The video discusses various aspects of the cannabis industry, including the evolution of cannabis products, the growth of microdosing, customer demographics, the popularity of CBD, changing vocabulary, the role of software companies in the industry, challenges with banking and taxes, brand loyalty, the future of the market, cannabis media, psychedelics, and social equity programs. The founders of Meadow, a software-based startup, share their experiences with fundraising and the challenges of being a licensed entity. They also discuss the fragmented nature of the cannabis industry and the lack of a dominant company. The video highlights the legalization of cannabis in Canada and the challenges of accessing banking services. It also touches on the taxation of cannabis products and the impact on prices. The founders discuss the importance of brand loyalty and the influence of budtenders. They predict that the cannabis market will undergo significant changes in the next 5-10 years, with more favorable regulations and the removal of growing caps in California. The video also mentions the role of cannabis media and the similarities between the cannabis and psychedelics industries. Finally, it discusses the dismissal of past cannabis convictions and the implementation of social equity programs to support communities affected by the war on drugs.
What David brought with him
David Hua has brought a selection of cannabis products, including bowls, flowers, body rub, oils, live resin, and a pre-roll, showcasing the evolution of the consumer experience in the cannabis industry. His company, Northern Emeralds, helps distribute these products, particularly for smaller or boutique brands. The different strains of cannabis have distinct terpene profiles, with sativas often having a citrusy, uplifting head high.
- David Hua brought a variety of cannabis products, such as bowls, flowers, body rub, oils, live resin, and a pre-roll.
- These products highlight the evolution of the consumer experience in the cannabis industry.
- Northern Emeralds, David's company, assists in distributing these products, especially for smaller or boutique brands.
- Different strains of cannabis have unique terpene profiles, with sativas often providing a citrusy, uplifting head high.
Microdosing
- Microdosing has revolutionized cannabis consumption by allowing users to understand dosage, profile, and effects
- Users can avoid negative side effects by starting with a small dose and gradually increasing it
- The market for microdosing in cannabis is currently growing
What are people buying?
People are buying a variety of cannabis products, including flour, pre-rolls, edibles, and concentrates. The most common items are single pack pre-rolls, popular among tourists in urban areas, while brand loyalists in rural areas tend to buy larger quantities. Edibles are popular among new cannabis users, offering a different experience and precise dosing. The concentrate market, particularly through vapes, is rapidly growing. CBD strains are preferred for a milder effect, discreet options like cartridges and vapes are popular, and there is a stigma attached to the smell of flower products. The market for cannabis products is growing across the board.
Customer demographics
Baby boomers are the fastest-growing demographic in the cannabis industry, replacing prescription drugs and seeking a symbol of youth. They are turning to cannabis for health ailments and a positive change. The branding around cannabis has shifted towards wellness, with CBD seen as an herbal remedy with medicinal properties. CBD has various effects on general day-to-day lifestyle.
- Baby boomers are the fastest-growing demographic in the cannabis industry
- They are replacing prescription drugs and seeking a symbol of youth
- Baby boomers are turning to cannabis for health ailments and a positive change
- The branding around cannabis has shifted towards wellness
- CBD is seen as an herbal remedy with medicinal properties
- CBD has various effects on general day-to-day lifestyle
CBD
CBD, or cannabidiol, is a compound derived from marijuana or hemp plants. It has medicinal properties that can reduce pain and promote relaxation. CBD has been particularly helpful for people with epilepsy and seizures. Other cannabinoids like THC, CBN, and CBG are being researched for their potential benefits. CBD derived from hemp lacks the "entourage effect" that comes from the combination of cannabinoids, so products that combine different cannabinoids may have a better effect. CBD products have varying levels of THC and CBD to cater to different customer preferences. The popularity of CBD is driven by its mass appeal and the desire for specific effects.
Changing vocabulary around cannabis
The changing vocabulary around cannabis is a topic discussed in this video. The founders highlight the similarities between cannabis and the wine industry in terms of the evolving lexicon. They emphasize the importance of terpenes in cannabis vocabulary, as they impact the smell and effects of different strains. The video also explores various CBD extraction methods, including solventless techniques like ice water extraction and methods involving solvents such as CO2 and butane. It is worth noting that Meadow, the founders' company, focuses on software development for the cannabis industry rather than product manufacturing.
Key points:
- Cannabis vocabulary is evolving, similar to the wine industry.
- Terpenes play a significant role in the vocabulary and effects of cannabis strains.
- Different extraction methods for CBD are discussed, including solventless and solvent-based techniques.
- Meadow is a software company serving the cannabis industry, not a product manufacturer.
What is Meadow?
Meadow is a software-based startup that assists dispensaries with inventory management, compliance, and understanding cannabis products.
