Trevor Green is the co-founder and CEO of OneLeaf Cannabis, an aspiring licensed producer based in Saskatchewan. He spoke with Cannabis Professional’s Jameson Berkow about the challenges of leaving an unrelated legal career for cannabis, navigating the Health Canada licensing process and why larger producers are already beating down his door for supply deals months before OneLeaf plans to harvest a single plant. Below is an edited transcript of their conversation.
Q: YOUR BACKGROUND IS IN OIL AND GAS LAW, HOW DID YOU GO FROM THAT TO STARTING A CANNABIS FIRM?
A: One of my partners in this cannabis project, he and I had started our own law firm six years ago that specialized 100 per cent in oil and gas. And with the downturn in 2014, all of that work effectively disappeared. We went back and started working at another firm in town together and after about a year of that we decided we wanted to get into cannabis. It was the next thing and compliance in the cannabis industry is really similar to oil and gas, where people have to understand all the different regulations. So we thought it would be a good transfer of our skill set in that area.
Q: SO ONE OF YOU LITERALLY JUST SAID OUT OF THE BLUE ONE DAY, “LET’S START A CANNABIS COMPANY?”
A: Not quite like that. We were having coffee one day with one of our other partners who was also an oil and gas guy. We actually weren’t even talking about production, what we were talking about was these black market dispensaries that were opening in town and how much money they were making. We just knew a couple people that were involved in them and the money they were making was just astounding. Obviously as a lawyer we were surprised that they were involved in an illegal activity but they were allowed to be operating and making so much money. We didn’t even know about the [ACMPR] or the licensed producer space at all. We started looking at dispensaries but we realized that was still illegal. We met a couple groups that said they were doing their own LP and we could help them out and we tried that for a while. It didn’t really work out. At one point we said, hey we should just do this ourselves there is enough time and there were only 50 licensed producers at the time. Now there are over 130 but we started with a great opportunity.
Q: DID YOU FACE ANY STIGMA FROM FAMILY AND FRIENDS WHEN YOU TOLD THEM ABOUT THIS PLAN? WERE THEY SUPPORTIVE OR SURPRISED?
A: Some people were surprised. A lot of people I talked to, especially older family members, were surprised. I have a young family. I have a three year old daughter and I had a steady job. I think it is just generationally that people look at people in my generation, I’m 34. We look at things a little bit differently we don’t look at our careers as a straight line. The older generation was more about putting time in and climb up the ladder. But I think the younger mentality has allowed us to take this risk. But there were definitely a lot of people who said this was somewhat irresponsible and reckless.
Q: WHAT WERE THE BIGGEST CHALLENGES YOU FACED GETTING STARTED?
A: You get into it thinking that, since we specialized as lawyers in regulatory compliance in oil and gas that we had the expertise. Once we got into it we realized that is part of it but most of the up-front regulatory compliance is operational. It is more about understanding how to operate and build these facilities. So we quickly realized that we needed help getting out application together. We didn’t want to be one of those companies that is in the licensing process for five years because Health Canada kept coming back and saying you have to do this different or that differently so we linked up with Cannabis Compliance and we had a pretty big sticker stock: $200,000. But having that regulatory expertise and people who had done this before, there was a lot of help on developing our business plan, raising capital and building facilities. That was definitely one of the initial shocks. Another one was the first $400,000 we raised for the company, it took us one meeting with an investor. We didn’t even have a company formed. We hadn’t started anything. He just gave us $400,000. He believed in the industry and he believed in our team. Once we got that, it was pretty amazing. Money is never that easy to get. We paid CCI to get our license in, procure our land, and we didn’t have to worry about money for a few months.
Q: SO THAT FIRST INVESTMENT CAME EASILY, HOW ABOUT THE REST OF YOUR STARTUP CAPITAL?
A: We were coming into this industry in the fall of 2017 and that was when the private equity money really started to become hard to come by. A lot of the big money had already been spent. So we had to solely rely on our family and friends and our personal connections to lend us money. I flew all over Canada to try and get money from brokers and people in the industry and there just wasn’t an appetite for a really early stage applicant like there had been maybe six months before that. Trying to get any money after that $400,000 became really difficult. Probably the hardest part of this process was raising the capital required and understanding that everything costs more than you think. Dealing with contractors that had never built these sort of facilities before. It took some time but we ended up raising short of $7-million all through personal connections. We didn’t have to pay brokers for any of that money. It worked out really well. And 95 per cent of our investors are Saskatchewan residentsm so it is a fully owned Saskatchewan project funded by Saskatchewan people, which is a really good part of our story.
Q: WHERE IS THE BUSINESS AT NOW?
A: The facility is done, a 48,000-square-foot facility. We are starting with around 1,600 kg a year of capacity once we are open - hopefully by December or early January. We are hoping to be in that facility by the end of the year then the cultivation license should come shortly after that once we jump through some more hoops with Health Canada. We have to submit a video evidence package of the last steps. Then they can issue the cultivation license that allows you to grow but not to sell. Then we can grow test crops and store those but then there is a whole other process to get a sales license but we hope to have that by the spring of 2019. Given the supply issues right now though we already have multiple [licensed producers] asking about whether we would be prepared to sell all of our 2019 production to them.
Q: YOU ALREADY HAVE OFFERS TO BUY CANNABIS YOU STILL AREN’T TECHNICALLY ALLOWED TO GROW?
A: We will likely sign one of those deals right away and that will allow us to get some revenue almost immediately without having to hire a full sales team with call centre staff and do all the packaging ourselves. Essentially we can just be bulk producers, we ship it in bulk to another producer and they package it for us and they can even put our brand on it if we want them to then we can split the revenue from that. Half of your sales costs per gram really goes to sales. It is about fifty fifty now for most producers. They are spending anywhere from $0.70 to $1.50 per gram for production but their sales costs are probably as much as $2 per gram for all the sales and marketing and packaging.
Q: WHAT IS THE LONG TERM STRATEGY? DO YOU WANT TO REMAIN A WHOLESALE PRODUCER FOREVER?
A: I think that is more a 2019 plan but not a longer term plan. Long term for us we really believe the future of the industry is on intellectual property, research and development and branding. The recreational market right now is a very large distraction. It is a historic event for sure but the international medicinal market is infinitely larger. You’re going to see a huge push from producers, probably not the biggest ones, to file patents and combining cannabis with other different types of products and medicines. That is going to be our focus. We recently formed a scientific advisory board, we have had two doctors join that board and one is a plant geneticist who works in precision medicine. Ultimately we think production will become commoditized so a facility like ours are going to need to be special purpose facilities for new formulations.
Q: WOULD YOU BE WILLING TO SELL THE COMPANY?
You look at every opportunity that comes up and a lot come up all the time. I think the answer is you leave yourself open to be acquired if a good deal comes along but you have to plan for the future as well. I think the companies that are just planning to be acquired and that is their whole goal to just build an asset and sell it, to be honest for a long time that was our goal but it has since become clear to us that it is not just about having a facility and assets. You need to have a legitimate plan in place so anyone who wants to buy us will want to buy us for our management team and the intellectual property that we have. The facility is great, but these days it is almost a given that you’re going to have a state-of-the-art production facility. The question will increasingly be asked: “What else do you have?”