Marijuana equipment start-ups flourish as large rivals avoid legal pitfalls

USA Today/March 27, 2017/Trevor Hughes

GREELEY, Colo. – Marijuana’s uncertain legal status across the country has unleashed a network of innovators and entrepreneurs into a space that would ordinarily be filled with name-brand manufacturers, pharmaceutical companies and federally funded research universities.

These small “cannabusinesses” are rushing to fill niches and make money in a field where the drug’s illegal status at the federal level has made many start-up basics — from getting a new machine to accessing credit — far more challenging. Colorado, for instance, boasts a cottage industry of innovation because it was one of the first states to legalize recreational cannabis sales to adults, and also has a highly educated, youthful workforce.

Take Greeley, Colo.-based Leaf, for example: A converted garage in this northern Colorado college town has become a de-facto lab for developing the company’s self-contained marijuana-growing “refrigerator.” The $3,000 wifi-enabled cabinet has a webcam so its owner can monitor the growing plants no matter where they are.  Leaf introduced the cabinet earlier this year and has already sold more than 1,000.

“We started small there and then it kept growing, literally and figuratively,” said Leaf CEO Jonathan “Yoni” Ofir.

There is a marijuana-extraction system inside the Wana Brands factory in Boulder, Colo. The dark liquid is highly concentrated marijuana oil, and workers are using high-grade ethanol as a solvent to remove impurities before the oil gets added to cannabis-infused candies. Like many marijuana companies, Wana has had to build much of its own equipment because conventional equipment suppliers have little experience with marijuana businesses.

The innovations aren’t limited to Colorado. More than 1,000 miles west in Orange County, Calif., Danny Davis’ team at Convectium built seven versions of their cannabis-cartridge filling machine in 15 months, starting with cobbled-together technology and ending with a touch screen display. Now, customers are begging for something even faster than the current $16,000 model. And in a reversal of the usual pattern, Davis’ researchers have been tearing apart Chinese-made vaporizer technology so they adapt it for marijuana use.

“You see innovation coming from the grass-roots level. It’s the thing that begins everything else,” said Davis, a former venture capitalist.

Back in Denver, the marijuana social media platform MassRoots is celebrating having 1 million registered users and being restored to the Google Play store after being banned since November. MassRoots is like Yelp for cannabis, and the company doesn’t even touch pot. But while it’s seeing success in connecting marijuana users, both Apple and Google have thrown up roadblocks. Apple in 2014 booted MassRoots from the App Store, and only allowed it to return by forcing a series of changes that included people never talking about other drugs on the platform. The company’s solution: Every post by those million users has to be reviewed by a MassRoots worker.

“That’s the nature of the marijuana business – facing challenges that no other business has to face,” said CEO Isaac Dietrich.

The lack of large industry players has left room for plenty of snake-oil salesmen and publicity-seekers making outlandish claims about the unique nature of their products. But that vacuum of established research has also opened up a wide, albeit semi-legal, playing field in a new green rush that appears only likely to accelerate as California, Massachusetts, Maine and Nevada, among others, ramp up recreational marijuana sales.

Nationwide legalization could dramatically change the playing field, inducing larger manufacturers and banks to market to businesses seen as too risky because pot is still illegal nationally. But with the election of President Donald Trump, whose stance on marijuana is most unclear, such a national seal of approval seems far off.

That’s allowed a cottage industry of experts, consultants, and equipment manufacturers focused on marijuana to flourish.

In the mountain town of Evergreen, Colo., Jon Cooper’s team of scientists and researchers are trying to isolate the compounds in marijuana so they can provide a more consistent experience. While most people have heard of THC and perhaps the non-psychoactive CBD, Cooper’s team at ebbu have isolated 18 different components of cannabis. They claim their new water-soluble cannabis extract acts more like alcohol: a faster, more consistent “high” that also wears off relatively fast. It’s the kind of research you’d expect to see taking place inside a university lab filled with grad students, or maybe a pharmaceutical factory.

