Farmers looking to add cannabis to their crop mix can contact Mark Spear. The founder and CEO of Wildfire Collective, which up until late June was known as Burnstown Farms, is looking to build a cannabis version of a traditional farming co-operative. Two organic vegetable farms in southern Ontario have already signed on to grow cannabis on small sections of their land, and Mr. Spear expects as many as 30 existing agricultural producers to join his collective over the next five years, and at least partially convert to cannabis.
Wildfire will launch a crowdfunding campaign to raise $2.5-million in startup capital later this month, which Mr. Spear hopes will provide a model for his existing and potential partner farms to follow. Starting in Ontario, the plan is to have craft-style products available by late 2020, and partners elsewhere in Canada by 2021, with the ultimate goal being for consumers to detect geographic differences in cannabis just as many currently do with wine (i.e. the difference between a Pinot Noir or Pink Kush from southern Ontario versus British Columbia’s Okanagan Valley). He spoke with Cannabis Professional about his business model, his unusual funding plans and what consumers can expect from Wildfire products. The full conversation, lightly edited for length and clarity, is reproduced below.
Cannabis Professional: What was the impetus for thus? Was there an issue with the original Burnstown model?
Mark Spear: Originally we started out in Burnstown (within McNab/Braeside in Renfrew County), but we had municipal issues there so we have since moved on to three other sites. Two of our new sites are in southern Ontario, our first partner farms, and we have our wholly owned site here in the Ottawa valley just south of Calabogie.
It is all outdoors. We are the first producer to focus strictly on outdoor and we really believe the opportunity, just like in greenhouse and indoor as some of the larger producers are finding out, is in smaller batch, craft-type products. That is where the margins are going to stay high.
CP: How does licensing work, is it a micro model?
MS: These are standard cultivation licenses. Micro-licensing really is not a very compelling option for outdoor farmers since you’re limited to 200 square meters. [Major producers such as Weed MD that recently announced winning outdoor licenses] already had existing licenses, so they just needed to add an amendment to there existing indoor operation to get these outdoor areas licensed, but we were outdoor from the outset.
CP: What is the business model, is it similar to a farming co-op?
MS: It is a co-op type of model but it is a little different. One of the big barriers to entry for small farmers in particular is licensing, and we have been through the process several times now. That is something we help our partner farms with, going through the licensing process, as well as providing them with genetics. We are one of the very few companies that have been working on outdoor genetics specifically for our environment here in Canada for a number of years and that is really where a lot of our intellectual property lies. We license those out on an annual basis to our partner farms and we also provide cultivation consulting on an as-needed basis. Our two partner farms down south are experienced, organic vegetable farms but they don’t have any experience with cannabis itself. They see the opportunity here and cannabis is now just a crop like any other so we are going to help them with their first couple of crops just to make sure they get comfortable with the differences in this particular crop. Then the final part is we have a five-year agreement to process their crop.
CP: How would revenue be distributed?
MS: We keep 30 per cent of the sale price. We are currently in negotiations with a couple of existing licensed producers to use their sales channels, but we are also going to have a couple of agreements with licensed processors so the agreement with the partner farm is they will retain 70 per cent of the sale price. In many other circumstances and with other producers, all of the margin ends up with the processor, but we didn’t want to see that happen in this case and we really believe that paying top dollar to the farms really incentivizes them to grow top-quality product.
CP: It sounds like you would insist on capping how much your partners could produce, or how many acres they could cultivate on?
MS: We really want to set ourselves apart from those other farms that are growing on hundreds of acres of what is going to be ingredient-quality cannabis for things like beverages and topicals. We don’t want to see anyone [in our collective] cultivating on hundreds of acres. We really believe there is a fine line in terms of economies of scale at any one site and risks of major crop loss and just the challenges of getting each individual plant the hands-on care it needs. That becomes very difficult on a large scale. We see real value in scaling much slower than maybe some of our larger competitors. We really want to focus on high-margin products that are sold every year. We have no interest in keeping any inventory. Each of our partner farms is starting with three acres, and five would really be the upper limit we would want them to start with. We are estimating, quite conservatively, 500 kilograms of dried cannabis per acre.
CP: How would products grown within the Wildfire network be branded?
MS: We have a couple of options there. Some of our products will end up in co-branding with existing licensed producers and we wouldn’t differentiate necessarily where the product came from in that case, but we also want to see each individual farm have its own branded product so it would still be under the Wildfire name but from that specific location and we really want to get to the point where consumers are able to try the same strain, even the same phenotype, from different locations in the country and really notice the difference in the terroir as people can from wine. It is a big thing now in California and we think it is going to catch on here too.
CP: How many farms, ideally speaking, are you hoping to sign up?
MS: At the moment we are focused on Ontario, but the response has already been overwhelming and we haven’t even really put ourselves out there yet as being open to taking on additional partners yet. We get inquiries every week from existing farmers or people who have a piece of land that they would like to see converted into a cannabis farm. Five years down the road, we would like to see maybe 25 or 30 partner farms. We don’t have any intention of trying to take over the market. We think there is a big enough pie for everyone. It is really our goal to prove that excellent cannabis can be grown right across Canada and we are really excited to see the differences from place to place and eventually be able to have people travel from location to location and see the different environments and the different ways of doing things in different parts of the country. We are absolutely looking to expand beyond Ontario, not necessarily in 2020, but I would say in 2021.
CP: Why choose the crowd-funding model instead of more traditional financing?
MS: That is something we have been contemplating for some time. It is a bit of a challenge to raise money for startups until they get licensed, you are really limited to friends and family and business associates and that is a pretty small circle for most people. We have had many great conversations with institutional investors that would love to be involved once we’re licensed but not beforehand because the risk profile is just too great. We decided to stay as independent as possible though, since we did have other offers from traditional venture capitalists but they typically wanted to own the whole company or at least a majority share. We haven’t quite settled on our valuation yet, but we are looking somewhere in the range of raising $2.5-million at an $8-million pre-money valuation. Ultimately this campaign is a proof-of-concept for our partner farms because we see it as really an ideal way to get start-up financing for them. We see value in helping our partners raise money in a little bit of a different way.
CP: When do you expect to start signing supply deals and getting production started?
MS: We will be signing one this week with an existing licensed producer and two processors. The deal with the LP is a wholesale supply agreement. We don’t necessarily want to rush out and sign any agreements with provincial distributors. At least in 2020 we are going to focus on our wholesale premium flower and getting our own processing beyond that. We will have three [farms] at a minimum and depending on how our crowd-funding goes, we might add one or maybe two more for 2020. We won’t have much beyond that though as we really want to prove the concept next year and expand from there.