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we should start by talking about what David has brought oh yeah this is different than a normal podcast yeah yeah yeah I bought a selection of my favorite bowls which my wife makes they're called mellows I've also brought a bunch of flowers I figure we would be able to smell a lot of different flowers so you can get the the terpene profiles I think it's kind of like when you do wine tastings so I think that's important I'm really into terpenes I bought some body rub some oils that we can talk about some live resin and also a pre-roll and these are a lot of these products are all available on the market today it's about kind of showing you kind of how the evolution of the the consumer experience has been mm-hmm and these are some of the I've got at the green door which is right around the corner yes this office this one of my favorite shops to go to and do you distribute any of these products yes so northern emeralds has actually just talking to Kody this morning about it and we distribute would help with northern emeralds distribution we share an office with them actually over in Oakland we've we've tried working with Papua and Berkeley but I think they do their own distribution so a lot of these brands do their own kind of self distribution but then often times a lot of like smaller brands or boutique brands will often ask a third-party distributor to help out so that that'd be us the interest yeah so since you guys have gotten into yeah let's break it apart some of these so this one is called blueberry crumb I I got this particularly because it just smelled really good it has this like like really sweet nose right yeah so that you'll get this like crazy blueberry nest to it this is a northern emeralds gelato you're gonna get like kind of a cheesy musky you know type of type of smell there all right here we go there and then this is the full Cana yeah so this is more like the lemon it's called orange zest mmm but you get that like citrusy feel and like when you smell flowers I have that citrus feel you get way more of that uplifting energizing head high head high really yeah that signals what strain it is yeah usually it's like sativas have more of like a head high like citrusy lemony kind of like a Roma to it and that's kind of just like the the turkey and profile which is basically just like what you imagine is like a flavor profile for wheat and then indica on the other hand is more of like I think people normally remember it by saying like in the couch basically it's you know you slip into the couch and you just get really lazy okay it's more of the body hi and yeah I think indica and sativa are like the ways that people typically like to categorize and like hybrids but then at the end of day there's so many different varieties of strains that and nowadays with the crossbreeding of all them everything seems to be somewhat of a hybrid a strain right yeah and does the the strength of the smell indicate its potency in any way or is that just freshness not really I think you so a lot of these have their THC percentages now huh so if you look on the labels you'll see how potent it is all right this one says 27% no CBD this one is your live resin this has 65 percent THC so it's gonna be way stronger this is your ha ha and because this is a resin you're gonna see like you see all that's been extracted control it this is like basically all the trichomes have been put taking from the flower all the cannabinoids are extracted and put into this resin and so this is what people use for dabbing yeah yeah yeah which is super strong right so pretty strong how many milligrams of THC would be in that so this is 650 milligrams it's a lot yeah so I was like concentrate yes super concentrate yeah yeah okay right and so for for the amateur what do you guys recommend so like I mean your flick 5 milligram edible is that what you're talking yes so this is the this is like that's 5 these are 5 those are 5 yeah so this is label Thanks yeah there this is like brown butter sage black sesame cookies and cream right these are like gourmet low dose and that that's cut what kind of the new consumer is going after right they're not trying to get blitzed on a dab that's gonna get right but there are consumers in those Instagram videos though oh yeah I cannot compete yeah there are people literally doing like 2 3 gram dabs full dabs and God and just like holy cow valedale yeah yeah and they're just like all right walk the dog yeah but like for for what we're seeing in the market new consumer you know wants to do more micro dosing really yeah so you know micro dosing I think has revolutionized how I think about you know cannabis consumption yeah right because you know we never knew back in the day what you were really getting right you just like alright yeah just show up at the story yeah right but now you know the consumer can understand how many milligrams it is smell the profile understand what's within it and then kind of build their relative scale on how it affects them yeah and most people you know when they get too paranoid or they get a little bit like anxious yeah they just did way too much right they have to just they're just way sensitive so dial it back keep dialing it back until you can then add a little bit more yeah right and how you feel what does the market look like these days now are more people buying edibles since its become legalized in California well at least from our standpoint as a distributor the higher velocity items and high volume items that flow through the market are just like flour and pre-rolls still just because that's kind of the most common like base of understanding of what it is okay and so people generally buy a lot of you know these single pack pre-rolls and it depends on the market as well so if you're in the middle of a city people will buy smaller quantities just because there's a lot of tourists and they like you know want to walk into a dispensary these days when they come visit San Francisco it's like part of their to-do list yeah and then they'll pick up something small versus like if you're kind of this like brand loyalists in like a more rural area you'll buy a larger quantity like in denominators of eighths or maybe even larger and then edibles are a big part of as well and I think it's typically for the kind of newbie weed I guess experiencer and they because they for I guess for edibles the argument for that eventually being a bigger market is that you know for for people who haven't consumed weed before or smoked before they have to kind of get their head around like two levels of friction one is just like smoking first anything and then second the weed part vote for edibles they eat and anyway so you know this is just like one step away from consuming weed right yeah but they're like very granular dosing yeah I mean that was great for me when I started getting into this stuff yeah but I just find that it's a completely different sensation anyway yeah yes yeah yeah you're metabolizing in through your liver it's more of a body hi you are yeah the onset takes a little longer to you have edibles you're looking at typically an hour maybe an hour and a half yeah there's some like beverages like California dreamin which is a YC batch they take theirs quicker yeah you know so