Key points:
- Founded by David Hua and Vincent Ning
- Focuses on the cannabis industry
- Works closely with stakeholders in the supply chain
What is Nabis?
Nabis is a cannabis startup that specializes in license distribution at the wholesale level of the supply chain. Founded by David Hua and Vincent Ning, the company prioritizes the movement of cannabis products rather than manufacturing.
Key points:
- Nabis is a cannabis startup focused on license distribution
- The company operates at the wholesale level of the supply chain
- Founders David Hua and Vincent Ning prioritize moving cannabis products over manufacturing.
Why did they choose to not do cannabis product manufacturing?
The founders of the cannabis startup Meadow chose not to do cannabis product manufacturing because it is capital intensive and requires expertise. They found distribution to be a lighter weight business to start up. However, fundraising was difficult due to the friction caused by being a licensed entity. They had to invest a significant amount of money to obtain a distribution license. Additionally, some investors were hesitant to invest in the cannabis industry due to restrictions from their LP agreements. The founders of Meadow went through Y Combinator, which they considered an unfair advantage, and faced intense questioning during the process. They decided to focus on building software for dispensaries to be compliant and run their businesses effectively, as the majority of dispensaries in California are small businesses.
- Cannabis product manufacturing is capital intensive and requires expertise
- Distribution was seen as a lighter weight business to start up
- Fundraising was difficult due to being a licensed entity and restrictions from LP agreements
- Obtaining a distribution license required a significant investment
- Meadow founders went through Y Combinator and faced intense questioning
- They decided to focus on building software for compliant dispensaries
- Majority of dispensaries in California are small businesses
Fundraising as a cannabis company
The founders of a cannabis startup raised $2.5 million in funding from angel investors, family offices, and institutions after nine months of securing funding. Investors were initially cautious due to the context of the cannabis industry but became more comfortable after discussing regulations, licensing, and the industry's future. The founders emphasized the growth of the industry, particularly in California. They also discussed the potential for distributing cannabis products out-of-state, highlighting California's agricultural and technological prominence. The founders expressed a desire to preserve the culture and history of the cannabis movement in San Francisco.
Why is there not one dominant cannabis company?
The cannabis industry does not have one dominant company because the market is still fragmented.
- Companies have not achieved dominance in multiple states.
- The legalization of cannabis in 2018 has reconfigured the supply chain.
- Lack of uniformity in local laws across California creates a disconnect between state and local permits.
- Complex regulatory landscape and disconnect between areas with licenses and those without hinder dominance.
- Compliance and legal work required to obtain local approval and licenses is a significant hurdle.
- Varying laws created by local governments further complicate the industry.
- California and Colorado are the largest states in terms of sales volume.
- Federal legalization of cannabis in Canada is a significant factor.
Legalization across Canada
Canada has fully legalized cannabis, leading to the emergence of large Canadian companies investing in their own operations and expanding into legal states like California. These companies are also buying up pieces of licensed businesses in the United States. However, the lack of access to banking services remains a challenge in the industry.
- Canada has passed a bill to fully legalize cannabis across the country.
- Large Canadian companies that were previously privatized by the government are now investing in their own operations and expanding into legal states like California.
- These Canadian companies are buying up pieces of licensed businesses in the United States to establish a presence for the future.
- The lack of access to banking services remains a challenge in the cannabis industry.
Banking as a cannabis company
Banking for cannabis companies is a challenge, with most transactions being conducted in cash. Some cannabis companies use small credit unions or big banks without mentioning their industry. Many cannabis businesses have multiple banks and spread their cash across different accounts. Delivery operators collect cash on site and bring it back to the dispensary. Proposed regulations may allow delivery operators to deliver anywhere in the state, similar to an ice cream truck model. Cannabis companies store large amounts of product in their locations, with millions of dollars flowing through each week.
- Most transactions in the cannabis industry are conducted in cash.
- Some cannabis companies use small credit unions or big banks without mentioning their industry.
- Many cannabis businesses have multiple banks and spread their cash across different accounts.
- Delivery operators collect cash on site and bring it back to the dispensary.
- Proposed regulations may allow delivery operators to deliver anywhere in the state, similar to an ice cream truck model.
- Cannabis companies store large amounts of product in their locations, with millions of dollars flowing through each week.
In the video, the founders of a cannabis startup discuss the banking challenges faced by cannabis companies. They mention that cannabis products come in various forms and sizes, including packaged goods and raw materials. They explain that their main business is delivering final packaged goods to retailers, but in order to move products between licensed entities, a distributor is required. Distributors are responsible for compliance testing, tax collection, and permitting. The cultivation tax is around $150 per pound, and there is also an excise tax.
