Tag Archives: tech

An Interview with Bespoke Financial Co-Founder & CEO George Mancheril

By Aaron Green
No Comments

Founded in 2018, Bespoke Financial is the nation’s first fintech lender focused on the cannabis industry. Led by a premier team of experts in the credit, technology and cannabis industries, Bespoke Financial has financed more than $800M in GMV across the US cannabis industry and is on track to deploy $1B by end of year 2022 via their revolving lines of credit. Bespoke’s financing empowers cannabis companies to increase purchasing power, remove working capital limitations and accelerate growth in a rapidly growing industry. The company is backed by respected venture capital firms such as Casa Verde Capital, The General Partnership, Greenhouse Capital Partners and Ceres Group Holdings.

Bespoke recently entered into a milestone partnership with Blaze as the cannabis industry’s first tech-enabled B2B lending product available in CA & MA. Through this partnership, Bespoke and Blaze will be the first to bring “Buy Now Pay Later” to the industry. With just the click of a button, vendors can utilize this BNPL feature by paying directly within the Blaze platform via Bespoke’s financing with a 60-day repayment term on all vendor payments while minimizing dispensaries’ reliance on cash transactions. 

We caught up with George Mancheril, co-founder and CEO of Bespoke Financial to learn more about trends in cannabis lending and their unique partnership with Blaze. George was the company’s CFO prior to taking the CEO position in 2019. Prior to Bespoke, George was a VP at Guggenheim Partners in California. 

Aaron Green: What does it mean to be a fintech lender in cannabis?

George Mancheril: Bespoke Financial is a first mover in fintech lending for the cannabis industry, equipped with a robust network of investors, industry expertise and a multi-year track record solidifying our credibility in the space. We are focused on working with established cannabis companies who can use our financing to unlock growth, profitability, and success in the near- and long-term future.

Cannabis lenders must navigate a complex web of both cannabis and financing regulations, specific to each state, while trying to identify good borrowers in a nascent industry comprised of new companies. This has caused banks, traditional lenders, and institutional investors to avoid cannabis despite the unique growth opportunities and economic potential of the industry overall.

Green: What makes Bespoke different from other cannabis lenders in the business?

Mancheril: Unlike the few cannabis lenders active in the market, Bespoke Financial combines best-in-class technology and lending products designed to address the specific financing needs of the industry to better serve our clients. Our tech platform offers a simple interface for our clients to easily access financing, monitor loan balances, and manage payments. Bespoke’s technology allows us to service a broad array of clients in numerous markets across the US, offering our clients a reliable financing partner for their immediate and future needs.

Green: What markets do you serve in cannabis? Are you able to finance plant-touching operations?

George Mancheril, Co-Founder & CEO of Bespoke Financial

Mancheril: Bespoke works with cannabis companies across the entire supply chain within 15 U.S. cannabis markets, with the vast majority of our borrowers being plant-touching operations, Our portfolio comprises cultivators, manufacturers, distributors, dispensaries, non-plant touching cannabis brands, ancillary service providers and CBD companies. Our financing options have helped a wide variety of cannabis operations overcome working capital limitations and capitalize on new growth opportunities and increase profitability.

Green: You recently announced a “Buy Now Pay Later” partnership with Blaze. What problems do dispensaries have that you are solving for there?

Mancheril: As broader economic activity slows in the US with the threat of a recession impacting both businesses and consumers, dispensaries face supply, demand, and fundraising challenges:

  1. Consumer demand challenges:
    1. Cannabis consumers in 2022 are significantly more price sensitive than recent years for several reasons.
      1. High inflation over the past 1yr+ has reduced disposable income for consumers in the US.
      2. Post-COVID return to normalcy has allowed consumers to spend disposable income on many goods and services which were largely been unavailable since the beginning of 2020 (ie travel).
      3. Concern about a recession and slower wage growth has further reduced consumer spending.
      4. Illicit cannabis has always been the main competition for legal dispensaries with little enforcement or curtailing of black-market activity to note in the US.
    2. New cannabis consumers are gravitating towards smaller (but growing) product categories (edibles, concentrates, infused beverages, etc.) as opposed to just purchasing packaged flower. Dispensaries must carry a wide array of products and brands in order to better attract and service new and existing customers.
  2. Supply side challenges:
      1. Mature cannabis markets, such as California, have been saturated with over supply since Q2 2021 leading to inventory build ups and declining wholesale prices for cultivators, manufacturers, and brands (collectively referred to as suppliers). In this environment, suppliers are offering discounts to incentivize customers (i.e. dispensaries) who can:
        1. Purchase larger quantities more frequently to allow suppliers to move inventory before the product quality degrades.
        2. Pay COD for purchases as cashflow and capital are very important for suppliers during periods of economic stress.
      2. Dispensaries without the financial means to conform to suppliers’ preferences will be at a considerable disadvantage as they will continue to have trouble sourcing popular products at the lowest possible cost.
  1. Fundraising challenges:
    1. Cannabis’ federal illegality has resulted in a much smaller universe of potential capital providers. Once a potential lender or investor is identified, typically the application process requires time and resources to complete which puts dispensaries in an especially disadvantageous position. Large MSOs, who tend to attract most of the available capital, can rely on internal finance teams to source capital whereas dispensaries are much more constrained and require a simpler, faster, and easier application process.

Our partnership with Blaze to offer B2B BNPL to dispensaries addresses these challenges and more. With access to our financing, dispensaries are empowered with:

  1. Fast access to financing without a lengthy application process, entirely housed within the Blaze POS’ platform
    1. Dispensaries on the Blaze platform do not need to seek out lenders or weigh various financing options.
    2. No materials need to be gathered for the application.
    3. At the click of a button, dispensaries gain access to capital which they are free to use as they see fit with no obligation.
  1. Easy to understand financing
    1. No obligation: dispensaries have full discretion to use our financing only when they choose.
    2. No prepayment penalties or additional fees.
  1. Increased purchasing power, enabling dispensaries to
    1. Carry a wider array of cannabis products and brands to better service consumer needs.
    2. Purchase a higher quantity of inventory from suppliers to qualify for volume-based discounts.
    3. Pay COD for purchases to qualify for early payment discounts.
    4. Offer lower prices to cautious consumers as a result of these discounts, thereby increasing sales and gross profit while strengthening their relationships with suppliers.

Green: Can you explain your decision to launch in CA and MA first? 

Mancheril: While our ultimate goal is to offer B2B BNPL in all legal cannabis markets, we launched in CA and MA first because these states represent the largest and fastest growing markets in the US respectively. California was the first state that both Bespoke and Blaze launched in individually, so it was a natural starting point for our BNPL partnership. Massachusetts’ continued growth is compelling for any service provider and we believe our BNPL financing will be as successful addressing the needs and challenges in this newer market alongside those in more mature states.

Green: What trends are you seeing in US cannabis debt financing?

Mancheril: Since 2020, we’ve seen many MSOs increasingly rely on debt financing as opposed to equity capital. MSOs accounted for over ~80% of the debt raised over the past 2 years despite only representing a fraction of the broader cannabis market. Additionally, commercial real estate financing options for cannabis companies have increased over the same time period, driven by the growth of cannabis focused REITs. In general, by the end of 2021, we saw an increasing number of debt investors focused on higher yields participate in cannabis deals.

The recent macroeconomic volatility, increase in rates, and widening credit spreads in 2022 have slowed and slightly reversed the trends seen over the past 3 years. While banks and traditional lenders continue to wait for federal legalization, the vast majority of cannabis companies continue to have very limited access to debt financing options. Over the past quarter, we have seen debt investors leverage the recent illiquidity to negotiate higher interest rates and equity components in new debt deals, a trend we expect to continue until the broader economy strengthens or federal legalization gains traction.

At Bespoke, we empower entrepreneurs to grow their businesses without having to surrender control of their companies or visions. We are excited to continually be market leaders addressing this very vital need for cannabis companies of all sizes in all market environments.

Green: What trends are you following in US regulations and emerging markets?

Mancheril: The most recent headlines have been mixed for US cannabis regulations. Federal legalization is a huge point of focus with SAFE Banking failing (again) to survive the US Senate while the introduction of the revised CAOA offers a glimpse of hope. We believe federal regulatory changes will continue to be debated and discussed without any meaningful progress over the next 2 years but the current discussion of the CAOA revisions will provide the best insight on lawmakers’ priorities. On the local level, the list of states with adult-use sales continues to expand and we would expect to see a handful of new markets ushered in by voters in 2022.

Green: What would federal legalization mean for the cannabis lending industry? How do you stay ahead of the curve?

Mancheril: Federal legalization can occur in a variety of ways, including rescheduling cannabis (currently Schedule 1), descheduling cannabis entirely from the CSA, deferring to state specific regulation, implementing a national cannabis regulatory framework, or some combination of all of the above. The complexity of future regulatory changes makes the timeline for legalization difficult to forecast but we believe that the path forward will be comprised of multiple legislative changes over a number of years as opposed to a comprehensive reform addressing all the relevant points at once.