they're on sets quicker yeah the the category that we see that's growing pretty quickly is the concentrate market but through vapes okay right so like here here a couple examples I brought some eras and then within each one of these I have a different pod so I carry around you know different pods for different feelings this one is a forbidden fruit so this is kind of like an indica that's a little bit more of a you know chilling out type of strain you have the over here at ac/dc that's a it's a CBD strain so when I'm not looking to get really high but I'm looking to you know take the edge off a little bit that's why I really turn to CBD often that's probably the cartridge I switch out the most and then I have this Nina Simone here which is uh or sorry Nina Lamone which is a sativa and this is from legion of bloom this is way more when I just want a little kick up and what's great about it is I can take a little bit of a puff and I you know doesn't smell it's discreet yeah and you know I think that's what people are looking for is that's kind of what edibles do for people as well they can just put it in their bag they can eat it flower still has that smell I love it yeah personally but there are people that have that stigma attached to it to have that you know oh I don't want small likes dirty yeah my neighbors gonna find out or my landlord yeah so it's um you know I recommend if that's a thing you can go the concentrates or find a vape like a mighty from Storz and Bickel where you can store it like you know new a vape without combustion and it's not that smelly and in terms of your market your average customer for you guys in particular mm-hmm is it across the board growing is there a certain segment where people are really taking it up in terms of age or demographic the fastest demographic we're seeing in deck is actually the baby boomers really yeah the they are coming in and they are you know they're replacing a lot of their prescription drugs there's also this feeling of I don't want to feel old it's like a symbol of youth Yeah right which is super ironic because this is the generation that kind of brought us the war on drugs supportive you know this movement that and for us you know dare they worked it there yeah all right yeah work they pushed their right they were like you know they were kind of hippies or they knew about it but they kind of bought into this war on drugs mentality and it's you know funny ironic that they're coming back to this you know because of their health ailments and you know feelings of have changed which is good right yes it positive direction and I think there's this whole kind of like like branding around like wellness as well for for a weed not just the fact that it gets you high but also there's like CBD effects that kind of have medicinal properties or just herbal like its kind of seen as somewhat of like an herbal remedy or you know something like that that helps your general day-to-day lifestyle can you break down CBD for people who aren't yeah in the know yeah so I think it stands for cannabidiol if the I don't know how to actually set cannabidiol in a bad I'll yeah and it basically comes from you can actually derive from two different plants like marijuana and hemp and so the hemp base CBD is legal and you can sell that anywhere so you can get it like Costco if you want I've seen like hemp lotion and like all that sort of stuff but then there's also just like CBD products that are derived from marijuana that can be sold in dispensaries and essentially what it is is it's it's you know for for I guess the layman it's its THC without the effects of getting high and you know have like medicinal properties that essentially will reduce pain and it'll basically generally make you feel a little more chilled out and you know otherwise you won't feel too much of an effect of getting yeah high of THC okay the the crazy thing about CBD is if you look at you know if you watched that CNN special weed from Sanjay Gupta he had a few a few years ago but you know essentially a CBD was really helpful for people with epilepsy and you know that had seizures so there's a group called you know the Stanley Brothers out in Colorado they were growing Charlotte's Web and what's crazy is if you looked at the the history of cannabis growing a lot of it was bred for potency it was also bred and for smell you know but people didn't really understand the science around what was in it and so with a legalization of it with the requirements of lab testing they started finding other cannabinoids and CBD THC or two of perhaps hundreds of cannabinoids within the plant itself so you're seeing research on THC VT see a CBN CBG all these different cannabinoids are helping people identify ways to help them in their in their life and with CBD especially if you just take it from hemp derived the the problem is there you don't have this what they call the entourage effect and what what that pretty much means is each of the cannabinoids kind of help each other with the fact and so that's why when you look at something like Popham Barclays like three to one yeah and you're putting this on you know sore spots it has a better effect than if you're just gonna get a CBD lotion right you kind of need one you know to balance to complement each other yeah and like products nowadays apart from just being strain based as what you would normally buy back in a day you're like I'll buy some blue dream or some of this or and based on strain now a lot of products are ratio based or like effects based so they'll have like higher THC content to lower CBD or you know one to one or up to ten to wash and that's just driven by becoming more mass appeal right because the customer goes in the store and they're slightly dude I want to feel this way like yeah I don't know all this lingo yeah or is that not true I think there's I think the lexicon is is continuing to build I mean a lot of people don't know yeah and I think it's kind of like wine yeah right where you have your percentage of alcohol yeah but then you have your tannins and kind of how you know how it smells you know I think that next frontier is really gonna be around the terpenes right you're gonna have your THC and CBD percentages yeah but you know if you put this red Congo against you know this lemon meringue the smells are completely different and you're gonna feel a little bit different as well and you know that's just how I've been human trialing myself stuff like this like this rub how do you derive the different strains or rather the CBD for instance like how do you pull the CBD out but not everything else yeah so there's a number of extraction methods now that's kind of bucket into two categories you have solvent lists and then you have solvent okay so solvent list is kind of like with Mel she uses actually this gold seal red congolese through an ice water extraction so it's basically you take the flower and you trim you've run it through cold water and ice and then you sieve out the runoff into bags and those bags produce hash you dry it out and you have this hash that hasn't been you know extracted with anything else but just water and some some movement agitation then you have you know co2 you have BHO which is butane you have alcohol distillation and so they put the flour through there they actually