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They couldn’t get in the door to the retail to meet with any of the buyers. And so we said, hey, we’ll just send an email newsletter out to our whole advertiser network to see if anybody would like to make a purchase. And with that, you know, they were able to sell out their inventory within two hours. And that’s when I really went, oh my gosh, our most valuable asset as a company is the network that we’ve built.
Jay Clouse 0:22
The startup investment landscape is changing, and world class companies are being built outside of Silicon Valley. We find them, talk with them, and discuss the upside of investing in them. Welcome to Upside.
Eric Hornung 0:49
Hello, hello, hello, and welcome to the Upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Eric Hornung, and I’m accompanied by my co-host, Mr. Bowling-Uncle himself, Jay Clouse. Jay what’s going on, man?
Jay Clouse 1:04
I don’t like how closely Bowling-Uncle sounded like boring uncle, but it was Bowling-Uncle. I did take my niece’s bowling this weekend. Only took us eight months to cash in on their Christmas present, a trip to go bowling with their uncle Jay. They have booming social calendars, as friend the podcast Colleen said to me. Took eight months to get on their calendar.
Eric Hornung 1:26
I heard she was chirping you. Yeah, you couldn’t get on — how old are they, seven and nine?
Jay Clouse 1:30
Well, my sister corrected me. So one is nine, very nearly ten, and the other is seven, very nearly eight.
Eric Hornung 1:37
Wow. And you said six in your Instagram story.
Jay Clouse 1:40
I said seven, maybe six. I mean, I wasn’t wrong. She is seven, and Sophie is nine. So technically, I was correct. But I was erring on the side of, I thought they might be younger, and in fact, they were older than I realized.
Eric Hornung 1:54
Yeah, so you were correct, but also wrong.
Jay Clouse 1:56
Do you have any nieces?
Eric Hornung 1:57
No, I do not. I am the oldest on my mom’s side of all of the cousins and the, well, I guess that wouldn’t matter because that’s not how nice is work. But I’m also the oldest of my siblings.
Jay Clouse 2:09
That’s right. That’s right. So you don’t know the joy of being a fun uncle yet?
Eric Hornung 2:12
No, I don’t. Or a boring uncle. I don’t know the joy of either.
Jay Clouse 2:15
Yeah, well, ttheygot bumpers, I did not have bumpers. And I thought, you know, I’m playing against a couple of young girls. This is the perfect time for me to up my bowling game and learn how to spin this thing instead of throwing it straight. And I did not do myself any favors. It’s actually a lot easier to lose to kids playing with bumpers than I realized, and I lost twice.
Eric Hornung 2:36
Yeah, I saw a lot of zeros on your scorecard.
Jay Clouse 2:39
Lot of zeros. They earned their ice cream reward. We had a very large bowling alley pizza. It was a fun time. Fun Time with the nieces.
Eric Hornung 2:50
You know how amazing ice cream had to be, like, in the 1920s? No one really knew what it was, it was like, you had to go down to the corner store, get your ice cream, it cost a nickel or whatever. It was frozen; people had no idea what frozen stuff was. Maybe that was the 1880s. I don’t know when it happened. Gilded Age, who knows. Seems like we really diluted the value of ice cream.
Jay Clouse 3:08
Imagine how difficult it would be to move ice cream around logistically back in the 1920s.
Eric Hornung 3:14
I feel like you had to make it in its own kitchen. Like in its own ice cream maker at a parlor, where you got a egg cream soda. I don’t know, that seems like a 1920s thing.
Jay Clouse 3:24
Probably true. Well speaking of treats early on in their existence and moving them around, today we are speaking with Chase Nobles, founder and CEO of Kush.com, a managed marketplace dedicated to helping the legal hemp and cannabis industries thrive. They are the largest wholesale raw materials exchange in the cannabis industry with over 6000 registered industry professionals on the platform. They bridge between licensed producers, processors, and retailers, with a b2b platform for wholesale transactions and business development.
Eric Hornung 3:58
That was the biggest stretch of a segway I think in upside history.
Jay Clouse 4:01
The best part way, I thought you were trying to lead the stretch and talk about how awesome it must have been to have ice cream early on when it was new. I thought you were leading the stretch, and then I realized you didn’t, and I had the opportunity to tie those puzzle pieces together into our segway.
