High Spirits: The Cannabis Business Podcast

#063 - CEO Roundtable at Benzinga w/ Sunderstorm, Prelude, Speedwell, Wolf Meyer, & Vertosa

AnnaRae Grabstein and Ben Larson Episode 63

What if cannabis businesses could harness the power of AI to revolutionize their operations? Join us as we uncover this fascinating intersection and other topics in our first CEO roundtable following the close of Benzinga Chicago with industry leaders Cameron Clarke of Sunderstorm, Michael Murphy of Prelude, Heather Molloy of Speedwell Partners, and your hosts, Ben Larson of Vertosa and AnnaRae Grabsteinf of Wolf Meyer. In a rapidly evolving landscape, they share their strategies for navigating global expansion, leveraging AI in dispensary operations, and crafting investment approaches in a market contending with ongoing federal restrictions. From the excitement of product expansion into new territories to the intricacies of strategic retail partnerships, this discussion offers a front-row seat to the future of cannabis.

As the cannabis market continues to grow, understanding the dynamics between the hemp, illicit, and licensed sectors becomes essential. Our guests dive deep into how legalization is reshaping the industry and the role that hemp, especially in the beverage industry, plays in attracting new consumers. They share insights on predicting market shifts, the importance of strategic foresight, and the surprising growth in unexpected regions like Texas. This conversation emphasizes the need for business flexibility and forward-thinking strategies to stay ahead of regulatory challenges and consumer behavior trends.

What are the unique challenges of operating in a federally illegal market, and how can companies optimize their supply chains despite these hurdles? Discover the answers as we explore the competitive landscape, the role of AI in customer experience enhancement, and the financial complexities of the industry. Our experts discuss software innovations, such as Acumatica, for cost-effective operations and exciting prospects for global partnerships. Listen to this episode for an enlightening look at how cannabis companies can strategically harness technology and policy insights to thrive in this burgeoning sector.

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High Spirits is brought to you by Vertosa and Wolf Meyer.

Your hosts are Ben Larson and AnnaRae Grabstein.

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Remember to always stay curious, stay informed, and most importantly, keep your spirits high.



Ben Larson:

Hey, everybody welcome to High. Spirits. It's episode 63. We're live after Benzinga. We're live after Benzinga and we're here with a few of our friends. You got Ben. Larson and Ray of course, heather Malloy. We have two new friends to the show, cameron and Michael. We'll get through introductions in just a bit. Yeah, it's good to see you all. Thanks for joining us. Glad to be here. Thanks for joining Early Thursday morning after the whirlwind that is Benzinga.

AnnaRae Grabstein:

Benzinga brings together lots of executives from around the industry, so we thought it would be fun to do our first CEO roundtable and to bring CEOs who hold different roles and different perspectives in all different parts of the industry so that we can think about what is ahead and start to get some predictions. But also one of the things we talk about a lot on this show is how businesses need to be flexing internally in order to be resilient and plan for the future so they can execute on their visions and goals, and so we're excited to talk about that and kind of get your guys' reflections on everything that you took in over the last few days and how it might be going into the next few months as you roll things out in your own respective spaces. So let's get started with some intros. If you would each go around and do a quick little introduction, that would be great, cameron.

Cameron Clarke:

I'll start. So. I'm Cameron Clark. I'm the CEO and co-founder of Sunderstorm. Sunderstorm owns the Kana brand of edibles, although we just bought a vape company in Nevada called Bounty, which now have launched Kana vapes in Illinois, and both our babes and gummies are doing really well in Illinois, so we're excited about that. We operate in multiple states in the US and recently we've opened up in Thailand, so we are now a global brand. So we're excited about that and I'm glad to be here as one of the largest edible brands in the country. Excellent.

Ben Larson:

Yeah, welcome.

Michael Murphy:

Well, I'm Michael Murphy. Nice to be here. Thanks for the invite. Co-founder and CEO of Prelude and at Prelude, what we've built is an AI-powered solution that helps dispensaries reduce excess inventory and miss sales, with the ultimate goal of improving cash flow and profitability. So we have partners in a few states. I've been primarily focused on retail. We're starting now also to partner more on the brand side as well, which is cool.

Ben Larson:

Yeah, all right, I know, that's the buzzword, right yeah, that's what you have to say in order to get. You're the one taking all the investment.

Michael Murphy:

Yeah check our deck from three years ago. We were at before the hype came around did you call it machine learning then? You know depends. I'll use it by the end of the session.

Heather Molloy:

That's good I'm heather malloy. I'm the ceo of a fund called speedwell. We've been investing in the equity space for the last I don't know year and a half or so. Prior to that, I ran mergers and acquisitions at terrazone and I've been in the space for about 10 years awesome and heather is a repeat guest on the show I think our first one oh, I'm really thank you.

Heather Molloy:

yeah, thank you. I think you had somebody else come back. No, no, I think I think you're our first one. Oh, thank you. Yeah, thank you, I think you had somebody else come back.

AnnaRae Grabstein:

No no, I think that. I think you're literally our first repeat guest. Yeah, we are planning on having Hirsch come after the election and do an election breakdown with us, so there'll be a repeat. Yeah, thank you for being our first repeat. Thank you for having me. Yeah, absolutely, and you guys know us. I'm Anna Rae. I'm CEO of Wolfmeyer. It's a strategic advisory firm and we help people all across the industry doing different things.

Ben Larson:

I think that might be the first time we said that on the show.

AnnaRae Grabstein:

Possibly we don't talk about ourselves.

Ben Larson:

that much Do people even know what we do I'm not sure. I'm Ben Larson, ceo of Virtosa and we do. The active ingredients for products like coffee which I saw Lisa. Yeah, she was in the gym this morning. Those are just making me feel bad all around. So what are some?

AnnaRae Grabstein:

takeaways. Like what did you guys think of the last few days?

Cameron Clarke:

Was it what you thought? I'll start? Yeah, it was definitely a hurricane, but you know what this?

Cameron Clarke:

my first Benziga conference actually, which was kind of odd. But you know what? My first Benzinga conference actually was just kind of odd. It was one year ago here in Chicago and I was excited about that conference. But this conference actually blew the doors down from last year. I thought they were great attendees, I had terrific meetings, it was just nonstop valuable insights and potential partnerships for us. So it was completely invaluable. It was fantastic For us. It's valuable because we need a lot of different things. So we're always looking for different types of technology. We're always looking for different potential partners, regional partners in various markets and then also, now that we're global, we're looking for a lot of international opportunities and there certainly is an international component here. Advancing Betzinger.

