Your Partner During Highs & Lows
Jonathan Gass: Awesome, well welcome back everybody to another founder sessions. We’re here this time with my friend Jeff, who is an entrepreneur in the cannabis space. I’ll let him intro himself more to talk in more detail about it, but we’re just overall really excited to have this conversation. Jeff, I know that we had an event in this space, now it’s probably nine months ago.
Jeff Samuels: Last January.
Jonathan Gass: I’m excited personally to just see what’s changed since that conversation, given your specialty in this space. Jeff, why don’t you go ahead and introduce yourself to everybody.
Jeff Samuels: Sure. Jeff Samuels, I’m the General Manager of Alpha Root, we’re an insurance technology company focused on the cannabis space, so we’ve been doing insurance for startup companies for the last five years or so, and about three years ago when Now York legalized the compassionate care act here, a lot of news, a lot of changes going on in the cannabis space overall, we just saw a huge opportunity to really become specialized, provide a service, which is insurance, and you know, when you think about cannabis, definitely not the first thing people think about, but we felt it was something that helps legitimize these businesses, it helps kind of bring the companies into the mainstream.
It can ultimately protect the companies if they are in a situation where, you know, they have a massive product recall or there’s some sort of issue that could shutter the company. We wanted to be able to provide that back stop, provide the service to help these guys scale the company, stay in business, and ultimately provide a service that we think legitimizes cannabis.
Jonathan Gass: Yeah and so you were in the tech space with Founder Shield, and then launching this as a cannabis and agriculture product was the next big step for you.
Jeff Samuels: Yep.
Jonathan Gass: Yeah, so what brought you to tech, and then, you know, what about cannabis is a space that really stokes your passion?
Jeff Samuels: Stokes my passion, I like that.
Jonathan Gass: Pun unintended but I should take credit for it.
Jeff Samuels: Pun unintended. So I guess just, very quick on the back story, you know, I came up in the ad tech business, and really affiliate marketing. Shout out to my buddy Rob Schwartz if he’s watching, but we interned kind of in this space during college and kind of got comfortable with you know ad networks and kind of affiliate marketing, as that was becoming a prominent thing back in 2009.
That’s taken me on a journey through a few different tech companies, but, largely in the startup space, and basically long and short, one of the last mobile tech companies I was at, a business called Extify, we were purchased by IBM, so went through a really cool acquisition. But that really kind of gave me the opportunity to see what it’s like working at tech startups, what it’s like being an entrepreneur and growing a business, raising capital and exiting.
And then also, what it’s like going through the acquisition and being on the corporate side of things. So great experience at IBM, and obviously enjoyed that and learned a ton, but for me, you know, definitely a little bit more gritty, I like working with smaller teams where I can really make an impact, so that was kind of my experience on the tech side.
At the time, I knew I wanted to leave IBM and come back down to my roots, again, pun intended, and, I had came across the guys from Founder Shield who just got started at that time, and they were doing insurance for tech startups, I thought it was a brilliant idea based on, you know, my experience the past 10 years or so working with these various startup companies and seeing that as one of the pain points.
So when I came over to Founder Shield, I was the first sales hire, and we kind of worked on building out the business model, how do we provide a good service, which is insurance to you know, fast, high growth businesses, fast paced businesses? So, how do we really attack that and provide a good service for startups in general? And then, again, fast forward a couple of years later, cannabis became one of those niches and one of those emerging industries we felt, holy crap, like this is an awesome business, we need something solely focused on cannabis.
Myself, growing up in pretty liberal environments, and certainly a fan of the cannabis plant and all of the benefits that it brings, it was something that I wanted to kind of attack and take on that opportunity.
Jonathan Gass: So it’s both the opportunistic aspect of it as an industry, I think that attracts a lot of people, but also your core beliefs in that people could benefit from using the products and its foray, and you guys could facilitate, from a business aspect, reducing risk around that.