Eric Hornung 4:16
That’s what 18-plus months of recording Upside will get you, just telepathy through the radio waves, the internet —
Jay Clouse 4:23
Eric Hornung 4:24
— the broadband cables. I don’t know what we’re actually talking through here.
Jay Clouse 4:28
Kush.com was founded in 2016. They’re based in Seattle. They started as Kush Tourism in 2014, and, Eric, diving back into our — if we have two data points is it called a series yet? Do we have a cannabis series now between this and Periodic Edibles, or do we need three?
Eric Hornung 4:46
No, I think, when we only have two points that’s a line, but this does come from Meb Faber, who is a friend of the podcast and has been on the podcast. He is doing a cannabis series and recently released a cannabis ETF, so shout out to Meb for the introduction to Chase.
Jay Clouse 5:03
That’s right. Excited for this interview, excited to hear where they bought the domain from, I have to imagine a four letter domain that is Kush.com must have been difficult to come by or they must have been some visionaries. I don’t know. If you guys have any thoughts for us as we go through this interview, you can tweet at us @upside.fm or email us firstname.lastname@example.org. So let’s jump into that interview with Chase. Chase, welcome to the show.
Chase Nobles 5:31
Howdy, howdy. How you guys doing?
Eric Hornung 5:33
Doing pretty well, man. On Upside, we like start with a background of the founder. Can you tell us about the history of Chase?
Chase Nobles 5:40
Sure. Yep. So I grew up in east Tennessee, born and raised outside of Knoxville, you know kind of had the, little bit of a rural, little bit of an urban, you know, childhood where I grew up in a town of 2,000 for a lot of my childhood, lived in lower Alabama for a really short period of time, moved back to east Tennessee, then moved down to Knoxville for high school. Was a competitive gymnast and ended up getting recruited to go to the Air Force Academy. Was on their D1 gymnastics team for two years, moved to Colorado out of high school, went to school there. I ended up dropping out of the Air Force Academy to pursue whitewater kayaking. Parents talked me back into going to school, which I was pretty adamantly against. Ended up graduating with a business degree and a minor in entrepreneurship, which I didn’t even really know what an entrepreneur was at that point, or like how you would even get there. Started my own company while I was in college, moved to Seattle for whitewater kayaking as soon as I graduated, and eventually met my business partner on the side of a river, and we started this company, Kush.com.
Jay Clouse 6:44
When you say that you were recruited to the Air Force Academy to be a gymnast, how does collegiate recruiting work for branches of the military? Do they go about it the same way that, like, an Ohio State or a USC would? Or they looking for someone that has a predisposition to join the armed services?
Chase Nobles 7:02
Yeah, so I’d say it’s probably a little bit different because the criteria to get in is really high, you know, you have to get a congressional nomination, you have to have good academics, you have to have, you know, extracurriculars, you know, that make you, you know, make you more likely to get in. So, you know, I was an Eagle Scout, or I guess I am an Eagle Scout. And, you know, I was an outdoors enthusiast, I was pretty high level at gymnastics, and I had good, well I had decent grades. So it kind of put me on the fast track for being a blue chip recruit out there. So that ended up working out for me, which, you know, I’m really thankful for, it didn’t end up being a good fit for me and what I wanted to do with the rest of my life, but I learned a lot while I was there and enjoyed my time as much as you can enjoy your freshman and sophomore year at the Academy.
Eric Hornung 7:50
So when you left, and you went and got your degrees, you said that you got a degree in entrepreneurship, but you didn’t even know what an entrepreneur was. So can you talk about how your world was opened up to the idea of entrepreneurship?
Chase Nobles 8:03
Yeah, so we had a great professor, Tom Dunning at the University of Colorado at Colorado Springs. He teaches maybe, like a not standard, he has a non-standard kind of way of teaching. And for a lot of his classes, he would have a local entrepreneur come in and tell the story about how they started their business. You know, this is probably a little bit before podcasts really got huge, which is how a lot of people learn about entrepreneurship now is from YouTube and podcasts. But back then, you know, it wasn’t that long ago, but back then, and even now, getting to meet an entrepreneur and have them tell you their story can be really impactful. And it’s like, for me, I looked at that, and I said, that’s who I’ve always been, I need to figure this out and pretty quickly started a small company. Didn’t do very well but learned a lot going through that process, and it really set me up for what we’re doing now.