Based on the interests and goals of all stakeholders in this conversation, we believe that:

  1. Cannabis de-scheduling or rescheduling is unlikely to occur before 2025
  2. Any federal legislation which is approved will require long transition periods for new rules to be finalized, implemented, and adopted by relevant stakeholders (state regulators, courts, cannabis operators, financial institutions, etc.)
  3. Federal lawmakers may allow for financial institutions to service the cannabis industry prior to de-scheduling through limited scope legislation like SAFE banking
  4. Federal legislation will have a difficult time balancing deference to state specific cannabis regulation while enabling federal agencies such as the FDA and Treasury department to issue guidelines and rules for the broader industry. Too much federal agency interference will jeopardize existing & functioning cannabis markets while too much deference will impede vital oversight and consumer protection.
  5. We believe interstate commerce will not be allowed immediately following federal legalization. Interstate commerce will benefit larger MSOs and states with mature cannabis markets (which are hampered by oversupply) at the expense of smaller single state operators and new markets. State governments are motivated to legalize cannabis in the pursuit of tax revenue and economic opportunity for their constituents, both of which would be significantly reduced for newer markets competing with out of state operators.

Regardless of which path federal legalization takes in the coming years, the net benefit for the industry overall will be clear. Setting aside the societal benefit from expunging criminal records for non-violent offenders and freeing enforcement agencies to focus on more serious issues, any progress towards legalization would significantly reduce the challenges that cannabis operators face today. Cannabis companies will see a reduction in operating expenses, a wider array of options for basic business services like insurance and marketing, and an increase in consumer demand as the stigma of illegality fades into memory. Allowing banks to service the industry would remove cash as the primary form of payment, entice larger pools of capital to enter the cannabis market, and in general de-risk the industry tremendously. Bespoke will continue in our role as market leader and cannabis industry advocate in this new paradigm by empowering our clients with even greater access to the capital and services vital to their continued success.

Soapbox

Give a Voice to Scientists in the Executive Suite

By Dr. Markus Roggen, Amanda Assen
2 Comments

What do Aurora Cannabis, Tilray and Pfizer all have in common? They all produce and sell products used for medicinal purposes, they are top competitors in their field and they all have statements on their websites claiming that science is one of the most important things to their business. But unlike Pfizer, Aurora and Tilray do not have any positions in the executive suite for scientists or medical personnel. This led us to wonder, why does the structure of their corporate ladder (as well as so many other cannabis companies) not align with what they claim to be their values?

According to Aurora Cannabis, “Science is at the core of what we do”.1 Look up the definition of “core” and you will get “foundational, essential, central, and enduring.”2 Sounds important. Meanwhile, Tilray’s main page states: “For the therapeutic value and risks of cannabinoid-based medicines to be fully understood, Tilray believes it is critical to evolve current scientific understanding of the field.”3

aurora logoYou would assume that somebody in the executive suite would have a position and an educational background relating to the central and enduring part of a business, right? We looked at 10 of the biggest Canadian cannabis companies, their founders’ educational backgrounds and whether there were executive positions for science, R&D or medicine (Table 1). We also looked at the same data for the top 10 biggest pharmaceutical companies (Table 2). As expected, every pharmaceutical company had upper-level (C and/or P level) positions for scientists and/or medical personnel. However, only 2 of the 10 cannabis companies had this.

tilray-logoTo figure out why this is, (as scientists) we did some research. It turns out, the consensus is scientists are bad at commercialization. Scientists are rarely successful as CEOs because they are (usually) not good at attracting customers and get confused by things like revenue models.4 As Akshat Rathi bluntly put it, “just because you are the smartest person in the building does not make you capable to run a company.” In fact, many CEOs of life science companies got to the top by pursuing business, finance, marketing or sales. In the 90s, some life science companies took a chance on scientists and hired them as CEOs, but when they hit financial turmoil, they quickly undid this.5

So maybe scientists aren’t always cut out to be the CEO of a company. But that still doesn’t explain why so few large cannabis companies have a chief scientific/medical officer, or even a president of R&D.

Maybe we are looking in the wrong place. Maybe their value of science can be demonstrated by their spending on research. Typically, a larger agricultural company will spend 9% or more on R&D, and a smaller company will spend 2-4%.6 Meanwhile, the major pharmaceutical companies we looked at spent between 12 and 25% of their revenue on R&D during their most recent fiscal year. Since a cannabis company falls somewhere in between we approximate they would spend around 9-12%.

Canopy_Growth_Corporation_logoHowever, Canopy Growth was the only company that fell into our prediction range, spending 10.5% of their revenue on R&D in 2021.7 Tied for a distant second place were Charlotte’s Web and Aurora Cannabis (a subsidiary of Tilray), spending 4.6%. At the very bottom were Tilray which only spent 0.16% on R&D and TerrAscend which spent 0.21% during their most recent fiscal year.8,9 With most of the cannabis companies, we saw a gradual decrease in R&D funding over time, which intensified with the Covid-19 pandemic.

So why the heck are these companies going on about how they value science? To give them the benefit of the doubt, maybe they do think they value science, but they don’t know how to value it.

 It’s hard for a company to take actions that show they value science if there are no voices for scientists at the executive level. After all, how can you make decisions based on science if nobody in the room understands it? Sure, we saw the argument that people who make it to the top can “learn enough science to ascend to the executive suite without much trouble”.5 But what is “enough science”? The mitochondria is the powerhouse of the cell?

This leads to our argument for putting scientists in the executive suites of cannabis companies and giving them a more powerful voice. Whereas scientists are not good at marketing, those in managerial roles tend to overly rely on intuition – even when the evidence is against them.10 For those relying on intuition, R&D is an easy target during times of crisis (like a global pandemic). Cutting costs in R&D yields a short-term immediate increase in profit and the negative impacts are often not felt until years later.11 However, cutting R&D investment is the opposite of what you should do during a time of crisis. Evidence suggests companies that maintain or even increase spending in marketing and R&D and focus on operational efficiency (such as process optimization) are the ones that will come out as the top competitors in the long run.12,13 Having a chief scientific officer or an executive for R&D with a scientific background can help sustain companies by promoting R&D during hard times and indicating what projects will be the most promising to help the company optimize their processes.

Having a scientist in the executive suite can also help keep everyone in check. “Senior execs live in a feedback loop of positive reinforcement making them unlikely to question their decisions,” according to Stefan Thomke and Gary Loveman.10 They claim the best way for those in managerial roles to avoid over relying on instinct and break out of that positive feedback loop is by “thinking like a scientist”. This involves not letting bias get in the way of truth, studying anomalies, being skeptical, developing strong hypotheses, producing hard evidence and probing cause and effect. To add to this, we think a major part of thinking like a scientist is by having at least one high up in the team. In our own company, giving equal value to scientific voices has resulted in all parties learning and thriving by making fact-based decisions.

Finally, scientists deliver! To be a scientist (with a PhD), one must master the field, find a gap in the knowledge, then fill that gap – all for little pay and no guarantee of a job at the end. This makes them dedicated workers whose main goal is to contribute something unique to their field, or in this case, their company.14 Having someone up top who is dedicated, passionate, innovative and trained to look for gaps in knowledge can be an invaluable voice in the executive suite. They are likely to point out potential money-saving solutions (i.e.: optimizing extraction conditions) that others up top may not have thought of on their own.

If you feel strongly that science is at the core of what you do, and you already know that R&D is crucial for the long-term survival of your company, you are already on the right track. In addition to this, consider giving a voice to scientists at the executive level in your company. The cannabis industry is still in its infancy. This means there is potential for R&D in more than just new product development. Basic stuff like extraction, modifying plants to be heartier against harsh conditions and pathogens, curing and safety testing processes have all barely been studied and optimized to reduce costs. These things won’t be solved by a Juris Doctor, an MBA or even an engineer, they will be solved by scientists, and it will take a scientist up top to ensure the whole company recognizes the importance of these projects.

Table 1: Top cannabis companies stats on founders and their educational backgrounds, presence of scientific executive positions and spending on research and development

Company Founders Founder’s Educational Backgrounds Science executive position? % Revenue spent on R&D
Aphria Inc.

(now owned by Tilray)

 

 Cole Cacciavillani and John Cervini Cole: B. Eng

John: Born into a family greenhouse business

 Chief science officer

Garry Leong: B.Sc. Chem,

M.B.A. Quality Management 15

 NA
Canopy Growth Corp

 

  Bruce Linton and Chuck Rifici Bruce: Ba Public Policy, Minor: Economics. 16

Chuck: B. Eng, MBA

 no 10.5% 17
Aurora Cannabis Inc.

(subsidiary of Tilray)

 Terry Booth, Steve Dobler, Dale Lesack and Chris Mayerson Terry: Master Electrician18

Steve: B. Eng

Chris: Concrete business

Dale: Electrician and homebuilder

 no 4.6% 19
Village Farms International Inc.