“The big companies, the people you’d expect to be filing the patents, they can’t play right now,” says Cooper, a former business executive with a resume that includes Level 3 and Accenture. “There’s an opportunity for us to make a huge impact.”

A major driver is profit. Today’s patchwork of cannabis marketplaces means small players have an advantage, and bigger companies can’t as easily bring to bear their expertise and capital, leaving room for entrepreneurs selling not just marijuana but the proverbial picks and shovels.

New Frontier Data, a cannabis analytics firm, says the current legal cannabis industry could grow to $8 billion by year’s end and reach $16 billion by 2020. Another industry analyst, GreenWave Advisors, says there’s 30 million recreational marijuana users today, spending an average of $1,500 annually. And the potential growth is significant: the Los Angeles area has more than twice as many marijuana customers as the entire state of Colorado.

Industry players say it’s only a matter of time until larger companies figure out how to scale up the techniques and work across state lines. They think national legalization, or at least a formal relaxation of prohibitions, will come eventually. And when that happens, expect pharmaceutical companies, tobacco companies and traditional investors to supercharge what is already a fast-growing industry, richly rewarding entrepreneurs who’ve got intellectual property and processes all dialed in.

“You’ve got a lot of really smart people with a lot of money just waiting to dive in,” Davis said. “Companies that do things the right way will ultimately be gobbled up and build something much bigger than ourselves.”

How Cannabis Brands Can Lead Content Marketing

Young Entrepreneur Council/March 20, 2017/Dario Meli

As more and more cannabis brands pop up on the market, each one encounters the same problem: advertising.

Under federal U.S. law, it’s illegal for cannabis brands to place ads in “any newspaper, magazine, handbill or other publications.” According to the U.S. Postal Service, it’s also illegal for newspapers to mail publications containing ads for cannabis products, even in states that have legalized marijuana. But marijuana marketing faces more scrutiny in the states that have legalized recreational marijuana — Alaska, Colorado, Washington, Oregon and the District of Columbia. For example, Colorado does not allow for any outdoor advertising and requires that any spots that advertise marijuana are shown only to a demographic where 70 percent of viewers/attendees are 21 years of age or older. Online tech giants like Google and Facebook enforce strict policies that prohibit marijuana ads.

Because of these legal restrictions, the cannabis industry needs to be savvy with how they advertise its brand. To do so, it should consider the benefits content marketing. Here are three places for cannabis brands to start to help them claim their share of the market space.

  1. Deep-Dive Into Marijuana Data

Data is a marketer’s best tool to understand what your audience is searching for and, in turn, what they may be looking to purchase. Since laws prohibit marijuana advertisements, people are still searching for cannabis-related terms. The average monthly search volume for the top searched cannabis-related terms over the last two years are “marijuana” (301,000), “weed” (246,000), “vape/vape pen” (135,000) and “cannabis” (110,000), according to our own in-house research.

Those are some broad numbers to work with, but your job is to conduct a deep-dive by analyzing search term data more closely. You’ll be able to take key phrases from data that doesn’t include prohibited words/imagery but still bare relevance to the marijuana industry (e.g. “the munchies”). You can use demographic, location, age and gender data to learn more about who’s searching for what.

In addition, you’ll want to pay close attention to how the data changes over periods of time. This will be your first indicator to pinpoint any spikes in search term volumes and search trends to discover why this is happening at that moment. This can help you craft insights. For example, if you are looking more closely at the search term for “vape/vape pen,” you will notice that its rise in popularity began in 2013.

There are hundreds of great observations to be made about data, but only some of it may be relevant to your marketing. That’s why you’ll need to craft insights and actions from it.