AnnaRae Grabstein:

Were there people that were setting stuff up in other countries, absolutely when. Did you see what kind of country I met people that are doing stuff in Africa.

Cameron Clarke:

I met people that are doing stuff in Europe. A lot of Germans, a lot of Germans. Yeah, what's going on in Africa? You know what? Yeah, there is.

Cameron Clarke:

I had no idea, I mean it never ceases to amaze me about when some new country pops up and you're like the cannabis has been sold in that country. But apparently there's a few countries in Africa that are actually importing cannabis products From Canada, from Europe, apparently. Yes, yeah, very surprising. Glad to hear it. For me and for all of us. I think the more the global market develops, the better it is for all of us. And, to be honest, the US is challenging and difficult and we have to operate separately in different states. Right, because it's fairly illegal, but for the globe, right, for the world, you can manufacture in one place, ship all over the world. So as global markets develop, um, I think there is opportunity for all of us and, just out of curiosity, jump in.

Michael Murphy:

you mentioned that you're starting in thailand or have started in thailand. What would what?

Cameron Clarke:

why thailand compared to you know some other, so we, actually we actually operated in canada a few years ago, um, and that was our first foray into into kind of a global market. But, uh, my background is international trade. I've done years and years of international trade in a previous life. So I worked in thailand, uh, and understood asia and thailand. And when someone came to me and one of our partners said, oh, I've got an opportunity in thailand to just be scheduled, I said I'll go over and take a look at it in five minutes. I looked at the market, said I'm in. How do I, how do we get started? For a variety of reasons. Number one is the first place in asia, um, and secondly, when I was there, they just basically blew the doors down. Cannabis was being sold everywhere. Um, my partners I found some partners that were very well connected with the government. Uh, one of the first five met the license holders there, so they were stable.

Cameron Clarke:

And our model when we open up in different markets is always to find a partnership, either a joint venture type operation or fall under someone else's license. So we look for really good partners and, to be honest, I always say the single most difficult thing in business is finding trustworthy partners. That's so important in this business. That's for sure, right. So I've definitely been screwed in the past plenty. So I look for good partners. When I find a good partner, I'm all in. There's just a lot of excitement and the margins are great in Thailand. We have a 90% gross margin, I think, in Thailand. Wow, it's pretty amazing. I don't know how long that will last. Thailand is one of the five tigers, so they have a big nutraceutical industry. They've been exporting all over the world for decades, so for us it's just a great opportunity to be able to plant a flag and be able to sell cost effective products all over the world.

AnnaRae Grabstein:

Wow yeah, Michael, I know from talking with you that partnerships on your mind a lot right now too.

Michael Murphy:

Yeah, how are you approaching partnership? No for sure. I think what struck me the most about this, Benzinga, is the amount of conversations that I've had with other tech companies that either are tangential to what we're doing or express interest in doing what we're doing at some point in the future.

Michael Murphy:

But a lot of times companies have big cabbage, happy cabbage, like all these. But yeah, I mean there there's basically just a general vibe. I get at least on the tech side of all right, well, let's pick our lane, let's specialize, like, rather than try to build everything internally. Like you know, there are a hundred sequoia backed tech companies in the cannabis industry, so people are actually looking to pick their own lane and then partner, you know, with other companies that could potentially complement that offering, which, frankly, has been a very different vibe than kind of the experience that I've had in the three years now being in the industry. But, you know, welcome to it, because you know we foundationally believe, right at the end of the day, specialization of tasks is how we can all go further faster, and that was one of my big takeaways from the conference go further faster.

Heather Molloy:

And that was one of my big takeaways from the conference.

Michael Murphy:

I think the other and I don't mean to bring up, you know the, the, the big, the other buzzword I was shocked by the presence of him at Benzinga or any show that I've been to. Compared to you know the past, you know three years in the cannabis industry. I won't take us down that rabbit hole yet, but that was just another big takeaway. You know, it seems a lot more people who have not been paying attention or have been deliberately not paying attention are now starting to think about is this an opportunity that's right for my business, which I thought was particularly notable compared to past events?

Heather Molloy:

Yeah, but I think that also when you think about what's happening or what we think the forecast is going to be, so it's like scheduling conversation will happen in december. The hearings and the scheduling language that we all read, I think, was, like you know, this is what's going to happen on the schedule, except as it relates to hemp is defined in the farm bill. That was like the first pass of, I think, the language I saw, and so when I looked at the changes that were kind of being proposed in the Miller Amendment around hemp and then calling some of it industrial and some of it non-industrial, I was wondering how that would integrate into the schedule. And so I think the hemp opportunity is super interesting for investors that have the ability to deploy capital into that lane to see if it works. But as an investor it's very hard to navigate. So, like I've been, and I was having some conversations with some investors that are like you just have to go, you just have to run at it, and I don't think that that's my capital right now.

Heather Molloy:

Is that Ian? Yeah, love you Ian. And so what I said is I said, well, I hope I get a second bite of the apple because if it works. The amount of working capital that these beverage companies are going to need to take the national distribution orders is going to dwarf whatever they're looking to raise right now, and so hopefully there's a second bite of the apple when there's like greater regulatory certainty. But it is. It's hard to sit back and watch what's going on and watch what's going on, but my last two deals have been more supply chain related on the hemp side, because I'm thinking about the cannabinoid market becoming a global market and not necessarily only a flower market, and I'm not really just thinking about, I guess, the kind of traditional adult use rec market. I'm thinking longer term about how will cannabinoids be ingredients, how will essential oils be ingredients and how do they integrate into global supply chains, and that's that's kind of the only way I can think about it right now.

Heather Molloy:

That's exactly the way to look at it I mean, I mean it's interesting, right.

Cameron Clarke:

I mean, we all, we're all very passionate about cannabis. We know we're. We've been driving this, this, this culture, this cannabis culture, for years, um, and and we're thrilled to be able to deliver it into, you know, these populations that need it. But, to be honest, cannabis cannabis is an ingredient, right, it's a powerful plant medicine that can be incorporated into all kinds of products. But it's not only about cannabis, right, it can be used as an ingredient.