 

 Michael A. DeGiglio BSc Aeronautic Science no No data available on R&D expenses
Tilray Inc

 

 Brendan Kennedy, Christian Groh, Michael Blue Brendan: Ba. Architecture, Msc: Eng, MBA20

Christian: Ba. unknown, MBA21

Michael: Ba. Finance, MBA22

 

 no 0.16% 23
Ayr Wellness Inc

 

 Jonathan Sandelman Juris Doctor, Law Degree24

 

 no No data on R&D spending available
TerrAscend Corp

 

 Michael Nashat Pharm. D . Post doc in Neuroscience25 no 0.21% 26
HexoCorp

 

 Sebastien St-Louis Ba. Economics, MBA 27

 

 no 3.09% 28
Fire & Flower Holdings Corp

 

 Trevor Fencott Ba (unknown), and Law degree29 no No data on R&D spending
Zenabis Global Inc

(now owned by hexo corp)

 Rick Brar, Mark Catroppa, Monty Sikka Rick: Ba. (unknown)

Mark: Ba. Finance 30

Monty: Ba Accounting and Finance31

 

 Chief science Officer:

Natasha Ryz PhD experimental medicine.32

 

 

 NA

Table 2: Top pharmaceutical companies founders and their educational background, presence of executive positions for scientists and spending on R&D

Company Current Executives Educational Background Science executive positions? % Revenue spent on R&D
Amgen Robert A. Bradway BSc. Biology, MBA33

 

 Chief Medical officer: Darryl Sleep, M.D. 33

Senior VP in R&D:

Jean-Charles Soria PhD molecular Biol, MD

 18.5% 34
Sanofi Paul Hudson Ba. Economics, honorary doctorate in business35

 

 Executive VP, R&D:

John Reed, MD, PhD in Immunology35

 14.51% 36
Bristol-Myers Squibb Giovanni Caforio MD.37

 

 Chief Medical Officer: Samit Hirawat, MD.

Rupert Vessey:

Executive VP: R&D PhD molecular immunology 37

 

 24.58% 38
Takeda Christophe Weber PhD. pharmacy and pharmacokinetics, Msc. pharmaceutical marketing, accounting, and finance39

 

 

 Director

President, R&D:

Andrew Plump, MD.  Ph.D. in cardiovascular genetics 39

 14.25% 40
AbbVie Richard A. Gonzalez No college degree. Practical experience in biochemistry research. Vice chairman and president, R&D:

Michael E. Severino, MD, Bsc biochem41

 

 12.60% 42
Novartis Vasant Narasimhan Bsc. Biology, MD, Msc Public policy President, Biomedical research, James Bradner M.D.

President innovative medicine, Victor Bulto: Msc. Chemical engineering, health economics, and pharmaeconomics, MBA. Chief medical officer, John Tsai BEng. MD43

 

 18.04% 44
Merck Robert M. Davis Ba Finance, MBA, Juris Doctor45

 

 Executive VP and president of Merck Research Laboratories; Dean Li MD, PhD cardiology45 25.14% 46
Johnson & Johnson Joaquin Duato

Vanessa Broadhurst

Peter Fasolo

 Joaquin: MBA, Master of international management

Vanessa: Ba, Master of Business Administration

Peter: PhD in organizational behavior, Msc. Industrial Psychology, Ba Psychology47

 

 Executive VP, Chief Medical Safety Officer; William Hait MD. PhD Oncology

Executive VP, Pharmaceuticals R&D; Mathai Mammen MD. PhD Chemistry

 15.69% 48
Pfizer Dr. Albert Bourla

Sally Susman

Payal Sahni Becher

Rady Johnson

 Albert: Doctor of Veterinary Medicine (biotechnology)

Sally: Ba Government

Payal: Ba psychology, Msc Psychology

Rady: Accountant49

 

 

 Chief Development Officer:

William Pao: MD. PhD oncology

Chief Scientific Officer, Worldwide R&D:

Mikael Dolsten; MD. PhD Tumor Immunology49

 17.01% 50
Roche Dr. Severin Schwan, William N. (Bill) Anderson, Dr. Thomas Schinecker, Dr. Alan Hippe Severin: Ba economics, PhD law

William: Msc in management and chemical engineering

Thomas: Bsc genetics, Msc molecular biology, Phd molecular biology

Alan: Ba, Phd in administration51

 

 

 CEO Roche Diagnostics; Dr. Thomas Schinecker; PhD in Molecular Biology51

 

 23.563% 52

References:

  1. Aurora Webpage. Auroramj https://www.auroramj.com/#science.
  2. Definition of Core. Merriam-Webster Dictionary https://www.merriam-webster.com/dictionary/core?utm_campaign=sd&utm_medium=serp&utm_source=jsonld.
  3. Tilray Brands WebPage. https://www.tilray.com/.
  4. Rathi, A. Why scientists make bad entrepreneurs—and how to change that. Quartz (2015).
  5. Mintz, C. Science vs. Business: Who Makes A Better CEO? Life Science Leader (2009).
  6. Fuglie, K., King, J. & David Schimmelpfennig. Private Industry Investing Heavily, and Globally, in Research To Improve Agricultural Productivity. US Department of Agriculture, Economic Research Service (2012).
  7. Canopy Growth R&D expenses. https://ycharts.com/companies/WEED.TO/r_and_d_expense.
  8. Tilray R&D expenses. Ycharts https://ycharts.com/companies/TLRY.TO/r_and_d_expense.
  9. TerrAscend R&D expenses. Ycharts.
  10. Thomke, S. & Loveman, G. Act Like a Scientist. Harvard Business Review (2022).
  11. Knott, A. M. The Trillion-Dollar R&D Fix. Harvard Business Review (2012).
  12. Gulati, R., Nohria, N. & Wohllgezogen, F. Roaring Out of Recession. Harvard Business Review (2020).
  13. Soferman, R. Why You Shouldn’t Cut R&D Investments In Times Of Crisis And Recession. Forbes (2020).
  14. Madisch, I. Why I Hire Scientists, and Why You Should, Too. Scientific American (2018).
  15. Havn Life Sciences Inc. Announces Appointment of Gary Leong as Chief Science Officer. https://apnews.com/press-release/accesswire/science-business-life-sciences-inc-aphria-inc-319a516963144b308d146d97dee0dc69 (2020).
  16. Bruce Linton. Elite Biographies https://elitebiographies.com/biography/bruce-linton/.
  17. Canopy Growth Page . Ycharts https://ycharts.com/companies/CGC.
  18. Lee, A. 20 Things You Didn’t Know About Terry Booth. Money Inc (2020).
  19. Aurora Cannabis page. Ycharts https://ycharts.com/companies/ACB.
  20. Brendan Kennedy Profile. linkedin https://www.linkedin.com/in/kennedybrendan/.
  21. Christian Groh Profile. Bloomberg https://www.bloomberg.com/profile/person/17139193.
  22. Micheal Blue Profile. Bloomberg https://www.bloomberg.com/profile/person/18227502.
  23. Tilray Page. Ycharts https://ycharts.com/companies/TLRY.
  24. A Jonathan Sandelman Profile. zoominfo https://www.zoominfo.com/p/Jonathan-Sandelman/2245250.
  25. Dr. Michael Nashat Appointed President & CEO of TerrAscend. https://markets.businessinsider.com/news/stocks/dr-michael-nashat-appointed-president-ceo-of-terrascend-1012862002 (2018).
  26. TerrAscend Page. Ycharts https://ycharts.com/companies/TRSSF.
  27. Sebastien St-Louis Profile. Linkedin https://www.linkedin.com/in/sstlouis/?originalSubdomain=ca.
  28. HEXO Corp Page. Ycharts https://ycharts.com/companies/HEXO.
  29. Trevor Fencott Profile. bezinga.com https://www.benzinga.com/events/cannabis-conference/speakers/trevor-fencott/.
  30. Mark Catroppa Profile. linkedin https://www.linkedin.com/in/markcatroppa/.
  31. Monty Sikka Profile. linkedin https://www.linkedin.com/in/monty-sikka-3024a1a6/.
  32. Natasha Ryz Profile. crunchbase https://www.crunchbase.com/person/natasha-ryz.
  33. Senior Management Amgen Page. Amgen https://www.amgen.com/about/leadership.
  34. Amgen Stocks Page. YCharts https://ycharts.com/companies/AMGN.
  35. Sanofi Executive Team Page. https://www.sanofi.com/en/about-us/governance/executive-committee.
  36. Sanofi Stocks Page. Ycharts https://ycharts.com/companies/SNY.
  37. Bristol Myers Squibb Leadership Team. https://www.bms.com/about-us/leadership/leadership-team.html.
  38. Bristol Myers Squibb Stocks Page. YCharts.
  39. Takeda Executive Leadership Page. Takeda https://www.takeda.com/who-we-are/company-information/executive-leadership/.
  40. Takeda Pharmaceutical Co Stocks Page. YCharts.
  41. Abbvie Our Leaders Page. Abbvie https://www.abbvie.com/our-company/leadership.html.
  42. Abbvie Inc Stocks Page. YCharts https://ycharts.com/companies/ABBV.
  43. novartis executive committee page. novartis https://www.novartis.com/about/executive-committee.
  44. Novartis AG Stocks Page. YCharts https://ycharts.com/companies/NVS.
  45. Merck Executive team Page. Merck https://www.merck.com/company-overview/leadership/executive-team/.
  46. Merck Stocks Page. YCharts https://ycharts.com/companies/MRK.
  47. Johnson and Johnson Our Leadership Team Page. Johnson and Johnson https://www.jnj.com/leadership/our-leadership-team.
  48. Johnson and Johnson Stocks Page. YCharts https://ycharts.com/companies/JNJ/market_cap.
  49. Pfizer Executive Leadership Page. Pfizer https://www.pfizer.com/about/people/executives.
  50. Pfizer Inc Stocks Page. YCharts https://ycharts.com/companies/PFE.
  51. Roche Executive Committee Webpage. Roche https://www.roche.com/about/governance/executive-committee.
  52. Roche Holding AG Stock Page. YCharts https://ycharts.com/companies/RHHBY.

