Thinking About Getting Into the Cannabis Business? Make Sure You Follow This Advice From the Experts First

While cannabis’s future has dimmed ever so slightly over the last year as the regulatory environment has become slightly less certain and economic legislation has feathered the breaks, cannabis still remains one of the most attractive industries for entrepreneurs looking to start businesses in promising markets.

However, for anyone looking to get into this growing industry, there are several questions to ask and considerations to weigh before jumping in with both feet. Like any dynamic market, there are opportunities for big wins, but also big losses. Knowledge, foresight, and careful planning can increase your odds.

As a business coach who helps companies scale, I’ve worked with several cannabis-based businesses with interesting and exciting business models. And along the way, I’ve met several entrepreneurs, consultants, investors, and advisors who are bullish on the sector, but also advise caution.

1. Pay for good advice, and follow it.

The laws around production, distribution, and sale of cannabis-based products vary greatly from state-to-state and they are constantly changing and being interpreted differently. Invest in a good lawyer, or two, who knows the laws and has experience working with them in the state and county you’re planning on doing business in.

David Feldman, Partner at the law firm Duane Morris, stresses that it’s critical for any entrepreneur entering the cannabis space to have lawyers with real experience in the area. He explains that the legal complexity of the cannabis business is significant and there are a morass of state regulations that differ dramatically from state to state, and the federal government’s attitude toward enforcement continues to shift.

2. Get a good banker, or four.

The fact remains that cannabis is still illegal at the federal level and many banks and financial institutions will not do business with companies that deal in weed. Make sure your banking partner is comfortable with your involvement in the industry before you become overly reliant on them.

Rick Martinez, a cannabis entrepreneur and investor out of San Antonio, Texas, says the biggest thing to pay attention to early on is your merchant processing. He suggests you have a backup, a backup to the backup, and then one more backup. While most people agree that the banking industry will create more stable solutions in the coming years, it’s still extremely volatile and is a significant risk for companies in the business.

3. Have a firm grasp of the fundamentals.

Many entrepreneurs get into the cannabis business thinking they just need to grow and the money will magically follow. While it remains one of the most profitable crops, you still need a solid business model and the right management skills to turn your product into profits.

Vinay Tolia, founder and managing partner at Bengal Capital, says if you strip away the hype around the cannabis industry it’s really no different from other existing business models: in order to be successful, you must produce a quality product at a competitive price and sell/distribute as efficiently as possible.

Defining a clear core customer, core product/service, and core channel will help you accelerate growth. And getting a tight control over your cost of goods sold and overhead will ensure you are making a healthy profit that can use to fuel your growth.

4. Think outside the bud.

Many people get into cannabis thinking they will be either growing, distributing, or selling plant products themselves. While this is the core of the market and a huge part of the revenues in the business, there are a myriad of opportunities in the cannabis industry that have little to do with the plant itself.

Jenny Argie, founder of Baked at Home in Brooklyn, New York, is becoming the Betty Crocker of pot with her set of dry mixes that allow you to add your own canna-butter or canna-oil to make homemade treats. Argie is just one of hundreds of entrepreneurs carving out their own segment of the cannabis industry without running amok with federal law.

Serious and significant businesses are being built around technology, training, packaging, standardization, real estate, wellness, and many other ancillary products and services to support the market. There are literally hundreds of niches for willing players and serious money to be made.

Cannabis is a huge market with immense potential, but it’s not without its complexities and risks. While some will get lucky and strike it rich despite themselves, the majority of winners in the industry will be sharp business minds with savvy entrepreneurial skills.

Thinking About Getting Into the Cannabis Business? Make Sure You Follow This Advice From the Experts First

While cannabis’s future has dimmed ever so slightly over the last year as the regulatory environment has become slightly less certain and economic legislation has feathered the breaks, cannabis still remains one of the most attractive industries for entrepreneurs looking to start businesses in promising markets.

However, for anyone looking to get into this growing industry, there are several questions to ask and considerations to weigh before jumping in with both feet. Like any dynamic market, there are opportunities for big wins, but also big losses. Knowledge, foresight, and careful planning can increase your odds.