AnnaRae Grabstein:

So I totally agree with you on that perception and while I did see a much larger hemp presence um at this event than I have when we say next, are we saying like beyond hemp beverage.

Ben Larson:

Well, so that's what I was gonna say is.

AnnaRae Grabstein:

I was gonna say that I think that I I will say that there's there's a difference within the hemp space that is starting to become more prevalent as it's becoming more clear that there is going to be some type of regulatory future for hemp-derived cannabinoids and there's starting to be the separation within people that make hemp-derived products that I see the inhalable products and the non-inhalable products that include beverages and edibles and in those beverages and edibles, more the low-dose folks. Those are the people that are showing up to integrate into a more professional environment and to become a part of the policy discussion. I did not see THCA pre-roll DTC companies at this conference looking to scale. I think those are much more short term folks that are looking to stack cash in the interim while there's a gray area in the law, and they're probably not targeting people like you, Heather, to talk about a five-year plan.

Cameron Clarke:

There's not a lot of five-year plans. They're already making enough money in there.

AnnaRae Grabstein:

Yeah, it's like let's stack it now and then realize that there's not a long time.

Ben Larson:

I was actually talking about this with the flower hire guys. They were saying that they don't even have staffing plans. They're just like scaling up and trying to just kind of capture as much as possible right now and not thinking about how many heads are going to need to hire at the end of 2025.

AnnaRae Grabstein:

Yeah Well, we like to think about the future. You know what?

Cameron Clarke:

You know what I think? A lot I think for a lot of us it's easy to kind of get stuck in the weeds right, to be very, very granular about how we see all these markets developing. But what I tell people is that you've got three markets right. You've got the hemp market, you've got the illicit market and you've got the licensed market. To me, that state has $100 billion markets, massive market. It's a massive market. And when you step up to the 65,000 foot level, what you see is this market, that there's all kinds of products being supplied into various corners of this market, but as you dive in, you see a lot of fraudiness. There's a lot of regulation changes, there's a lot of structural changes, different products popping in and out of different places, but what's really happening is the legalization of cannabis. That's what's really happening.

Cameron Clarke:

And, to be honest, hemp is. We've dealt with challenges for years. I've been in this industry for 10 years as well and we've dealt with all kinds of challenges and we will continue to deal with challenges. And this is just another one. But to me, what hemp has done and the beverage market is certainly demonstrating this is we are adopting new consumers very, very quickly and, to be honest, one of the things, one of my big complaints about this industry is we've done a terrible job, to be honest, as an industry, of bubbling up outside of a little cannabis subculture and all fighting for the same turf when there's all kinds of consumers around us that are really willing to adopt For our products there are. They're using gummies to sleep in that that. That's valuable, but that's a tiny subset of the real opportunity. And hemp the beverage market. You know, when you go to minnesota and you see a bunch of people walking into total wine buying these beverages, left and right, they are now full adopters of cannabis.

Cameron Clarke:

To be honest, it's it's, uh, we're, you know, for us, for we're, it's, it's in the license industry it's we're looking at, it's like, oh my god, this is a, this is a big problem, but at the same time, it's legalization of cannabis and I think that we just need to figure out a particular action so my husband's got started on the hemp drinks and now he drives to a dispensary in new York to buy drinks because the supply chain so you heard it here.

Ben Larson:

Yes, we need to know that because we've been talking about this theory.

Heather Molloy:

but it's tested. Yes, I was talking to anchor about this because, like the question I think a lot of these MSOs have is like what we were talking about this last night what's the value of a retail chain going to be down the road if cannabinoid products expand into all these distribution channels? And I think as consumers we want them in all these channels. We want them to be safe and effective and age tested or gated when appropriate. I don't think all cannabinoids probably really need to be age gated. I'm guessing when you look at some of the data on the non-psychoactive stuff it's therapeutic, so it's just such a broad plan with so many applications. But so for him he's like okay, well, what do I order? And I think the first beverage I ever ordered was like d8 seltzer.

AnnaRae Grabstein:

Like it was like because I looked up like bean soda online let's try this and so we tried that.

Heather Molloy:

And then we kind of like went down this rabbit hole of hemp drinks and and he's like, but I can, just where can I buy them in New York? And I said, well, if you go to the dispensary, it's tested, it's New York sourced, reputable brand, good flavor profile. And so, yeah, now he went from never going into a dispensary in the 10 years I've been into the industry that now, like you know, once a month he's stopping and he's the beverage guy and he's the beverage guy.

Cameron Clarke:

Yeah, that is a great story and I think it's an example of what's happening all over the place.

AnnaRae Grabstein:

Yeah, and we see it. There's lots of states in the US that have regulated alcohol in kind of unique ways, where there is hard alcohol has to be sold in a different place than maybe a low potency beer.

AnnaRae Grabstein:

And so, yeah, I think about it. So what you were saying, cameron, about broadening the consumer base, that having broad access to cannabinoids can be an on-ramp into the adult use market for the consumers, that never materialized, like your husband, before. Because if, if somebody has some low-dose stuff and realizes that, oh actually I kind of liked the way that made me feel, use it for sleep, maybe I want to try something else, or or learn about more products.

AnnaRae Grabstein:

So that's, yeah, I think it's exciting, complicated, but exciting. Yeah, well, let's, let's talk about strategy. You know you guys all have a lot of stuff going on in the way that you're approaching the industry, and Ben and I, over the past month or so, have both been talking about the way that we have, in our own companies and with our clients, have been planning for next year. It's a good time to do that. If you wait till next year happens before you think about next year, you're way far behind. So I'm curious from a leadership perspective which is kind of where I always like to start when I'm thinking about how businesses succeed is starting with the humans. Like, how are you guys individually approaching, leading your teams to think about next year?

Cameron Clarke:

Yeah.

AnnaRae Grabstein:

It's like a me yeah.