State of the US Cannabis Payment Processing Market: An Interview with Executives at KindTap and Aeropay

By Aaron Green
No Comments

Federal regulations have made compliant credit processing in the cannabis industry difficult to achieve. As a result, most cannabis retailers operate a cash-only model, limiting their ability to upsell customers and placing a burden on customers who might rather use credit. While some dispensaries offer debit, credit or cashless ATM transactions, regulators and traditional payment processors have been cracking down on these offerings as they are often non-compliant with regulations and policies.

Two companies, KindTap Technologies and Aeropay, are addressing the cannabis industry’s payment processing challenges with innovative digital solutions geared towards retailers and consumers.

We interviewed both Cathy Corby Iannuzzelli, president at KindTap Technologies and Daniel Muller, CEO at Aeropay. Cathy co-founded KindTap in 2019 after a career in the banking and payments industries where she launched multiple financial and credit products. Daniel founded AeroPay in 2017 after a career in digital product innovation, most recently at GPShopper (acquired by Financial), where he oversaw the design and development of over 300 web and mobile applications for large scale Fortune 500 companies.

Green: What is the biggest challenge your customers are facing?

Cathy Corby Iannuzzelli, co-founder and president at KindTap Technologies

Iannuzzelli: Our customers include both cannabis retailers and their end consumers. As long as cannabis is illegal at the federal level, normal payment solutions such as debit and credit cards cannot be accepted for cannabis purchases. This has resulted in heavy cash-based sales and unstable, transient work-around ATM payment solutions that can be ripped out with little notice, disrupting the entire business. The lack of a mature payment network to support retail payments for cannabis purchases is a huge challenge for all stakeholders. Cannabis retailers bear the high cost and safety issues of operating a heavily cash-based retail business. Consumers encounter several friction points that require them to change their behavior when purchasing cannabis relative to how they purchase everything else.

Muller: Our cannabis business customers have faced a constantly changing and, frankly, exhausting financial services environment. From the need to move and manage large amounts of cash, to card workarounds, added to the disappointment from legislation around the SAFE Banking Act, these inconsistencies have acted as a roadblock to their potential growth and profitability. Aeropay is in the position to be a stable, long-term, reliable payments partner ready to help them scale their businesses. We believe these opportunities are limitless.

Green: What geographies have got your attention and why?

Daniel Muller, CEO and founder of Aeropay

Iannuzzelli: KindTap’s focus is on the U.S. market where federal policy has created the need for alternatives to traditional payment networks. KindTap is available in every U.S. state where cannabis is legally sold. In terms of our distribution channels, KindTap’s digital payment solution was brought to market during the COVID-19 pandemic when curbside pick-up and delivery became critically important. These channels are where the exchange of cash at pick-up posed the greatest security risk to employees and customers. Our early integrations were with e-commerce platforms focused on delivery and pick-up orders, and our integration partners have strong customer bases in California and the northeast. So, while KindTap can provide its “Pay Later” lines of credit and “Pay Now” bank account solutions anywhere, we have heavier penetration in those regions.

Muller: California, for its established tech culture and how it plays into the cannabis industry – your product simply has to live up to their tech standards to be heard. Also, Chicago, our headquarters, with its newly emerged commitment to financing the cannabis industry and bringing with it a more traditional business approach. In Chicago, you have to have elevated standards of professional practices in any industry you enter. And of course, we love to watch emerging markets like New York and Florida as they head towards adult-use and what shape cannabis and payments will take.

Green: What are the broader industry trends you are following?

Iannuzzelli: We continue to see a strong transition from cash and ATM transactions over to digital payments. Since KindTap has a fully-integrated payment “button” on e-commerce checkout screens, the adoption rate of end consumers to that one-click experience is quite strong. We are also seeing trends of more “express lines” in the retail environment – for those KindTap users who paid online/ahead – and faster/safer delivery experiences to people’s homes since there is no longer the need to collect any payment upon delivery. We are firm believers in the delivery/digital payments combination and a strong increase of that trend as more states allow for delivery.

Muller: The cannabis industry is starting to normalize payments and mirror traditional online and brick-and-mortar. With bank-to-bank (ACH) payments, cannabis businesses can now offer modern customer shopping experiences including pre-payment for delivery orders without the need for a cash exchange at the door, offering the option to buy online pickup in-store and contactless in-store QR scan-to-pay customer experiences. With these familiar and customer-driven options now available, we are seeing widespread adoption, as well as meaningful increases in spend and returning customers.

Green: Thank you both. That concludes the interview!

About KindTap: KindTap Technologies, LLC operates a financial technology platform that offers credit and loyalty-enabled payment solutions for highly-regulated industries typically driven by cash and ATM-based transactions. KindTap offers payment processing and related consumer applications for e-commerce and brick-and-mortar retailers. Founded in 2019, the company is backed by KreditForce LLC plus several strategic investors, with debt capital provided by U.S.-based institutions. Learn more at kindtaptech.com.

About AeroPay: AeroPay is a financial technology company reimagining the way money is moved in exchange for goods and services. Frustrated with the current, antiquated payments landscape, we believe there is a better way to pay and a better way to get paid. AeroPay set out to build a payments platform that works for all- businesses, consumers, and their communities. Learn more at aeropay.com.

Soapbox

Where the Cannabis Industry is Headed in 2022

By Serge Chistov
2 Comments

Federal legalization of adult use cannabis is still out there as a potential, but ultimately, there are no guarantees that come with such a move. Further, even with legalization, the state-to-state variations in regulations for everything from cultivation standards to packaging and transportation will make marketing country-wide a difficult proposition for most cannabis businesses. The businesses that will grow and thrive will be ones that embrace trends and opportunities that are on the horizon for 2022 and beyond.

Economic resilience even in challenging times
Large scale companies are dealing with the issue of state-to-state differences in regulations by building branded verticals in each state: from growing to packaging, as well as building stores, in order to avoid the issue altogether. It’s an expensive proposition that is out of reach for the smaller entrepreneur, but it creates an almost regulation-proof setup for these organizations.

One interesting trend that would never have been as clear if the pandemic had not occurred is that cannabis is being generally viewed as a recession-proof industry. The pandemic has put the same types of constraints on consumer activity as a recession does and the results are clear: people are still interested, perhaps more so, in cannabis-related products and will choose to continue using them, even in times of restraint.

This economic resilience has also encouraged the growth of investment opportunities in the cannabis industry. ETFs (exchange-traded funds) that cover the industry are growing in number, as more cannabis related businesses grow in size and go public.

While banking through traditional institutions will continue to be difficult for cannabis businesses, pending federal legalization, there is a lot of money being funneled into the industry, through venture capital and angel investments. There is no question that it is still a growth industry now, and into the next decade.

Technological advancements 
Now more than ever, cannabis has gone mainstream. The medical uses for it in terms of stress reduction, mental health and so on, have built up markets that might have otherwise looked to more traditional pharmaceutical options. There is an interesting portion of this new mainstream market that is interested in the therapeutic effects of cannabis but not in the traditional consumption method of smoking. In addition to wanting to avoid inhaling smoke, this same section of the market is acutely aware of what they put into their bodies and what impacts their choices have on the environment at large. The result? Organic, ethically sourced and developed cannabis products are becoming more and more the norm.

Some of the many infused products on the market today.

Products that include oils, tinctures, topicals and edibles are all within the scope of what the discerning cannabis consumer is looking for. The only downfall for many of these types of products, versus a smokable, is the effectiveness of the THC. For example, edibles can take upwards of an hour to produce any psychoactive effects. That limits the function of these types of products, so the next generation of these requires technological innovation to find a solution to that limitation, such as nano emulsions.

For example, we have innovated by leveraging technology that reduces THC particles to a nano size and creates a barrier around the particle so that they can be absorbed into the bloodstream, bypassing the neutralizing effects of the digestive system. This effectively creates edibles that produce a high that is comparable to what can be obtained by smoking a joint, therefore solving the issue that edibles have had in the past.

Multinational growth opportunities
With the inability to export from the US to other growing markets, there is the opportunity for cannabis companies to expand as multinationals. Growing and marketing cannabis products elsewhere and exporting to other countries that will accept the imports, is a big opportunity. To use an existing example, Uganda has established a government sponsored program to produce and export medical cannabis to Germany. This is an important change that has other countries in particular watching to see how this evolves. Certainly, from the point of view of local economic development, it’s too good an option to ignore.

