know. There could be a reason why someone would want to include that. So we have that option as well.

Matthew: Well, I did find out why some people want the cotton mouth effect, and I had heard that ALS patients have a drooling problem, and the dry mouth can help them quite a bit. So I thought that was interesting.

Cy: That makes a lot of sense, definitely.

Matthew: Did you scratch your own itch with creating Leafly or saying okay, I want to see what the community is saying, and I'm going to let them steer maybe to my next decision on a strain for myself?

Cy: Definitely. When we first started, I really didn't have a good sense of the scope of the variety of strains and the different effects, and lot of that has to do with your access to cannabis. But after we started Leafly and getting more involved in it, learning more about the different strains, I definitely started scratching my own itch. If you go into any dispensary, and they could have any where between 20 and 30 different strains at a given time. And it's really tough to choose, and you rely on the bud tender at the counter. But if you're looking for a particular condition or what have you, it's great to have Leafly as a resource. Just having the app in your phone and you can check it real quick and compare to the menu that the dispensary lists and look at all of these rating. It's really been helpful for myself, and that helps drive new feathers that we put together because we all use the app as well.

Matthew: So you have all this data from your users. If you could only make one strain, I mean, I know people are picking out all these diverse strains, but you see that most people want something similar, the 80/20 rule. If you were aggrageate all that Leafly data - if you had to make one strain, what would be the characteristics of that strain?

Cy: Yeah. That's a great question. We see people searching for top conditions anxiety and migraines or ADD. Some of the top sypmtoms are depression, fatigue, and insomnia. So if somehow you could kind of bring those together in the perfect genetic cross. Also, you'd want to include some effects. You see a lot of people searching for creative, euphoric, or uplifted in the filters. So somehow if you could find the perfect combination, that would be the strain that I would try and put together definitely.

Matthew: How do Leafly users interact with each other? Is there social element?

Cy: We have a really light social layer within Leafly. Currently, you can tag different reviews. You mark them as helpful, not helpful, so both our strain reviews as well as our location reviews, that's about the best way right now. You can also dig into a user's profile for the non-anonymous users and see their review history. But it's actually something that we're working on right now and will have with our next release is more of a platform for peoople to connect and follow different individuals. We see a lot great reviews coming out of some of our visitors and, of course, and we want the ability to be able to follow those individuals and stay up todate with what they are viewing. So we're building that feature as we speak.

Matthew: So you mentioned you can be anonymous if you want to share information, but you just don't want people to know who you are?

Cy: Yeah, that's right. So there's a few ways right now within Leafly. You can actually journal your own usage and keep it completely private so no one would ever see. There's no anonymous listings. It's just a personalized journal. You can also share your review publicly, but you can choose whether or not to share your user name right now. So you can publish those anonymous or with a user name.

Matthew: Now switching gears a little bit and looking a Leafly from a merchant or dispensary's point of view, why do they want to be involved with Leafly?

Cy: Yeah. So dispensaries or recreational shops are primary customer and it's a great platform for them to be part of because it really does drive a lot of new patients to their location. Leafly's pretty special in the sense if you're in a new market - say you're in New York or a state where medical is just coming online or the dispensary system is just getting established, Leafly has been there for quiet a while. We have coverage and visitors coming from all over the world, and a lot of that has to do with strains being pretty widely available. So people are just looking for the information no matter where they are. So as soon as there's room for dispensaries or recreational shops, it's great for the dispensaries to sign up with us because we already have that user base using it search strains, and then you're location gets right in front of a potential new customer or patient.

Matthew: Can you give us an example of a merchant that is really leveraging Leafly properly to get new business?

Cy: Definitely. So with I502, which is the Washington recreational law up here, the recreational shops are continuing to open up. We still have a small amount, but we're seeing a lot of those new guys coming on, and they are really doing it right. The best way to get exposure on Leafly is to keep an updated menu. Our visits love to see the latest menu. If the menu gets too outdated, they might look at someone that has something more updated. Also having a menu and updated menu, it really helps with visibility because you're linked to those strains and edible products reviews. So if I'm buying Girl Scout Cookies, I can find the exact spot and you would show up if you're menu is linked. Also, we have ways for dispensaries to connect with their patients and recreational shops with their customers through a following system. So you can actually follow a dispensary and just stay tuned to their updates and dispensary and shop updates are basically like Twitter updates where they can post 140 characters at a time. And that's a grerat way to connect with your patients and stay up to date. Also, responding to reviews is really important. So provide that ability as well so whether it's a positive review or less than positive review, it's really good for the shops to get in front of that and start a conversation with their customers. So we're finding some of the new recreational shops here are really doing it right and getting a lot of traffic coming from Leafly.

Matthew: Now if there's a dispensary owner that says, you know, I just don't have a budget for this. I'm just getting startted. I've got a million other things to do, can you give them a sense of how easy or difficult it and how much money it takes to get started with Leafly?