As a business coach who helps companies scale, I’ve worked with several cannabis-based businesses with interesting and exciting business models. And along the way, I’ve met several entrepreneurs, consultants, investors, and advisors who are bullish on the sector, but also advise caution.

1. Pay for good advice, and follow it.

The laws around production, distribution, and sale of cannabis-based products vary greatly from state-to-state and they are constantly changing and being interpreted differently. Invest in a good lawyer, or two, who knows the laws and has experience working with them in the state and county you’re planning on doing business in.

David Feldman, Partner at the law firm Duane Morris, stresses that it’s critical for any entrepreneur entering the cannabis space to have lawyers with real experience in the area. He explains that the legal complexity of the cannabis business is significant and there are a morass of state regulations that differ dramatically from state to state, and the federal government’s attitude toward enforcement continues to shift.

2. Get a good banker, or four.

The fact remains that cannabis is still illegal at the federal level and many banks and financial institutions will not do business with companies that deal in weed. Make sure your banking partner is comfortable with your involvement in the industry before you become overly reliant on them.

Rick Martinez, a cannabis entrepreneur and investor out of San Antonio, Texas, says the biggest thing to pay attention to early on is your merchant processing. He suggests you have a backup, a backup to the backup, and then one more backup. While most people agree that the banking industry will create more stable solutions in the coming years, it’s still extremely volatile and is a significant risk for companies in the business.

3. Have a firm grasp of the fundamentals.

Many entrepreneurs get into the cannabis business thinking they just need to grow and the money will magically follow. While it remains one of the most profitable crops, you still need a solid business model and the right management skills to turn your product into profits.

Vinay Tolia, founder and managing partner at Bengal Capital, says if you strip away the hype around the cannabis industry it’s really no different from other existing business models: in order to be successful, you must produce a quality product at a competitive price and sell/distribute as efficiently as possible.

Defining a clear core customer, core product/service, and core channel will help you accelerate growth. And getting a tight control over your cost of goods sold and overhead will ensure you are making a healthy profit that can use to fuel your growth.

4. Think outside the bud.

Many people get into cannabis thinking they will be either growing, distributing, or selling plant products themselves. While this is the core of the market and a huge part of the revenues in the business, there are a myriad of opportunities in the cannabis industry that have little to do with the plant itself.

Jenny Argie, founder of Baked at Home in Brooklyn, New York, is becoming the Betty Crocker of pot with her set of dry mixes that allow you to add your own canna-butter or canna-oil to make homemade treats. Argie is just one of hundreds of entrepreneurs carving out their own segment of the cannabis industry without running amok with federal law.

Serious and significant businesses are being built around technology, training, packaging, standardization, real estate, wellness, and many other ancillary products and services to support the market. There are literally hundreds of niches for willing players and serious money to be made.

Cannabis is a huge market with immense potential, but it’s not without its complexities and risks. While some will get lucky and strike it rich despite themselves, the majority of winners in the industry will be sharp business minds with savvy entrepreneurial skills.

Nothing Is More Important Than This One Thing To Turning Your City Into A Startup Hub

Why do a mere handful of cities attract startups while so many of them fail? What should aspiring startup cities do to boost their odds of success?

I set out to answer these questions in my recently published book, Startup Cities: Why Only a Few Cities Dominate the Global Startup Scene and What the Rest Should Do About It (Apress, February 8, 2018).

Forget San Francisco, San Jose or Boston.  Let’s take Wenatchee, Wash. as an example.
Would you guess that a rural town near Washington state’s Columbia River is rapidly attracting capital to fund startups? Probably not.

But by February 2018, well over $100 million in investment was headed to Wenatchee, Wash. thanks to its abundant supply of the country’s cheapest hydroelectric power (2 to 4 cents per kilowatt-hour — up to 80% cheaper than the nationwide average of 10 cents).
The startups hungry for that cheap power are cryptocurrency miners who create more bitcoins by using powerful computers that require massive amounts of electricity to solve difficult math problems.

Between October 2017 and February 2018 alone, Wenatchee’s hydroelectric utility had received four bitcoin mining inquiries for 100 megawatts each which would require more than $160 million to build, according to the Wall Street Journal.