We are partnering with a chain of medical clinics in Tanzania—“Your Local Clinic”—to provide local medical practitioners with the ability to prescribe medical cannabis, once legalization is realized. This is the first step in a longer term plan that will allow us to build up legal exports to Europe.

Export to the European Union (EU) is expected to grow dramatically by 2025, leaving plenty of expansion opportunities for US companies to take their growing practices, as well as available technology for irrigation, to the next level, via Africa and potentially even Latin America.

Creating a Deeper Client Relationship with a Customer Success Mindset

By Samantha Smith
No Comments

Why is customer success a critical differentiator when evaluating technology partners for your cannabis operations? You’re probably familiar with a customer service department. Typically, a customer service team is a reactive relationship that you call on when you have a question or problem. Customer success is different because it takes a proactive approach to relationship management and focuses on your company’s desired outcomes.

It Starts with Transparency

The customer success team is introduced during the sales process, so they know the customer’s goals, objectives and the pain points they’re looking to solve. Keeping these priorities top of mind allows the entire implementation process to align to the customer’s objectives, ensuring immediate success after purchase and a long-term roadmap for future deployments.

A boilerplate solution in software implementation is often not a good idea. While you need standard processes in software deployment, it’s mostly about listening and learning to adapt to a customized approach. Each client can weather different levels of change and advancement, so a customized strategic effort starting in the beginning of the process can help avoid issues later on.“Customer success ensures you are not making unnecessary investments while educating you on available software that would complement existing technology.”

Implementing new software can be a lengthy and challenging process, depending on how many team levels need access, what software integrations are required and the level of business activity you have on a seasonal basis. Adopting new technology into facilities can be even more complicated when implementation delays occur, or the product isn’t working as intended during the initial rollout. Customer success provides transparency throughout the deployment process by conducting ongoing timeline reviews, drafting enablement plans that work within your schedule and driving awareness and adoptions throughout your organization, resulting in a faster return on investment.

Creating a Deeper Partnership

Customer success works as an advocate for the customer while balancing the needs of the business. With software products, it’s easy to turn capabilities on as it is to turn them off, so determining the right timing for each new feature is part of the balancing act. Knowing when customers are ready for specific features and functionality provides a software roadmap for a customer. In this role, the customer success advocate becomes a trusted advisor and becomes integrated into the customer’s business operations.

Being Proactive, Not Reactive

A simple way to describe the differences between customer service and customer success is to consider how your software vendor works with you. Is it a proactive approach or a reactive one? Customer success always leads proactively, strategizing on solutions to benefit the customer immediately while also keeping the long-term vision top of mind.

Creating Benchmarks for Success

Software as a Service (SaaS) has become a competitive advantage for cannabis operators looking to implement a consistent, cost-effective cloud-based technology. Still, many companies end up overspending or paying for more licenses than needed. Customer success ensures you are not making unnecessary investments while educating you on available software that would complement existing technology. Customer success does this by providing tailored reporting, enabling existing and new team members within your facilities on product features and functions, and aligning your software deployment to your facility’s requirements.

When considering a technology partner, inquire about post-sales support. Do you only hear from your technology providers when it’s time for renewal or when you call in for help? Are they offering a “set it and forget it” support model approach? Customer success is about a mutually beneficial relationship between the customer and the software vendor, retaining a happy, using, paying customer who achieves a measurable outcome when using the software. Your success is customer success.

Technological Evolution of the Cannabis Industry

By Serge Chistov
No Comments

Discussions about the evolution of the cannabis industry are often focused on the legalization of adult use and medical cannabis, the growth of the business models associated with the industry and so on. An interesting corollary to those discussions is how technology is impacting the evolution of this growth industry. 

It’s no longer just a question of growing some buds and offering up a high, with little thought as to product, packaging, marketing or the end consumer. Technology has changed the way cannabis is being commodified, and that’s a good thing. After all, with more and more states making adult use legal, creating products that appeal to a wider market and demographic is in part accomplished thanks to tech.

From the growth stage

Few growers are using outdoor facilities, where the elements cannot be controlled. Until recently, indoor growers ran into issues like simulating natural light to a level that would be of maximum benefit to the plants. The amount of lighting required to be effective was very expensive to maintain in terms of electricity consumption, but that is changing.

Then LEDs came on the scene: high quality, low heat light with a far larger and more natural spectrum, versus blue and red light frequencies that are available in standard bulbs. Using far less electricity and emitting less heat, therefore requiring less need for additional air cooling, as well as longer bulb life spans, LEDs have become an industry standard.

Beyond the plant

LED lights use less energy and omit less heat than other more traditional options

As with any agricultural product, the important work is in growing the plants but thanks to technology, producers and manufacturers can now offer their customers a much wider array of products than buds for smoking. Edibles, vapes, oils, capsules and even creams are all products of technology influencing change in the cannabis industry. For consumers who aren’t interested in smoking directly, these offer promising options. 

The issue consumers have often had with edibles has been the lag time from consumption to high, as the THC has to pass through the digestive system, which takes upwards of an hour, and reduces the effectiveness of the dosage as some just doesn’t make it to the bloodstream. Technology has led to the creation of a method for making non-smokable forms of cannabis just as effective as a direct to the lungs hit of a joint: nanoencapsulation.

The point of nanoencapsulation is to reduce the size of the cannabinoid to a nano size and protect it—the encapsulation part of the equation—so that it becomes soluble in water, or in the body which is 75% water. The ability to bypass the digestive system and the gastric fluids that impact the effectiveness of an edible, and get it through the stomach walls to the bloodstream, means that nanoencapsulated formulations can have the virtually the same “time to a high” effects as a joint, without the need to inhale smoke.

It’s now possible for consumers to quantify exactly how much THC they are consuming, allowing for new and different consumption styles, including micro-dosing. Finding the right “dosage” for each individual—as everyone responds differently to cannabinoids—isn’t a simple task but newer technology is setting up a path to personalization that will make it easier.

Personalization

Imagine being able to take a test that would allow you to determine the perfect balance of THC and CBD dosage, as well as the right strain of cannabis, to create the desired effect. Whether that’s a reduction of anxiety, improved sleep or the psychoactive high that cannabis is known for, technology is leading the path to ending the guessing games as to dosage and blending of different cannabinoids.

A perfect example of this is CannabisDNA, a saliva-based swab test that evaluates over 70 of an individual’s genetic markers to establish what strains and dosages are most compatible with that person’s physiology. It’s a matter of time before this technology becomes more readily available and consumers will be able to obtain a range of products created with their personalized profile in mind.

In addition to matching cannabis to an individual’s DNA, there are efforts to decode the DNA of the various strains of cannabis, to better clarify important elements like THC, CBD and other cannabinoids like CBC. This last and far more rare cannabinoid has been associated with very strong anti-inflammatory reactions. This kind of deconstruction of cannabinoids at the DNA level will make it easier for producers and manufacturers to create products that address specific needs, both medical and recreational.

Purchasing power

Boutique dispensaries are popping up to make the more mainstream consumer comfortable. And thanks in part to the recent pandemic, online purchasing has jumped, with apps and websites being developed for purchasing and shipping just the right product, any time. 

Ads for CBD products online regularly perform very well

As has occurred in other areas of agriculture, there is a push towards transparency on product provenance and growth methods, so that the end consumer can make choices about what they are putting into their bodies, with as much information as possible. Field to dispensary tracking is on the table as a method to keep consumers educated and informed, which ultimately improves the connection between producers and consumers. 

Add to these ideas the fact that there are serious improvements in packaging being developed, which allow buds to remain fresh and full of flavor by eliminating light, air and moisture, while still remaining child proof. This is all part of the evolution of the cannabis industry, with a view to keeping customers happy and interested in the product.

Technology within the cannabis industry isn’t an end in itself: after all, the most important part of the effort is the growth of the plants themselves. But technology can change the evolution of the industry in ways that make it more interesting for everyone, from the grower, to the manufacturer of products, the dispensary owner and the consumer as well.

Leaders in Cannabis Testing – Part 1: A Q&A with Milan Patel, CEO and Co-Founder of PathogenDx

By Aaron Green
No Comments

In this “Leaders in Cannabis Testing” series of articles, Green interviews cannabis testing laboratories and technology providers that are bringing unique perspectives to the industry. Particular attention is focused on how these businesses integrate innovative practices and technologies to navigate a rapidly changing landscape of regulatory constraints and B2B demand.

PathogenDx is an Arizona-based provider of microbial testing technologies. Since their inception in 2014, they have broadened their reach to 26 states in the US. In addition to cannabis product testing, PathogenDx also provides technologies for food safety testing, environmental testing and recently started offering human diagnostics testing to support COVID-19 response efforts.

We interviewed Milan Patel, CEO and co-founder of PathogenDx. Milan founded PathogenDx as a spin-off from one of his investments in a clinical diagnostics company testing for genetic markers in transplant organs. Prior to PathogenDx, Milan worked in finance and marketing at Intel and later served as CFO at Acentia (now Maximus Federal).

