Industry Roundtable: An Oral History of the Future of Weed
A discussion on the state and future of the the legal weed space.
"The future of the legal cannabis industry is bright,” Dooma Wendschuh tells The KIND. “Supernova bright.”
Wendschuh is the founder and CEO of Ebbu—an intellectual property company developing a predictable, standardized high for the consumer market.
There is no shortage of speculation surrounding the future of legal marijuana. Rolling Stone called 2015 “the year of ‘Big Weed.’” The International Business Times likened the booming legal cannabis market to a modern-day gold rush. In November of last year, Nick Lachey told Ohioans to legalize bud, but that only him and his rich buds should be allowed to grow it commercially. The Atlantic asked if smoking the stuff is a human right. Silicon Valley is willing to pay to ensure that it is. And The KIND writes about it every day.
To glean insight into this seemingly bright future, The KIND reached out to four stakeholders driving commercial cannabis's next wave. This entrepreneurial quartet is leveraging technology, data, and scientific research to empower cannabis businesses and innovate within the consumer market.
Ebbu's Dooma Wendschuh is joined in the conversation by:
David Hua is co-founder and CEO of Meadow, a mobile platform that operates in the same vein as Uber or Postmates, streamlining the process of having medical cannabis delivered to the front door.
Cy Scott co-founded online strain database and cannabis lifestyle hub, Leafly. His latest venture, Headset, is a logistics and business intelligence platform utilized by companies operating in the legal marijuana market.
Kevin McKernan is founder and CEO of Medicinal Genomics—which claims to be the first company to sequence the cannabis genome.
These influential founders discussed everything from finances and banking to the importance of intellectual property, weighing in on emerging trends across a landscape populated by criminals at every level (at least according to federal legislation) and where medical research is an arduous process.
As mainstream politicians and funds move from a furtive side-glance to a willful enthusiasm—the legal marijuana market is expected to be one of the fastest growing and highest grossing industries over the next two decades.
These four people are working to turn those high hopes into an elevated reality. (Responses have been edited for fluidity.)
On Entering the Game:
"The cannabis industry is one of the largest economic opportunities of our generation," David Hua, co-founder and CEO of Meadow, tells The KIND. "It's an industry that is ripe for innovation."
Cy Scott of Leafly and Headset shares a similar view: "A number of dedicated funds are investing in cannabis, and we're seeing a lot of angel activity not afraid to get into the space. Technology and cannabis go so well together."
Recent headlines corroborate Scott’s observations. Gateway, an accelerator in Southern California, will reportedly provide $30,000 in seed funding, and five months of office space to 10 cannabis startups in 2016.
According to Kevin McKernan, founder and CEO of Medicinal Genomics, intellectual property in the weed industry will see major disruption in the coming years: “Blockchain technologies will make it possible for ironclad, cryptographically ensured, digital-notarization; and definitive evidence of unique DNA among cannabis strains,” he says.
Image via Leafly.com
Which means that weed strains can be considered IP and conceivably will be trademarked. It will be possible to prove the existence of an OG Kush, or a Tangerine Dream, and will give the buyer a greater assurance in the provenance of purchase: “Consumers should no longer trust what is on a label unless it has been tested in a free market testing paradigm,” says McKernan.
According to Scott, pot’s recent past is predictive of its future: “If the past five years are any indicator, we'll see some real traction with legal markets and further expansion of medical marijuana programs. Federal de-scheduling—or worst case re-scheduling—and fixing banking.”
On the Woes of Working in the Legal Weed Business:
The obstacles that need be overcome in weed’s current quasi-legal status provide an industry-wide common ground. Banking being perhaps the most pressing shared concern.
“The cloud of illegality hangs over you everywhere you go,” says Wendschuh. “Banking is difficult. Credit card processing is difficult. Raising money is nearly impossible.
“Line of credit?” Wendschuh suggests. “Forget it!”
He tells The KIND: “Remember, anyone who has been in this industry before legalization is a ‘criminal.’ That’s a tough label to give someone whose only crime was dealing in a product that should never have been illegal in the first place.”
This tinge of illegality applies to everyone from the programmer behind the computer monitor to the budtender inside the dispensary, and even—according to our panel—the researcher inside the laboratory.
“Publishing peer reviewed articles can be challenging when you have to perform illegal experiments in order for the paper to publish,” says McKernan. “We performed the initial sequencing of the [cannabis] genomes in a hotel room in Holland. In 2011, we were still afraid to ‘touch the bud’ inside the United States.”
David Hua, like everyone The KIND spoke with, embraces the swim against-the-current spirit: “Be comfortable being uncomfortable. Working in cannabis, we've encountered challenges that range from following legislative changes to banking issues,” Hua says. “Another issue we’ve faced is making sure we are working with quality partners.”
Wendschuh echoes this sentiment: “Some of those folks I’d work with in a heartbeat. Others you should stay away from if you want to continue to have a heartbeat.”
“Prepare to spend a lot of money on attorneys," remarks McKernan. "And don’t be surprised when there is no clear answer.”
According to Scott: “In other industries, things like payments are just taken for granted. In cannabis, you have to get creative, and it unnecessarily slows down very basic tasks. With Leafly, we lost a number of banks and payment processors,” he says. “Headset is in Washington, where the state has taken in more than $114M in excise tax for 2015; yet these businesses struggle to keep their bank accounts.”