Cy: Sure. It's quite easy. We have a services section in the footer so if you do have a story you could go there and sign up, and we'll - someone on our team will get in touch with and get your account created. We do have different service levels. The pricing ranging from a few hundred dollars to a few thousand dollars depending on how many ad placements you'd like or what kind of exposure you're looking at. So it's pretty flexible, so from the small shop that doesn't really have much of a budget, they can get some advantage out of Leafly to the bigger places that want to spend more, get more exposur. We have solutions for everybody.

Matthew: Other than legalization, are there any big trends you see growing in the cannabis technology sector that you're excited about?

Cy: Sure. Probably one of the best trends lately has been the increased professionalism and mainstream accessibility we're seeing in cannabis products. So the branding that doesn't just cater to the common stereotype of cannabis. We're seeing a lot of that happening now in Washington. Across the the U.S., we're seeing some really good branding happening, and that's exciting to see. It's a little more welcoming to a larger audience than what I think a lot of people associate cannabis with. And it's good for the whole movement as well. It kind of puts a nice face on cannabis when the branding looks nice and the packaging looks great, looks professional, and that's something we wanted to do with Leafly and we feel like we've really helped push this conversation forward by giving people something that looks nice, and is well designed, and feels comfortable when you use it. So we're seeing a lot of of that happening more and more through out the U.S., and I think that's just the nature of the industry kind of maturing. So that's a pretty exciting trend definitely.

Matthew: Now, Cy, how can people try Leafly for the first time? What's the easiest way?

Cy: Sure. We have a lot of ways to access Leafly. So you can find us on the web at We also have an app for both ios and android, so just search Leafly in the app store or Google Play, and you can find us there.

Matthew: Great. Thanks so much, Cy. We really appreciate your time for the interview today.

Cy: Absolutely, Matt.

Learn How Cannabis Dispensaries and Cultivators Connect with Cannabase

jennifer beck

Cannabase offers an online wholesale marijuana marketplace that connects commercial growers with retailers and dispensaries. Cannabase promises to do the heavy lifting for retailers and growers to help them facilitate their ability to both buy and sell cannabis with the right partners. Listen to this interview with Jennifer Beck, co-founder and CEO of Cannabase in Denver Colorado.

Prior to October 1 2014 dispensaries were required to grow 70% of their own cannabis. This requirement was called, vertical integration. With the end of vertical integration both dispensaries and cultivators are freed from the burden of selling only what they grow. This presents tremendous opportunities for both growers and retailers. aims to help these two parties connect.

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Matthew: Cannabase offers an online wholesale marijuana marketplace that connects commercial growers with retailers and dispensaries. Cannabase promises to do the heavy lifting for retailers and growers to help them facilitate their ability to both buy and sell cannabis with the right partners. I'm happy to have Jennifer Beck, co-founder and CEO of Cannabase with us today. Hi, Jennifer.

Jennifer: Hi, Matt. Thank you for having me.

Matthew: Sure. Just so people understand where you are in the world, can you let them know where you are geographically?

Jennifer: Yes, we are in Denver, Colorado.

Matthew: Great. And can you give us some background on what Cannabase is and how it helps people?

Jennifer: Absolutely. Cannabase is a comprehensive network that connects the legal cannabis community. So there are three main components: Cannabase Marketplace, which has cannabis wholesale network; Cannabase Connects, a private network for consumers 21 plus; and Cannabase Maps, which is our dispensary finder.

But based on what we've talked about in the past, I think we'll probably be focusing on Cannabase Marketplace and the wholesale market that's inside of it.

Matthew: Okay. So how did you get into this business? I mean, were you involved in the business at some capacity and just saw the need, or were you talking with people? How did this come about? How did Cannabase come about?

Jennifer: Yeah. My background is in technology. So my emphasis has always been on online marketing and understanding consumer behavior. My actual background before that was in psychology. And so, I've always been fascinated with how technology can really encourage certain behaviors. And in an industry like cannabis, you have really complex systems that are changing frequently and are really hard to navigate. And so, when we decided to build Cannabase, I think one of the things that we were the most excited about was how we could bring some really powerful technology to the space to solve problems that still hadn't been solved yet.

And then on a more personal level, I've been fascinated with how we can help encourage the success of cannabis by helping business owners be compliant, be more efficient, and grow their businesses in a way that makes the rest of us - the consumers, and the political bodies watching over us happy as well.

Matthew: Now for listeners to really understand how Cannabase helps growers and dispensaries, can you tell us what vertical integration is and how since that has gone away that's a boon for Cannabase?

Jennifer: Absolutely. One of the reasons that when we entered this space wholesale wasn't a hugely defined component of the industry yet was because Colorado was vertically integrated. Vertical integration mandated that to have a cultivator license you had to also have a retail license and vice versa. So you had to grow 70 percent of what you were going to sell, leaving a 30 percent margin for wholesale.