Jay Clouse 8:53
On your LinkedIn in the certification section, there’s a piece that says, Hardcore Bootstrapping, you have a certification in hardcore bootstrapping. Can you talk about that?
Chase Nobles 9:04
That’s a self-certification. You know, we ran out of money really quickly when we started this company, and we didn’t have access to a lot of capital. So we had to figure out how to make money to stay in business, which was our jobs. And we weren’t even making it. We weren’t paying ourselves. So I think having to go through that moment of really not knowing if you’re going to have a job in a month or have, like, a career in a month, because what we were doing was somewhat loose. And it might not be…it might not be an asset to say, on your resume, to say that you went and tried to start a cannabis company, you know. So for us, we took a lot of risks, and we put ourselves in such a position that we had to succeed that, you know, it was a force function. We had to make it work and we bootstrapped for a long time doing that. And I’m pretty proud of that self-certification. It was more of a joke, but yeah, I like that. I forgot that I put that on there.
Jay Clouse 9:59
I figured it was. I’m going to put a pin in that and come back to that later. But you mentioned, when you we’re doing this whitewater kayaking, you met your business partner at the side of a river. Can you talk to us about that interaction and how you met him?
Chase Nobles 10:13
Yeah, so, up in the northwest, it’s kind of the whitewater capital of the world. There’s so many great rivers in the wintertime, it’s raining a fair amount, so all the low land rivers are healthy with flow. And then in the summer, it’s, you know, these high altitude, glacial melt runs come in. And so, it’s got a huge community of whitewater kayakers. So every time you’re out on the river, you’re meeting new, interesting, cool people, and can build a lot of great friendships that way. And that’s how I met Mike. Mike and I, you know, ended up on the side of the river talking about how — this is in 2013 — how cannabis is being legalized, and, you know, this is just the start. And he had this idea for Kush Tourism, which ended up being our media company. It was one of those ideas that, you know, once it’s brought up in conversation, we just couldn’t stop jamming on it. It was this, that, how could we do this, what can we do here, how can we make money there, how could we, you know, build a community here. And it was just one of those ideas where, I mean, we’ve all had them, where you just can’t stop jamming on it. That was kind of the genesis of what Kush.com has become, which is now such a different company but a pretty big powerhouse in this space.
Eric Hornung 11:25
So when it was a kush tourism business, or a cannabis tourism business, who are you looking at as, like, oh, I want to be like champagne? Or I want to be like Napa? Or what kind of tourism was it? What was the setup? What was the idea?
Chase Nobles 11:40
Yeah, that’s a good question. I don’t think that we really modeled it after anybody. We just thought, we’re in one of the two states that have legalized recreational cannabis. People from around the world, they’re going to want to come here, Seattle’s a huge international destination. And we thought, they’re going to want to learn about cannabis. And, you know, we could be the people, we could be the company that introduces them to that world, because at that point, it was really closed down. You couldn’t get a tour through anywhere. And if we worked hard enough, we could make it so that we couldd provide a really strong, educational tour to say, hey, this is what’s happened in Washington, and this is what we’re doing in Washington when it comes to cannabis. I believe a lot of people took that experience and took it back to their own home state or their own home country and are having a different conversation saying, hey, the sky is not falling, hey, cannabis legalization created a lot of jobs, hey, you know, this is a freedom issue, this is an individual rights issue. And it’s a bunch of great people building companies in this space, and it’s good for society. So I think we changed the narrative based on what people expected on a cannabis tour to what they got. It was a really professional, high quality, educational experience. And I think we played a pretty big role in changing that narrative when it came to cannabis legalization, especially early on as it was in 2014.
Eric Hornung 13:00
What kind of people went on these tours?
Chase Nobles 13:02
Oh, you got everybody. You got doctors, you got lawyers, you got accountants, you got everyday people, you got a lot of — this was my favorite tour to run, because back then we were running all the tours — my favorite tour to run was the husband-wife tour, where one of them was a really big fan of cannabis, obviously smoked a fair amount of weed, and the other one really frowned on it. And that was such a good tour because it provided some legitimacy to someone else’s affinity to cannabis, where it opened up a lot of people’s eyes. And I just love that because by the end of the day everybody was having fun, and everybody had a little bit more understanding of what the cannabis industry is and the effects of cannabis. And it was just a lot of fun to be able to take people that wanted to teach their significant other more about something that they enjoyed that couldn’t necessarily get it any other way. So, yeah, that was a lot of fun.