“Once you get in, life doesn’t slow down. It only speeds up,” says Wendschuh.
Meanwhile, the banks wait and watch mostly from the sidelines.
In 2014, Bank of America Merrill Lynch released a report painting legal marijuana as the fastest growing American industry, grossing $2.7 billion that year. The same research projects this number to grow to $35 billion by 2020 as more legal markets open up across the country. The California Attorney General remarked that a recent initiative to legalize cannabis—under the condition it faces the same regulations as alcohol—could net the state nearly $1 billion in tax benefits.
On Disrupting the Status Quo:
Financial gain isn’t all that is pushing legal pot forward. Wendschuh describes the feeling of being a part of a social movement as: “Feverish excitement—the unbridled intensity of the inevitable—the exuberance of being on the cusp of global change." In summation, he says, "Creating a better future is what motivated me to enter the industry.”
Wendschuh tells The KIND, “It’s true the cannabis legalization movement was pretty far along by the time we joined. But for it to achieve mainstream appeal—and compete legally with alcohol as a commodity for recreational use in bars and restaurants—we need to create a safe, reliable and predictable product.”
Which is one role he envisions Ebbu filling: “We are going to be that brand.”
“If the GMO space is any foreshadowing of how the FDA will manage the cannabis space, I think we should aim to do better.”
Hua describes arriving at the inspiration to found Meadow after attending Oaksterdam University, the weed-positive educational institution in Oakland, California: “While there, I met Debby Goldsberry, an activist and one of the original founders of Berkeley Patients Group. Debby inspired us to create software to help dispensaries improve their operations and automate tedious and repetitive tasks.”
For McKernan, joining the marijuana movement was a bit more personal: “About the same time a few friends were diagnosed with cancer, I came across a nature paper from [Spanish cannabis researcher] Manuel Guzman, describing cannabinoids,” he says. “Having some experience in mitochondrial sequencing, this seemed like a very promising direction to head in.”
Scott sees technology as a major vehicle to carry the vision of cannabis-empowered commerce and marijuana-enriched medicine into the future: “My cofounders and I saw the rapid growth of the market and a real lack of resources for those curious about cannabis in all its varieties,” he recalls. “There are so many inefficiencies in all areas of the supply chain that can be helped with custom cannabis-specific technology, and even applying readily available technology solutions that exist in other industries.”
He sees the future cannabis consumer enjoying, “more variety, better prices, and more accessibility.”
“This Green Rush is going to last a long, long time.”
On the Next Five Years:
Like Scott, McKernan places high value on consumer education and the importance of technological solutions for the next wave of cannabis entrepreneurs: “Consumers will need to get educated on free market regulation,” he says. “While the FDA and USDA may play a roll in the future, these organizations don’t have competitors and frankly have a history of oppressing this space.”
McKernan sees Medicinal Genomics as a means of circumventing this alleged oppression: “If the GMO space is any foreshadowing of how the FDA will manage the cannabis space, I think we should aim to do better.”
On his five-year vision for the company: “100,000-1M cannabis genomes will be sequenced. We will have a QTL [Quantitative Trait Losuc] map of every terpene, cannabinoid, flavonoid, and desired genetic markers for desired traits.”
For consumers this means: “A large percentage of patients will have been sequenced in five years. We will know the mutations in their endocannabinoid system and have a better sense of drug-drug interactions and personalized cannabinoid therapies.”
And for the industry, especially the seed and retail sector, where brands base their business models on the availability and reliability of certain types of cannabis: “If you are not paying attention to the defensive IP side of this field, you are unlikely to get funded,” McKernan says. “You’re equally as unlikely to survive in a market emerging from counterfeit-prone grey markets. You don’t have to be an IP proponent to defend yourself from patent trolls. You just need a little foresight and sequencing.”
Wendschuh notes consumer safety as one of Ebbu’s ambitions: “We are going to create safer and more effective medical products the right way, by doing the appropriate tests to ensure their safety and efficacy; and taking all necessary steps to ensure consistency, while eliminating any contaminants.”
Image via Fusion/Youtube
He makes reference to the recent recalls of pesticide-tainted pot in states where weed’s being sold legally, albeit with a lack of lab-tests: “Colorado has done a very good job of protecting consumer health. But the other states where cannabis is legal have a long way to go,” he says. “If we don’t take it upon ourselves as an industry to self-regulate and ensure the health and safety of our consumers, we put everything at risk.”
Which means that the legal cannabis business is both a heavy wager and a large responsibility.
Many people working in legal pot cite the feeling of working in alcohol on the eve of prohibition’s end. The next chapter in legal cannabis hinges on legislation, regulation, and technology defining and leveling the playing field. But with Wall Street poised to produce the next “Walmart of weed,” and the Silicon Valley of cannabis launching marijuana “Ubers" and "Instagrams," is there still room in the market for the “Mom and Pop Corner Marijuana Shops?"
As Wendschuh puts it: “We’re still at the ideation phase in this industry. We’re still figuring out what the problems are and how to solve them. There will be a whole new phase yet-to-come, where we improve on the solution," he says.
“This Green Rush is going to last a long, long time.”