Meanwhile, Wenatchee’s 30 recently opened bitcoin mines were turning an old laundromat, a former fruit-packing warehouse, apartments, and free-standing cargo containers into 25-by-25-foot rooms sucking up as much power as 1,000 homes.
Indeed, all that power demand was straining local electricity systems, melting wires, overloading transformers, and caused a power outage resulting in a local grass fire.

The Wenatchee bitcoin mining boom makes it clear that becoming a startup hub can be a two-edged sword. The inflow of capital and jobs boosts local tax revenue and hoists real estate prices. But it also strains local infrastructure which pressures local leaders to act.
Wenatchee’s success highlights an important insight for other cities and towns –there is no point in trying to become the next Silicon Valley.

Instead local leaders seeking to attract startups must identify what makes their region uniquely compelling in the eyes of entrepreneurs. Doing that effectively requires the city to conduct a rigorously objective analysis of what founders view as its world-class asset.
The world hosts over 4,000 cities with more than 100,000 citizens and in the last decade a rapidly growing number have hosted startup accelerators.

A 2016 Kauffman Foundation report found that the number of accelerators in the U.S. grew at an average annual rate of 50% — from 16 programs in 2008 to 170 in 2014 — and held mostly steady thereafter.

In 2016 there were 579 accelerator programs worldwide hosting 11,305 startups which received about $207 million in capital, according to the 2016 Global Accelerator Report. Most (52%) of that capital was invested in the U.S. with Europe capturing 24% with the rest going to South America, Asia, and the Middle East.

But the concentration of venture capital in a few U.S. cities reveals three insights:

  • Accelerators, while evidence of global entrepreneurial aspirations, are a mere sideshow;
  • Most of the venture capital goes to a tiny number of regions; and
  • That capital allocation reveals which cities investors believe are most likely to generate the highest returns – and which they view as money-losers.

According to the PWC Moneytree report, Northern California – with $7.9 billion — dominated the 2017 VC scene with San Francisco attracting $5.2 billion in investment and Silicon Valley receiving another $2.7 billion; New York Metro garnered $2.9 billion with New England in third place with $2.1 billion in funding.

Startup Cities presents the idea of a Startup Common – a collection of six regional resources — pillar companies, universities, human and investment capital, mentor networks, and values — with the potential to encourage a cascade of fast-growing startups over generations.

What was interesting to me was that some cities, such as Stockholm, have created very lively Startup Commons over a relatively short period of time.

The key for Stockholm was a two decade change in its culture. While Stockholm had universities that produced great technology talent, the local culture thought entrepreneurship was shady until Ericsson, one of Sweden’s biggest employers, started firing tens of thousands of great people.

Swedes realized that working for a big company was no longer the key to a secure life. That – coupled with government policies that encouraged startups – led some of them to conclude that they should try to start companies.

They did, and some of those companies – mostly in gaming, music streaming, and wireless payment services -; were acquired. This enriched their founders, who invested their time and money in more startups. It also provided local role models that drew others into the startup scene.

Now Sweden leads the world in unicorns (startups worth at least $1 billion) per capita.
What should cities do? Local leaders should build a compelling vision of their startup hub based on their region’s world-class skill. Chapter eight shows how they can achieve this.

If your city wants more startups, read my book to learn how to turn that vision into a reality.

These Young Entrepreneurs Created the Hippest Business Networking Event on the Planet

What do you do if you’re a young entrepreneur, frustrated by the fact that you aren’t getting invited to any fun, business-networking events? Well, if you’re like the founders of the Summit Series, you go out and start your own.

Founded by entrepreneurs Elliot Bisnow, Jeff Rosenthal, Brett Leve, Jeremy Schwartz and Ryan Begelman, the concept for Summit Series started in 2008 with a single conference in Park City, UT. Since then, Summit Series has grown exponentially, playing host to some of the biggest names in business and entertainment, with speakers such as Bill Clinton, Russell Simons, Richard Branson, and Kendrick Lamar

There are many different networking events around the world, but Summit Series is unique. A merger of experiential learning, TED-style presentations, art and wellness, Summit Series is a hands-on, cross-disciplinary mastermind developed by the Millennial generation.     