This effectively kept the market really small while we were still testing out the first licenses and how legal cannabis was going to work. It was a very, very successful model for Colorado. But that law expired in October making it legal for first time for someone to get a specialty license as just a cultivator or a license as just a retailer. In addition, that 70/30 law has expired for recreational shops. So now they can choose how much of their own product they want to grow themselves and how much they want to buy on a wholesale market.

Matthew: So why would a dispensary want to buy wholesale versus growing themselves? I'm just playing devil's advocate here.

Jennifer: Absolutely. There's a number of reasons. When wholesale is limited to only 30 percent, dispensaries were required to be growing their own products. So it was a key component of their business plan and their brand. But even with that imposed, you still had situations like 420 is coming and you want to stock up on extra product, so you would buy it wholesale. Or something happened. You had mold problem, you could restock with somebody else's product or even variety. A lot of people have specialty strains and they might be excited to see how their consumers react to a new type of strain, if they're able to buy from another grower and decide then whether or not they want to start growing that themselves.

With the end of vertical integration, I think there are a lot of retailers who will abandon their grow altogether. A grow is specialty. It's a lot of work. It's very expensive, and you have to really have to have a passion for growing and maintaining that. Some businesses would prefer to focus on the consumer side, the retail shop, and growing a retail brand. For those businesses, it's going to be more cost effective and probably better for their quality of life and the growth of their business to abandon their own grow, and instead work on finding growers that they really know, like, and trust. And can focus their business on building their own brand.

Matthew: Now would you say that there's an element of, eharmony, or yelp in Cannabase where these are two different parties coming together in evaluating each other online?

Jennifer: Absolutely. We borrow from all the major social networks. The reason for this is that there isn't one single place that can really join together cannabis users or cannabis businesses in an effective and tailored manner. So we've really taken the best of each of those existing social networks to try and make a really comprehensive community. For Cannabase Marketplace, which is our licensed business network, and that's where our wholesale market is, you have a LinkedIn like feel where to get on and to have a profile you have to have a valid license number as either a grower, a retailer, or marijuana and mj's product processor. Once you onboard with that license number, you're landed into this private network with in-app secure messaging and tons of brands represented.

We have over 40 percent of Colorado's licenses are in Cannabase Marketplace participating in the wholesale market with businesses profiles and employee accounts, and everything is handled on a connection basis, which uses our in-house secure messaging. So businesses can safety connect over listings and requests on the wholesale market. They can also connect with one another's private business profiles and their employees just to have a normal interaction like they would on Facebook or LinkedIn, but without having to have a profile that's going to be filled with spam because of solicitors or their mom asking if they want to come over for dinner. It's just strictly private business connection platform.

Matthew: Let's say a retailer might want to say this grower was great, five stars. They did everything that I requested. It was a great relationship, and then others have visibility to that?

Jennifer: Absolutely. We're really working towards how we can create a sophisticated vendor trust. The most important thing with whenever we open it up to ratings or reviews is that there's room for people to fudge it, for the data to not be 100 percent transparent. So we layer in features like that very, very slowly.

But when businesses are represented in our private wholesale network, they're brands are very apparent. The owner, the name, and so if somebody is going to post about someone else, it's clear who's doing the talking. Right now the best way that a retailer can evaluate a grower on the market place would be through their listings themselves because the listings are integrated with lab data. So if a grower chooses to they can push lab data straight from the lab itself.

We also have a really robust image galleries and listings show supply and demand. So they show the number of unique views and the number of active connections. So versus just getting on the phone and saying, hey, this is what we're selling. A lot of people want it. You had better hop on it quickly. We have the ability to at least back it up a little bit and say, hey, we see you've had 24 unique views. Our different viewers have been checking this out. There's five active connections. It must be a great deal. I had better hop on.

Matthew: If you're either a retailer or a grower, if not now in a few years, it's going to be a much more competitive business for both of them. What suggestions or tips could you offer both a grower and dispensary to make sure that they're not just another dispensary or another grower? That they stand out in some way?

Jennifer: I think the most important piece is really recognizing and accepting what you just said, which is that this is going to be a very deafened landscape in two, three, four, five years. A lot of the business owners who are very successful today, have been able to do that - have been able to achieve that level of success without having to analyze their business in other - in traditional capacities that are taken for granted in other industries. For instance, the world of wholesale being texting everybody you know and seeing who has what in stock, and then having one or two connections that you go to all the time to refill product.

I know on a long term basis, it's not the most affective way to be managing your inventory, your margins, the quality of product that you're bringing in. And so, the number one thing that I think that businesses need to be to doing now is having the humility to say, okay, I was a pioneer. I did build a great a business, but that doesn't mean that more people aren't going to enter and that it isn't going to change. And so, I'll be open to tools of the future, but they have to work for me in the present. And using tools like Cannabase, I think businesses can make that transition out of a more underground - small underground market that it sort of began as, and help move it into a more traditional, transparent, sophisticated, set up where you're comparing vendors, you're comparing analytics. You're seeing market forecasts and you're really evaluating your business in a more traditional light.