Cameron Clarke:

Because I have a plate that's so full. My team hates me. I drive them crazy because I see so many. There are so many opportunities in this industry and we sometimes forget about that, and I like to move the ball forward in a lot of different places, and I think one of my one of the things I'm decent at is is looking for opportunity and try to take advantage of it, and so, for us, we're moving the ball forward on multiple fronts. Number one in the US. We have to be in more markets than the US, so we've got a couple more states that we're working to launch in. Again, we just launched here in Illinois, so we're excited about that. We have taken on vape, so we're going to roll in our vape line as well. We just launched in California our new minis, which are an M&M, which are super exciting.

Heather Molloy:

Everybody was raving about those the other day.

Cameron Clarke:

I'm sorry I ran out. They're 4 milligrams THC as opposed to 2 milligrams of a minor cannabinoid, depending on which one you have. So we have 1ST, cb, cbg and CBC yeah, yeah, and they melt in your mouth, not in your car, that's what I tell them Great chocolate butter. But so we're moving that forward, so we're moving new products forward. And then the global markets. I mean, that's been really high on my plate. We talked about Thailand earlier. You know we're able to export around the globe, so we are looking out for markets around the world to be able to sell um, sell our products you export from, from thailand, absolutely yeah, and I think for us.

Cameron Clarke:

You know I came in this industry because I'm a huge advocate of plant medicines.

Cameron Clarke:

I've done all kinds of interesting stuff, lived in the amazon for six months, so I've done some interesting things, um in previous life and so I really appreciate the wellness aspect of the plant and I feel like with our global story, we can tell more of that wellness aspect. So we have signed a deal in Japan for CBD products and so out of Thailand, we're already on that path. So we are new product categories, new markets in the US and then new global markets, high complexity? Yes, indeed, and that's why I just hired a VP of strategy to figure out how to get it all done. Congrats, thank you. But I do think it's good to focus, and I will mention one of our competitors here Wild. I appreciate their ability to stay very, very focused in what they do and they've been highly successful at that, and we've watched that from afar and they're a very tough competitor. But I think that our strategy is really to just build a global brand with really amazing products and enter into different markets.

Cameron Clarke:

I will also say that we are also in the hemp market. We've been looking at that for two years. We entered the hemp market a while ago. We've been testing different parts of it. We do not do anything in hemp that we do in the licensed markets. So there's no overlap. Don't anger the MSOs.

Heather Molloy:

Well, not just the MSOs. I am Well, it's not just the MSOs.

Cameron Clarke:

I would never compete with our customers Like in California. We never retail, yeah, retail. It's like why would I do that? I don't even want to sell on my website, right, We've never really pushed sales through our website. I want to sell through my retail partners.

Ben Larson:

We've talked about that a lot with a lot of beverage companies because it is direct competition especially if you start doing pricing differentiation. It's like creating different SKU sets for the two venues.

Cameron Clarke:

Yeah, you have to be really smart about that. We highly value our retail partners everywhere. It's important not to piss them off.

Michael Murphy:

How long do you think, and realistically, the retail layer of the industry can continue to be kind of the gatekeeper for that end point sale? Because, you see, another retail category is right, obviously, with proliferation of e-commerce, there was always this concept that you know, or there was this fear that physical retail would become obsolete, but obviously it hasn't. And now you see exact dynamics where there are, you know, businesses selling products online direct consumer and also through third-party customers.

Cameron Clarke:

I have a data point that we can all talk about with that. Super interesting and I was kind of shocked about it when it came to me. So we actually have a sales rep on the ground in Texas running around selling into B2B stores in Texas. Yes, but they're selling everything right and it's booming in Texas and you've also got, just like Minnesota, you've got breweries on draft selling D9 drinks. I mean, it's incredible $6 to $8 billion retail market for hemp products.

AnnaRae Grabstein:

Incredible, incredible, wild. Yeah, the biggest cannabis market in the country Basically. Yeah, that's incredible. Yeah, the biggest cannabis market.

Cameron Clarke:

Yeah, and one of the largest retailers there, who it is. We're in many of their stores and they they said to us, they said you know what, we know that you know when someone, when, when our consumers comes in that store, it comes to our store and they buy your product, you know many of them will go and then go find it online and they'll buy it online and we know that's just a natural. That's just a natural course of course of business. We just want to make sure that we're not being undercut by too much, because sometimes they'll come in the store because they're driving by and sometimes they'll buy online whatever, but they they do. It does seem like some of the retailers do understand that that there is, that this is sort of normal course of business at CPG, and I do think the manufacturers and the brands have to be very smart about how they price it, because ultimately, you want to give consumers a choice, but we all need these retail outlets Totally, so do you create?

Ben Larson:

tax or not, tax parity, I'm thinking about policy. Do you price?

Cameron Clarke:

parity. We are very sensitive about how we price our stuff online and how we price it against uh in our retailers. Yeah, and we tell them that.

AnnaRae Grabstein:

I think it's really smart because I think a lot of brands get swept up in this idea of direct to consumer because they look at a spreadsheet and they see that they get to capture the full retail margin or a much larger margin. But what's missed in that is the cost of acquisition of a customer to get them to your website and there's so much more momentum and potential throughput at a retail store because that store is responsible for getting customers through that door. And, yes, you're going to take a haircut because you're selling it wholesale instead of a retail price, but the ability to touch so many more customers in that environment is it's just if you're building a brand, you have to do it all.

Cameron Clarke:

Yeah, you have to, you have to. You have to do it all. Right to that point, though, I am shocked at how successful people are being with their subscription uh, for products like this.

Ben Larson:

Yes, like 30% of their online sales are subscription. Yeah, that's just repeat customers and you know, just consistent revenue. It's crazy and we're talking about 40 to 60% of revenue coming from direct to consumer for a lot of these brands.

AnnaRae Grabstein:

Do you guys sign up for subscriptions like that on Amazon, where it's like buy the shampoo next month again?

Cameron Clarke:

I never do so I do like. Sounds like shampoo next month again. I never do I do. Sounds like we all like to work out. My protein powder gets shipped.

Heather Molloy:

My amino acids, my Elysium supplements.

AnnaRae Grabstein:

Because you know you're going to use them at a certain amount. That makes sense.

Ben Larson:

I have one of those old man pill organizers. It's got like 20 pills in it every day.

Heather Molloy:

Yeah, yeah that and laundry detergent.