Aaron Green: What’s the history of PathogenDx?

Milan Patel: PathogenDx was effectively a spin-off of a clinical diagnostics company that my partner Dr. Mike Hogan, the inventor of the technology, had founded when he was a professor at the University of Arizona, but previously at Baylor Medical College back in 2002. I had invested in the company back then and I had realized that his technology had a broad and wide sweeping impact for testing – not just for pathogens in cannabis specifically, but also for pathogens in food, agriculture, water and even human diagnostics. In the last 14 months, this became very personal for every single person on the planet having been impacted by SARS-CoV-2, the viral pathogen causing Covid-19. The genesis of the company was just this, that human health, food and agricultural supply, and the environment has and will continue to be targeted by bacterial, fungal and viral pathogens impacting the safety and health of each human on the planet.

We founded PathogenDx and we pivoted the company from its original human organ transplant genetics market scope into the bigger markets; we felt the original focus was too niche for a technology with this much potential. We licensed the technology, and we repurposed it into primarily cannabis. We felt that achieving commercial success and use in the hands of cannabis testing labs at the state level where cannabis was first regulated was the most logical next step. Ultimately, our goal was and is to move into markets that are approved at the federal regulatory side of the spectrum, and that is where we are now.

Green: What year was that?

Milan Patel, CEO and Co-Founder of PathogenDx
Photo credit: Michael Chansley

Patel: 2014.

Green: So, PathogenDx started in cannabis testing?

Patel: Yes, we started in cannabis testing. We now have over 100 labs that are using the technology. There is a specific need in cannabis when you’re looking at contamination or infection.

In the case of contamination on cannabis, you must look for bacterial and fungal organisms that make it unsafe, such as E. coli, or Salmonella or Aspergillus pathogens. We’re familiar with recent issues like the romaine lettuce foodborne illness outbreaks at Chipotle. In the case of fungal organisms such as Aspergillus, if you smoke or consume contaminated cannabis, it could have a huge impact on your health. Cannabis regulators realized that to ensure public health and safety there was more than just one pathogen – there were half a dozen of these bugs, at a minimum, that could be harmful to you.

The beauty of our technology, using a Microarray is that we can do what is called a multiplex test, which means you’re able to test for all bacterial and fungal pathogens in a single test, as opposed to the old “Adam Smith” model, which tests each pathogen on a one-by-one basis. The traditional approach is costly, time consuming and cumbersome. Cannabis is such a high value crop and producers need to get the answer quickly. Our tests can give a result in six hours on the same day, as opposed to the two or three days that it takes for these other approved methods on the market.

Green: What is your business model? Is there equipment in addition to consumables?

Patel: Our business model is the classic razor blade model. What that means is we sell equipment as well as the consumables – the testing kits themselves.

The PathogenDx technology uses standard, off-the-shelf lab equipment that you can find anywhere. We didn’t want to make the equipment proprietary so that a lab has to buy a specific OEM branded product. They can use almost any equipment that’s available commercially. We wanted to make sure that labs are only paying a fraction of the cost to get our equipment, as opposed to using other vendors. Secondly, the platform is open-ended, meaning it’s highly flexible to work with the volumes that different cannabis labs see daily, from high to low.

One equipment set can process many different types of testing kits. There are kits for regulated testing required by states, as well as required environmental contamination.

Green: Do you provide any in-house or reference lab testing?

Patel: We do. We have a CLIA lab for clinical testing. We did this about a year ago when we started doing COVID testing.

We don’t do any kind of in-house reference testing for cannabis, though we do use specific reference materials or standards from Emerald Scientific, for example, or from NCI. Our platform is all externally third-party reference lab tested whether it’s validated by our external cannabis lab customers or an independent lab. We want our customers to make sure that the actual test works in their own hands, in their own facility by their own people, as opposed to just shrugging our shoulders and saying, “hey, we’ve done it ourselves, believe us.” That’s the difference.

Green: Can you explain the difference between qPCR and endpoint PCR?

Patel: The difference between PathogenDx’s Microarray is it uses endpoint PCR versus qPCR (quantitative real time PCR). Effectively, our test doesn’t need to be enriched. Endpoint PCR delivers a higher level of accuracy, because when it goes to amplify that target DNA, whether it’s E. coli, Salmonella or Aspergillus pieces, it uses all the primer reagent to its endpoint. So, it amplifies every single piece of an E. Coli (for example) in that sample until the primer is fully consumed. In the case of qPCR, it basically reaches a threshold and then the reaction stops. That’s the difference which results in a much greater level of accuracy. This provides almost 10 times greater sensitivity to identify the pathogen in that sample.

The second thing is that we have separated out how the amplified sample hybridizes to the probe. In the case of our assay, we have a microarray with a well in it and we printed the actual probe that has the sequence of E. coli in there, now driving 100% specificity. Whereas in the qPCR, the reaction is not only amplifying, but it’s also basically working with the probe. So, in that way, we have a higher level of efficiency in terms of specificity. You get a definite answer exactly in terms of the organism you’re looking for.

In terms of an analogy, let’s take a zip code for example which has the extra four digits at the end of it.  In the case of endpoint PCR, we have nine digits. We have our primer probes which represent the standard five digits of a zip code, and the physical location of the probe itself in the well which serves as the extra four digits of that zip code. The analyte must match both primary and secondary parts of the nine-digit zip code for it to lock in, like a key and a lock. And that’s the way our technology works in a nutshell.

Endpoint PCR is completely different. It drives higher levels of accuracy and specificity while reducing the turnaround time compared to qPCR – down to six hours from sample to result. In qPCR, you must enrich the sample for 24 to 48 hours, depending on bacteria or fungus, and then amplification and PCR analysis can be done in one to three hours. The accuracies and the turnaround times are the major differences between the endpoint PCR and qPCR.

Green: If I understand correctly, it’s a printed microarray in the well plate?

Patel: That’s correct. It’s a 96-well plate, and in each well, you’ve now printed all the probes for all targets in a single well. So, you’re not running more than one well per target, or per organism like you are for qPCR. You’re running just one well for all organisms. With our well plates, you’re consuming fewer wells and our patented foil-cover, you only use the wells you need. The unused wells in the well plate can be used in future tests, saving on costs and labor.

Green: Do you have any other differentiating IP?

The PathogenDx Microarray

Patel: The multiplex is the core IP. The way we process the raw sample, whether it’s flower or non-flower, without the need for enrichment is another part of the core IP. We do triplicate probes in each well for E. Coli, triplicate probes for Salmonella, etc., so there are three probes per targeted organism in each of the wells. We’re triple checking that you’re definitively identifying that bug at the end of the day. This is the cornerstone of our technology.

We were just approved by the State of New York, and the New York Department of Health has 13 different organisms for testing on cannabis. Think about it: one of the most rigorous testing requirements at a state level – maybe even at a federal level – and we just got approved for that. If you had to do 13 organisms separately, whether it’s plate culture or qPCR, it would become super expensive and very difficult. It would break the very backs of every testing lab to do that. That’s where the multiplexing becomes tremendously valuable because what you’re doing is leveraging the ability to do everything as a single test and single reaction.

Green: You mentioned New York. What other geographies are you active in?

Patel: We’re active in 26 different states including the major cannabis players: Florida, Nevada, California, Arizona, Michigan, New York, Oklahoma, Colorado and Washington – and we’re also in Canada. We’re currently working to enter other markets, but it all comes down to navigating the regulatory process and getting approval.

We’re not active currently in other international markets yet. We’re currently going through the AOAC approval process for our technology and I’m happy to say that we’re close to getting that in the next couple of months. Beyond that, I think we’ll scale more internationally.

I am delighted to say that we also got FDA EUA federal level authorization of our technology which drives significant credibility and confidence for the use of the technology. About a year ago, we made a conscious choice to make this technology federally acceptable by going into the COVID testing market. We got the FDA EUA back on April 20, ironically. That vote of confidence by the FDA means that our technology is capable of human testing. That has helped to create some runway in terms of getting federalized with both the FDA and the USDA, and certification by AOAC for our different tests.

Green: Was that COVID-19 EUA for clinical diagnostics or surveillance?

Patel: It was for clinical diagnostics, so it’s an actual human diagnostic test.

Green: Last couple of questions here. Once you find something as a cannabis operator, whether its bacteria or fungus, what can you do?

Patel: There are many services that are tied into our ecosystem. For example, we work with Willow Industries, who does remediation.

There’s been a lot of criticism around DNA based technology. It doesn’t matter if it’s qPCR or endpoint PCR. They say, “well, you’re also including dead organisms, dead DNA.” We do have a component of separating live versus dead DNA with a biomechanical process, using an enzyme that we’ve created, and it’s available commercially. Labs can test for whether a pathogen is living or dead and, in many cases, when they find it, they can partner with remediation companies to help address the issue at the grower level.