Jeff Samuels: Absolutely, I think, there’s a couple of things when you look at the cannabis industry, if you compare it to tech in general, a lot of people and I think the numbers are there, it’s growing faster than not only the dot com boom back in the day, but also kind of the modern tech growth that we’re witnessing here. Like, California is legalizing adult use in January, that market alone represents $5.5 billion in sales, that’s one state. So massive opportunity.
We’re seeing places like Canada legalizing and not being run by the government. Internationally, places like Israel and Germany and a lot of other countries are rolling out programs. So opportunity is massive, and for me, you know, it’s yes, the adult use is cool, obviously I enjoy it and I think my peers do as well, but the medical side is also really amazing, looking at, again, places like Israel and some of the studies they’ve been able to do to help people with epilepsy, with cancer, with different ailments, and really kind of use the tool and use the cannabis plant as medicine.
Jonathan Gass: Yeah, how big is the space now?
Jeff Samuels: Massive. I think, for new people, getting into this space, the toughest thing is figuring out what part of the market do you want to attack? Even from like a geography standpoint, you know, being that we’re in New York City, we’re certainly one of the rare businesses that are working on cannabis, although largely growing here, and like High Times is right downstairs, which is pretty cool.
But as you go kind of further to the West Coast, and again, internationally, a ton of opportunity in this space, certainly a billion dollar market overall, and I think it’s really just a matter of like how you want to position your company to provide a service to the space, whether you’re a cannabis grower, you’re a dispensary, or you’re an insurance guy, you know, there are business services that are needed, just like in any other industry.
And I think that’s where people are having success is kind of capitalizing on those gaps in the market.
Jonathan Gass: So you mentioned a couple of different areas, but you know, how would you break down these different sectors, and who are you working with, who are your clients in this space?
Jeff Samuels: For sure. From the sector standpoint, there’s kind of two different ways the industry looks at and the types of companies in it. It’s plant touching businesses, you’re a grower, you’re a cultivator, you’re a dispensary, you’re a manufacturer of edibles, that sort of thing, and then it’s you’re an ancillary service, like Alpha Root is an ancillary service. One of the coolest areas, which kind of brings us back to tech, is the software side of the business.
So anybody who is awarded a license, regardless of the state, there’s something called seed to sale technology, which basically allows a state like Colorado to be able to track every single piece of flower, is what we call the bud, that goes into the ground, that’s ultimately grown, sold, and kind of, you know, transacted to the end user. The way that Colorado is able to say we did a billion dollars of sales, and take that money and put it into the infrastructure, is through these seed to sale tracking systems, which are largely CRMs catered to the cannabis business.
A ton of clients in that space, which definitely, proud to say, I was telling Nam before.
Jonathan Gass: Quick shout out, Nam Lee, the man behind the camera.
Jeff Samuels: Shout out Nam.
Jonathan Gass: Yeah. Good timing on that.
Jeff Samuels: But, you know, these companies are massively important, because it’s inventory management, they’re providing point of sale systems, it’s infrastructure, and it’s all driven through tech. And I think if you look at like any other software that was applied to a retail business like Crape Barrel or Sephora, Ralph Lauren, it’s largely these systems now catered to cannabis.
Jonathan Gass: Yeah.
Jeff Samuels: So we’re seeing a lot of companies, like Baker’s a really cool client of ours, they’re more on like the customer loyalty side of things. Trellis, which is our kind of enterprise software, they’re doing some of the seed to sale stuff. Head Set does dispensary analytics. So a ton of really awesome companies in the space. So that’s kind of the ancillary, our business kind of started with the tech first, which is, you know, obviously what my background is, and now we’re getting more into insuring large scale grows, insuring dispensaries, insuring edible companies, and more kind of the plant touching side of the business.
Jonathan Gass: Wow that’s awesome, and are these things only changing now that it’s been legalized? Are some of these, they’re just aspects of the changing over time?
Jeff Samuels: There’s a ton of different stuff, I think like, when people thought about cannabis maybe five years ago, it’s like, Bob Marley, it’s you know, you’re thinking about like people in tie dye and hippies and this whole kind of old school imagery of the business.
Jonathan Gass: Which is one of the jabs we apply to this thing.
