Is Marijuana Legalization Gonna Be Bad For Marijuana Startups?
In business, there is an advantage of being small. It has nothing to do with precision or outside thinking or anything else some motivational influencer would say. The difference is very simple and it’s reputation. Say it was Bitcoin in the year 2012. The prices are a few bucks. Couple interesting points on technology and someone in the offices of Goldman Sachs say they believe this is investable and should have services catered on it. That person goes to the board, they look at this and they see the money, but they say one word. No. Reason? Reputation. They’ll call it some sort of sketchy black market money and walk it off. So what happens? A company previously famous for selling magic the gathering cards and World of Warcraft merchandise begins selling bitcoin and billions in transaction happens. With cannabis, there’s no difference. The laws are tough. The banking is tough. The basic reputation issues in older investors in a pain. This is why major brands have just ignored cannabis and small players have popped up building larger businesses from nothing. The multi billion dollar industry of cannabis and it’s near entirely small business. For now…
Last week I met DankStop founder Louis Coniglio “@Louis” who created a Marijuana company from scratch in New Jersey that evolved into a higher level small business starting from nothing. Accessories, better marketing channels and investing into a 23,000 square foot facility got him a company that pretty much is the 1% for cannabis startups.
I asked him a ton of questions on cannabis and how he got going in the space. The big difference I found from talking to Louis versus others in cannabis was expression of the challenges to get going. A lot of the time the mentality I’ve found from other people in the space is more simple in the “We grow it and we sell it” vibe. Lou however showed the obstacles he had getting started. Dealing with things such as social networks that forbid direct marketing. Having to confront banks not servicing his company properly and wiggling around all of that. It’s him and people such as him doing basically all the work to build an industry, but the big question hits. What happens when it’s 100% legal?
“I predict probably 70% of cannabis companies will go under when it’s completely legal and big companies jump in. Budweiser, Marlboro, Coca Cola and others already are preparing for it. It’s gonna be difficult to compete when up.” @Louis
That dialogue really hit a volume for me, because it is pretty concerning. People went in and built a market are now about to get multi billion dollar companies coming in. They did nothing to build it, but are likely gonna keep all the edge. Doing this, Lou and I discussed a few tactics on how to prevent this and I think we came into four real options for smaller marijuana companies to live the wave of the post legalization Fortune 500.
This is one where it’s just obvious. Don’t just sell marijuana that is some generic brand. Add a uniqueness to product and a marketing plan that offers something recognizable about it. Coca Cola wasn’t the only soda to hit the market, but it was the one recognized the most.
Option Two-Real Estate
This is one very simple for distribution with physical products. If someone owns the best land in town to sell cannabis out of, they will have trouble with competition. In every town there’s the church, the post office, the school, the liquor store, the McDonald’s and now the marijuana store. Be the local marijuana store.
Simplest point. If someone in cannabis can invent something truly original, they’ll have something to last. Something that the law will not allow a large company to copy and it adds a legal monopoly in that category.
Not a ton of people know this, but NABISCO isn’t just some random family name. The cookie companies name means “National Biscuit Company”. When 130+ local bakeries set up shop together and decided to form as one unit to make consistent products and defeat competition. The result were products that went global and moved competitors out in the early baked goods market.
Cannabis might need founders to act as a unit into a core set of products under one brand or franchise to survive. Having a hundred shops, growers, brands and more blend as one company where everyone has a piece and it becomes a centi million dollar operation could be the bigger path. It’d make the market more capable of dealing with competition and could rise.
Talking to Louis, I learned a lot about Dank Stop and more. It put in a new thought into my head which is while legalization has to 100% happen, there might be some pains for the people who built this mutli billion dollar industry and got it going. With that, I’m @CharlesPeralo and keep getting high locally.