Big Weed (20 page)

“After I get finished being pissed, yeah. Because I know you're worth it. See, if you do it this way, a couple of jobs like you do for me and then get a few other clients, in a year you could end up making . . .”

I held up the napkin.

“Jesus!”

“It won't be easy, but it's doable. But this way, your family doesn't have to move to Nevada. They stay put right here in Denver. You fly to the clients to dial in their growing operations. It stresses you, not your family. And one day, when you get sick of flying around and the business is established, you could probably sell it for, oh, six to ten million bucks.”

He was silent, peering at the numbers on my napkin like they were unobtainable gold.

“I can't . . . I can't do that. I'm already in with these guys in Nevada. They're offering me forty percent of the company.”

I smiled. “Do both. Look, I don't want to tell you what to do. But if you go to Nevada, you're moving backward. In four years'
time, you'll still be running their
one
grow servicing their
one
dispensary, and the whole time, you'll have to keep praying that they know how to run a business. We'll have twenty dispensaries in three years' time. Why go backward? Play the field. Get us all to sign consulting agreements. That way, you get a piece of
all
our companies.”

You could see in his eyes he was thinking, “This could work.”

I slid the numbers over to him.

“Take the napkin home. Think about it. Want another drink?”

Thursday night, it was my board's turn to be pissed.

Who the hell did Corey think he was? He had already put his name on another application? For some other company? The ranting went on for a little while. The directors were all pissed. Similarly, they all felt betrayed. They had every right to be angry. They also had every right to be happy. My job was to get them to accept happy over angry.

If there's one thing I've learned, it's that fighting in business rarely gets you anywhere. You have to look for the win-win solution. If you're selling something, you have to figure out what the other guy needs, not only because he'll help you close the deal but because you'll have his emotional buy-in as well. With employees, the paradigm is slightly different. They want a good salary and benefits, but they also want to feel appreciated. They want to feel like part of a team, part of something bigger. That's where I'd screwed up with Corey. I'd ignored his requests to talk about his future, and I'd made him feel like he was outside the fold.

“No,” I told the board, “you're not seeing the whole picture. Corey is part of our success. He's part of the Green Man story. We either choose to be angry, or we can choose to have a meaningful business partnership.”

They came around slowly, but they came around. When we adjourned the meeting, the board was on board. I just needed to wait for Corey's response to my proposal.

People often need to be reminded what side their bread is buttered on. I was pretty sure we were going to work something out with Corey. He knew my offer was sincere and heartfelt, and he would consider it carefully. But I also felt good for myself. I had managed to sever my feelings of work betrayal from the bullshit of my personal life. And I had taken a positive step forward to appreciate a colleague I loved like a brother, and who had helped make my business what it was.

Later that week, we threw a party at the Cap City Tavern to congratulate ourselves on the Cannabis Cup win. We invited everyone we could think of—employees, board members, vendors, colleagues, patients, and clients. In the back of the bar, we set up a bar of our own. Instead of serving drinks, we were offering samples of our winning Ghost Train Haze and all of the other strains we had showcased at the Cannabis Cup. Our guests helped themselves to our bud bar.

We all marveled at our new world as we smoked away.

I got roped into a conversation with a marijuana hater.

“I still think it's wrong,” she told me bluntly. She had hated seeing the national media cover the 420 event in front of the capitol. Hated seeing her city broadcast nationally as the marijuana mecca of the United States. “I just think it's bad publicity and it's bad for the state.”

Hey, I wanted to say, your husband has been working with our company for five years. You're directly benefiting from our success.

And thank you for your concern, I could have gone on, but I think the great state of Colorado is making out all right in the bargain. Last I checked, it was projecting a $30 million windfall this year on marijuana tax revenue.

But hey—she is entitled to her point of view. If she says she doesn't like seeing Denver portrayed this way, who can argue?

It's not my place to judge what other people think or feel. As I'd just recently learned for the umpteenth time, even when I think I am in a fully committed relationship, my partners may change their minds. It reminded me to choose my partners carefully and remain flexible. With all our success, there remained many hurdles, both expected and unexpected, to be overcome.

I nodded until she wandered off to procure more of her drug of choice—booze.

14

Investors

Sometime in 2013, I began putting together business plans to present to the qualified investors I was courting. Every business plan has a section where the prospective borrower states the risks of investing in their company. Typically, the biggest risk is that investors might well lose their shirts. Ours was probably the only business plan ever written that carried this strange disclaimer:

Currently, there are many drug dealers and cartels that cultivate, buy, sell and trade marijuana in Colorado and worldwide. Many of these dealers and cartels are violent and dangerous as well as well-financed and well-organized. It is possible that these dealers and cartels could feel threatened by legalized marijuana businesses such as the Company's and could take action against or threaten the Company, its principals, employees and/or agents, and this could negatively impact the Company and its business.