Ben Larson:

Why did you do that, yeah? I mean and paper towels it took me a while, but like once I broke the seal and I just started adding things to it, it's like why not take the 15% off? Good, I'm just checking. All right Back to the. I'm just checking. It was prime date this week. I just got the notifications while we were at the show Heather. I'm curious for you.

Heather Molloy:

How are you thinking about it, planning for next year? For me, I feel like it's no different than for any entrepreneur. So we had our first fund close. We're pretty fully invested. Now we're expecting to have a second fund close, depending on how successful that is. That will determine how 2025 goes, and that's basically to stay focused on equity. And then the question will be I think there's a lot of funds out there right now that are converting to the credit opportunity because it seems like that's an easier thing to raise, for I'm still more interested in putting equity into companies than levering them up right now. I think, like a lot of this, debt is problematic for companies and you're seeing people are trying to work their way out of it and they're working their way through the story of like well when 280 comes, then we'll be able to pay down our tax liability and our debt liability and maybe sort out our working capital problem.

Heather Molloy:

And maybe sort out our working capital problem. So it's like the debt thing. I think in certain circumstances it can be a very valuable tool and I get why some people are doing it. But I do feel like a lot of groups are taking debt that should be taking equity and they don't want to take the equity because the valuations are so low. So it's just so. On the investing side, I guess it's like TBD. And then I'm very curious about how the market is developing and I'm trying not to have a closed mind and my thesis at the two years ago versus I don't think I'm going to attend MJBiz, it's so overwhelming to me.

AnnaRae Grabstein:

But there's a policy day happening out there with Vicente is putting together.

Ben Larson:

Are you?

Heather Molloy:

going to that. I'll send it to you, but so it's a bunch of policymakers that'll be in Vegas talking about policy at MJBiz. So I'm going to go that way. I can see some people that just kind of stay focused on policy and then, with portfolio companies, really trying to do whatever we can to help them strategically. So not trying to have our hands in their business, but be there to help when they have questions or if we can make introductions, and so I think we've been at Speedwell pretty good about connecting our portfolio companies with opportunities that have helped them accelerate the business and I definitely want to stay focused on that.

AnnaRae Grabstein:

I want to jump in, I want to actually double click a little bit in policy discussion and ask you about why policy matters so much to strategy in Canvas when you're writing checks and space, and and how different policies may or may not affect your willingness, interest and kind of engagement types. Yeah, of companies like what is it you're looking for to happen in policy?

Heather Molloy:

I'm like this is probably terrible. So I feel like there's been a lot of enthusiasm in space, like we have these good catalysts and things are going to get better, and I I don't know if we're at the beginning of a new 10 year cycle of like things being incrementally better but still really, really hard, and if we don't get improvements in terms of support at the federal level, where they say we are hands off if it is a state legal business, if it's cannabis, there will be no federal enforcement or rules. I think that helps grease the wheels with financial institutions to the extent that they may or may not be able to get policy through. That helps making financial transactions easier. Listing um, I think then the hemp opportunity is going to run exceedingly fast and cannabis is going to literally get left on the the wayside.

Cameron Clarke:

I completely agree with you. And these hemp guys have capital and they're stepping into.

Heather Molloy:

They're trying to step into our side of the business, right, but then also, like cpg can do hemp see like, so that the all of the issues that we're all trying to work our way through this regulatory flagmire. If hemp stays protected and what I'm hearing is that it's likely exclusively beverage and low dose, and then the dispensary channel stays high dose, but none of that is done. The farm bill is not done, it's likely getting kicked. So that's going to delay any certainty, which means that the hemp market is going to continue to develop and it's not. And then it's going to be way harder to control. And then the question is even if they do regulate it, what's the enforcement? Do people actually stop their activity?

Heather Molloy:

And the only way that's going to kind of settle out, I think, is if, like, the payment processors are saying to retailers or e-commerce sites like, we will not handle your funds, and if that doesn't happen, then I don't see how the market close, I don't see how this market closes. So I think, from a regulatory side, it's kind of like understanding where capital will flow, where value will flow and where exits will be created. And so if cannabis gets locked on this island of no uplisting, no ability to transfer, no ability to be acquired, these quirky transactions where it's like we have a call on your company when it's federally legal. That's a really, really difficult moment to capture if you're trying to raise money, to get investors excited about an opportunity, because I have things I invested in 10 years ago that were supposed to be three to five years and they're still sitting unharvested.

AnnaRae Grabstein:

And then flip side of that like what if the right thing happens, then what's?

Heather Molloy:

well then I think it'll be so much fun. We're gonna get called by like every fund manager out there. That's like, hey, our clients or any you know wealth. And all these people are gonna be like, hey, our clients are asking now about how do we get exposure to the space. That's right. And then there's going to be this amazing opportunity for all of us to work with, work with join, to come like big financial institutions, regular way funds have the benefit of fully robust capital markets.

Heather Molloy:

Um, so if the regulation starts swinging in the right way, which I I think hemp inadvertently is like pushing it that way, because now this normalization is happening so fast and it's shifting the perception of like who is consuming, because all these states that couldn't pass, couldn't pass medical, are like the largest markets in the country. So it's, I think it's interesting because it is actually converting, I think, from the illicit to the hemp market. And then I would like to see the hemp and the medical, or the cap, if we say hemp and cannabis. I would like them to just become one, one market. And I think I kiddingly said to you and maybe I said it last time we talked if they would just change the farm bill to be 30% THC, then cannabis would just be hemp and everything just be done and everything would be done.

Heather Molloy:

That's amazing. But why not just like I mean it's a difference without a distinction like just literally start, like if you can't get it through this other path, like just use the tool that you have in hand and then regulate so that's FarmGate and then regulate the consumer products, which I think is what Widen is trying to do?

Cameron Clarke:

Yeah, I think your comments are incredibly insightful. I totally agree with everything you just said and it's so interesting to me, which is rare, by the way, we got smart people to help right, that was the idea.

Cameron Clarke:

But you know, when I look at the markets, three years ago you had, like I said, before you had- the illicit market you had the licensed market, you got the hemp market and what's so interesting is that the consumers would not cross over into the other markets. The illicit market guys would always just shop that they would buy that product. The hemp buyers would only buy the hemp product and the licensed would only buy the license. But now you start to see the crossover and you mentioned it the illicit folks are actually walking into the hemp stores, the CBD stores, and buying hemp products. That's starting to happen now and you know, like your husband right, he's crossing into the license. So these markets are merging together. That's what's great about this industry. It's just really frothy and complicated, but I think that these are exciting times.

