Starting in November of 2015, we asked the cannabis community to nominate and vote for their favorite individuals, products, and organizations in the field for the inaugural Laurel Awards.

We weren’t sure what to expect, but we quickly took stock of the major players in the industry as more than 1,100 initial nominations and well over 7,500 official votes were submitted. The top winner by people’s choice in each of the ten categories will hold the honor for one year.

WE HAVE A TIE!

CONGRATULATIONS TO

Dixie Brands

and

IVXX

Both Winners of the Laurel for Best Infused Product Brand

Dixie

Undisputedly, the fan favorite in the realm of cannabis-infused products is Dixie. The company made national headlines throughout 2015 as one to watch in the global cannabis space.

Then, CEO Tripp Keber announced that Dixie Brands would be expanding out of its home state of Colorado in order to serve medical cannabis dispensaries in California, then announced in November that its edibles line would be coming to Australia, New Zealand, Oregon and Arizona as well.

Due to the federal legal status of cannabis, interstate commerce is always a sensitive subject, and Dixie shows that out-of-state, or even international expansion is an attainable goal with hard work and compliance.

Dixie infuses cannabis into dozens of different confections and delivery methods, from medicated mints and chocolate bars in multiple craft flavors, to signature beverages, to disposable vape pens, tinctures, and topicals. Dixie’s two new CBD brands, announced over the holidays, include Aceso for humans and Therabis for pets.

To find out more, go to DixieElixirs.com.

IVXX

A subsidiary of Terra Tech Corp, one of the more well-known publicly traded companies in the cannabis space, the IVXX cannabis brand had a strong showing of support during both nominations and voting.

We’re not entirely sure that it counts as an “infused product,” but leaving out an actual cannabis brand didn’t feel right – especially in the case of a tie.

IVXX is famous for its signature line of organic cannabis, concentrates, and pre-rolled joints. All available in California, the products prove that spectacular branding is already underway, even in states where adult use is not yet legalized. The brand will be coming to Nevada and other states soon.

From IVXX’s website and social media profiles, it’s clear that their sugar waxes and shatters are some of the best that the industry has seen. Cannabis concentrates are an emerging trend and will be a profitable and exciting market for years to come.

For more information, visit IVXX.com.

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Investor Insight: David Friedman, Chicago, IL

He’s talking about the importance of a team, the art of moving aside, staying educated, trusting your gut feeling, and a whole lot about investing in the legal cannabis industry. Cannabis entrepreneurs and advocates alike will find something to hold onto in this interview with the compelling David Friedman of CFO Worldwide.

How did your entrepreneurial journey begin?

I graduated college in 1988 with a finance degree with the expectation of my family to take my CPA and go to law school. The week before I graduated I made the decision that I wasn’t going to do either. I had spent summers at my grandfather’s and uncle’s law firm while my friends were busy being lifeguards; I did tax extensions and I saw first-hand what these business owners were making and knew then that I wanted the autonomy to do my own thing. Both my grandfather and uncle encouraged me to do anything but go to law school.

I went to work in a family business for about a brief minute and then came to start my first company printing t-shirts. We grew that up to about $8M in sales and had several other companies built into that model. I sold out in 2001 when realized I was much better at starting and fixing companies than running them long-term.

Using my finance background and experience as a business owner, I started acting as an outsourced CFO for transactional finance (mergers and acquisitions) and ended up doing a lot of work in the financial turnaround of small companies. That led me to work with a couple of large family offices; I ran their direct investments and alternative finance groups where I’d invest their money in deals and then step in as CFO to watch the money. In 2006, I started CFO Worldwide and began to build out that model and move more towards the growth companies as opposed to turnarounds. Over the years, we added investment banking services and eventually began investing in businesses as well.

Both my grandfather and uncle encouraged me to do anything but go to law school.

What was the motivating factor for you to invest in the cannabis industry?

My ex-girlfriend, whom I’m still good friends with, and an investor in another CFO Worldwide venture had a son who struck out to Colorado to make his fortune in the legal marijuana trade. He ended up at O.penVAPE and she said to me one day ‘You have to figure out how we can make money in this space. If anyone can figure it out… it’s you.’ It peaked my curiosity and I began to study investment opportunities only to find a lack of information pertaining to such.