Matthew: Oregon and Alaska recreational use is legal as of yesterday. They don't have a market place yet, but will you be moving into those markets - and when, and how?

Jennifer: Absolutely. We're actually in Oregon and a beta phase with their medical market. So Cannabase works for both medical and recreational product. We really like Oregon - working with Oregon. Oregon is very compatible with Colorado in terms of on a culture level. But also it feels a lot like Colorado in terms the wild west they've built with their medical marijuana program and really how well it's run. It doesn't look to be very strictly managed. It's a little bit chaotic, yet it's been a very successful program. So we're really excited to expand our Oregon offerings to the new recreational user base that we'll be entering, but we're already really excited about it and we would love to expand to Alaska as well.

Matthew: As we see legalization become wider and more mainstream, and cultivators become - their ability to create and grow more marijuana is enhanced, where do you see the price dynamic changing? Where is it now and where do you see it changing?

Jennifer: It's going to change enormously. This go back to that same concept of helping the businesses realize that although they've been successful up until now, there are going to be a lot of changes that occur over the next two, five, to ten years. And to me, one of the biggest changes is going to be the ability to differentiate strains objectively, which we don't have very easily right now.

One dispensary will call above a cush what another dispensary would not call above a cush. And dispensary prices are relatively arbitrary because cannabis is not a - it's so far from being a commodity that we don't even know how to decipher - we're still comparing apples and oranges and calling them the same the strain.

So part of the power of Cannabase is taking the baby steps to be able to make sense of what product is hitting the market and begin validating the prices being asked. So for instance in our wholesale market, a brand could list a strain and put that strain on the wholesale market and integrate it with lab data straight from the source. We could see the number the number of listings, connections, and activity compared to other listings that are similar. Cannabase is the largest wholesale market in terms of amount of product available. And so, we have a pretty robust data set to being slicing and dicing where we're seeing the outliers and where we're seeing the patterns and the trends. So if you take that strain, and you integrate it with the lab data, and you integrate it with it's marketplace data, and you compare and contrast it against it's peers, it's a very powerful data set.

We also have Cannabase Connect, which is an individual social network. And in this social network it's a lot like a Facebook, but individuals can say what they're smoking, and we can have trending strains. So at the moment you can just say what strain you're smoking. But in the next release of Cannabase Connect, which should be this Friday of this week or Monday of next week, individuals will also be able to tag the store that strain was from.

And we think it's going to be incredibly powerful for those brands to be able to reinforce their price on the wholesale marketplace not only with that lab data, which is important, but it isn't everything. You don't go to a liquor store and just look for sulfates and alcohol content. You want to look for the deeper experience, popularity, and how many of your peers and appreciate that product over it's counterparts. We think it's going to be really powerful to be able to say that brand's strain performs X, Y, and Z in the wholesale market, but you know what? It's priced so high because it is trending four to five times more often than its counterparts in the individual network. And that's where we're really going to be able to validate the marketplace with true consumer data, consumer trends, and consumer feedback. And I think that's the ultimate dream of Cannabase is to be able to aggregate that data, make sense of it, and help our businesses know how and when to use that data to reinforce the price points that they believe in and that they're looking for that objective way to reinforce.

Matthew: As entrepreneurs, you create this software, and you hope people use it, and they do. But is there anything that surprised you about the way people are using it that you didn't anticipate?

Jennifer: That's a great question. And I chose to be surprised every step of the way. So one of the main things that defines Cannabase is that we are at our heart a tech company. My background is in tech. My husband is our CTO, and he a brilliant developer. We are nerds at heart, and we love technology, and we can stay in the office for 70, 80 hours a week building and improving our product. And that's what we know, and that's the heart of this business.

When we chose to start this company, we took a different approach than a lot of cannabis tech companies have taken. And I do not blame them for the road they've taken. Because of the limited access to funds, because the federally legal nature of cannabis, it's hard to get enough money to build a tech company in order to create an in-house development team. Normally, most businesses are outsourcing. A lot of businesses are outsourcing. They're buying an app. They're buying a product from an agency. And that's what they go sell. We took the opposite approach. We were able to solidify enough seed funding to build a really powerful in-house development team. And so, we were able to take a completely unique approach with our product and that was building it on a customer development feedback model.

So what we do is we launch wait we call MVPs, minimum viable products - minimum viable feature sets, and then we let our users tell us what they like and how we can make it better, and how we can make it more tailored to their unique business, and we listen. We improve our software every single week. We do deploys. We release bug fixes, or front-end improvements, or small new feature sets. And then we take the features that aren't being used and we cull them. So we've been able to really create very tailored piece of software for this very unique user base that doesn't have anywhere else to go.