rip apart everything they take away the terpenes they take away the cannabinoids and then they reconstitute it at the end of it to bring it back to to what it is right and so when you look at something like a 3:1 CBD or THC CBD they most likely extracted it probably co2 they were left with different compounds then they measured it see what the concentration was and then they put it back to the ratio that they wanted gosh okay now so so is meadow making any product no okay yeah so meadow meadow build software for for dispensaries but we spend a lot of time with our dispensaries understanding the products understanding inventory helping them with compliance and I think everyone at Meadow is pretty passionate about cannabis in general yeah so yeah we're very much software-based and working with a lot of people within the supply chain okay in Vincents similarly you guys are making anything your distribution exactly so companies called nabis and we basically do distribution like license distribution so we'll basically just move product at a wholesale level in the supply chain okay and what caused both of you to not get into manufacturing with the actual like higher level of the business that's a good question I think for me at least it was it's a pretty capital intensive side of the supply chain just because you need to buy all the equipment and machinery and have the expertise to produce everything yeah and that was not something that I was born with or it came with and so you know a lot of people who do manufacturing will essentially white-label for a lot of other brands and you know for us like we actually had friends who wer manufacturers who are manufacturers rather and that's a lot of the ways and how we kind of got introduced to a lot of the brands that we work with today yeah so it distribution was a much lighter weight kind of business for us to be able to startup but you did fundraise right we did fundraise we just closed a recent round our seed round rats thanks yeah and it was it was quite different it was quite an ordeal compared to tech or finance or any of the traditional kind of VC fundraising industries just because we're licensed entity so we have a distribution license in Oakland it's a type 11 distribution license in California okay and it kind of creates a lot of friction as far as what investors feel comfortable investing in meaning you're gonna have to throw a bunch of their cash at just getting a license from the get-go yeah so that was something we had to do it wasn't too expensive it was several thousand bucks to get the process done but you know on the fundraising side it creates a lot of friction just because for a lot of institutions that can write larger check sizes they have LPS for their funds that basically they sign LP agreements that say like you can't invest in certain vice industries like gambling or alcohol or weed of course with yeah right and it was fund raising similarly difficult for you guys for meadow yeah well we went through YC right which i think is an unfair advantage but we were the first company to go through I didn't think they were gonna accept us we had Kevin Kevin Hale yeah sir and Carolyn I hope Carolyn levy yeah so we're oh it was ten ten minutes the most intense questioning what did they ask you everything I mean we talked about the legal side yeah yeah we are an ancillary business right and you know we chose that because all of us have been in tech for a while have been building software and we just saw a need to build this the system that allows dispensaries to be compliant but also run their business effectively I mean 90% of the shops are our mom-and-pop right now in California so and they don't you know if you've looked at prop 215 and where cannabis was records work I considered evidence so people didn't really keep keep records yeah you know heavy records that's why you hear about companies it's all cash oh gosh all records and coming into legalization yeah now you have to keep records for up to seven years you have to keep attacker tax records you have to keep patient records you have to keep you know everything from who's bringing in the product to touching it to how it's getting destroyed and everything and then on top of that you have to create a consumer experience that obfuscates all the complexity around supply chain yeah and so this consumer land already get a lot of stuff it's more expensive than it was which is definitely a negative but you know you get a lot of selection you get testing all that stuff so we just saw a need for it early in 2014 yeah and when we apply to YC you know we ended up getting accepted and fortunately as this stuff was happening in Colorado there are a lot of signs in other states legalizing as well I mean in California hopefully was gonna go we don't know we saw all their attempts that failed before and then we did a pitch during demo day that tried to bifurcate the the audience as much as possible and so that way if they were interested in weed or cannabis they would come talk to us so what did you what did you say yeah we you know a lot of it was like hey if you want to stand around the stand on the right side of history come talk to us we really did that so I think there was this feeling of okay like you have to kind of step forward with us in order to make sense and so you know when we did that we got a bunch of interest did you have a both of you guys did you have a lot of funds or were they angels that could just spend their own money on whatever they wanted for us it was about half half like in terms of capital committed like we we do have a lot of smaller Czech angels just because they're the types of people that David just mentioned you are like forward-thinking and they think this is kind of like the end of Prohibition era the New Age for weed and they're super interested a lot of family offices and then a couple of institutions here and there okay yeah yeah and you we had over 40 angels right how much money did you raise we raised two and a half on twelve and so we came out of YC it took you know we didn't close it up all after demo day I took probably around nine months well you know just meeting with people and we just had like a rolling close already saves all on save okay and also it was a there it's not like hey we're building you know XYZ CRM and we're good to go I think people had to get really comfortable with the context around cannabis first yeah and so there's a lot of meetings that were just like introductory here's what's going on the space this is where we see the world and then they had to kind of take that in and like all right do I believe this and if so let's have another meeting and then we kind of work through yeah it is a lot of that I feel like angels are generally curious I think investors see prophets and they see upside of all this but then at the end of day like a lot of them are doing their diligence as well so they like come talk to weed founders who are you know set as you know working in the space and they ask them a bunch of questions about like the regulations the licensing how we view this industry moving and shifting forward and then you know they go back to their homework talk to some other cannabis people and then finally come back to a decision is there one particular stat where you're just like you