Today, Summit Series host events all around in the world. This year’s scheduled domestic events will take place in Los Angeles and New York. The team also holds international gatherings, which include a Safari trip to Kenya and a 3-day summit in Tulum. Last but not least, Summit Series has ongoing events at Powder Mountain, Utah, a private ski resort the company purchased for 40 million dollars in 2012.  

So what do Summit Series events entail, and who gets invited to these exclusive gatherings?

Summit Series events are focused on building a community of like-minded people and allowing those relationships to foster and flourish through shared experiences. Underlying this inspiring, yet slightly vague company focus is the idea of making a positive change in the world.

But you can’t just show at these events. To attend, you need to be invited by a current Summit Series member, accepted through an application process, and then cough up a few thousand dollars or more for admission.

While it’s difficult to tell from the outside looking in, the value of Summit Series events appears to be a combination of three things. The group’s ability to offer talks from top-notch speakers, a powerful and connected network of attendees, and an excuse to party in cool cities, and exclusive destinations alongside this trendy, successful crowd.

So how did five young guys pull this together?

Summit Series didn’t grow up overnight.  Like many startups, they began humbly, cold-calling individuals they respected in the hopes of wrangling guests for their first ever ski-weekend event. When only a total of 19 people showed up, the founders were not discouraged. 

Instead, the guys doubled down and booked a second event paid by credit cards, this time in Playa Del Carmen, Mexico. The second gathering brought some high-visibility founders from the start-up world, which helped kick-start the Summit Series community and provided a much-needed dose of clout. 

Their next big break came when the White House invited Summit Series to produce an event to discuss economic expansion with the Obama administration. Here, the Summit crew succeeded again, bringing entrepreneurs such as Zappos CEO Tony Hsieh, and Twitter co-founder Evan Williams.

From these scrappy beginnings, the network grew, and the events continued. Now, ten years into the company’s growth, the Summit Series team shows no signs of slowing down.

It’s still unclear whether Summit Series is a real driver of social value. Still, whether you believe in their mission or not, this invite-only tribe of entrepreneurs is here to stay. 

Amazon’s HQ2 List is Down to 20 Cities: Here Are the Ones Most Likely to Win

It was huge news last fall when Amazon announced it would be building a second company headquarters somewhere in North America. Of the more than 200 cities which applied to be chosen for “Amazon HQ2,” the ecommerce giant has now whittled the list down to 20 contenders: Toronto, Columbus, Indianapolis, Chicago, Denver, Nashville, Los Angeles, Dallas, Austin, Boston, New York City, Newark, Pittsburgh, Philadelphia, Montgomery County, Washington (D.C.), Raleigh, Northern Virginia, Atlanta and Miami.

It’s an enormous opportunity expected to bring with it as many as 50,000 jobs and tens of billions of dollars’ worth of investment, but in reality only a handful of areas are best suited to be chosen by Amazon. That’s according to Matt McIlwain, managing director at Madrona Venture Group, the most active and largest VC firm in the Seattle area and an early investor in Amazon. He has been investing in machine learning, AI and intelligent apps lately including several co-invests with Bezos Expeditions, Paul Allen’s Vulcan Capital, Amazon and Microsoft. Oh, and one of the managing directors at Madrona sits on the Amazon board. Here are McIlwain’s words on which locations are most likely to make the final cut.

Several Centers of Excellence

Overall, I continue to believe that an Eastern time zone location is the most likely location should Amazon pick one location for their HQ2 city. With that in mind, I believe Washington, D.C., Boston and Atlanta are the top three contenders. However, it still seems more logical to me that Amazon will chose to have three to four “Centers of Excellence” cities where they may commit to 10,000 to 15,000 employees per city and pick those cities for certain areas of deep talent and expertise. If that proves to be true, then Toronto, Dallas, Austin and Pittsburgh become prospects for the “Centers of Excellence” cities.

Washington, D.C., Area

Amazon picked three of the 20 finalists in the greater Washington, D.C., area, which has a long history of telecommunications depth, government work, AOL and international talent. There are three major airports in the region and while traffic is troublesome there is good mass transit. There is also the growing importance of government relations and public policy in the technology world. In addition, Amazon Web Services has one of their largest and most frequent testing regions in Northern Virginia along with their Government Cloud efforts. Finally, it doesn’t hurt that Jeff Bezos is remodeling a large home in Washington, D.C., and owns The Washington Post.