So, yeah, every thing has surprised me. Everything has surprised me, but I've let them determine what the product would be versus what I thought it should be. And knowing that we have the users we have, we have their time, we have their ear, we know that we'll be able to crafting a more and more sophisticated product as the market evolves and as that's what the users are ready for.

Matthew: You mentioned minimum viable product or MVP there, and I'm taking it you probably read the book The Lean Start Up by Eric Ries?

Jennifer: Uh-hmm.

Matthew: That is a great tool. And something that I just want to emphasize for other entrepreneurs out there is that you don't have to create this 100 feature software product or service, but just get it into the hands of your perspective clients as quickly as you can and get that feedback and then iterate. I mean that's kind of in a nutshell what the lean startup is. And so, it's so refreshing to hear you say that because I think it's frustrating for entrepreneurs to go into the cave and spend all that time, money, effort for something that prospective users may not even want. So that is great. I'm so glad to hear you say that, and so glad that you can share that lesson with other entrepreneurs in the space.

Now switching gears a little bit to your personal life, I read in a New York Times article about your wedding at Devil's Ranch here in Colorado. And you considered offering some cannabis infused cupcakes. What was it like to be the subject of that article, and do you see this as a trend to offer infused products or edibles at weddings?

Jennifer: It was very interesting being included in that series of articles around cannabis and weddings that were coming out right around when Chase and I were getting married. So we had solidified our wedding date for about two weeks after the Cannabis Cup, a year before - I mean, a year in advance. So we did before we decided to official start Cannabase. If we had known the schedule we would be on, we probably would not have planned a wedding for that time.

But because we had a wedding coming two weeks after the Cannabis Cup, we were included in a lot of these discussions around, yeah, incorporating cannabis into the event and, I mean, I do not - in a nutshell, I do not think it's going to become a big part of weddings especially bigger than alcohol, at least for a very long time. Although we thought it could be fun, and it could be a fun thing to give our friends, and a fun thing in light of what we do.

I think there's a lot of risks when you are bringing family members in from other states and even friends in that you maybe don't see all the time and encouraging them to try a brand new substance. You know you don't want anybody drinking for the first time at your wedding anymore than you want anybody smoking pot at your wedding. And I definitely think, although we considered the edibles road, it's a dangerous because as we all know edibles hits slow, unpredictably, and very intense. I mean, of all the drugs, I don't think cannabis is necessarily the best for a wedding.

A wedding is supposed to be a celebration. And it's emotional and you want people dancing and getting excited. Some people are able to do that with pot, but a lot of people - most people, especially if they don't smoke often are going to become a little more introverted or introspective or relaxed, not necessarily going into wedding dancing mode. So I don't think it's necessarily the best fit. But Chase, my husband, him and his groomsmen did go to a cabin nearby, and they were going to smoke a little bit afterwards, and that was really fun for them. And so, I think as long as it's done with taste and thought through, there's no reason it can be incorporated a little bit.

Matthew: Excellent point. I agree. Jennifer in closing, how can listeners learn more about Cannabase?

Jennifer: We encourage you to vised, which is our website. From there you can really discover each of our offerings. Like I said in this interview, we really focused on Cannabase Marketplace, which is our network for licensed businesses, and within that is the wholesale market.

But we also have Cannabase Connect for cannabis consumers 21 plus. And it's a private portal where they can connect with those business owners through virtual private store fronts.

And we also have Cannabase Maps, which is our public facing dynamic dispensary finder. We'll be launching - we really only launched the MVP of our map up until now, which came out about August. But we'll be launching the really official Cannabase Maps at the end of this week or the beginning of next week. It's the first map with driving directions, really beautiful dynamic filters, really, really phenomenal, fast, robust, user experience. And then you're able to rate and review any of the stores on that map by signing in with a Cannabase Connect user account, and you're able to be on that map if you are a business in Cannabase Marketplace. So it's a pretty exceeding suite of tools, and we always encourage everyone to check out, and find their place in the base.

Matthew: Thanks so much for the interview, Jennifer. We really appreciate it.

Jennifer: Thank you, Matt. Thank you for all your time.

Keep your Cannabis Business in Compliance – Mark Slaugh – CEO of iComplycannabis

Mark Slaugh

Many cannabis business owners focus only on the bottom line, serving their customers and generating revenue. But just as important as making money is mitigating risk. Mark Slaugh, CEO of gives us a brief on staying in compliance with regulators.

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Matthew: I'd like to welcome to the show Mark Slaugh, CEO of iComply in Colorado. Mark, are you in Denver or Colorado Springs? I'm not sure.

Mark: Well, actually, I have offices in both cities. They are first and second largest markets in Colorado, and I'm kind of following where the business is. But we extended our Denver office in February.

Matthew: Can you give listeners a little bit of background on what I iComply does?