tell it to the average investment like oh my god you know like how fast the industry is growing for example like I don't even know like I know it's popular you have no idea how much weed people are buying yeah I mean for us we kind of say it's the end of prohibition in California and I don't know if this is the case anymore but a couple years ago including the black market 80% of the cannabis in the United States came out of California so that was for us a great pitch because we were based in distributing California and are you wait are you guys distributing out-of-state no no no not legally no not at all yeah but if you look at kind of where agriculture is in California right you know most of our products are exported to the rest of the country right yeah you know 70% of Agriculture comes out of California right you know tech comes out of California Coulter hands out for the fifth largest economy in the world right yeah and so I think there's a lot that we have here especially because cannabis the medical cannabis movement started in San Francisco in 96 with prop 215 mm-hmm so there's there's just a lot of history here I think um you know you know as we're turning this thing over there's just a hope that we keep a bit of the culture and kind of what this thing minutes what's hard I mean it's hard I think this shit's amazing yeah I love the truck I love you I'm not a choice I get when I go to the store yeah but um one thing I've been curious about since the I mean legalization but before that when I just had a medical card why is there not like Marlboro why is there not like one dominant edible company I mean you said like all these stores or mom-and-pop shops why is it not like you know the CVS of canvas yeah I mean I guess like for in terms of like brands I think it's still so it's still fairly like fragmented there are certain companies that are getting bigger and distributing a lot of products across California but yeah none are I guess fairly dominant not our dominant in multiple states and I think that's probably a lot of the reason why you don't have like a Budweiser of wheat even in California yeah like why I don't get it like why isn't there just one place yeah I think there's a lot of fragmentation in the market and if you look at kind of how legalization has started in 2018 the entire supply chain has been reconfigured from what it was before in the you know pre 2018 a grower can go directly to a dispensary not have a lab tested not have to go through a distributor right but now with all the different licenses a grower has to you know cut their harvest give it to a manufacturer the manufacturer that brings it or the manufacturer has a product ready for the distributor that you pick it up yeah the distribute then has a quarantine and the yeah has tested and I'm Aptos for what just the compliance testing so making sure like homogeneity potency any sort of additives like all that checks out pesticides bacterial yeah you know anything like that and then once it's tested or approved then you know the distributor brings it to the dispensaries okay yeah and you know the the problem that we're seeing in California you know we thought this was gonna be a bumper year harvest year right jack we expected this to be multiples bigger than for context this was the first legal year first legal year but last year we probably did three billion dollars in medical sales this year we'll probably do as much of that in adult youth sales and medical will be a fraction of that maybe you know half a billion we get there and so the problem is you have thirty three percent of the state that's some form of local laws and then 67% of the state that has no laws whatsoever and because of that you have this disconnect between state law where you can get your permits but you can't get a permit unless you get your local permit and so it's a for the this legal world that we're in it's not just the compliance side but there's a lot of advocacy and legal work on the regulatory side on getting local approval a local and novice to grow or so ro to do anything to get touches tribution anything yeah so imagine so you're saying why isn't there this one you know huge brand it's because there's so many hoops to jump through yeah there's and the state's massive yes it is massive this is not like Oregon right yeah it's just a massive State and then you have a disconnect between areas have licenses areas that don't right and then people trying to get licenses in these areas but running throttle because of local governments that haven't created those laws hmm yeah and is the same thing as German Colorado and the other i mean who assume california's two biggest state in terms of volume yes sales for sure and then following that is Colorado or yeah you have Colorado you've Oregon Nevada is pretty Nevada yeah and there's a very big yeah yeah okay and then Canada what's Janet's coming just federally legalized so I think October 17th was it the date that come they're basically they passed the bill and now it's gonna be fully enacted to be legalized across the country really yeah so that can make a huge play yeah yeah if there is a huge bet yeah I mean I don't know I think if you ask a lot of people in California cannabis like if they can name all these provinces a year and a half ago I'm probably like no yeah but now you know with Toronto like Toronto's coming up you have Vancouver coming up you have basically these companies that were privatized with the government yeah and now they're opening it up with into public markets yeah and now these huge massive Canadian companies yeah listed yeah got all this capital yeah and now they're investing it into you know their own operations but now bringing that capital down into legal states like California yeah ya know we've seen a lot of that as well I think part of the whole like consolidation pattern that will come just because the markets so fragmented right now will be heavily pressurized by Canadian like publicly traded heavily capitalized companies just because they're coming in and they're buying up pieces of licensed businesses in California and other states in the United States just so that they can have their stay in the ground for the future yeah and so that's just to you know go back to why isn't there this massive brand it's because there's no capital - right not only do you have all these hoops to jump through on the regulatory side but there isn't there are there's not banking yeah yeah right because the FDIC obviously federal federal right yeah and it is not federally legal so what do people do for banking yeah well it's kind of like a band-aid solution for everyone I would say there's like small like credit unions that will bank cannabis companies there's other banks some people just use you know big banks but then they don't mention anything and generally people have four license businesses at least they have multitude of banks and they spread their cash across everywhere because you touched on it earlier more than I would say for us at least more than 90 percent of our transactions are in cold hard cash and so we have safes everywhere as well as a banking solution and how do you guys get it if you're doing delivery well so we work with the dispensaries that do the deliveries these delivery operators collect cash on site so