Another product we offer is an EnviroX test, which is an environmental test of air and surfaces. These have 50 pathogens in a single well. Think about this: these are all the bad actors that typically grow where soil is – the human pathogens, plant pathogens, powdery mildew, Botrytis, Fusarium – these are very problematic for the thousands of growers out there. The idea is to help them with screening technology before samples are pulled off the canopy and go to a regulated lab. We can help the growers isolate where that contamination is in that facility, then the remediation companies can come in, and help them save their crop and avoid economic losses.

Green: What are you most interested in learning about?

Patel: I would prefer that the cannabis industry not go through the same mistakes other industries have gone through. Cannabis started as a cottage industry. It’s obviously doubled every year, and as it gets scaled, the big corporations come in. Sophistication, standards, maturity all help in legitimacy of a business and image of an industry. At the end of the day, we have an opportunity to learn from other industries to really leapfrog and not have to go through the same mistakes. That’s one of the things that’s important to me. I’m very passionate about it.

One thing that I’ll leave you with is this: we’re dealing with more bugs in cannabis than the food industry. The food industry is only dealing with two to four bugs and look at the number of recalls they are navigating – and this is a multi-billion-dollar industry. Cannabis is still a fraction of that and we’re dealing with more bugs. We want to look ahead and avoid these recalls. How do you avoid some of the challenges around antimicrobial resistance and antibiotic resistance? We don’t want to be going down that road if we can avoid it and that’s sort of a personal mission for myself and the company.

Cannabis itself is so powerful, both medicinally as well as recreationally, and it can be beneficial for both consumers and industry image if we do the right things, and avoid future disasters, like the vaping crisis we went through 18 months ago because of bad GMPs. We must learn from those industries. We’re trying to make it better for the right reasons and that’s what’s important to me.

Green: Okay, great. That concludes the interview. Thank you, Milan.

Patel: Thank you for allowing me to share my thoughts and your time, Aaron.

The Importance of Smart Cannabis Packaging

By John Shearman
No Comments

Regardless of their size, all consumer package brands spend a significant amount of money and resources on packaging to attract consumers’ attention. We are all very visually oriented and gravitate to items that pique our interests. Cannabis brands are no exception when it comes to branding their products. Packaging plays a big part in carrying their brand forward and standing out on the dispensary shelves. When I was in Las Vegas at a CBD tradeshow in early 2020, I visited a dispensary, and it was beautiful. I remember commenting to a colleague that was with me how spectacular the product packaging was in the glass cases. One had unique artwork on each different product they offered, and it was indeed art. Yes, I did purchase this one that pulled me in.

The cannabis industry in the United States presents a challenge to brands because there is no overall federal guidance for packaging. Each state is controlling the cannabis legislation and, with it, the packaging guidelines. So multi-state operators (MSOs) have to manage each state as a separate entity and abide by the packaging regulations, which is not very efficient and adds a cost burden. As the industry matures and becomes federally legal across the country, packaging regulations will be easier to implement.

Louis Vuitton bags are one of the many goods that are commonly counterfeited
Image: UK Home Office, Flickr

Let’s take a look at counterfeit products across all product categories. There is a significant global problem with counterfeits, as articulated by the below statistics.

The total global trade in fakes is estimated at around $4.5 trillion. 

Fake luxury merchandise accounts for 60% to 70% of that amount, ahead of pharmaceuticals, entertainment products and representing perhaps a quarter of the estimated $1.2 trillion total trade in luxury goods.

Digital plays a big role in this and perhaps 40% of the sales in luxury fakes take place online.

Customs and Border Patrol confiscated $1.3 billion worth of counterfeit goods in the U.S. for Fiscal Year 2020. (The value of 2020’s seizures are actually down compared to the $1.5 billion worth of counterfeit goods seized by CBP in 2019).

Unfortunately, the figures above are concerning, and the cannabis industry will face the same counterfeit issues that will add to these stats in the future. What can be done to help fight the problem and alleviate the pain for cannabis brands? Smart technology.

The trend towards “smart technology” varies by sector, but the underlying concept involves building levels of technology systems designed to impede or limit the highly sophisticated counterfeiter from replicating or replacing products. These levels typically include a forensic level control on the product, digital systems to track the material and customer facing systems to articulate the underlying value to the consumer.

Building these levels of smart technology into cannabis-products and packaging allows consumers to authenticate real versus fake, and in the case often in cannabis, legal versus illegal. Molecular technology is one forensic level of control option that can be used as a unique identifier for product authentication. Each brand would get its unique identifier to apply to the raw materials that make up its product, such as oil or an isolate. Then a sample can be tested at the origin point and subsequent nodes in the supply chain using a remote testing device. All the digital data is captured in a secure cloud database for traceability and transparency to the end consumer, to show them the authenticity of the product they are consuming. The same molecular technology can be applied to the ink or varnish for packaging and labels. A great application to help combat counterfeits and product diversion across the globe.

Counterfeiters can create near duplicate versions of the original

Another engaging platform is called StrainSecure by TruTrace Technologies. Their SAAS platform allows cannabis manufacturers to track all their product batches and SKUs tied to a blockchain. It also facilitates the interaction between the manufacturer and third-party testing facilities to conduct product testing and reporting. The data is captured within the platform, and with easy access dashboard views, it provides the insights to authenticate products at any time.

A company out of Australia called Laava is producing a product called Smart Fingerprints. It’s the next evolution of QR codes. The Smart Fingerprints can be applied to each package, providing a unique identifier that consumers can read with a mobile phone application. The consumer is provided with information concerning the product’s authenticity and any additional information the brand wants to share with the user. Smart Fingerprints are a great example of customer engagement at the point of activity that is secure.

The above three solutions show the availability of advanced technologies the cannabis industry can implement on its packaging and products to ensure authentic and safe products are sold to consumers. It provides consumers with vital information and insights about products so they can make informed buying decisions. There is no one silver bullet solution that provides all the answers. As with every high value product, counterfeiters will work to create near duplicate versions of the original until it becomes unsustainable to do so. It will take a technology ecosystem to seamlessly connect and provide actuate and timely information between supply chain partners and ultimately the end consumer. As the US works to separate the legal from illegal production for both the adult use and medical supply of cannabis, the looming challenge will be on protecting and communicating authenticity, packaging will be the first step in this.

A Q&A with Matt Hawkins, Co-Founder & Managing Partner at Entourage Effect Capital

By Aaron Green
No Comments

The cannabis industry saw close to $15.5B in deals across VC, private equity, M&A and IPOs in 2020 according to PitchBook data. Early and growth stage capital has been a key enabler in deal activity as companies seek to innovate and scale, taking advantage of trends towards national legalization and consolidation. Entourage Effect Capital is one of the largest VC firms in cannabis with over $150MM deployed since its inception in 2014. Some of their notable investments include GTI, CANN, Harborside (CNQ: HBOR), Acreage Holdings, Ebbu, TerrAscend and Sunderstorm.

We spoke with Matt Hawkins, co-founder and managing partner at Entourage Effect Capital. Matt started Entourage in 2014 after exiting his previous company. He has 20+ years of private equity experience and serves on the Boards of numerous cannabis companies. Matt’s thought leadership has been on Fox Business in the past and he has also recently featured on CNBC, Bloomberg, Yahoo! Finance, Cheddar and more.

Aaron Green: How did you get involved in the cannabis industry?

Matt Hawkins: We’ve been making investments in the cannabis industry since 2014. We’ve made 65 investments to date. We have a full team of investment professionals, and we invest up and down the value chain of the industry.

I had been in private equity for 25 years and I kind of just fell into the industry after I’d had an exit. I started lending to warehouse owners in Denver that were looking to refinance their mortgages out of commercial debt into private debt, which would then give them the ability to lease their facilities to growers. I realized there would be a significant opportunity to place capital in the private equity side of the cannabis business. So, I just started raising money for that project and I haven’t looked back. It’s been a great run and we’ve built a fantastic portfolio. We look forward to continuing to deploy capital up to and through legalization.

Green: Do you consider Entourage Effect Capital a VC fund or private equity firm? How do you talk about yourself?

Hawkins: In the early stages of the industry, we were more purely venture capital because there was hardly any revenue. We’re probably still considered a venture capital firm, by definition, just because of the risk factors. As the industry has matured, the investments we make are going to be larger. The reality is that the checks we write now will go to companies that have a track record of not only 12 months of revenue, but EBITDA as well. We can calculate a multiple on those, and that makes it more like lower/middle-market private equity investing.

Green: What’s your investment mandate?

Matt Hawkins, Co-Founder and Managing Partner at Entourage Effect Capital

Hawkins: From here forward our mandate is to build scale in as many verticals as we can ahead of legalization. In the early days, we were focused on giving high net worth individuals and family offices access to the industry using a very diversified approach, meaning we invested up and down the value chain. We’ll continue to do that, but now we’re going to be really laser focused on combining companies and building scale within companies to where they’re going to be more attractive for exit partners upon legalization.

Green: Are there any particular segments of the industry that you focus on whether it’s cultivation, extraction or MSOs?