The language is pure Wall Street: measured, careful, perhaps even a little stilted, but I'm guessing you get the gist. Now, did I really believe that there was a slight chance that drug lords were going to come kill us? No. According to the last report I'd read, the United States' illegal drug habit—for all major drugs—generated about $100 billion
for the drug cartels every year. The entire
legal
marijuana business in the United States took in only $1.53 billion in revenue in 2013. By that measure, I thought the drug lords were still doing pretty well, but there was still a risk, and every risk needs to be in a business plan.

When I was fresh out of college and starting my first ice cream shop, a young friend of mine had a sizable fortune and wanted to invest in my business. I was into it. She was gung-ho. There was just one hurdle. Her accountant wanted to see my business plan.

I was like,
Huh?

I had graduated college with a BA in political science. I had studied Russian and traveled to Russia as part of my education. My first trip was part of a language and cultural exchange to Leningrad in the summer of 1990. My second trip was to Moscow in the summer of 1992. I arrived in a very different place than I had been two years before. The Russian people had revolted against the communists who controlled the Soviet Union. Once their revolt turned to revolution, they installed a democratically elected senate and president. It was a fascinating moment in history for a young man to observe.

While in college, I was president of my fraternity, SAE, vice president of the student body government, president of the student senate, vice president of College Republicans, and sat on a Greek disciplinary board. I was one of those serious young people who got quoted a lot in the campus newspaper. I was a big man on campus, maybe too big. I was a straight-C student. The whole time I was in college, I was learning a lot about how the world worked. In addition to the activities I just mentioned, I always held down another job to pay the bills. I worked as a bartender, a caddy, and a bouncer at a topless bar.

But I'd never written a business plan.

I wouldn't get my friend's money unless I did. So I went to the library, read up on some models of what these plans looked like, went back to my apartment in Seattle, and cranked one out in a weekend.

I got the money and ran that ice cream business for five years before selling what I had grown into a three-store local chain.

It wasn't until later, when I was working for a start-up mortgage bank, that I finally grasped what kind of information investors needed to hear in order to close the deal. The institutional investors I was dealing with were serious. There was little room in their cosmology for passion. These guys weren't investing because they loved real estate. Their jobs were to deploy this capital and get the anticipated return, and if I wanted them to take me seriously, I had to speak their language.

Following a brief introduction to the concept of the investment, we would provide them with an information memorandum (IM) that explained the proposed investment in great detail. IMs are the cheat sheets of the business world. They give a detailed description of the nature of the investment, the management team, financial projections (historical as well as forward-looking pro forma financials), risk factors (like the drug cartels mentioned earlier) as well as a host of supporting exhibits—the operating agreement, subscription agreement, investor questionnaire, and so on. The intention is to provide investors with all the information they need to make an investment decision in as few pages as possible.

In my new life as a ganjapreneur, I was beginning to see that I had a leg up on so many of my competitors. They were growing weed because they had been in the business before it went legit, or they had gotten hit by the recession and were looking to do something else. But they didn't have business backgrounds. All they knew was that cannabis was fun and looked to be a hell of a lot less stressful than the rat race they'd just fled. Some of the owners of these dispensaries thought it distasteful to hustle and grow their business. They wanted to take it easy. Perhaps they even regarded cannabis as the slow path to a comfortable retirement. Many had gotten in early with dollar signs in their eyes. They imagined arising each morning to a new sack of cash being delivered to them by magical fairies, only to wake from their dream state to realize that the marijuana business was as complicated and competitive as any business out there.

The trouble was, the industry was constantly changing.

At this time, everywhere I turned, people wanted to take a meeting to talk investment opportunities. I was doing meetings with longtime Colorado residents, meetings with out-of-towners, meetings with rich guys who were looking to set up their sons or daughters in a business that they wouldn't screw up, meetings with semiretired country clubbers who wanted to brag to their friends that they still had skin in the game and were shifting their portfolio beyond boring blue-chip stocks.

In some of those meetings were polished individuals who worked for the Big Tobacco companies. They were watching the cannabis industry very closely. For now, they were prevented by law from investing in the marijuana business in states like Colorado, but those restrictions would lapse soon enough, and these companies would descend upon our market with their entire arsenal. They had everything they needed to succeed: lobbyists, politicians amenable to their cause, farmers willing to grow the next big crop at a moment's notice, and a shitload of money. One guy I talked to let slip that his tobacco company already had an outdoor grow facility in the Southeast, just waiting for marijuana to become legal there.

It did not shake me up at all to think that someday you'd walk into a 7-Eleven and be able to buy a pack of joints as easily as cigarettes. That was inevitable. It troubled me more that these guys might possibly take an industry that prided itself on growing with integrity—cleanly, naturally, organically wherever possible—and turn marijuana into a pesticide-heavy crop. Most of the growers I knew denied that such a thing would ever happen, but I could feel it in my bones. Like it or not, brutally efficient capitalism will eventually transform what has been until now a very mom-and-pop, feel-good industry.

The numbers also suggested that the cannabis industry was already constricting. In our state, the number of licensed retailers had
declined by 40 percent in the first few years. That suggested that people were rushing into the business, losing their shirts, and not being replaced. If your cannabis company was not growing, you already needed to start thinking about who you might sell to as an escape strategy.