- Cannabis products come in various forms and sizes, including packaged goods and raw materials.
- The main business of the founders' cannabis startup is delivering final packaged goods to retailers.
- Moving products between licensed entities requires a distributor.
- Distributors are responsible for compliance testing, tax collection, and permitting.
- The cultivation tax is around $150 per pound, and there is also an excise tax.
Taxes
The taxation of the cannabis industry is a significant factor in the high prices of cannabis products. Key points include:
- Taxes are applied at various levels, including sales tax and excise tax.
- In the City of Oakland, a 5% tax is applied to gross receipts of sales.
- The high value of cannabis products contributes to the high taxes imposed on them.
- Taxes result in increased prices of cannabis products, such as gummies.
- The cannabis industry is highly price sensitive due to the impact of taxes.
Price sensitivity
Price sensitivity is a topic discussed in the video.
Key points:
- Legalization of cannabis has led to increased prices in the legal market.
- Medical patients are turning to the illicit market due to higher prices.
- Medical patients require higher dosages and more value.
- The state did not anticipate this shift and the medical card has lost its significance.
- Separate supply chains for medical and adult use products have been combined.
- Obtaining a medical card is costly and time-consuming.
- Decrease in tax revenue for the government.
- Disproportionately affects the medical community.
Brand loyalty
Brand loyalty in the cannabis industry exists, but there is also a significant portion of consumers who are open to trying new products. Budtenders play a crucial role in influencing consumer choices, as brands often pitch their products to them through demos. Brands with higher marketing budgets can buy out shelf space in dispensaries, increasing their visibility and sales. However, regulatory changes, such as phase 2 testing for pesticides and potency, have caused some brands to be wiped off the market. This has led to a shortage of supply and a need for new compliant products.
- Brand loyalty exists in the cannabis industry, but many consumers are open to trying new products.
- Budtenders have a significant influence on consumer choices.
- Brands with higher marketing budgets can buy shelf space in dispensaries to increase visibility and sales.
- Regulatory changes have caused some brands to be wiped off the market, leading to a shortage of supply.
- The cannabis industry is experiencing a rush of brands trying to capture different consumer segments.
- Many brands rely on co-packing, co-manufacturing, or licensing agreements, making it difficult to secure investments.
- The future of the market is uncertain due to increasing regulations and industry uncertainties.
What will the market look like in 5-10 years?
In 5-10 years, the cannabis market is expected to undergo significant changes, with more favorable regulations leading to decriminalization, medicinal availability, and eventually recreational availability. However, federal changes may take longer. Businesses currently face the challenge of complying with regulations in each state and a shortage of capital. Canadian companies are acquiring distribution companies for their licenses. California will remove the one-acre cap for growing cannabis in 2023.
Key points:
- More favorable regulations expected in various states
- Decriminalization, medicinal availability, and eventual recreational availability predicted
- Businesses currently face compliance challenges and capital shortage
- Canadian companies acquiring distribution companies for licenses
- California to remove one-acre cap for growing cannabis in 2023
Cannabis media
Cannabis media has been instrumental in raising awareness about the industry, although messaging can sometimes fall short. High Times and other pioneers have played a key role in disseminating news. Public figures like Elon Musk and Gwyneth Paltrow have helped change perceptions, but stigma remains.
- Cannabis media has raised awareness about the industry
- High Times and other companies have been pioneers in cannabis media
- Public figures like Elon Musk and Gwyneth Paltrow are associated with cannabis
- Stigma surrounding cannabis still exists
Psychedelics
Psychedelics have similarities to the cannabis industry, including media influence and advertising challenges. They offer a deeper level of self-awareness compared to cannabis. Safe and dosed experiences are important, but currently lacking. MAPS is a leader in funding psychedelic trials. The significance of people being exonerated in relation to psychedelics is also discussed.
Exonerations and social equity programs
The topic of exonerations and social equity programs in the cannabis industry is discussed in the given summaries. Here is a concise summary of the topic:
The legalization of cannabis has led to the dismissal of past cannabis convictions and the implementation of social equity programs. These programs aim to support communities disproportionately affected by the war on drugs, particularly people of color. Established cannabis businesses are incentivized to assist smaller businesses run by individuals with cannabis convictions or from disenfranchised areas. The government is providing funding for these programs, but more resources and knowledge are needed for their success.
Key points:
- Cannabis convictions are being dismissed due to legalization.
- Social equity programs support communities affected by the war on drugs, especially people of color.
- Established cannabis businesses are encouraged to assist smaller businesses run by individuals with cannabis convictions or from disenfranchised areas.
- The government is providing funding for social equity programs.
- More resources and knowledge are needed for the success of these programs.