Jay Clouse 14:00
What were the aspects of a tour like that, or what were the stages or the moments that made people understand cannabis differently?
Chase Nobles 14:10
You know, as much as we had really nice content around what we wanted to teach people and the individual aspects of the industry, whether it was, in Seattle there’s a big art and glass blowing scene, so there’s a lot of great, pretty famous pipe-makers up here. And we would take them to a growth facility, we would take them to an extraction facility, we would take them to a retail shop, we’d take them to a couple of different places. And I think when it came to, like, the moments that people loved the most about the tours, it was the conversations, not the boilerplate content that we would put together. It was actually getting to introduce them to Jeff the gardener or to Aaron the glass blower, and let them ask the questions and make it more freeform. I think it made it a really authentic experience that you can’t really expect on most tours.
Eric Hornung 15:04
So, how successful was the tourism component when you first launched?
Chase Nobles 15:08
It was marginally successful. We made money doing tours. It was like, we like to say it was a really good job, it wasn’t a really good company. So it was a lot of fun, and we made enough money to support one or two people with it. But it wasn’t a scalable business built for the long term. And so, we ended up starting a media company on top of the tour company, primarily because it helped us sell more tours, to get a really strong search presence. But we started building resources such as cannabis friendly lodging in each state, and frequently asked questions in each state, and what-to-do where-to-go in each state, and what is and isn’t legal, and where to buy cannabis. And that last one, where to buy cannabis, really built us up as a presence, because retail shops started reaching out to us to advertise. Because in cannabis, you can’t just advertise everywhere, there’s a lot regulation about where you can advertise. And we had built a really strong media presence really quickly with our website that was a great outlet for retailers to acquire the tourism market. And so, when we pivoted to a media company, that was a pretty big growth moment for our company, and that took us a long ways and is still alive and well today.
Jay Clouse 16:21
So at what point did you guys decide, okay, now let’s add to the tourism company, let’s add to the media company, let’s make a marketplace?
Chase Nobles 16:29
Yeah, so you know, Kush.com’s a much different company now than when we started. And I guess one of the biggest points where we made that shift was, we had all these advertisers, these retail advertisers throughout, you know, the legal states, and one of the ways that we knew that we could create more value to just advertising was to aggregate deals and specials between producers and processors in the industry to these retailers. And we got to that idea because we had a processor here in Washington that was really struggling and that we liked a lot, that was a part of our tour at the time. And they had invested a ton of money and their life savings into starting this company. And they had launched at a point where the market was really saturated in Washington with products. And so they couldn’t get in the door to the retail to meet with any of the buyers. And so we said, hey, we’ll just send an email newsletter out to our whole advertiser network to see if anybody would like to make a purchase. And with that, you know, they were able to sell out their inventory within two hours. And that’s when we really went, oh my gosh, our most valuable asset as a company is the network that we’ve built, not the media and not the content, not anything else’s. It’s how fast we built a network in such a young industry. And we’ve pivoted since then because that was all processor to retailer. Now we’re upstream from farm to product manufacturers. But that was the beginning of the marketplace for us. And it’s been, I would say, we got on the train that we’re on now at that moment, and it’s been a pretty wild ride since then.
Jay Clouse 18:01
So how do you describe Kush.com to somebody who’s hearing about it for the first time today?
Chase Nobles 18:06
Yeah, we’re a wholesale, raw materials trading platform for the hemp and cannabis industry.
Jay Clouse 18:11
And when and how did you buy the domain Kush.com?
Chase Nobles 18:14
Oh gosh, yeah, we bought Kush.com last November. You know, there was a huge process to get the domain and to make the the purchase, I think it was like, it was one of the top domain purchases of last year. That involved a lot because we didn’t want to take the money straight out of our bank account, so we ended up raising a small amount of money on a convertible note just to make the purchase so that we didn’t have to tap the resources that we had already allocated for the next 18 months of growth. Once we bought it, it wasn’t over, right? Because then we had to become Kush.com, which was a whole rebrand, and we didn’t just want to reskin the site. We wanted to kind of build more of the full vision and launch as a really strong brand in this space. And I believe we’ve done that really well. Kush.com is…It’s great to be able to say, hey, I’m Chase with Kush.com, on a sales call or in a meeting, because we get the meetings really easily because people know who Kush.com is, and they know what we do. And a lot of the larger processors in this space use us to source raw material on a regular basis. So it’s really exciting to kind of see the impact of a strong brand in addition to a strong business model.