Hawkins: We tend to focus on everything above cultivation. We feel like cultivation by itself is a commodity, but when vertically integrated, for example with a single-state operator or multi-state operator, that makes it intrinsically more valuable. When you look at the value chain, right after cultivation is where we start to get involved.

Green: Are you also doing investments in tech and e-commerce?

Hawkins: We’ve made some investments in supply chain, management software, ERP solutions, things like that. We’re not really focused on e-commerce with the exception of the only CBD company we are invested in.

Green: How does Entourage’s investment philosophy differ from other VC and private equity firms in cannabis?

Hawkins: We really don’t pay attention to other people’s philosophies. We have co-invested with others in the past and will continue to do so. There’s not a lot of us in the industry, so it’s good that we all work together. Until legalization occurs, or institutional capital comes into play, we’re really the only game in town. So, it behooves us all to have good working relationships.

Green: Across the states, there’s a variety of markets in various stages of development. Do you tend to prefer investing in more sophisticated markets? Say California or Colorado where they’ve been legalized for longer, or are you looking more at new growth opportunities like New York and New Jersey?

Hawkins: Historically, we’ve focused on the most populous states. California is obviously where we’ve placed a lot of bets going forward. We’ll continue to build out our portfolio in California, but we will also exploit the other large population states like New Jersey, New York, Arizona, Massachusetts, Michigan, Ohio and Illinois. All of those are big targets for us. 

Green: Do you think legalization will happen this Congress?

Hawkins: My personal opinion is that it will not happen this year. It could be the latter part of next year or the year after. I think there’s just too much wood to chop. I was encouraged to see the SAFE Banking Act reappear. I think that will hopefully encourage institutional capital to take another look at the game, especially with the NASDAQ and the New York Stock Exchange open up. So that’s a positive.

I think with the election of President Biden and with the Senate runoffs in Georgia going Democrat, the timeline to legalization has sped up, but I don’t think it’s an overnight situation. I certainly don’t think it’ll be easy to start crossing state lines immediately, either.

Green: Can you explain more about your thoughts on interstate commerce?

Hawkins: I think it’s pretty simple. The states don’t want to give up all the tax revenue that they get from their cultivation companies that are in the state. For example, if you allow Mexico and Colombia to start importing product, we can’t compete with that cost structure. States that are neighbors to California, but need to grow indoors which is more expensive, are not going to want to lose their tax revenues either. So, I just think there’s going to be a lot of butting heads at the state level.

The federal government is going to have to outline what the tax implications will be, because at the end of the day the industry is currently taxed as high as it ever will be or should be. Anything North of current tax levels will prohibit businesses from thriving further, effectively meaning not being able to tamp down the illicit market. One of the biggest goals of legalization in my opinion should be reducing the tax burden on the companies and thereby allowing them to be able to compete more directly with the illicit market, which obviously has all the benefits of reduced crime, etc.

Green: Do you foresee 280E changes coming in the future?

Hawkins: For sure. If the federal illegality veil is removed – which means there’ll be some type of rescheduling – cannabis would be removed from the 280E category. I think 280E by definition is about just illegal drugs and manufacturing and selling of that. As long as cannabis isn’t part of that, then it won’t be subject to it.

Green: What have been some of the winners in your portfolio in terms of successful exits?

Hawkins: When the CSC started allowing companies in Canada to own U.S. assets, the whole landscape changed. We were fortunate to be early investors in Acreage and companies that sold to Curaleaf and GTI before they were public. We are big investors in TerrAscend. We were early investors in Ebbu which sold to Canopy Growth. Those were huge wins for us in Fund I. We also have some interesting plays in Fund II that are on the precipice of having similar-type exits.

You read about the big ones, but at the end of the day, the ones that kind of fall under the radar – the private deals – actually have even greater multiples than what we see on some of the public M&A activity.

Green: Governor Cuomo has been hinting recently at being “very close” on a deal for opening up the cannabis market in New York. What do you think are the biggest opportunities in New York right now?

Hawkins: If it can get done, that’s great. I’m just concerned that distractions in the state house right now in New York may get in the way of progress there. But if it doesn’t, and it is able to come to fruition, then there isn’t a sector that doesn’t have a chance to thrive and thrive extremely well in the state of New York.

Green: Looking at other markets, Curaleaf recently announced a big investment in Europe. How do you look at Europe in general as an investment opportunity?

Hawkins: We have a pretty interesting play in Europe right now through a company called Relief Europe. It’s poised to be one of the first entrants to Germany. We think it could be a big win for us. But let’s face it, Europe is still a little behind, in fact, a lot behind the United States in terms of where they are as an industry. Most of the capital that we’re going to be deploying is going to be done domestically in advance of legalization.

Green: What industry trends are you seeing in the year ahead?“We’re constantly learning from other industries that are steps ahead of us to figure out how to use those lessons as we continue to invest in cannabis.”

Hawkins: Well, I think you’ll see a lot of consolidation and a lot of ramping up in advance of legalization. I think that’s going to apply in all sectors. I just don’t see a scenario wherein mom and pops or smaller players are going to be successful exit partners with some of the new capital that’s coming in. They’re going to have to get to a point where they’re either selling to somebody bigger than them right now or joining forces with companies around the same size as them and creating mass. That’s the only way you’re going to compete with companies coming in with billions of dollars to deploy.

Green: How do you see this shaking out?

Hawkins: That’s where you start to look into the crystal ball. It’s really difficult to say because I think until we get to where we truly have a national footprint of brands, which would require crossing state lines, it’s going be really difficult to tell where things go. I do know that liquor, tobacco, beer, the distribution companies, they all are standing in line. Big Pharma, big CPG, nutraceuticals, they all want access to this, too.

In some form or fashion, these bigger players will dictate how they want to go about attacking the market on their own. So, that part remains to be seen. We’ll just have to wait and see where this goes and how quickly it goes there.

Green: Are you looking at other geographies to deploy capital such as APAC or Latin America regions?

Hawkins: Not at this point. It’s not a focus at all. What recently transpired here in the elections just really makes us want to focus here and generate positive returns for investors.

Green: As cannabis goes more and more mainstream, federal legalization is maybe more likely. How do you think the institutional investor scene is evolving around that? And is it a good thing to bring in new capital to the cannabis market?

Hawkins: I don’t see a downside to it. Some people are saying that it could damage the collegial and cottage-like nature of the industry. At the end of the day, if you’ve got tens of billions of dollars that are waiting to pour into companies listed on the CSC and up-listing to the NASDAQ or New York Stock Exchange, that’s only going to increase their market caps and give them more cash to acquire other companies. The trickle-down effect of that will be so great to the industry that I just don’t know how you can look the other way and say we don’t want it. 

Green: Last question: What’s got your attention these days? What’s the thing you’re most interested in learning about?

Hawkins: We’re constantly learning about just where this industry is headed. We’re constantly learning from other industries that are steps ahead of us to figure out how to use those lessons as we continue to invest in cannabis. We all saw the correlation between cannabis and alcohol prohibition. The reality is that the industry is mature enough now where you can see similarities to industries that have gone from infancy to their adolescent years. That’s kind of where we are now and so we spend a lot of time studying industries that have been down this path before and see what lessons we can apply here.

Green: Okay, great. So that concludes the interview!

Hawkins: Thanks, Aaron.

Molson Coors Joint Venture Selects Quicksilver Scientific as Technology Partner

By Cannabis Industry Journal Staff
No Comments

According to a press release published this week, Quicksilver Scientific, a nanoemulsion delivery technology company, announced a partnership with Truss CBD USA, which is the joint venture between Molson Coors and HEXO Cannabis.

Quicksilver is a manufacturer of nutritional supplements that uses a patent-pending nanoemulsion delivery technology. Their technology is what enables companies to produce cannabinoid-infused beverages.

Because cannabinoids like CBD are hydrophobic, meaning they are not water-soluble, companies have to use nanoemulsion technology to infuse beverages. Without this technology, beverages with cannabinoids would have inconsistent levels of compounds and they wouldn’t work well to actually deliver the cannabinoids to the body. Nanoemulsion essentially cannabinoids water soluble, thus allowing the delivery of cannabinoids to the bloodstream, increasing bioavailability.

Dr. Christopher Shade, Ph.D., founder & CEO of Quicksilver Scientific says they have perfected their nanoemulsion technology over the past decade. “CBD is not water-soluble, which creates challenges for manufacturers when attempting to mix it into beverages,” says Dr. Shade. “Our innovative nanoemulsion technology overcomes these challenges by encapsulating nano-sized CBD particles in water-soluble spheres that can be directly added to beverages. The result is a clear, great-tasting product with greater bioavailability, a measure of a compound’s concentration that is absorbed into the body’s bloodstream.”

The Veryvell beverage product line

Quicksilver is providing their technology to be used with Veryvell, the joint venture’s new line of non-alcoholic, hemp-derived CBD beverages. The beverage line is already available in the Colorado market. According to the press release, the three product offerings include: “Focus” (grapefruit and tarragon with ginseng and guarana), “Mind & Body” (strawberry and hibiscus with ashwagandha and elderberry) and “Unwind” (blueberry and lavender flavors with ashwagandha and L-Theanine).