Ben Larson:

I do feel like things are changing and it's going to be good for all of us, as long as we can figure out how to navigate it.

AnnaRae Grabstein:

Yeah, I hope so.

Ben Larson:

Stop writing, yeah.

AnnaRae Grabstein:

And then I want to come back to you.

Heather Molloy:

You were saying about the portfolio support, which I interrupted, and then, and then we'll talk to michael about what he wants to do 25 so I mean, hopefully I have a ton of money and I'm investing, but that's not so, um, I don't know that that's going to happen realistically. So I, you know, always talking to our portfolio companies that's what's great about being here is like you're sitting at the bar in the hotel and all of a sudden you're like wait, I want you to meet this person and you can give the quick like intro. They see each other and then things start happening. So I really do like the in-person meetings here, and I was talking to Elliot and he said that I think Benzing is going to drop down to one event a year now in Florida.

AnnaRae Grabstein:

They're not going to keep doing two, which I was bummed about because I actually really like this event. I like Chicago better than Florida. Yeah, I agree with that.

Ben Larson:

I think it brings more of the whole thing together. It does, but I didn't feel there was a different vibe between the two shows. Miami has a different vibe than Chicago.

Heather Molloy:

Yeah, miami's a fun vibe, they said there's a lot more people there too, which I didn't realize.

Cameron Clarke:

I feel like this is very big. No, it didn't, it's interesting, I feel like this week was really busy.

Heather Molloy:

Yeah, it was. It was devastatingly busy. It was just too many meetings. The app didn't convert to my calendar. I can't do two things at once. If it doesn't go to my calendar and I'm like I can't do two things at once, so it's like if it doesn't go into my calendar, it's not happening.

Cameron Clarke:

So I think I missed like 100 meetings. It took me three hours just to go through the list of all the people.

Heather Molloy:

Can you please develop?

Ben Larson:

some.

Heather Molloy:

AI tools yes, please.

Ben Larson:

That's not expected.

Cameron Clarke:

I do want to hear about the upside here, because retailers need to save money. So anything you can do to make the retailers more efficient is for sure, and I think actually well to take a big step back like.

Michael Murphy:

What's been pretty cool about what we're building is that we've stayed very on course with our vision since day one, which is we have to create the intelligent data layer across the entire supply chain to, in a future state, ensure that the plants being planted in the ground are ultimately based on the true consumer demand signals from the point of sale. That's where we're going, I think, what's been cool so far. That being said, I'm not thinking too much about 2025 yet, just because we're at the beginning of Q4 and, frankly, we have the most momentum we've ever had. So it's a matter of taking these new signals to just execute on now. What is very clear to us is the highest priority over the next 90 days, and then the benefit of being an early stage company is that our ability, to you know, switch directions or at least readjust more quickly than a large organization is part of the strength, right? But with all that being said, coming back to your question and actually you know you may not even be privy to the relationship that we're starting to establish with Sunderstorm, between one of our retail customers and Sunderstorm, but what's really cool is, uh, um, what we're finding, which has been fascinating.

Michael Murphy:

As mentioned, we build a platform that helps the centuries reduce excess inventory and miss sales. What we're finding is, the actual supply side of the industry has a larger sense of urgency to solve this problem for retailers than retailers themselves, and the beauty of that is that we have built the infrastructure to be able to connect retail and warehouse data frankly, across a variety of different tech stacks, a variety of different markets. So we're starting to see our retail customers calling up their top vendors saying you need to connect your data into the Previus platform so that they're not only ordering based on an ideal supply side scenario, but based on what's actually available, and then that unlocks a lot of just streamlined capabilities from a workflow standpoint on both sides. So you know that's a path that we're running down pretty quickly.

Heather Molloy:

Are we opening 10 below next year?

Michael Murphy:

But that you know. We'll save that for another conversation. Heather last night was saying someone needs to open the TJ Maxx of cannabis.

Ben Larson:

To liquidate all the inventory.

AnnaRae Grabstein:

Those stores exist in California. They do. There's definitely discount stores.

Heather Molloy:

So much inventory needs to get moved out.

Michael Murphy:

Oh yeah, sure, that's a whole other opportunity. As you're probably noticing, I'm trying very hard not to get distracted. It's like the ongoing challenge of what are the new signals that we pay attention to and adapt to and what are, you know, shiny objects that we may want to tackle those problems ASAP, but you know, ASAP has to be after what's right in front of us.

AnnaRae Grabstein:

Well, michael, one of the things, as I've gotten to know you over the past couple of years, that I've always thought was really compelling about managing inventory better at the retail store level is that ultimately it reduces the cost of inventory that retailers need to carry if they have better insight into the inventory that they need. And what we're all talking about is the capital constraints. And there's all these new markets coming on and as new dispensaries are opening, it's harder and harder for them to get capital. The supply in those markets is constrained, so sometimes people don't get terms on the products that they're trying to open their stores with, or whatever the case is. So overbuying inventory is ultimately a huge, a huge problem, because it means that people need more money that to put into their company that has high cost of capital, all these things.

AnnaRae Grabstein:

I mean not to get it's all interconnected in a pretty unique way.

Michael Murphy:

Yeah, not to get too existential or philosophical about, but I fundamentally believe that the biggest operating challenge preventing the industry from reaching its policy side, preventing the industry from reaching its unbounded potential is ensuring that the right products in the right quantities end up in the right stores at the right time. And that's a very straightforward statement. But that doesn't necessarily mean that it's easy right.

Heather Molloy:

Well, we were talking about this on Monday necessarily mean that it's easy, right, and we were talking about this on monday and I, so I think it's interesting, if you look at the dispensaries, all this power sits with the buyer and the buyers buying, and they were making decisions based on like what they liked, what their relationships were, who they knew, and now with like what you're doing and with what some other companies are doing people actually you could have.