Eric Hornung 19:22
When you were evaluating Kush as an option, Kush.com as an option, what other things were you evaluating? Or was this the brand you always wanted to build?
Chase Nobles 19:31
This was the brand. Yeah, there wasn’t another domain that we would have wanted. We had KushMarketplace.com, and we had KushTourism.com. And we always thought, you know, if we could become Kush.com, that would just be such a huge move, because people already referred to us as Kush, team Kush, the guys over at Kush. I think, to become such a short domain, you know, really showed our network — hey, we’re taking this seriously, as well. We’re, you know, we’re agile, we can rebrand and become something better because that’s what we’re doing all the time, is becoming a better platform for our users.
Eric Hornung 20:07
What was the biggest pushback you got from investors on that convertible note that was raised? It sounds like pretty much just to buy this domain.
Chase Nobles 20:15
I don’t think we got much pushback. I think, honestly, it was about communicating why we wanted to do it, which wasn’t that hard. I think if you look at a lot of the one, you know, the single word domain purchases that are done by tech companies, it tends to be a really good move, if your trajectory is headed in the right direction, and our trajectories has been headed in that right direction for a while. And it was available for sale and somebody was going to buy it. We figured, it might as well be us, and we can find the resources to do that.
Jay Clouse 20:48
Are you able to share how big of a purchase that was? I’m super curious.
Chase Nobles 20:52
Yeah, it’s online, it was a $500,000 purchase. About half a million dollar.
Jay Clouse 20:56
Chase Nobles 20:57
Yep, independent owner.
Jay Clouse 20:59
Chase Nobles 21:00
It was a family.
Jay Clouse 21:01
Love that. So, you guys started doing the marketplace, I think in 2016 is what my research found. Talk to me about what that trajectory has looked like from a traction standpoint. Who jumped on early? Why were they excited? What type of success have you seen to this point?
Chase Nobles 21:18
Yeah, so I’d say there’s been a couple of big, you know, changes for the marketplace. We started off processor to retailer, product manufacturer to retailer. Then we noticed some really big transactions happening on our platform from farm to product manufacturer. So we decided to pivot and fully focus on that raw materials trading platform. Scaled it up in Washington pretty quickly. And then California went legal, so we moved into California, just it’s, you know, the sixth, I think it’s the sixth largest economy in the world. So we figured, why not go after the biggest one. And then hemp was legalized back in December — federally — and we had already had our, you know, feet in the hemp industry, and so, who better to really build this marketplace than us? And, you know, there’s a lot of farms out there growing a lot of raw material, and they don’t have the resources to hire a full sales team. So we’ve become that source of liquidity for a lot of farms in the industry. And being that source of liquidity has allowed us to build the resources that they need and that the buyers need on the product manufacturing side. So, I like to think that there’s a lot of trust within the network that we’re going to dump every single dollar that we make back into building a better platform. And I think that they’ve seen that in a lot of ways already. And so, it’s a really strong relationship between us and our users. They’re happy to be working with us. And it’s really exciting to see them invest in us just as much as we invest in them.
Eric Hornung 22:46
How do you keep that feedback loop tight to ensure that you are making good product updates?
Chase Nobles 22:53
A lot of phone calls and a lot of site visits. I mean, I was traveling last week, I was in Tennessee, Kentucky, Maine, and Michigan, all in three days. And a lot of that was just to meet people to see how the team was doing for them and see how we could do more for them. And I think that feedback loop is great on the phone, but it’s even better in person. So I’m always on the road. We’ve got a great team here at the office to kind of hold down the fort and make sure that we’re executing on what we say we can do. Well, you know, it’s freed me up to be able to go and meet a lot of these people. And I also, you know, kind of fill the Chief Product Officer role for the company. So that feedback loop’s so important to figure out not just how to make what we built better but what should we build in addition to what we already have?
Jay Clouse 23:38
You guys have a great ten-minute video on your about page recommend listeners go check out. But a line that stuck out to me in that video is you saying you have to go out and meet these people. It’s an industry about trust and relationships. And in the tech world, a lot of people would argue, well, that doesn’t scale. So when did you decide that you were going to take a hard stance to be very analog and personal and forming these relationships for what a lot of people would consider, you know, a large marketplace that you need to get a lot of people on quickly?