Mark: Yeah. I started iComply back in the year 2011, when I saw the need for commercial cannabis regulations and someone to really help hone in these businesses. Believe it or not a lot of marijuana operators kind of came from a different background than a regulated, licensed, and strictly controlled marketplace. So if all of the nuances ñ the rules that we have here in Colorado, we started our business with the understanding that with regulations naturally comes regulatory enforcement, and that if we want to keep violating federal law legally, we have to show compliance with state law.

Matthew: And how do individuals in the cannabis business demonstrate compliance?

Mark: Well, I mean, the biggest way is certainly by not getting in trouble. But that's the simple answer I think. More realistically how we show compliance in the long run is by showing that we're working the world of mitigation. In the laws here in Colorado, we have about 500 pages of rules. It's actually more regulations, I think, than even oil and gas. I often joke it's easier regulatorily speaking to frack in Colorado than it is too grow the hemp plant. But anyway you look at it, we have seed to sale tracking, and we have regular inspections by enforcement.

So certainly with our tracking software especially, which tends to be a hallmark of the industry regulations here in Colorado, and it's something that other states are looking at. We literally track every gram that is grown down to every dollar that is sold from the seed through the cultivation, through the harvesting, through the packaging and processing all the way until it reaches the point of sale. That entire process has various points of data that are collected, and this statewide system has to be used by every operator out there. So the system itself is a regulatory tool for enforcement so that they can analyze metadata from these operations and be able to tell when someone is out of compliance.

So in terms of the ability when you're being watched 24/7 on camera, those cameras record up to a period of a month and a week or 40 days, all of these business have faced intense scrutiny and can be caught at any moment if doing the wrong thing. Of course, all it takes is one employee not knowing what that one thing is. And so, that's where we really help work in the world of mitigation by training them up front, by ensuring the (indiscernible) was off, that their compliance was on, and can build a history of that compliance success over time, and that they have standard operating procedures that take into account compliance protocols so that they can operate in a fashion that is compliant an ensure that all their employees adhere to those SOPs.

Matthew: That's good to know. One thing listeners should understand is that Mark is talking largely about Colorado, but all these regulations in some fashion are coming to states where there's medical marijuana is legal or adult use, so this is very apropos to those other states outside of Colorado as well to kind of get a sense of what regulation looks like even though some of the details will be different for whatever state you're in. Now digging back into Colorado a little bit, I think it was 30 new regulations that were released a couple of weeks ago. Can you give us a little background on what those are exactly or what the highlights of those are?

Mark: Definitely. The few rules that were released a couple of weeks ago were just from the rule-making process. And as you get in regulations, no matter where you are in the county, and you can see sort of out here in Colorado rules coming out every month or every two months. So it's a pretty rapidly moving target and it changes pretty often. What they changed from a 30,000 level view are some pretty important areas: things like 30-day patient registration rule, which actually determines plant count in medical marijuana here in Colorado. For some odd reason the constitution limit 20, we tie our patient plant count to the number of patients that are registered with the center. So many other places operate in a similar model of cooperatives and that sort of thing.

The rule has changed so that those folks are now being tracked through the inventory compliance system known as METRIC. So the regulators have a really good understanding if patients are registered to multiple locations at the same time. And they're cracking down on that and reining that in, which of course on the production side reduces the amount of plants that any facility is able to grow, if they have patients that are registered to multiple facilities. That's a pretty big change.

Other things that we've seen come in this rule update deal with labeling and packaging. They're even debating now possibly color strips, stamping, shaping, and making edibles look at certain way and recently had a proposed edibles ban come out from the Colorado Department of Public Health and Environment, which we were successful in sort of beating back.

But here's the reactionary force to legalization that I think everyone really has to pay attention to. Some of the rules were really around production and inventory control systems for regulators. So not only can they control price through taxation and determining what supply and demand is, keeping a close eye on that, now they have mechanisms to also determine the overall capacity of production of each type and essentially now have the power to reign that in at any given point, and that operators aren't allowed to expand that in terms of their capacity for retail marijuana unless they can prove a running three-month period of selling at least 85 percent of what they had cultivated. So they really want to be able to warrant the demands of the marketplace not being by an oversupply of new market entrants and people growing and benefiting from the economy of scale. So we're starting to see the med put in regulatory tools to control supply and demand and inevitably price. The goal is to put out the black market, but at the same time ensure that we're not encouraging black-market, but such low prices that we incentivize out-of-state sales and diversion to minors.

Matthew: Just rewinding a little to what you said about edibles and beating efforts to ban edibles, was there some sort of other suggestion about making edibles look very distinct so there was absolutely no confusion about, hey, what you're about to eat is confused with THC? I heard some rumors about that, but I was wondering if you had any more details.