Heather Molloy:

You could have. You could convert that buying decision to being like completely data-driven, which is like in our zip code, what products are selling at what price points, okay, what vendors are in that category, and you could, I think, probably use AI to just be like here's your order, for this is gonna be your highest velocity sales and this is what your percentage on shelf should be. And that buyer which right now has. If you look at the way we're doing things now, it's terribly inefficient. It's locked up. What at least a billion dollars in working capital that's sitting stagnant on people's balance sheets. So there's like a huge unlock with data that is just waiting for people to be able to understand how to act. Act it 100%.

Cameron Clarke:

Sorry, go ahead, I'm just going to throw this out. My estimate for years has been if we could actually make sure that our products were on the shelf in every store, that everyone our customers forget the ones that don't want to carry us, just our current customers, and they just kept it supplied, didn't go out of stock, didn't go out of stock, I think our business would be 25%, maybe 125% of your time, I think you may have synced up with the guy that, keith or something over the show, because I was talking to Eric and he was saying that this opportunity could be as high as 40% in their high velocity stores because there's so many times where he walks in and the shelves are just empty and they never even made it call Endlessly an issue.

Michael Murphy:

Sorry, no, I was just going to say it's funny you say that 20-25%, because based on kind of the first pilot of you know, syncing retailer and vendor data together. We've seen an uplift in about 20-25% from you know first order to second. I mean this big brand right in California. So, you know, not every brand is going to have the luxury of on-shelf equating more revenue, but for brands like Kana that statement seems very reasonable when, to your point, it has recognition and the enemy is stocking out. So the early data point we have is spot on.

Cameron Clarke:

Yeah, I'm thrilled to see these tools come into play because I think they're so crucial for our industry. If you look at how CBG operates, the buyers set up their planograms for the year and then they just put it back on the distributors to just keep the shelves full. The stores are just a conduit to the consumer and the vendor management, or VMI, just automatically replenishes whatever the product needs to be on the shelf.

Cameron Clarke:

And if it doesn't sell, then they just replace it with a different brand, right or different product, and that needs to happen in this industry, and there are a number of brands, ourselves included, that are building VMI as well, so that using tools like yours or whatever to be able to make sure that the shelves stay full. There are other problems. You know AR and other things that pose challenges to this problems. You know ar and other things that that pose challenges to this, challenges to this. But the more that we can use technology to be able to do this integration and have the free flow, uh, of product at the right, at the right pace, uh, it'll be incredibly valuable, for sure.

Michael Murphy:

And then just to come back, you know, to a point that heather made, like, uh, at the end of the day, I mean, I was, uh, you know, trained as a retail buyer a a sneaker company, first job out of college, and I remember, literally day one, my mentor saying buy this part art, part science, what we're focused on at the end of the day. We're excellent at the science part, but what that ultimately allows purchasing and procurement teams to do is more heavily invest in the art, and that is crafting the assortment. What is actually merchandising the store? How does that drive sales? So I think it's very important to emphasize that. You know, platforms are meant to continue to have that engagement from teams, but that engagement just is going to shift to, you know, the heart of the, but I feel like it's so disparate by market how people can merchandise, because it's really difficult to tell what's driving a sale in a store.

Heather Molloy:

Is it the bartender's recommendation behind the counter? Is it the placement near the register? Some markets there's no product to interact with, so you're limited to an iPad screen and a menu. So this is another thing that's interesting too about hemp. When you walk into convenience stores or these other stores, it's easier to interact with some of the products, so you can take your time and look at a product, figure out what you want, and the rules of retail are not even equal amongst it's a much better shopping experience.

Ben Larson:

Yeah, yeah.

Cameron Clarke:

And we do have it on the licensed side of the business.

Heather Molloy:

It's just not everywhere.

Ben Larson:

But there's some stores that are awesome and you can do that, and then some you're.

Cameron Clarke:

It blows my mind. You walk into the stores and it's like oh, the menu's over there. Go to the screen and pick what you want, right, there's no product anywhere on the shelves. It's a terrible shopping experience.

AnnaRae Grabstein:

And that's the rules of play in many of the markets. But there, many of the markets, but there's ways that brands can be, or retail stores can be, getting around this. I mean. I tell retail stores that if you're not allowed, to display real product every time you place a wholesale order. Ask for some empty boxes, ask for some empty jars, so that you can just put it on the shelf.

Cameron Clarke:

Put lots of information out.

AnnaRae Grabstein:

Yeah, whatever it is so it feels like a shopping experience, even if it's not.

Cameron Clarke:

Yeah, create a comfortable shopping experience, so that you know you're not being yelled at by someone behind the counter as soon as you walk in the store. Hey, what do you want, right? Yeah, it doesn't work. The the fragmentation of the rules around hemp, though, is creating some barriers for this.

Ben Larson:

I know tennessee um just passed some rules about putting the products behind the counter, behind glass, and so you just completely lose that interaction, and signals like that immediately cause pause with distributors and retailers.

Cameron Clarke:

On the whole product line, yeah, but I still think you can create a nice shopping experience even if the product itself is behind the walls.

AnnaRae Grabstein:

Big little partnership thoughael, I'm curious, as we're touching on hemp and you've been building specifically in the regulated market you know, with apis and to track and trace programs and working within that space from a technology perspective, watching what's happening in hemp. Do you think about that?

Michael Murphy:

that's a place that you should be learning about retail data also in that space, absolutely, supply chain optimization platform that optimizes supply based on demand. That obviously is necessary. You know every node of the cannabis supply chain and, frankly, any supply chain. So if we're focused on building a big business which we are that obviously transitions in the long term into other markets.

Heather Molloy:

When we first met, remember, I was like why are you doing cannabis? I was like let's start with another market?

AnnaRae Grabstein:

No, no.

Ben Larson:

I get that question a lot.

Michael Murphy:

Because he has no problem. No, but market, you know. Coming back to a comment that I made before, uh, there's just kind of natural policy around the industry because it's federally illegal, right even to this day. You see big tech staying out of the industry to a certain degree and like, as an early stage startup that has so many different things that potentially derail your business, not having to worry about this new behemoth coming in and eating your lunch today is nice to not worry about when you're competing against, you know, ultimately, other startups within the space, right. And then again, coming back to the investor, right, you know my past company.