  1. Use Data Insights to Create Marketing Actions

Now that you have all of this data at your fingertips, it’s time to put that data into action so you can see real results. The best way for marijuana brands to do so is to create content. As previously noted, marijuana advertisements are illegal online and off; however, marijuana content is not. It is perfectly legal for brands and bloggers to write about marijuana, and the search term volume data above shows how many people are actively searching for marijuana. Since Google search algorithms love content, marijuana brands have to create content to be found; they might as well use data to be found more easily. By creating data-driven content that emphasizes searchable keywords, your brand can divert search user’s attention to your website and products.

To borrow my “vape/vape pen” example, its popularity rose in 2013 and has since become the third biggest marijuana-related search term on a monthly average (see above). How can we use this information in our content marketing? One possible answer is to create an article detailing the history of vape pens and why it exploded in popularity. Whatever the observation or insight, you need to specifically act on it. That action could be specific to strategy, creation or distribution, but it should always come from data. Without it, you are marketing blindly.

  1. Add More Data and Keep Tinkering

Now, once you’ve created content, you will have a larger, more exclusive pool of data to work with. You will need to add that data to the research you’re already conducting about search term volumes, for example. From there, you should look to isolate what content is performing well — based on whatever metrics you decided on — and try to answer why it is performing well.

For example, if you see “good” numbers from content about Hollywood’s depiction of stoners, ask why that is. Is it because you published it after the release of a new stoner movie? Is it because pop culture pieces generally perform better than medical marijuana pieces? Is it because of where it ranks in Google or when you shared it on Facebook? These are all important questions to consider, ask and answer. The answers from this will affect your future content strategy.

Some may look at marijuana marketing as a glass half-empty scenario, but those people are looking to the past instead of the future. The future (and the present, for that matter) is data-driven content marketing. And the realities of present-day marijuana marketing have forced cannabis brands to adopt innovative approaches for the better.

Ten Things a Budding Ganjapreneur Should Know About Starting a Cannabis Business

Ten Things a Budding Ganjapreneur Should Know About Starting a Cannabis Business

Westword/February 22, 2017/Kate McKee Simmons

Every startup has its challenges, but a cannabis startup comes with additional challenges. Entrepreneurs who want to get in the business face a unique set of hurdles, including ever-changing regulations, legal issues and struggles to set up the right team.

Canopy, a Boulder-based business accelerator program and venture fund for the cannabis industry, chooses ten new enterprises every year for its mentorship and business-building program. The first class graduated in 2015; this year’s companies range from a robotics endeavor to a real estate outfit to an eco-friendly packaging firm.

Micah Tapman, managing director of Canopy, is in charge of the team that narrows down the program applicants. “Finding participants is easy and hard,” he notes. “It’s easy to get a lot of interest; it’s hard to find the gems.”

We recently sat down with Tapman to find out what he thinks is essential for success in the cannabis industry. Then we added some tips from the Women Grow Leadership Summit earlier this month to compile this list of ten things would-be ganjapreneurs need to know:

  1. Your team is key

The main challenge for any company getting started, whether it’s in the cannabis field or any other industry, is setting up a balanced management team, Tapman notes. “The team really has to have a bit of diversity, particularly in terms of skill set. They need to combine business and finance with some technical skill, and then some sales and marketing skill. That can be one person if they’re a super-person, but more likely that’ll be two or three people,” he says.

  1. Get an attorney

Karyn Wagner, CEO of Paradigm Cannabis, says that the most important thing to do when starting a business is get an attorney — and not just one attorney. You need a lawyer for your business and a personal attorney, and any partners should have their own attorneys as well. “It sounds like overkill,” she says, but that is the only way to ensure that everyone’s interests are being protected. There’s one person looking out for the business’s interests, someone looking out for you, and someone looking out for your partner.  It’s easy to get into this industry with friends or people you’re comfortable with, she explains, but it’s important to treat your company as a business from the get-go in order to prevent problems or disagreements that can spiral out of control down the line.