Mark: Yeah. We're just about to have a meeting here about 30 minutes to talk about industry groups out here. But we did on Friday have recommendations come to the enforcement agency and the regulators from the Colorado Department of Public Health and Environment. And one of the folks over there sort of blind-sided some of his colleagues by recommending that all edibles either be lozenges or tinctures, period. No more cookies, no more brownies, no more candies, no more soda pops, no more drinks, with the concern around the Halloween fear that somehow kids are not going to be able to tell the difference. We have hashed this out before having dealt with the public CDPHD and the Colorado Department of Public Health and Environment. As well as Children's Hospital here in Denver really focused around how do we prevent accidental ingestions or people not being able to tell the difference between a regular candy and a marijuana candy. And so, there's where the policy discussion lies and really the most effective solutions are the things we've done already, which is child resistant packaging, labeling, and education.

And our packages actually have to be okayed so they can't even see the gummy bears inside the bottle for example. It would look like any other pill bottle. So the concern from sort of the traditional prohibition is from the CDPHE recommendation were really in the realm of getting rid of getting rid of all those other products so that there as no confusion, and there simply would lozenges and simply be tinctures for every business model out there. So some questions whether or not that's constitutional and certainly whether or not it's even effective public policy is in the realm of accidental ingestion. You have between a million, a million and a half, two million products, be issued here in Colorado since the start of retail marijuana in January. And during that time, we've only had nine children end up in the hospital.

If you look at the rate of accidental ingestion to the number of products that could potentially be eaten accidentally, I think we're having a better track record than prescription pills, probably cleaning supplies in people's homes, let alone anything else a kid can tend to pick up and put in their mouth. So far the question really then, I think, becomes how much more effective is regulation like that banning cookies or drinks or going to be in preventing such a low accidental ingestion rate anyway? And we have to look at that in the context of people's ability to operate in the market place and also what consumer demand is. Cookies and candies aren't just for children. Seventy-five percent of adults consume candy. So where do we draw that line? How do we make that distinction beyond what we've already done when sort of the reactionary force to a kid ending up in the hospital for eating a gummy bear tends to be a lot more extreme than other industries that maybe facing some more challenges than accidental ingestion.

Matthew: Can you give and overview of what responsible vendor training is, and how iComply can help with delivery of that for people who have no idea ñ I know responsible vendor training exists in other industries besides cannabis but just give an overview of what that term means, and then what kind of training is given for people in the cannabis industry to satisfy the responsible vendor training?

Mark: Absolutely. It does exist in other industries. A lot of people know it from the alcohol industry as sort of the TIPS program. But it's essentially training for frontline bud tenders, owners, and managers of the dispensaries. It teaches them the overall view of what cannabis is, what it's effects are, and how to educate people at a standard level that is not just compliant with the rules and regulations. There are some components and compliance there that is also in the realm of responsibility. So just like we would teach a bartender not to over serve, or not to not serve to intoxicated persons, or how to check IDs, we're doing very similar training for the workers in the field.

With the influx and demand for labor since retail has exploded in business, we don't want a lot of qualified persons out there. So we have been extremely busy at iComply doing our responsible vendor training. We've actually had a course in place around compliance since around 2012. So we've been there for a little while in terms of training and certification. So we have a comprehensive compliance course that's sort of our flag ship bread and butter that a lot of people know us for and love us for. And then we also have our responsible vendor training program which is MITS and the new rules that they just came out with a couple of weeks ago in the process of developing approval programs around.

Matthew: Okay. Is that primarily ñ does that mitigate the risk of the business owner again back to that point? So an employee takes the responsible vendor training, something ends up happening down the road, and you could say, look, we did take the steps required to ensure this employee had all the information they needed. It's just that a mistake was made somehow?

Mark: Yeah. Exactly. There's some state statutes on the books since about 2012 that have really outlined this process program as something that can mitigate those offenses. So it will be a lot smaller slap on the wrist if an owner or bud tender or someone under them mistakenly or even on purpose secondly has a violation of any sort. And so, yes, it does kind of provide that for a of line defense for the business as well. And it reduces product liability and other factors that might be outside of the regulatory regime.

Matthew: And so, a new employee comes on. Let's say a bud tender, how long does the owner ñ business owner have before that employee needs the training?

Mark: Yeah. They have a 90-day window to get that employee trained. We hold our supplementary courses once a month, so there are at least two opportunities there get that particular employee up to speed.

Matthew: What do you think the biggest mistake is that owners make in the compliance arena?

Mark: I think it's assuming they won't be caught. Lots of times we're coming from a mentality that's hard to change. I think the biggest mistake is instilling a mentality of irresponsibility and sort of hiding from the law. I don't mean to say that about everybody out there. I think the industry is certainly becoming a lot more professional and growing up very quickly. But there tends to be an old school mentality certainly in places without a lot of robust regulation and certainly even here in Colorado where we've had to mature very quickly. I still see in particular operations biggest mistake being we can do this, this one time. And we can kind of get away with this. And don't worry, they're never going to come through and catch us. And so, you get a little bit lax over time because you're really worried about patients and plants and all of the operational things that go into running a business.