Since we already had a media business, we decided to launch MJ Investor News to cover the investment opportunities in the industry and develop and research. We would produce educational events and use that, not only to build a business, but to also find investment opportunities for CFO Worldwide. We are set to launch our first event, Marijuana Investor Summit, in April 2015! We are featuring a Shark Tank “Shark” as the keynote speaker who will also be sitting in on the live “Cannapitch” session where a panel of investors will have the opportunity to invest in pre-chosen companies who have been vetted by CannaFundr.

One thing many first-time entrepreneurs struggle with is raising money. How would you suggest someone to overcome this problem?

Don’t even think about raising money without a solid financial person on your team. Most companies start out with visionary, sales, product development, and maybe an operations person. If they are lucky, the operations person also handles their finances, but is completely unqualified. There is nothing that kills a deal more quickly than asking for money without first demonstrating that there is someone in place that can provide financial oversight. That’s basically how CFO Worldwide came to be as we sought to help companies raise money who did not have the credibility in that area to do so. You need solid financial projections, reasonable valuation models, and a realistic idea of WHY you need the money and how you will spend it to produce an ROI for investors.

What is the best advice to cannabis entrepreneurs when they pitch their project to you?

We invest in people not products. Give me an average idea with a rock star team over a rock star idea with an average team any day of the week. Assemble a team that can impress us with the ability to execute. At least someone in your team needs to have a successful exit in another business before we will invest. Invest at least some of your own cash, even if it is $10K, and find a way to have some skin in the game.

Most of all, have realistic expectations! If I see another pre-revenue, pre-money valuation of $10M by a team that has never had an exit – I am going to puke! Figure out how much you need to get to the next level and take as little as possible for your first round at a low valuation from strategic investors who can add more than just money. Build the value of the business and the strategic investors can then help you raise the valuation for the next round. Also, debt is always better than equity in the long-run, so consider different structures. Educate yourself and find out what your competitors have done.

Can you share your thinking on how to identify a company as a great opportunity?

Wow, tough question! I wish I could, but it’s a combination of a lot of things and in the end it’s a gut feeling that will really drive the final decision. As I said above, the team is the most important factor. There are so many opportunities in this space right now that all the ideas out there are almost all feasible. For us, we are focused on deals that are related to data and information or ancillary businesses that don’t touch the plant.

We also want to avoid the “me too” mentality. There are many of the same tech models around social networking and deliver apps, so I have deal fatigue around those. We also intend to rely heavily on CannaFundr to identify deals as well as remaining a part of The ArcView Group, which has given us access to the Who’s Who of the industry; best money I have spent in this industry by far.

What are the key ingredients in building a successful start-up?

People, product, and process. Stolen from “The Profit” by Marcus Lemonis; No reason to improve perfection – That says it all!

How does the role of the founder evolve as a company goes from seed to early growth to later-stage scaling?

Great question! It depends on the team, the founder, and the business, but it is important to know what the goal is and to be realistic about it as well. I stepped in as CEO and Publisher for MJ Investor News, but I knew my tenure won’t go beyond 2015. I need to be replaced by an experienced publisher who can take the business to the next level and I know that I am not a long-term operational CEO. A lot of younger founders also need to know at what time they should step aside. Eventually, you need to go from entrepreneurial management to professional management and often time that means the founder needs to step aside and make way for an experienced CEO.

What is your new knowledge in regards to investing in the cannabis industry?

It’s wide open and there is a fairly long runway. Institutional investors and big corporations are still sitting on the sidelines and will be for another few years. Partially because of “optics” and partially because it is still federally illegal. That gives the average investor a chance to get into this space before it blows up, but it also means prudence is important.

In the dot com and real estate bubbles, investors were competing with some of the largest institutions and corporations in the world. Since they are still sitting on the sidelines, now is the time for smaller and/or private investors to get their piece of the action in the cannabis industry. Now is the time to get in the game because the big brothers with deeper pockets will eventually take over the space.