  1. Impressions matter

This is an extremely relaxed industry; most people can get away with wearing jeans and a T-shirt to work. But Tapman thinks it’s important to own at least one good blazer: “You may not want to wear a suit, and that’s fine, but [investors] would like to see you show up in a professional way,” he says. “For better or worse, impressions matter. When you walk in the door, people are going to judge you from the first second you walk in.” Tapman suggests walking the line between showcasing your personality and looking professional: “When you show up, the dreadlocks are fine, but you might want to throw on a button-down shirt.”

  1. Be authentic

This industry has room for everyone. From the former banker who founded Tokken to the tech and business nerds behind Baker, successful ganjapreneurs have their own strengths and capitalize on past experience. Gail Rand, CFO of ForwardGro, says it’s critical to market yourself authentically. There are plenty of people in the industry who fail because they try to be what everyone else thinks they should be; Rand advises that the most important thing you can do for your business is be your best self and bring all you have to the table.

  1. If you feel like you don’t know what you’re doing, that’s okay; others have been there

Jane West is one of the most recognizable people and brands in the cannabis space. West has a successful line of bongs and accessories, but she admits to falling into cannabis almost by accident. She started out thinking it’d be fun to host cannabis events, and started doing just that almost as a hobby in 2014, right after recreational marijuana sales started. She attracted attention quickly, and the coverage propelled her to the front of the industry. “I was in the press so much that people were reaching out to me from all over the country and all over the world,” she says. “What I was doing, I had only done twice when I got fired. I held two two-hour events. That’s it…I had no idea what I was doing.”

  1. Consistency is key, especially in an inconsistent industry

“The old rule of thumb of business is, you can make money any time there’s consistency,” Tapman says. “However, when there’s inconsistent regulatory status, it’s almost impossible to do any planning, because anytime you do something, you’re told you have to change.” This is definitely true in the cannabis industry. In October, every edibles company in Colorado had to update its packaging; instead of just displaying the THC logo on packaging, the THC diamond was now required on every individual edible. That meant that every company had to update its molds, and some were forced to discontinue entire product lines. Tapman says it’s not only important to have consistency in your business, but also enough capital and flexibility to roll with the punches when your company may be forced to comply with new regulations.

  1. Make good connections

Everywhere you go is a networking possibility; you should take advantage of all opportunities. Meg Sanders, CEO and managing partner of BeMindful, says there’s immense power in connecting with others. In any industry, who you know can make or break your company — but in cannabis, your connections are what could be the difference between success and failure, she adds.

  1. Find ways to maintain your mental health

It’s stressful to start a business. It’s even more stressful to start a business in an industry that is federally illegal. “There are days I can’t get out of bed,” says Natasha Irizarry, co-founder and CEO of Stashbox. “Starting a business is hard, and there’s an unbelievable amount of stress that comes with being in this industry…. We really need to talk more about mental health.” Irizarry, who went through Canopy’s accelerator program, says it’s important to take time for yourself and engage in good self-care. “I wouldn’t be anywhere without my team,” she says. “They help me keep going. They help me get up and do this every day.”

  1. Learn how to navigate the legal market in an illegal industry

Yes, cannabis is illegal at the federal level, but it’s legal in many states. Whether you’re starting a medical company or a recreational one, it’s crucial to know the laws in your state and operate within the regulations of the industry. Despite the challenges of navigating within the legal confines of an illegal industry, there is plenty of room for new businesses in the space. “People underestimate the growth of the industry,” Tapman says. “The real issue that’s happening is we’re creating a new consumer product, and that is going to develop a whole new set of consumers.”

  1. Failure can be the most valuable lesson

Embarking on a new path will undoubtedly lead to failures along the way. Megan Rogers, founder of Hallaway Dispensary in Maryland, says it’s important to fail because that’s when you can learn the most useful lessons. But you need to know how to build from failure. Yes, she says, you will run into hurdles — but you can’t let those stumbles stop you: Getting up and keeping on is the only way to go.