you place the order they come to you they you know give you the order you give them the cash a check your ID make sure things you know on the up-and-up and then they take that cash bring it back to the dispensary and then and that's it and they just kind of go back and forth right it's not it's not like they're it's not like an ice cream truck well it's so well that's what's really interesting now it is allowed for the ice cream truck model coming into 2018 it was a hub-and-spoke model okay and and now we're actually in the proposed we've had three different sets of regulations this year mm-hmm okay this in there this year yeah and then this the proposed regulation we've been in what we call emergency regulations land okay and then we have the proposed regulations that should be coming out in the next few weeks and in that this iteration there was a proposed reg on allowing delivery operators to deliver anywhere into the state even in prohibited areas which is in contention with the Chiefs of Police Liga cities that California definitely pride itself on local control so if that does open up you'll have ice cream truck model or the taco truck model one that can carry up to ten thousand dollars worth of product at any time to deliver anywhere across the state how much do you guys carry in terms of like where how much we store in our locations so we have two we have an Oakland location we have an LA location yeah and probably at any given point overnight there's probably about half a million dollars worth of product in there and then flow through there's just millions a week a product that doesn't sit there just kind of you know hits the inventory and then the next day it will go out or something like that so typical all shapes and sizes so a lot of it will come in package final packaged goods and then oftentimes it'll just come in big just like gigantic trash bags full of 20 pounds of just raw ingredient raw material flower base seriously yeah what yes never so are you guys packaging and the dispensaries we don't do packaging it's there's these there's co-packers in the industry or manufacturers who can do the packaging but for us we we basically just take final packaged goods and deliver it to retailers that's our main business but as far as the licensing roles and responsibilities goes no one can move product between two different licensed entities without a distributor so even if you're just like a farm moving your product to a manufacturer you have to contract out a distributor or get your own distributors license in order to move it and the reason behind that is because I think the the state government wanted to hold one license party accountable for all things like tax and legal compliance to which the distributor's were kind of a gatekeepers for all of these all these products before it hits the retailer shelves yeah and so we have to be in charge for like compliance testing and making sure that passes excise tax collection cultivation tax collection permitting that to the state so it's not just like money that we have to remit back the brand it's also money that we had to remit to the government so we are kind of just this like hub of the supply chain that all product has to funnel through b fore it reaches a consumer okay so in on that tax side I'm curious because what is the what's the rate 20 something percent the cultivation tax is per per pound no either trim or full flower and that's a you know 275 or 925 right so yeah something like that yeah it's basically 150 bucks per pound around that and then the excise tax is 15% on the wholesale value mm-hmm and so the the and that's also taxed again at the retail level yeah so your sales tax taxes the sales the excise tax yeah and all the products now there's taxes everywhere and that's why the prices are or yeah right and for the most part that up site is for the government like are they are the farmers are anymore no no no no everyone that I mean that's why these products are just so expensive is because it has to be baked into that I mean we we recently learned so like if you wanted to the City of Oakland passed these just city tax laws that are five percent of gross receipts of sales so it's not just like 5% of your margin it's like of gross receipts so if you buy it at a dollar and sell it at a dollar you're technically just making nothing but then because the gross receipts a dollar you have to give five cents to the government yeah on this stuff cuz like the value is still so high yeah you know like I mean when I used to buy a 300 milligram bag I was like of gummies that would last me forever yeah I'm not eating 30 milligram gummies no just no no pass out fine or whatever but now it's like I think twenty eight dollars for a hundred milligram bag yeah yeah do you guys sense that there's a lot of price sensitivity absolutely okay I mean I think that's why you know I was looting too with the medical market being you know pretty much decimated no the the irony of legalization is that there's a lot of medical patients have gone and turned to the illicit market for their products right right you know the people that are medical they're not you know they need it as medicine they're not there yet they want higher dosage they want more value yeah and you know because they're eating it every day or every week to sustain their daily life but because of the the imbalance of prices on the legal market versus illicit a lot of medical people have turned to the illicit gone back you know yeah no it's not crazy yeah the state didn't see that coming I think they did like I mean they didn't the point of having a card anymore there isn't really yeah except for you know higher carrying limits or you want to consult with a doctor that really wants to kind of give you a treatment plan yeah but for most yeah yeah I'd say for most purposes it's the same products they get sold recreationally as they do medicinally right yeah yeah because they were it yeah yeah it's it's pretty complicated there was a dual supply chain in the beginning of the year an adult use in medical supply chain so if you were a producer and you were producing medical products you could only sell to medical people and vice versa I know nice and then they combined it and now you have people that are like right well there's probably gonna be more throughput on adult use so I'm gonna create more product there yeah yeah but you know in order to get your recommend if you get that then you can get your tax your sales tax exempt so but it's like 150 bucks to get it it takes a few weeks to you know a couple months to get yeah and then once you get it you know expires in a year yeah dude I haven't it was like what's the upside yeah yeah it I save like two or three dollars or something yeah consuming it that if you spend you know a couple grand a year on medicine then yeah makes sense but you know I think in the today's society it's really tough to kind of make someone jump through all the hoops to get it yeah yeah but the the the problem is it just it became it came down I think revenue tax revenue for the government and unfortunately I think the the community that needed it at most on the medical side or the ones are the most disenfranchised from the whole process mm-hmm do you find that um people are very brand loyal or do they just shop around