Chase Nobles 24:09
Yeah, well, I’d say that we already get a lot of people on quickly. So when it comes to the relationship and the trust with the user network, them knowing that we actually know what we’re talking about and that we actually work with them directly, not just our agnostic platform that they use every once in a while, them knowing that we’re invested in their company as a supply chain solution, it’s a different conversation. The fact that they know that we’re out in the field and that if, if they need help, that will come see them, it’s a huge benefit. You know, I’d say a lot of these transactions are like buying a house and, you know, Redfin’s great, right? But they still have their independent reps come out and do the showings and do all the closing the house. We do a lot of that same stuff but for the hemp and cannabis industry. So, I don’t think it’s ever going to be a pure tech play for us, it’s always going to involve a handshake, it’s always gonna involve a relationship. And that relationship that they have isn’t just with me, it’s with the brand Kush.com. So it’s a form of, obviously, we did some content generation on some of our trips that we’ve done. It’s also a form of brand building and marketing in the sense that they know who we are, and we’re a little bit different than anybody out there because we will come and see them, and we do want to have a strong relationship, and we want to be kind of their sole supply chain solution. This really insulates us for that.
Eric Hornung 25:28
How involved are you guys in the actual transaction, then? Is it, are you issuing invoices on both sides? Like what does it look like when someone comes on? Are they just being match-made? Or is there a lot of back office stuff that you do as well?
Chase Nobles 25:42
I’d say there’s a lot of back office stuff on the front end. So when it comes to…look, this industry’s huge, but it’s not that big when it comes to the number of people actually in it. And there’s a strong black market side that we filter out. And so, because we have such user growth, we have to vet and validate every single user that comes onto the platform. The fact that we invest so much of our time and so much of our effort into validating users, verifying that they have the licenses on file, verifying that they’re qualified to do what they say they’re going to do, cleaning up the network, if there’s a bad actor or if there’s somebody that’s not coming through on what they say they’re going to do on the platform, and really building a high quality network has been one of the biggest differentiators, I think, for our company, because there’s a ton of platforms out there that may or may not help facilitate, you know, legitimate transactions. We are completely different on that front. Now, if there’s a deal that needs help guiding through, if it’s almost to the finish line and it just needs a phone call or this or that, we also do that. But I would say the majority of our work comes on onboarding, and then the solutions built, and the users can get the value that they need out of that exclusive network, because we did all that work on the front end. But we’re still out in the field visiting our current users regularly.
Jay Clouse 27:02
What does the velocity of transactions look like in this world? Am I making a couple of giant wholesale purchases a year? Or am I ordering certain, certain things, you know, every couple of weeks? What does that look like for people on your platform?
Chase Nobles 27:17
Yeah, it depends on the buyer. It depends on the facility that they have. It depends on, you know, their ability to hold inventory. There is a shelf life on some of these products when it comes to degradation of the cannabinoids. So, you know, last harvest , raw material that was harvested last October may not be — and it probably isn’t — as good this July. Right? And so, they need to sell pretty quickly. And it can, it just depends on the user, they can make one purchase every two months, they can make a purchase every week, they can make a purchase every six months, if they have the inventory like warehousing to do that. Not very many people do that. It’s usually like monthly, weekly or bi-weekly purchases.
Eric Hornung 28:00
Random question that is about the industry in general: If I am a grower in Washington and I want to sell to someone in California, can I do that?
Chase Nobles 28:09
No, definitely not.
Eric Hornung 28:10
So you guys almost have, like, mini marketplaces within a larger marketplace, then?
Chase Nobles 28:14
On the cannabis side, everything is siloed. You know, hemp is changing with federal legalization and interstate commerce. But on the cannabis side, every markets its own silo. So yeah, it is a bunch of mini marketplaces. And that can be so challenging because a marketplace is already an interesting business model where you have two customers: you have the demand side and the supply side. Well, we have the demand side in Washington, a supply side in Washington; we have the demand side in California, the supply side in California; the demand in Oregon and the supply in Oregon; and the demand in Colorado and supply in Colorado. And then on the whole, just everything that happens on the hemp side. That’s a lot of different individual segments of users to serve. And so, that can be a challenge from a product perspective on how to make make sure that you’re doing a great job. I think we do that. But again, getting out in the field for us has been a big help on figuring out exactly where we create the most value and how do we replicate that.