Boston

This region has very strong technical talent and a positive (from Amazon’s perspective) supply and demand imbalance of deep technology (robotics, AI/ML, systems technology) capabilities.  Many of the largest technology companies that once headquartered in Boston (DEC, EMC, Lotus) are gone and even the newest “anchor tenant” GE is potentially getting much smaller. The infrastructure (one airport, older mass transit) is not as good as other cities and the taxes are comparatively high. But, the current governor is pro-business and strategic on trying to attract such a larger and impactful company. Finally, Amazon already has a good presence in robotics and AI/ML in the area.

Atlanta

Atlanta has a very interesting mix of executive talent with companies like Delta Airlines, UPS, Coca Cola and Home Depot and CNN/Turner all being based there. There are substantial strengths in transportation, logistics and technology from these companies and large regional or US headquarters for other corporations (Dallas can make a similar claim). Research institutions like Georgia Tech, Emory and others nearby also help.  Atlanta has a world class airport and strong public transportation although they struggle, like these other finalists, with rush hour traffic. Finally, Georgia has a pro-growth and investment governor and the Atlanta civic leaders have become increasingly strategic on growing their ecosystem. While I wrestled with whether Atlanta or Dallas (and Texas is even more pro-growth with no state income tax), the preference for an Eastern time zone city led me to Atlanta on the short list.

If they go with more than one city, I do think the other four finalist cities above have a strong chance of being included. I just don’t see them picking Toronto if it is truly the HQ2. The one out of those that could surprise me as the sole HQ2 is Dallas.

How Dallas Is Trying to Become the Smartest City in the Country

The City of Dallas is well known for Cowboys and corporate headquarters and but historically it is not been known for tech innovation innovation. 

If all goes according to plan, that last part will change.

Dallas is in the middle of a huge effort to become a smart and connected city. The project is currently in its second phase and when it is complete, it will include features such as free public Wi-Fi, a water conservation and leak detection project, and a smart parking pilot, which will let people use a mobile app to find optimal parking spots. One of the major reasons why Dallas’s smart city effort is notable is because the city has incorporated startups and entrepreneurs in its plans. 

Dallas Innovation Alliance Executive Director Jennifer Sanders and Trey Bowles, co-founder of the Dallas Entrepreneurship Center (DEC), understand startup and built the smart city effort with the intention of engaging entrepreneurial companies in the coalition of more than 30 public and private sector partners.

Sanders says, “We are building something that didn’t exist before – a Living Lab – that is very much a startup in city government. It is essential to have entrepreneurs at the table. They think differently and react in real time. When you need to make quick decisions in an environment with compressed timelines, constricted resources with an uncertain future, it is critical to have small business owners on the team.”

Who’s on the team

Park Hub and EB Systems are two companies that are on the team and are integral to the success of Phase 2 of the project.

Park Hub is a parking technology company that has a niche expertise in moving vehicles in volume for large-scale events. They have serviced the past six Superbowls in addition to hundreds of concerts and sporting events. Their hardware solution, Prime, makes it easy for attendants to accept payments. Their backend system, Portal, provides data to the operator such as volume counts and payment flow.  

EB Systems uses a three-part app, beacon and cloud platform to collect, secure and parcel data collected by the Living Lab to serve local retailers and restaurants. For example, they are able to show that revenues from the District have increased 17 percent year over year, proving that the infusion of capital, talent and resources in the area creates positive returns.

It wasn’t a massive Request For Proposal (RFP) that gave the incentive for Park Hub or EB Systems to participate. The DIA is intentionally creating smaller, more nimble pilot projects. This allows them to test things ahead of time and get results, that then inform a larger RFP process. 

How a smart city stays nimble

1. The Alliance Does the Leg Work 

Being able to plug into a city-approved technology platform is a big win. Smart city projects often require companies to work in the public domain (i.e. they need to access sidewalks, streets, lighting systems and/or pole attachments) in order to access connectivity. Which means they have to navigate a complex web of permits and policies that are different in every city. 