and not care um I think people are pretty open to right there there is definitely brand loyalty like pop um Berkeley makes these great topicals and oils and things like that and then there's certain like high-end brands like dosis that makes these like really great disposable vape pens that people love buying yeah and and I but then I think there is a large part of it that people are just trying out new products as well and they listen to what their budtender says about them but tender being like bartender but for weed and oftentimes a brand will go and the way that the budtender learns about all these products is brands for as part of their marketing they'll go into dispensaries and do demos for these bud tenders and they'll just pitch them on things so whoever has the higher marketing budget will go in and just buy out shelves for the dispenser like shelf space as a dispensary and they'll teach all the bud tenders at you know all the major locations and that's what will get pushed through the most and I need to get some recommendations from you guys cuz like the people that I talk to when I go to the store I think they're sampling a little too much they're also thing that there's there's been some pretty I call apocalyptic events this year where there's brands that have just been wiped off because of the the regulatory side so people that are used to getting a specific brand aren't getting it anymore I think July 1 was probably the biggest thing that we saw yeah so so July 1 was when they implemented phase 2 testing which essentially was around pesticides and potency and then people that couldn't pass it essentially were DQ'd from the market yeah it was pretty bad it was insane there's videos well because for compliance you have to record yourself disposing of the product whether you burn it or smash it or whatever there's videos of dispensaries just like as evidence just like damaging all their products and just basically having this huge demolition day of like millions of dollars worth of product ya know a lot of a lot there was a huge shortage of supply in the market and like my it's interesting my phone number is listed on our license publicly so I kept getting called for like Phase two compliant product and I was like I mean this is a huge opportunity for us it's a distributor so let's go buy as much as we can yeah but yeah generally speaking there was a huge shortage in market Wow so brands are coming and going it's it's almost as brand rush that we're seeing people are trying to create these different brands you try to get into different consumers but the market isn't that sophisticated yet we're and I'm talking about the supply chain where you have people that do Co packing a co manufacturing or like create this stuff this IP yeah and then oftentimes if you don't have a license you're kind of you're at the whims of you know people that do yeah and it's really tough from a business plan model to to have someone invest in you if you're just you know a brand yeah so where do you guys see the market going then like we have all this regulation coming out like seems like a bunch of random question marks but obviously you're raising money you're in this business like what does it look like in five to ten years I think at least from where we're sitting it's I think it'll probably be another a few years before anything federally changes and more and more States will continue to pass favorable regulations towards cannabis so a lot of them will start out by decriminalizing it and then making it medicinally available and then eventually recreationally available and then once enough states kind of ratify those laws then I think then the federal government will eventually see a more favorable light as well as far as the legal side of things and but until then the way we have to expand is although we're currently in California we actually have to set up a different legal entity in each state so that we segregated out our business it's not interstate commerce and you know basically expand that way from state to state and then have like a holding company that manages every other child company so it's there's there's a huge just cost of upkeep of your business as well on like a legal compliance standpoint security and it's just like licensing and everything that currently it's it's hard to build a business in this in this industry because there's also a shortage of capital - mm-hmm mm-hmm have you thought about getting capital from any of these Canadian companies investing in yeah they are I think they're more so seeing all the players right now as like pretty young so they want to just like buy out companies here and there for their licenses so they we have seen some distribution companies at least get bought out by Canadian companies and I think it's hugely just like like stock packages and like the the sea levels we'll go join the company and then the rest of the company kind of gets let go and so it's it's been it's been kind of this like brutal M&A like climate right now yeah but it does provide a lot a lot of opportunity for you know small guys like us who can stay afloat yeah and how about you David what do you think the markets gonna look like yeah I mean I think in California in five years we're heading what 2023 there is something that happens in 2023 with the laws that allow that removes a one-acre cap you know right now if you're growing you have a one acre cap that you can grow in however people have doing stacking so they get a bunch of licenses to stack but once 2023 hits unlimited size grows can happen in California sure and so you know I think the small farmer is is going to be in a tough position when that comes out and so they're they're gonna have to really think about their genetics their terroir where they're growing communicate value to the consumer that's buying from a small grower who puts a lot of love and attention and sustainable growing practices that the consumer can can buy instead of just these monolithic big crops now in five years I think I personally would love to see the entire country being legalized I know we're meadow you know we build we our goals to build the best software for the industry yeah but more than that it's about access for everybody mm-hmm that needs it you know even if you're a kid with epilepsy you should be able to get your CBD oil in school to minister by a nurse if you need it the I think the things that were at odds with right now is we're such a young industry that is standing on the foundation of advocacy all right this was all about advocacy and patient rights and access and you know legalization to some extent but it's like now with this industry model you have the capitalization side and with such a small industry that's essentially ceding a lot of ownership to you know the capital markets through either Canadian companies or other bigger companies that are shell for other bigger companies you're at odds you're playing a game that you're already kind of at a disadvantage from from especially from the og people I think it's going to be really important that people band together in order to kind of move forward but you're already seeing alcohol move in with their investment and consolation you have rumors with coca-cola doing a CBD drink beverage right you have constellation yep yeah so