Jeff Samuels: Shout out to Phish. But like, you know, today it’s people who are buttoned up, you know, investors, especially in New York and San Fran, they see the money coming in. Companies like us, again, like, I largely support the plant and the industry, but you know, I like to think we’re a little bit more clean cut. So I think it’s been kind of an adjustment from taking this kind of stigmatized, like, you know, stoner hippie culture, and now this is a legitimate billion dollar industry.
You know, people are changing their lives to enter and work in this space. So I think it’s becoming legitimate using services like Nomad Financial, like bringing in people to do the books, bringing in insurance guys to get product liability, insure to grow. It’s these sort of services that are helping kind of button up the industry.
Diversity is a huge thing, and there’s still like the old school culture and mentality of kind of the growers from Northern California and you know, how this stuff came to the mainstream, it’s still there, but I think now it’s just a little bit more serious and people see the money and the potential behind the plant, and that business.
Jonathan Gass: Yeah, you know, it’s funny you mention investors, and you have people who open up funds to focus specifically on this space, like Poseidon. And then you have your traditional VC investors, like Leer Ventures, you have Leer Hipa Ventures. Who have gone into the space as investors as well. Then that really requires entrepreneurs to be the more buttoned up, to run their business like any other entrepreneur as opposed to ignored space or a space where they know they kind of get away with it.
Jeff Samuels: Yeah, the toughest thing is, every single state has different rules and regulations. But, you know, you’re exactly right, if you want to raise capital, if you want to be able to scale and look at, you know, companies in you know, just a traditional startup industry that are now focusing on cannabis, you can kind of look at them and say how did these guys raise their Series A, how did they scale their business from a staffing perspective?
I think largely, people forget best business practices, if you do the best business practices, and you have, you know, a niche in a corner of the market, you’re going to be successful, and I think that’s something that a lot of our clients do well. And a lot of clients and customers in the space, who are also forgetting to do that, and those are the companies that are kind of fizzling out. So I think, making sure that you’re buttoning up, doing all of the best practices as a business is crucial to the longevity of any cannabis company.
Jonathan Gass: Yeah, so that’s great advice, is there any other advice you’d provide entrepreneurs, particularly newer ones, looking at the space?
Jeff Samuels: Sure, you know, I think as I kind of alluded to before, the industry is massive, there’s so many different needs from not only growers and dispensaries and people to create the product, but again the ancillary services are huge. You know, I think education around the product and especially things like CBD and hemp, which.
Jonathan Gass: What is CBD?
Jeff Samuels: CBD is a part of the cannabis plant which is less psychoactive, or the non psychoactive part of the cannabis plant. Also you can derive CBD from hemp, it’s largely used as a medicine. For me it’s like a healing thing after I play hockey or play a sport, or like my wife Carly likes it as something to put on after she works out as well.
So, it’s more for-
Jonathan Gass: Is it an oil? Is that where you’re kind of putting it on?
Jeff Samuels: Yeah they make it in a bunch of different forms, they’re tinctures, they’re lotions, there’s, you can get a CBD vape pen, or even you can smoke it. But I think like CBD and hemp products, which are taking more of the holistic angle, that’s super interesting because that’s the type of stuff where, from the legality standpoint, you don’t need necessarily a cannabis license to be able to sell and dispense it, and those are the guys who are trying to sell their products in places like Whole Foods and GNC and other like over the counter places.
So I think CBD and hemp, super interesting.
Jonathan Gass: And it’s one of those areas that are expanding.
Jeff Samuels: Yeah.
Jonathan Gass: Because of the increased education and knowledge around this space.
Jeff Samuels: 100%, yeah.
Jonathan Gass: Cool, very cool. And so, you know, you talked about, there’s legality concerns, when you come into this space. There’s a changing landscape, you know, if you’re not into this space but I think we have some people who are just curious about it, what does that look like? To you, what has this changed landscape been? Because maybe you’re on the ground more, you’re running into more people who, they themselves have changed perspective on the industry, or what it means to be a cannabis entrepreneur, which, from the inside we know what it looks like, seeing people who are doing it.
But what do you think for people who are on the outside, still looking, you know, through the looking glass?