When dealing with smart city technology projects, these bureaucratic processes often hamstring innovation. Dallas wisely circumvented this challenge by building a compressed corridor that gave startups a base foundation on which to build their technology. This ability to test within the Living Lab with full access to wifi and wireless networks promises supersonic progress that is very appealing to smaller companies.

2. Collaboration with Corporations

Sanders says big, global companies are key to the project. She notes, “Powerhouse corporations not only have vast resources, they also have experience deploying technology on a large scale all over the world.”

Learning from these experiences as well as learning how to work with multinational corporations can be of great value to smaller companies. In addition, they are able to showcase their technology to decision makers that could be a lead to future business.  

3. Writing a Better RFP

Park Hub and EB Systems are each doing their part in helping to move the bigger pieces forward, avoiding costly delays from poorly written technical or project specs. By contributing their expertise to these smaller parts of the process, they help the city ask smarter questions. In the long run, this creates a better base of knowledge to build a larger public-works project.

Startups and smaller firms have a big role to play in not only the creation of smarter cities. This inspires a ripple effect throughout the community, proving that innovation is contagious. Sanders is hoping that this kind of activity will invite more companies to build solutions in and for the City of Dallas.

The Smarter the City, the Greater the Potential

Think about it, if you’re a startup with a new technology, you’ll probably choose to invest your time in a city where there is a clear path and open invitation as opposed to one that forces you to wade through a confusing morass of red tape. This is the brilliance of the DIA’s approach which other city leaders would be wise to heed.

Farewell to New York

This piece was authored with my associate Stephen Mulvey, who decamped to London after a year in New York City and reflected on his experiences in the Big Apple.

“I still love you New York…” Ryan Adams said it best. Sang it best. Willingly but wearily. Intoned with fondness. But also with the telltale fatigue of a man whose expectations have been firmly reset by a deluge of days in the concrete trenches.

New York City. I love you like my banged-up Uncle Scott with the gambling problem. And Scott, each time you come a-stumblin’ back from the brink I’ll offer you a seat at the table and a firm embrace, but ...you’re not getting my money anymore.

New York – the band whose hits are so overplayed and glassy to fans that to hear them now, to really hear them, you’ve got to sift through old half cooked b-sides. These are the nooks of the outer Aves and sprawling boroughs that offer the best clues to the city’s character. Dive bars and greasy bodegas and sleepless diners…Crumbling near-gentrified hoods freshly spray painted, dripping character.

Me? Well I don’t have familial ties. I skated in from afar and just as soon as I’d finished being taken in by the glitzy tat (quite soon it turned out), I wanted to know what was happening below. So this past year when I wasn’t busy working I was busy wandering.

And yeah my expectations were reset too. But the shock of a grossly overstuffed subway car, a searingly cold February morning or a $30 bill for what really ought not cost $30 – you numb to these trivialities. You tune in to the little asides. The moments the city peels back and relents. The times it all came together. And it really sometimes did…and mostly didn’t…but when it does…

And I love the New Yorkers. I love watching them navigate it. Their trusty weaponry: snow boots, air cons, caffeine and cream cheese. I loved being a part of it in the early AM. Sliding into the bustle and discovering you could keep pace. And maybe we’re fools, every one of us. Maybe we should pack our stuff and retreat, return upstate, or the midwest or Ireland, or Asia or any place. Many of us will. But I doubt we’ll look back in anger or regret. We’ll simply declare that that was then and that was New York.

It was silly frivolity (brunch), profound beauty (sunsets across the east river), cultural deep diving (vegan Ethiopian food anyone?) and the full spectrum of humanity. It was too much. But muchness is the point. Let’s get stupid just a little trippy here. We’re human and we humans feel the need to matter. Not just individually but as a species, as a thing. So, on our lonely planet we’ve declared a rock called Manhattan the center and faithfully cultivate upon it a screaming ball of us. And maybe just maybe the noise and the color will carry up and away – away across the universe. And some distant other will hit upon it in some distant time on some device, and look on down and through and know. They’ll know and they’ll marvel and think, you know…pizza…that’s a great idea.