you have a little bit they are the guys behind Corona oh all right drinks all pharma you're gonna see tobacco you know these are huge players that are seeing their market shares change because of of cannabis yeah and so I think you're gonna see a lot more M&A activity you may even see it's feeling very frothy right now look the Canadian markets but there's because there's only so limited access to invest that capital yel keeps coming if they're it very much feels like internet.com like bubble is getting created yeah and sure there's going to be a handful winners but my fear is that there's me a lot of people that are just out of the game yeah and then we're left with you know less election we're left with less operators that have built this you know industry and this movement mm-hmm I think you're also gonna see a lot more exporting globally you're always seeing contracts being made with Canada and other countries I think you're gonna see a rise in Spain and Germany they're gonna be coming out and being bigger players but yeah cuz I don't know like internationally in Europe for instance you know if you buy cannabis somewhere where where are they growing like is that coming from California somehow how's that working yeah yeah I don't actually know how where they get it from it must grow it locally I'd imagine or bring it in from somewhere in South America I think that there there's a huge grow a lot of grow ops down there Canada - yeah huh-huh yeah it's interesting when you're talking about the adverse advocacy said I have have things like High Times and like you know Cheech and Chong mm-hmm have they been more harmful or beneficial for the industry hmm I think on a raising awareness level it's been beneficial yeah although sometimes the messaging isn't quite the the level that we needed to be because a lot of times just like funny memes or like some you know joke about yes like your friends getting high but I think it I guess you know to a certain extent it's a strategy to raise awareness as well because that is what captures eyeballs yeah and and then you know High Times does provide a lot of just like newsworthy articles about cannabis as well so I think there's there's kind of a lot of shift in media foot focus as well for high times and like Co and all these sorts of like cannabis media companies yeah I mean they're they're definitely they're pioneers in this and getting the message out you know I mean you know it's hard to imagine the fear that people had and the stigma that surrounded this yeah 10 20 years ago yeah when they're still publishing articles around home grows and Cheech and Chong coming out smoking a fat one well in public yeah it's these are people that have helped push this thing with a segment of the market that could gravitate toward it I think the problem was there are a lot of people outside that didn't necessarily want to affiliate with that you know segment of the population and became more stigmatized or more stereotypical as a STONER yeah but as we've been moving forward you know you the biggest news that we saw in the last month was Elon Musk taking a puff of one right and it's so it's starting to change you have one of Paltrow like looking at stuff you have Oh Whoopi Goldberg you know partnered with Maya on on stuff so the the figures that are stepping forward to represent cannabis are changing or adding to this this movement and getting people more comfortable with it yeah but it's stigmas still pretty high I just find it so silly man cuz yeah because I mean I remember I grew up in Massachusetts so like it was not legalized when I was in high school so you know you existed around all of that but you know obviously you knew people that were smoking when yeah like this is like such a crazy mismatch of media and reality yeah and now I I find it happening all over again with psychedelics yeah yeah and that's why that Michael Pollan's book was so great yeah yeah because it was just like accessible and he's like kind of nerdy and skeptical yeah and boy oh it's not just you know acid trips yeah and that's what I've been following so closely yeah to see the studies and if it's gonna happen or not yeah yeah yeah I was gonna say that and the media plays like a huge part in that and I think it's really hard at least for businesses in our industry to get the word out because normal channels like Google AdWords or like Facebook ad marketing and you know obvious like typical channels you would use to get your name or advertising out they'll shut you down if you try to advertise that you're selling weed and so yeah yeah so how do you grow influencer marketing so like basically having celebrities or like people endorse your products and going on you know kind of like newsworthy sources and outlets that those are like the hot times those are ways to get yo r name out there yeah I mean I think that like when you look at the the psychedelic movement yeah it it's following the the medical piece which that's how cannabis star with prop 215 essentially what started with was the HIV community here in San Francisco that you know found relief in cannabis and this you know we call them the the fairy godfather Dennis Peron who recently passed away but he authored prop 215 which allowed medical collectives to grow cannabis and share with one another and you know with medical that provided that that tip of the spear for people to then you know get in and then you know people with HIV finally found a little bit more relief and then other groups and other medical conditions happen without so Hep C yes exactly and then we look at the the trials are going through with MDMA and it's really around PTSD and for veterans for people that are trying to come over some psychological trauma they're having guided sessions and having a way to rise above what their their current state of consciousness is you know and I think you know my opinion a lot of this especially for cannabis it's like grown earth common biological place like a biological plant it's almost like it to me it's a human right to have this all right it's comforts from the right yeah it's not like someone you know made this and you know but I think what's crazy especially in the world we live in with so much hyper connectivity so much dress and like all the day to day we need to find outlets to go inward a little bit more because there's just so much stimulation outside and you know one of the reasons I love cannabis is that allows you to kind of have that and then you know on the the site that's like a del excite you know it's another leveling up and a whole other sense of awareness of yourself and and how you interact with the environment around you yeah yes that's fantastic I mean it's so cool that people are are now finally able to experience it in a safe way yeah and in a dosed way do which doesn't really exist with psychedelics yet imagine in our lifetime yeah it's gonna be a thing yeah definitely yeah I don't know who's the bleeding edge on this site it might even be in the states it seems like most of the funding and the studies are happening here maps is a really good organization to follow they're the ones that are really pushing the the trials and they're you know if there's people that want to fund the movement for psychedelics maps there's a great organization to do that cool