Compliance tends to be an extremely important detail that gets overlooked. And when you're starting to sow a culture of non-compliance because of excuses or rationale around it, that's often times, I think, that's the most fatal mistake owners can make. And I've seen some very drastic action be taken by regulators. They catch these folks with their pants down. And if you don't really understand the realm of what that compliance world looks like, there's a lot of risk being run in terms of non-compliance, and the costs involved in that are pretty hefty. I think that tends to be the biggest mistake is guys just assuming they know what they're doing.

If it's ñ we have a running joke that every grower is the best grower and every owner is 100 percent compliant. We've never walked into a facility that's been 100 percent compliant. It's always something. There's always some detail. And with as many regulations as we have, it's no surprise. It's all these new markets coming up. It's really important that they design and implement their systems, and their process, and their procedures, and their people into that keeping compliance in mind not as the last detail, but as the most important detail up front.

Matthew: Right. So I'm hearing you need a good offense, but also a good defense. I mean, a lot of business owners are really good at the offense, the cultivation or the dispensary piece, but they're not looking at the defense part, and that's just as big a part of the game. And by ignoring it doesn't mean it's not there, it's just you're exposed even if you're not aware of it. So those are good points.

Mark: Exactly. And no matter how good your product is, how awesome you people are, how many awards you win, all of that is at risk and can go away because somebody didn't know what they are doing or because there's some misunderstanding or some detail got missed. The entire world is helping manage those details and organize those structures so that compliance becomes something that is instilled as a culture within the organization and everybody holds each other accountable because not a single person can be responsible for the amount of compliance we have to deal with.

Matthew: Where do you see compliance and compliance training in the next two to three years? I mean, it's changing very quickly, but what's your best estimation of where we're be?

Mark: I think it's an absolutely necessity. It's just a question of whether or not owners recognize it. And those that are out ahead of the curve and see where the puck is going to be played are going to be in a better position to manage it and to take it seriously. But when you're monitored on cameras all the time just like in the casino world, you don't see 1,000 different casino operators. You see a very select few know how to handle it and do it right. And so, I think in a lot of ways compliance can be a bit of a threat to those folks out there that can't make that paradigm shift . And it really is a market that's starting to consolidate into medium and large-scale players.

I think training becomes an absolute necessity. The more businesses you have, the more employees you have, the higher turnover rate you have, the more transactions you have going on, the more risks you're running. And if you really understand the defense part of that, you begin to mitigate the risk and make sure that you have systems in place to handle that, and remediate it. There is no non-compliance. All of that becomes the realm of this new highly regulated industry. Besides, I think it will be a pretty big business in terms of training because it's going to be necessary for everyone coming in. If you're going to play the game, you've got to know the rules to the game.

Matthew: Do owners of infused products businesses have more or different kind of risk in general that's not as well understood compared to cultivators or other ancillary businesses?

Mark: Oh yeah, absolutely. In the extraction realm especially when you're dealing with solvents and flammable solvents, in dealing with bomb-proof rooms that are dictated by Denver Fire, there's a lot of compliance that goes into what it takes to extract using butane, propane, CO2 under heavy pressure. So there's a lot of regulations that go especially into the extraction realm just around safety. And there's also a lot of regulations that go into the food processing realm just around safety.

So marijuana-infused product manufactures in Colorado have to take Serve Safe Training. It's required, where it's optional in restaurants. They have to have inspections. They have to be OSHA compliant. There's a lot of other regulatory agencies that overlook them like health and safety in Denver and fire departments to ensure that they're not going to explode like we've seen a lot of hash explosions out there. So everyone has to have a separate enclosed room that they extract in. It has to be bomb-proof and rated that way. It also has to meet up to physical engineer certified industrial hygienist standards locked in the facility. All the equipment has to be enclosed loop extraction. It has to be UL listed or ETL listed. So there's a whole lot that goes into that whole realm to protect workers.

There's training programs that have to be instilled, documentation that has to be kept that everyone is adequately trained. There's a lot that goes into just the infused-products manufacturing realm that I don't think a lot of people are thinking about right now. In California and Washington there's a big learning curve there. There's quite a bit of expense that goes into it, and a lot of nuances especially when you're tracking production batches from your harvest batches. And in terms of how that comes out, I know Colorado is rolling out testing results as well. So you have contaminate testings and potency testing. If you fail your testing, you're destroying your entire batch, so your product is at risk of being completely lost, which is another big concern that bolt pros and MITS serve products are going to have to be aware of.

Matthew: Mark, as we close, how can listeners find out more about iComply?

Mark: You're welcome to visit our website. It's You can also send me an email at We're happy to answer any questions and take a look at sort of what the next horizon might be for those listeners out there.

Matthew: Thanks so much, Mark, for the brief today. We really appreciate it.

Mark: Thanks for taking the time. We look forward to doing it again.