As an investor, what are some of the key things you wish cannabis entrepreneurs knew?

• The definition of a valuation.
• The fact that cannabis means nothing unless you have business experience
• That your team is far more important than your product.

What needs to happen in order to create a billion-dollar company in the cannabis industry?

Federal legalization. Period. I don’t see any business getting that large without federal legalization. There are too many barriers around banking and other resources that will make it impossible to really build a national brand. There are a few trying and doing well namely, Dixie Elixirs and ebbu LLC; both have promised to keep pushing, but in order to hit that number, they will need to be able to build a distribution model that allows centralized distribution and efficiencies you see in other industries. It’s all about logistics! Find a way to ship products legally over state lines and then you’ll have yourself a billion-dollar company.

Find a way to ship products legally over state lines and then you’ll have yourself a billion-dollar company.

How do you decide between shutting down, keep funding, or selling your start-up?

Well, usually you don’t have a choice between all three. If you are looking at number one or two, usually three is not an option. Selling is an important question. At this point in my career – cash flow is a nice model! I don’t always focus on a large exit. It’s important to know your goals before you start and benchmark against them. If you intend to exit when you can sell for $5M then know where you are.

As for folding or funding, that is completely subjective and once again comes down to the team. Do we believe in them? Can they make the pivot? Are they emotionally and financially invested in the business? Don’t be afraid to walk away if things are not working.

The key to success is failure. Any good entrepreneur will tell you that they learned from failure, not success. So, somewhere along the way, we all have to fail. We can’t be afraid to admit that and we have to then move on. The worst thing you can do in any relationship, business or personal, is hold on too long. It makes a bad situation worse and everyone loses in the end.

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Investor Insight: Douglas Leighton, Boston, MA

Our very first investor we’d like to introduce you to is Douglas Leighton, Managing Partner of Dutchess Capital. His story is a unique one and his perspective and understanding of this industry is something that every entrepreneur, whether cannabis-related or not, should take note of. Have you ever played chess without a board? He does… every day.

How did your entrepreneurial journey begin?

I was 10 years old. It was the blizzard of 1978 and my father had a tractor with a plow on it. I plowed out the neighborhood and made about $3,000 in one day. After that I was hooked on working for myself. I never looked back and have continued to only work for myself.

What was the motivating factor for you to invest in the cannabis industry?

There are several reasons. The legal cannabis market is slated to grow from $2.4 billion in 2014 to $10 billion in 2016. That growth alone should pique the interest of any investor. The black market is $50 billion annually and the legal market is $2.4 billion, that gap has to be narrowed as more states roll out their cannabis programs. This is also a unique market in that there is no need to market a new product; the demand exists, it is just being serviced illegally.

One thing many first-time entrepreneurs struggle with is raising money. How would you suggest someone to overcome this problem?

First, know your business. Know every number, ratio, and statistic. Don’t just make a pitch deck that looks nice; have it be reflective of your actual business plans and your actual ability to execute. There are several outlets to meet investors: The ArcView Group is the largest with almost 300 investors that meet quarterly and a great online source is 420 Funders where you can post your deck online and investors can read it.

Don’t just make a pitch deck that looks nice; have it be reflective of your actual business plans and your actual ability to execute.

What is your best advice to cannabis entrepreneurs when they pitch their project to you?

Explain to me the problem, your solution, your value proposition, and why you can execute on your business plan. Be concise and know every risk and challenge and how you are going to mitigate those issues.

Can you share your thinking on how to identify a company as a great opportunity?

Management is first. During the due diligence process, we can tell a lot by how the first call goes, how much time went into their proforma and their deck. You can find out what type of person they are in the beginning and then you have to make a bet that they can navigate the challenges.

The second is:

• Does the company, product or service have a high barrier to entry, a first-mover advantage?
• Is there any ‘sticky-ness’ to the business?

If you have management that is willing to put the time and effort in and the product or service is needed, then you have the makings of an opportunity. Then, post investment, how they execute and scale is another story.

