5 Lessons We Learned Launching A Cannabis Brand During A Capital Crunch
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The cannabis industry will probably look back and say that 2019 into 2020 was a grueling time to launch a company. With the California market becoming intensely competitive, the capital crunch drying up a lot of the institutional investment, and a widespread vaping crisis subverting consumer trust—not to mention COVID-19 decimating the economy—the past 12 months brought a lot of new challenges to an already challenging industry.
All throughout last year, I kept hearing and reading that it was “basically impossible” to bring a new brand successfully into the California market today without big money.
I’d been working as an investor and corporate development liaison in cannabis for over a year, with a decade in private equity prior to that. I wondered if that was really true.
Has the industry become an arm’s race? Or is there still room for the scrappy start-ups with the ideas and the smarts to rise to the top?
My company Ciencia Labs had staked out a wide-open position in the market for a cannabis brand entirely focused on sleep. With between 60 to 80 percent of cannabis consumers reporting using the plant for sleep, and no company meeting this need directly, we knew we had a compelling concept. But as a group of young, upstart founders without major financial backing, we knew that we had to run lean and mean or we might not even make it to market.
We meticulously calculated everything we needed to launch our sleep-focused brand dreamt. This would cover everything from product development and manufacturing, to branding and PR, business incorporation, and compliance. Every dollar and cent was accounted for. And off we went slogging, hustling, and pinching every penny to keep our costs as low as possible without sacrificing on quality. We believed that if you focused on efficiency and worked smart, you could make and launch a premium product on a tight budget.
It’s thanks to this ethos that, despite our significant capital restrictions, we are in 50 dispensaries throughout California (at the time of writing). In other success metrics, we have been featured in 13 media outlets, including Rolling Stone, Business Insider, Cheddar, and ABC News, and won ‘Best New Product’ at Weedcon 2020, all since launching four months ago.
We’ve been truly humbled by how much we’ve learned throughout this process, and want to share the five most valuable lessons we learned while launching our first lean California cannabis brand.
1. A bigger founding team really helps
We have five co-founders, which for a little start-up is quite a lot. Some will balk at the idea of splitting that precious equity five ways, but the tradeoff is that you have more hands-on-deck in those grueling early days that make or break your business.
Obviously, building a successful founding team is about a lot more than simply having more hands. Each of us had unique skills, experience, and knowledge. This helped to ensure we were sufficiently well rounded and nimble enough to respond to the myriad challenges you can expect to confront when launching a cannabis company.
From five people we have extensive experience in science and product development, branding and marketing, project management, compliance and legal, business development, and financial management, all inside and outside of the cannabis industry.
Choose your founding team wisely. Try to avoid doubling up on primary skill sets (e.g. two branding gurus, but no one that understands compliance), and make sure that everyone is prepared to give it 150 percent. Without that unrelenting dedication across the board, resentment risks bubbling up as the going gets tough and you need to balance the workload.
2. A tight purse makes for smarter decisions
Unlike the start-ups flush with cash, we pooled all of our available capital and gave ourselves a very limited runway to conduct everything, from R&D and manufacturing to marketing and sales.
Tight capital constraints meant we had a razor-thin margin of error. We needed to ensure that every financial decision we made was the right decision for the company. That meant having a clear vision of where we wanted to go and striving to deploy that capital effectively and reduce wasteful spending that comes from a lack of planning.
In our early days as we set out to develop the branding around dreamt, we interviewed close to a dozen creative agencies. We had to take the time to review each pitch and look beyond the pricier LA-based companies. This led us to Vermont-based agency Cannaplanners, who provided the highest quality product in line with the small budget we had allocated.
If it wasn’t for the fact that we simply didn’t have the budget for the agencies that had more publicity, we wouldn’t have teamed up with such a talented group.
3. Speaking to all suppliers
The largest costs that a plant-touching cannabis start-up will face is purchasing raw goods and packaging. For dreamt, we had some very specific ingredients and a clear vision of how we wanted our packaging to look. We anticipated our costs being considerably higher than other brands.
A simple rule I made for myself was to take every meeting with a potential supplier. The persistent clandestine nature of our industry means that it’s impossible to thoroughly research every supplier out there. Every time I found a new one, I was able to work with them to cut considerable costs and increase our margins.
Initially, our first production run was looking really expensive, but because we met with so many suppliers, we were able to have them compete for our business and in the end, we cut that number almost in half. Going through this process early on in our company’s life cycle also meant that we were able to secure a healthy Rolodex of back-up suppliers, should we need alternatives.
While the random cold emails and spammy LinkedIn messages from salespeople can get annoying, taking the time to listen to a quick pitch could save you thousands of dollars.
4. Navigating hurdles
Every single business is going to run into hurdles. Throughout the entire process of getting to our launch point, there were many issues that came up that had the potential to completely derail us before we had sold a single product.
The biggest test of our resolve was the vape crisis emerging as we were on the verge of launching our first product, a vape. We were probably just too far along in the process to pivot towards a different delivery method, so onwards we rode, into the unknown.
This could have been a death knell for most fledgling brands, but our founding team consists of a Ph.D. chemist and one of the most prolific cannabis scientists working in the industry. Every ingredient in dreamt was thoroughly researched and vetted to ensure only the safest and most effective compounds were utilized in our unique formulation.
This approach has been greatly appreciated by dispensary owners. They are being extremely selective about new vapes coming into the marketplace, so by being both a unique product (purely focused on sleep) and maintaining the utmost scientific integrity, it has helped us breakthrough what would otherwise be an extremely tough sales landscape.
5. Keeping it simple
Unlike most cannabis brands, dreamt is designed to scale across delivery methods as opposed to across desired effects. We believed that the problem of sleeplessness is so widespread—there are an estimated 100 million people nationwide that report difficulty sleeping—that we wanted consumers to have access to our unique and effective formula in a method they prefer to consume.
We opted to launch with just one product, an all-in-one vape pen. The dreamt sleep pen is our MVP (minimum viable product), and the simplicity of having a single, solution-based product has allowed us to open relationships with dispensaries and build consumer awareness as we develop our forthcoming SKUs and fully expand our line.
We believe that brands that focus on problems and create products to address those problems will truly stand out in an increasingly crowded marketplace.
This is just some of what we learned on our path to the starting blocks, where the real work begins. While we can’t guarantee the success of our company, we have learned an enormous amount about the process for launching a fiscally responsible cannabis brand in an expensive industry. Don’t let the big dogs tell that you have to be monied to get it a good product out there. You just have to work smart, get creative and hustle hard.