Eric Hornung 29:09
You mentioned on a prior podcast that I heard you on that you had a crazy backlog of like, I want to say it was like, 800 or something companies to be on-boarded, vetted, and validated. How do you prioritize…
Chase Nobles 29:22
It’s probably more like 8,000. But yes.
Eric Hornung 29:26
How do you prioritize, given that you have all these many marketplaces, essentially, which one comes first and why?
Chase Nobles 29:33
Since that podcast, we’ve made a lot of steps. When you sign up, you can do it…You have different users that sign up, right? You have the really motivated user, you have the kind-of motivated user, you have the user that’s interested but not going to do much work. And then you have the user that has no business being here, right? And so we’ve done a much better job of segmenting those individuals. And we can make it at, you know, those users can do as much or as little work as they want to, and that changes their priority on the list. So if they upload their license initially, and they schedule a call, and they give us their license number, and all we got to do is do the checks that we run and do the onboarding call, their way up on the priority list because they already scheduled a call with our team. But if they didn’t do any of that, we’re probably never going to call them and they’re going to have to do a little bit more work to get there. And then there’s, there’s the people that do half of it. And there, they get all the prompts, they, you know, they get, you know, they enter our campaign of making sure that we communicate what they need to do to actually use the platform. But once you create, you know, once you register and upload kind of the base level information, you can see, you can see the platform, you can’t use it, but you can see it, and you can get a feel for how much value it can create for you. So that does a pretty good job of capturing the information that we need to validate faster. But still, it depends on the segment of user. And we’ve made a lot of great progress on speeding that up. But again, the speed is less important than the quality on our platform. And so I’ll stand by that all day. If we can do both great. If we can do speed a little faster, amazing. But if we lose the quality of our network and the quality of our platform, we’re in a bad place. And so, for us, it’s it’s about maintaining a high level of quality on our platform and monitoring and going back through and cleaning up the platform, if, you know, a bad user or two gets through that’s making offers and never has any intention of filling those orders.
Jay Clouse 31:28
So I want to get into some of the marketplace dynamics, because marketplaces can operate a lot of different ways. So do you guys, you don’t touch the product, I’m assuming, it’s peer-to-peer, use- to-user on the fulfillment side?
Chase Nobles 31:43
Yes, yep, we never touch the product, we actually don’t even touch the cash at the transaction.
Jay Clouse 31:47
Oh, interesting. So what is, what is Kush.com’s model for making money yourself?
Chase Nobles 31:53
Yeah, it’s technically, like, an introduction fee, and farms pay us on the back end to to provide the network to find liquidity. So they pay us after the transaction happens. That way, you know, everybody has to be happy, there’s a lot of alignment there because if they’re not happy, then we might not get paid. But if we provide a high quality experience that they want to come back to and do recurring sales, recurring purchases through us, then it just provides a lot of alignment in the business model. Plus, when it comes to touching the finances or touching the product, there’s also a lot of liability there, a lot of regulatory risks there, a lot of regulatory licensing there, and a lot of challenges when it comes to banking. So it makes it easier for us to scale faster by staying one step removed from the actual transaction and being a community in a network of buyers and sellers. That’s allowed us to scale as fast as we have.
Jay Clouse 32:43
How do you guys ensure that you are being compensated fairly? Or is it a lot on the honor system?
Chase Nobles 32:49
No, it’s up front. They understand the deal when they make a purchase or make a sale through the platform. We’re very clear about it on the platform, and people tend to be really happy to pay us because we’re…Look, we’ve built a platform where people don’t have to hire full procurement teams and don’t have to hire full sales teams. And when you’re saving somebody $150,000 a year, for a small fee, that it’s a really easy, really easy decision for them to make, and they’re happy to, they’re happy to work with us on that. So I do believe that’s the value we create as a platform for our users.
Eric Hornung 33:23
Is it a percentage of merchandise value, then? Or is it like, is it flat fee? Does it decrease as merchandise value goes up, or order size, or how does it, how does that work?
Chase Nobles 33:33
There’s, you’d have to jump into the Terms of Service, but there’s a bunch of different tiers based on your usage.