Jeff Samuels: Yeah, you know, again, I think East Coast is really interesting, and New Jersey for example, last night, Phil Murphy got elected, he’s a huge cannabis proponent, he said in his first 100 days, he’s going to put a bill into place to legalize adult use. So things like that, which, you know, is the tough part, because this stuff changes every single day.
But, for people trying to get involved in this space, there’s a bunch of really good newsletters, MJ Biz is like one of the biggest in the space, they host a conference, which is next week, there’s 16,000 people that are attending.
Jonathan Gass: How big has that gotten over time?
Jeff Samuels: When I went three years ago, I want to say it was like 7,000, so pretty massive. And now we have like, you know, there are NFL players, ex NBA guys, like, all sorts of celebrities and interesting people who are involved in the business. So that’s really cool to watch it change, but, you know, I think the ways that people can get involved are to keep up on the news, you know, find a couple of newsletters like MJ Biz.
There are a couple of others like New Frontier has a really good daily newsletter. Some others that if you guys email me or you know, I can shoot over, but, that’s huge. I think networking is a big piece of the business. I’m part of something called the National Cannabis Industry Association, NCIA, and I sit on the finance and insurance committee, so advocacy and making sure that these laws and these changes are happening on the government and the politician level.
that stuff’s super important as well, so you know, go on Meet Up, find local groups in your area, and just show up. You’ll learn something every time you go, and I think largely, what everybody says in the space, people want to give you information, people want to help you. It’s a brand new industry, and although it seems like there’s a million different businesses and they’re already kind of you know, leading the way, which they are, there’s still a ton of space, and there’s still a ton of opportunity, so if you want to search, you know, and you want to get involved, go out to the meetings, find people who are in the business, and they will largely share ways that you can kind of get involved.
Jonathan Gass: You know, what’s interesting, in terms of, I think for people outside the industry don’t see or know, was, I was at a conference recently, and one of the things I learned about was, if you think about the voting behavioral changes that were required to pass these laws, it’s mostly being driven by younger people. That’s the shift, I think as far as who’s pushing these boundaries forward, what other folks are catching up.
But from a use case basis, it’s actually, there’s a lot of seniors using the products once they become legal. And it really makes a lot of sense. I met somebody a couple of weeks ago who had both hips replaced, at least one if not both knees replaced, and you know, one of the biggest things is the opiod epidemic, and those pharmaceuticals, and for him, being able to go to Colorado and find pain relief from a much more natural source, is a huge deal.
Jeff Samuels: Yeah, I think that’s why you see a lot of athletes, ex athletes, especially NFL guys with, you know, the concussions and especially also people in the services that come back from overseas, whether they’re in the Army, Air Force, whatever it is, and they have, you know, forms of PTSD. You know, it’s again, the stigma is there, but I think once you look at these type of people, who have the serious injuries, they’ve had to replace hips and back problems and all sorts of stuff, or they have this anxiety from being in war, this plant is really providing massive benefits.
I think that’s where you see like New Jersey, they’ve always had a medical program, and that’s been something that’s been kind of growing over the past couple of years, and now a more progressive guy like Phil Murphy is listening, not only to the youth and millennials who want to legalize this thing, but also, you know, your Army vets and athletes and people that are really using this as medicine. They’re not trying to just get high. Which is a very important and cool part about the business.
Jonathan Gass: So given all the stuff we discussed, where does that lead us? What’s next, where is the industry going?
Jeff Samuels: Yeah, I think, again, the CBD hemp stuff is really interesting to me, just from like looking at the Alpha Root business. The past two, three weeks, we’ve had a ton of inbounds from people trying to come up with new and creative hemp and CBD products.
Jonathan Gass: Has anything triggered that?
Jeff Samuels: I don’t know necessarily triggered, but maybe some good advertising. Like paid content on our end, but I think people are seeing, again, the benefits, and also, it’s less hoops to jump through to be able to produce one of those products. I think largely, like that’s the type of thing that’s going to take cannabis into the mainstream is are the over the counter, the teas, the lotions, the things that people use as a topical, that you can, in the future, get from your drugstores, I think that’s massive.