Michael Murphy:

We were able to go talk to do the Sand Hill Road tour up and down Silicon Valley, talk to every investor Immediately, you know, reaching out to past networks like, oh, cannabis can't do that, vice versa. So there's just that is, you know there's limited capital, which again just levels the playing field in terms of competition standpoint and you know we're going to continue to bet on ourselves. So you can just look at the market dynamics. That's why cannabis. And then there's also an inherent complexity in the fragmentation of the supply chain and inconsistent nature of cannabis data that we've now invested years and millions of dollars to solve, which has made what we built really robust and defensible. But then, when we're ready to start pulling in additional data sources from other segments, potentially have a lot of hard problems. It's not going to be copy and paste, but a lot of the hard infrastructure problems have already been solved.

Heather Molloy:

One of the things for me as an investor right now that is making everything so tricky is no one's paying their bills. So it's like vendors, like lawyers, accountants, are telling me that they're not getting paid, and then you see it at the dispensary level, and so then, when you start looking at the vendors, people are pushing terms as long as they can. So it's like, to your point, there's not a lot of capital, but and that's complicating things further as an investor because you're like, okay, your forecast is this, but there's probably I don't know 20 to 40% of that that's going to remain uncollected for longer than 90 days, and so your actual cash needs are double what you're telling me that they are. And it's like I think that this, like non-payment in that industry, is really hard right now For sure I mean.

Michael Murphy:

What we're talking about on the vendor side is we're deepening our relationships with vendors. They're saying, yeah, great, getting vendor orders from our dispensary is absolutely necessary and needed, but that's half the battle. Half the payment is the other side. I'll just not, you know, not to get ahead of myself. This is something that's very high priority for us in the next 90 days. How do we establish the right relationships that you know, effectively address all those pain points in the ecosystem to have the right orders being generated that are then also creating returning the cash to both dispensary, but, equally as importantly, you know the vendor, because that has a huge knock on effect of the entire supply chain, if not to your point.

Ben Larson:

Yeah, can we zoom out just a little bit, because I think, as we look at 2025, and I want to do my planning we talk about AI a lot. What tools are you seeing out there that are coming online, that the industry can look forward to, or whether there are opportunities for AI to start working in dark workflows?

Michael Murphy:

I mean data analysis is a big one. I think, increasingly, like chat, the hype around AI that is often misconstrued is all centered around generative AI, open AI, effectively large language models. That's a bucket of AI. That's where all the hype started. I think what you're seeing is applications for people trying to use these large language models the chat, gpts or similar to just enhance customer experience within their products asking questions rather than having to dig through data. I think that's a fact that is occurring. I don't know how viable that will be or how impactful that will be in terms of actually impacting operations, but I think they're not only in Canvas, but in other industries. That's the lane that a lot of people are exploring.

Cameron Clarke:

I can talk to that too. So I have a software development background in a previous life, so yeah, that was way. So we're going to be behind the computer to being in the city of the middle of the room. But we actually are very, very keen on systems and software and process in Thunderstorm, and a lot of it has to do with my background, understanding software and technology and all that. I'm a bit of a geek when it comes to that. So what we've actually done is we have a very sophisticated implementation of our ERP.

Cameron Clarke:

It took us four stabs to actually find the right ERP and implement it over the course of probably five years, but now the current ERP has been running for about three years and it's amazing, right? So we know our cost structure. On every single bag of gummies it goes every step of the process of manufacturing, all the way through distribution on the shelf. Can I ask what you ended up with?

Ben Larson:

We used Acumatica.

Cameron Clarke:

Yeah, but we've completely customized it. So I have a whole systems team that we do some of our own software development but we've completely customized it. So I have a whole systems team that we do some of our own software development, but we also outsource a lot of it. So we have a full understanding of our cost structure so we can twist the knobs and dial things back wherever we need to.

Cameron Clarke:

But we also have all kinds goes out and checks the displays, you know all kinds of some retail data that we get access to. We just suck everything into an AWS server AWS and then we just unleash AI on top of it to be able to probe and try to find interesting kind of combinations of information to help us get a better understanding of what's going on in the market. So we literally have hundreds of millions of records of all kinds of information that we're using AI to probe deeply to understand consumer behavior and what's going on with our products and how they're selling it. You know if we do a bud tender pop-up, you know event or whatever in these five stores, you know what kind of impact do we see on sales, that kind of thing. So I really do think that these tools can be incredibly valuable for brands as they understand their markets.

Ben Larson:

Not to get too geeky, but having a well-functioned ERP system is next in line. Big deal we build cars on O2. Oh yeah, oh my God, well-functioned ERP system is next.

Cameron Clarke:

We built ours on Hodo. It's been a lifesaver. When we first launched our strategy, we launched in three states at the same time. The only way that we could actually do that was because we had the ERP system. We just plugged it into all the states. It was a nightmare, I will admit, launching all these states, but it's very easy for us to just plugged it in all the states. It was a nightmare, I will admit, launching all these states, but it's very easy for us to just plug it in. And when we just launched in Thailand, we just plugged it in over there and the sales reps were putting their information in productions, putting their information in procurements, putting their information in, and it's just much easier to scale the business that way Awesome.

AnnaRae Grabstein:

Well, this has been such a fun first ever CEO roundtable. We thank you guys so much for being here. I know we could talk all day and there's so much we didn't get to talk about that. I wish we could, so we'll keep doing it On our show. We do a last call often and I think today I'll do the last call, which is that, as everybody's looking at 2025, I just think that it's key and I heard from all of you is just to keep focusing on what winning is for you, for your company, for your team, for the industry, and be walking towards those wins and, while we walk towards those wins, also not being in denial about the challenges and the things that are ahead, the stuff that are the pain points in our businesses, the pain points and the regulations. I think that there's sort of a coming together between getting out of denial and creating opportunities to win as we move forward. So that's what's going to be my last call for today and, ben, if you want to read us out, we'll take it from there.

Ben Larson:

Yeah, thank you. Thank you. Thank you everyone. Thank you to everyone. Zynga, patrick, elliot great show. Javier. I want to send out our thoughts and prayers to those in Florida that are experiencing the storm right now. I hear there's maybe even another one coming after that. So it's just a rough, rough period in the southeast there. So thoughts out to you guys. Thank you for watching, liking, subscribing, sharing with your friends. Thank you to our teams, furtosa and Wolfe-Meyer. Until next time, folks, stay curious, stay informed and keep your spirits high. See you next time.

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