right on so on the legal side I've been really intrigued by people being exonerated yeah it's huge yeah it's amazing so what's like what's going on with that in California have you been following that part yeah yeah for sure I mean what's been great with legalization is that people aren't necessarily going to jail anymore yeah for kit for cannabis possession right and another thing that's great is there's a lot of cities that had stacks and stacks of medical cannabis convictions that were coming and just you know toss them all out yeah San Francisco did it there's a lot of other states or cities are doing it I think what you also are finding that people are realizing that with the war on drugs with people that have been more disenfranchised people of color in different communities there's a sense of trying to give back with social equity programs and so not only is there a decriminalization but there's a there's a there's a movement on create an on-ramp for people to get into the industry yeah I mean for us we actually have a social equity partner for our license and what that means is it basically just incentivizes us to help incubate if you will like a smaller like cannabis business that's run by a business owner who's been formally convicted of a cannabis crime or like lives in a certain area that is has been disenfranchised due to cannabis crime activity and so for us like we basically contribute to a thousand square foot of rent for each month to one of these social equity partners and that actually expedited our licensing process earlier this year so the government actually is creating ways to incentivize like businesses to help other businesses that are run by these disenfranchised folks in the past to help them get their operations up and running man it's so awesome yeah yeah there's definitely a lot more work that needs to be done like well there's a lot of that's funding right and so Senator Bradford just had a b12 94 pass or SB I think 12 12 94 pass which is a 10 million dollar fund which will be given to different social equity programs to help jumpstart their business you know the the issue that we still have is people you know you might have resources in rent but you still need capital and know how the kind of right kind of run yeah and you know we are there's still a lot more that needs to be done in order to help you know this group to move forward in this industry especially as other in other players and the and this game board have been leveling up and yeah right well that was kind of a narrative right so you're just like you know all these all these people who have been put in prison for years yeah jail whatever no and then like a bunch of white kids come in yeah yeah that's legal now cool and they just win the game yeah Yeah right and so yeah I mean I don't know the legal situation as well as you do but it seems like that is not figured out yeah no no not at all it's not yeah I mean because you obviously like you applied twice see you get some money and they are racist right yeah but it you know you don't have incubators like YC really you have you know the hood incubator you have supernovae you know hook appears based in Oakland their incubator bringing some some companies in but they don't necessary have millions and millions of dollars in the bank they need to fund people yeah and then you have you know groups in different cities that don't have unification around their programs either right but there's some interesting things happening within San Francisco you're gonna need to hire 30% of your workforce from social equity people you also as a dispensary may need to have a certain amount or certain percentage of your shelf space of products created and manufactured by people from social equity programs so there's there's definitely still a lot of thinking around that needs to happen but people are trying and I think the the key and all of this is for the consumer to really recognize that when they're buying you know one of these or like even flow kana flow kana supports artisans small growers up in Mendocino and the Humboldt and Trinity's Emerald triangle so when you're buying flow kana you're supporting a small grower and that's why I think more not just the knowledge of how distinguish what is in cannabis and how it makes you feel but who made it why it was made where it's coming from all those pieces need to be connected for the value proposition why someone to pay you know X dollars more for this versus that right um just kind of start a few questions or they're there I mean cuz you've both done my say you you didn't go through IC with your current company now would this happen e sure where there are certain elements of like a canonical startup advice that you found didn't always apply in the cannabis industry uh or do you just apply like the learnings and I mean I guess a lot of it did apply like I remember definitely the hole I'd do things that don't scale thing I we first started this we had a friend who basically ran like a pre-roll company that was distributing across California and prior to regulation this year is very much just like a backpacking industry where people would deliver their own products to fulfill to retailers and so what me and you know my best friend June did was we just drove our like hundreds of thousands of dollars worth of product in the back of our cars across California from like Oakland to Palm Springs and it was it was pretty romantic in a way but yeah I mean it like part of doing things that don't scale like that kind of helped us learn a lot about the industry how products were being moved and like just meeting people throughout the industry as well so yeah I think a lot of it does apply oh absolutely yeah I mean I think we probably ever eWEEK there's some mantra that we're quoting either you know make something people want or do things that don't scale is great yeah yeah we often think a lot about resilience right that cockroach yeah and you know survive and thrive mentality I think one of the biggest things have helped us just to be a little bit more patient about even with all this activities you know don't worry about competition right competition will kill itself you're just focus on your team focus on making something that people want focus on talking to your customers you know but one thing I think that I've also taken an extrapolated it's like build a community right right one thing I love about YC is the community of entrepreneurs and the shared you know alignment on how to build something and I think that's you know why we're together yeah but you know to take that sense of community and kind of bring that within cannabis a little bit more yeah because there's just there's so much going on and then finding people that are aligned and kind of can move forward and take care of their lane you know it's super important yeah yeah totally yeah the advice has been great I highly recommend anyone that's thinking about building a business to look at YC especially for that advice and look at you know the videos or any of the podcast yeah there's so much you know gold nuggets in there yeah be able to do yeah it's a good time to get dumped start a company yeah alright we're probably gonna have an Elon Musk moment if we don't stop guys thanks for coming in yeah oh thanks yeah thank you you