Obviously more states continuing to legalize it is a big thing. California is, 2018 is the year for California, again, they represent the biggest market in the world, so I think everybody’s looking at California to see, what is the future of cannabis look like? How are they going to roll out these laws and how are these companies going to go from operating in the gray and the black market to now this is a real, legit business. How is California going to handle that?
So I think, you know, knock on wood, we hope you know, a lot of positive things from California.
Jonathan Gass: Yeah, and you’ve had medical marijuana there for quite a long time. I imagine with something like medical marijuana, you have a pretty big discrepancy between income disparity and how you had access to it, where now, that all gets removed, which is going to be pretty amazing.
Jeff Samuels: Yeah, and I mean, you’re not going to need a medical card, although there are different products that people that have medical cards, versus not, have access to. But it’s-
Jonathan Gass: What does that difference look like? Is it the-
Jeff Samuels: Stronger.
Jonathan Gass: So if you’re going on like chemotherapy or, yeah.
Jeff Samuels: Super strong, on the milligram percentage of like an edible that has like 100 milligrams, which is a lot, versus on the rec side, which is usually 10. But, you know, again, there’s so many cool and interesting products, whether it’s like a tea, a drink, the lotions, all sorts of stuff. So I think we’ll continue to see innovation on the products that are out there. There’s no one true brand who’s holding the torch who’s like the Coca-Cola, the Nike, the whoever, or the industry.
So I think that stuff is beginning to kind of form and people are trying to hold that torch. But, yeah, just really excited to be here, it’s something that I’ve become passionate about, and you know, talking about cannabis, so this is like.
Jonathan Gass: Is there anybody that off the top of your head that’s doing really, really cool things? Like Puff Co is doing, like, we work with them, they’re doing some cool stuff in terms of, vapes right, and equipment there.
Jeff Samuels: Totally.
Jonathan Gass: Anything that you really, you’ve seen in the last nine months change in the space or really push something forward?
Jeff Samuels: Yeah, I think one of my first clients in the space actually is a business called Leaf, a buddy Yoni is out in Israel, he’s looking at, how do you take this tool, this plant, and use it at home and cater the growth of a plant to your specific ailments? So he’s working right now in Israel with kids with childhood cancer, it looks like a giant iPhone, and you manage the growth through an app, which is wild, and they’re creating strands based on people’s sicknesses.
That’s super cool. And then, something that I’m seeing more of as of late, especially, based on California’s laws are people catering to, you know, same concept, at home grows. So you’re actually able and legally allowed to grow this plant at home, and now there are services that are helping people set these gardens up and set up a grow system so they can cater the product to themselves.
Jonathan Gass: Very cool.
Jeff Samuels: Customization.
Jonathan Gass: So, if people want to get in touch with you Jeff, how should they do it?
Jeff Samuels: For sure, you guys can check out alpharoot.co, which is the website. You can email me, email@example.com. I think those are probably the best ways.
Jonathan Gass: That’s cool.
Jeff Samuels: You know, I’m always out there networking and trying to meet new people, so certainly open to any conversation about the business.
Jonathan Gass: Awesome, and if you need to reach us at nomadfinancial.com, you can also hit us up at firstname.lastname@example.org, we have a couple of team members who are actually more knowledgeable on cannabis than I am. So they’re always the good ones to connect to this space we’re interested in. Or if you’re in the tech world also, we’re always a good resource as well.
Thanks everybody for joining, Jeff, always a pleasure having you, one of my favorite people.
Jeff Samuels: Thank you.
Jonathan Gass: To say an anecdote before I let him go, one of the first times we met, he just was joining the family over at Founder Shield, and it was a bit of a deer in the headlight situation, how drunk I think everybody got while you were trying to play it. Play cool, you know, first time out, don’t want to push the boundaries too much.
Jeff Samuels: Hey man, I might have been a little high. You guys were on something else, I was a little more mellow.
Jonathan Gass: Thanks for joining Jeff, always a pleasure, and we’ll see everybody next week.