What are the key ingredients in building a successful start-up?

24/7 work ethic. You have to love what you are doing, then it is not work. You must measure every metric to figure out what is working and what is not. Time management is also very important if you want to scale.

How does the role of the founder evolve as a company goes from seed to early growth to later-stage scaling?

This is an interesting thing to watch. There are some growing pains that go along with a person who has an idea, executes on that idea, and then has to enter into a more mature hands-off role. The great companies are those that lean on others with more experience for help. They understand that they can’t do it all. We have an incubator project here at Dutchess Capital and we like to guide these founders along to different people on our bench that can help at different points along the growth trajectory.

What is your knowledge in regards to investing in the cannabis industry?

It is risky. Everything takes more time and there are more roadblocks than other industries. In saying that, the rewards can be potentially larger if companies can scale quickly before others get into the market.

What are you doing to impact the industry?

We try to cross pollinate our portfolio. For instance, Dixie Elixirs would love to advertise on Facebook, Google and Twitter, but their policies will not allow for cannabis advertising. So we got Dixie Elixirs together with another company in our portfolio, MassRoots, which is a cannabis social network where cannabis companies are allowed to advertise. Another thing we are doing to impact the industry is the formation of our cannabis incubator. We have two companies as of now; one is called Roll-uh-bowl, which is an indestructible foldable water pipe, and the other is an R and D company in the ceramic space. We offer capital, guidance, office space, and access to our vast networks and resources. Most importantly, years of mistakes that they can learn from.

I also sit on the board of the Association of Responsible Cannabis Public Companies. The ARCPC advocates best practices for publicly traded companies dedicated to the cannabis industry through the promotion of the highest standards of integrity, fiduciary duty, and transparent reporting of each Member’s operations.

As an investor, what are some of the key things you wish cannabis entrepreneurs knew?

You are not going to sell your business to a Fortune 500 company. Just because you are in the growing cannabis industry does not give you the right to ask for a crazy valuation. In some cases, you should get a smaller valuation due to the high amount of risk involved. We don’t make any money until we have all of our money back, then we count return. They also have to remember, that we were there when they did not have very much, and our money helped them get to where they are today. Remember that.

What do you think some of the most promising niche sectors are related to cannabis?

First I’d say consulting. I think the “top-down” approach has the most potential. I will equate it to the concept of selling picks and shovels to miners. In the case of cannabis, it is the consultants providing guidance and selling the related products to a grower on the B to B platform. An example of this is one of our portfolio companies, American Cannabis Consulting (AMMJ:OTC) They are at the forefront of this industry with about 12 major clients in the US and Canada. They provide solutions for businesses operating in the industry through consulting and advisory services, as well as supplying businesses with equipment and products.

I also like the technology sector. One of our first investments in the industry is the semi-anonymous social network MassRoots. They are the largest social networking site for the cannabis community and have grown over 2,000% year over year. They are anonymously collecting a tremendous amount of data from their user base such as a user’s strain preference, time of day they consume, consumption method, and among other key data collection points. They will be able to monetize this data via sponsored posts of either localized merchants and/or national brands.

Dutchess Capital also likes companies in various sectors with ‘brandable’ consumer products and goods. Tripp Keber has done a remarkable job with his branding efforts with Dixie Elixirs and Edibles. I also think a brand such as Foria Pleasure, the world’s first THC infused personal lubricant for women, has done a stellar job with its branding and they have proof to show for it; they were recently featured in British GQ.

What do you think the next five years has in store for the industry?

Growth. There will be many bumps in the road and more growth. Investing in this industry is like playing chess without being able to see the board. Eventually ignorance will abate, the banking issue will be fixed, and the drug will be rescheduled.

There will be many bumps in the road and more growth.

What needs to happen in order to create a billion-dollar company in the cannabis industry?

Banking needs to be fixed and the drug needs to be rescheduled. Once those two items are fixed, it will allow for some real expansion. Some companies, like Dixie Elixirs are setting the stage now to be in the right spot when the change occurs. MassRoots has a chance to be very successful as well since they can scale globally with very little capital investment.

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