Many of the dispensary and grow owners I've met have been lucky to attract money from outside investors, but they are ill-equipped to deal with the ramifications of that new obligation. I am still surprised when I meet people who are running successful cannabis companies who don't understand the difference between getting a loan and selling equity in their business. I'm not being facetious. They don't understand that they are selling a portion of their company, and maybe even control of the company, in exchange for a much-needed infusion of capital. I finally had to take one friend aside after he shared an agreement he had signed with a “lender” and say, “Dude, you understand that they own a piece of your company?”

“No, I'm just going to pay him back and then give him like twenty grand or something for his help.”

“No, this agreement gives him equity ownership in your company, and if you fail to make a payment to him, he can take control of the business.”

I didn't know what to tell him. Welcome to Business 101, maybe?

Still, I looked forward to describing our opportunity to more sophisticated investors. I had internalized the examples of a couple of good role models.

I admired Ben & Jerry's greatly. Have you ever noticed that customers aren't just loyal to the Ben & Jerry's brand? They're loyal to the
flavor.
I've overheard arguments between people over what flavor they should get at the supermarket to take home tonight. Chunky Monkey? Cherry Garcia? Hazed & Confused? New York Super Fudge Chunk? Phish Food? People swear by those flavors, and
they know they can't get them from any other brand. Think about how unusual that is. You might well love coffee, but are you loyal to French roast? I believed we could get people loyal to SkunkBerry, Ghost Train Haze, and Hells OG Kush.

The other thing I admired about Ben & Jerry's is that it transcended what the average corporation was supposed to be about. Companies aren't supposed to have souls or personalities, but Ben & Jerry's always did, even before it was fashionable.

Starbucks is another company that inspires intense brand loyalty. Yeah, I know—not everyone loves its coffee; not everyone loves that the shops are on every street corner in America. But you cannot deny that, for many people, that first sip of Starbucks was their first inkling that coffee could be a luxury product, a cut above the swill served in most fast-food locations in America until that time. Howard Schultz, the CEO who took Starbucks to the next level, is one of my role models in this regard, a classic Wall Street capitalist who managed to excite enough investors to raise the billions he needed to literally grow a store a day.

I wanted to create the same public passion for marijuana.

I wanted to grow the company in an honorable way.

I wanted Green Man Cannabis to be different from other marijuana out there. I wanted to win the minds, then the hearts, and finally the wallets of marijuana product and lifestyle consumers and become the most recognized brand of legal marijuana in the world.

Bold? Yes. In front of me was a great opportunity to achieve everything I had ever wanted. This was Green Man's moment, and I was completely committed to capturing it. And I was going to do it in a way that was meaningful.

As soon as the recreational-use referendum passed, I started getting calls out of the blue from potential investors who were eager to get in on the ground floor of the marijuana industry.

I was grateful. The first phase of our Cannabis Ranch construction required about $25 million in capital. A guy who needs money
for his business can't afford to pass up any opportunity to get someone to write him a check.

But this newfound attention quickly became a double-edged sword. I had underestimated how much education would be involved in wooing investors. When I was in real estate, I didn't have to teach people what real estate was, or how it was “made,” or what we did with it. Everyone knew the score. God made land, and he wasn't making more of it.

Legal cannabis was different. My typical song and dance with a potential investor started with my monologue about the industry. They had tons of questions: How profitable is it? Can I get in? What are the pluses? What are the downsides? And finally: What's an opportunity with you look like?

Individual investors came to us with a lot of curiosity and passion. They wanted to make money
and
look cool in front of their friends. Institutional investors were curious, too, but they checked their passion at the door. They were all about the dollars. Would the cannabis industry lead to profits—or was it a waste of time?

Both types of investors had to jump through our state's legal loops. Direct investors had to be permanent residents of Colorado. That eliminated most of the people I talked to, but there were always some surprises.

An attorney friend of Mr. Pink's called me once, asking if I wouldn't mind spending some time talking to her about the Colorado cannabis industry in general. She had clients who were thinking of investing, but she knew nothing about the industry at all. Her approach was guarded, but she was willing to learn in order to be better able to advise her clients. Would I be willing to talk?

We had a single, hour-long call in which I gave her the lay of the land. I described where I thought the industry could be in five or ten years, purposely keeping my own fund-raising need out of the conversation. I was doing Mr. Pink a favor; calls like this were about educating a serious party, not making a pitch.

In the end, though, she didn't think the risks of the marijuana business were suited to the client she had in mind. She then asked if I knew of any other deals in the marijuana industry. I told her about ours, but she didn't think ours was right for her client, either. But there was
another
client of hers, a basketball player, who she thought might be a potential investor.

“He loves the idea of the marijuana business,” she said. “He just can't get into it right now. He's still playing.”

I knew what she was talking about. I had already met with a number of athletes who were in the same situation. Most of their contracts and sponsorship deals carried serious morality clauses. This was intended to make sure that these athletes projected a squeaky-clean image before the public. They couldn't be caught doing anything illegal. They had to stay clear of marijuana.