Eric Hornung 33:39
And you mentioned payments and finance being a tough regulatory area. Who’s doing payments well in this space? Like how do people actually pay when they are touching the plant?
Chase Nobles 33:50
Nobody’s doing it well. And the way they pay is typically through wire transfers from one bank to another. And a lot of the cannabis banks or the cannabis companies work with smaller credit unions within their state. Hemp is a little bit different; but still, they get lumped into the same category of the cannabis company. So there’s all kinds of challenges there, you know, that’s a time problem. The way I see it is those issues will get figured out down the line where traditional, financial money-transmitter companies, you know, all the infrastructure there will work with the industry. But for now, you know, they have to do business a certain way, and that makes things a little bit slower. But it’ll fix itself over time, from our perspective. So, you know, we think that focusing on building a network and building a community and long-term value versus solving something like the money transmitter issue, we just see that as a really easy piece for us to pick off and say, let’s create the best platform and the best network for getting these deals done and building a supply chain and go head down there.
Jay Clouse 34:59
Can you walk me through what it looks like to both the buyer and the seller when a transaction goes seamlessly?
Chase Nobles 35:05
Sure. So, you know, right now on the platform, if you had a license to purchase, you know, cannabis in Washington, you would log onto our platform, and there we got some, we got some secrets that we don’t usually talk too much about. But you’ll list exactly what you need. It’ll show you all the matches in a competitive way. And then it’ll allow you to have a conversation with each one of the vendors to see which one’s the best fit. And then, it’ll also notify you when new products match your purchasing criteria, because you know what you need to purchase, and you know what you need to purchase pretty regularly, and by being able to set your exact criteria and know what’s on the marketplace at any given time and make that really efficient is great. You have that conversation, you make the offer, they accept the offer, products ship, you pay for it, and transactions complete.
Eric Hornung 35:59
So if I really like the supplier that I’m working with, and we connect on Kush.com, how do you guys ensure that you get that introductory fee going forward if I’m going to order from them every three months for the next ten years?
Chase Nobles 36:12
Sure, that’s a good question. I think there’s a couple of unexpected dynamics to the market where, you know, if you’re a farm and you have a harvest, you only have that harvest every so often. And so those purchases are made maybe not at the same cadence. So whenever you come to harvest season, that buyer may be full, or that buyer may be needing and you don’t know. But also, the price volatility could have changed drastically. And so renegotiating those prices, our platform does it in real time, it tells you kind of what your products worth based on the other products that have recently sold. And it’s almost like an appraisal for the farm and the buyer. So they know what their products worth. Just because you sold it to one buyer at one point doesn’t mean that that buyer is, one, going to be interested next time, or, two, need it, and, three, doesn’t mean the price is going to be the same. Our platform helps solve all that. And then we’ve got a couple other pretty big projects that we’re working to address that even further.
Jay Clouse 36:26
So you mentioned, it’s kind of a challenge for you in the siloed system to make sure that the marketplace is balanced and things are happening. As a buyer, I know that a bad experience is if you’re trying to buy something and the listing is stale or just old. Is that the biggest problem you guys have on the supply side, is helping people keep their information up to date?
Chase Nobles 37:37
No, I’d say the biggest challenge that we’ve had is — because we clean up, like we clean the database really regularly. We have we have a team of moderators actively moderating the platform and managing that supply and demand. But one of the biggest challenges we have is the wild swings we go through with supply and demand. We’ll — and maybe less on the demand side but on the supply side — we’ll have a hard seasonal, we’ll have a harvest season come down, prices will drop, you know, then prices will go back up late summer like they are right now as we go into kind of a shortage season, unless it’s a huge surplus market from the last harvest. So I think it’s not the usage of the platform, it’s the actual supply and demand on each individual market that’s important to track. And we’ve just launched some data analytics on that side based on the engagement on the platform, which we’re going to be pushing out later this week. So, excited to show that off just because it shows all those trends in real time on our platform.
Eric Hornung 38:34
Anything immediately interesting pop out that you could share?
Chase Nobles 38:37
Yeah, yeah. So the hemp market, dry flour and hemp, is in an apparent shortage, right? There’s just not enough quality product out there on the market. And what has happened is demand has actually declined. So even though we’re in a shortage, prices haven’t really risen, because demand declined with the supply. And that was unexpected, we thought prices were going to climb a little bit, and they didn’t climb much at all. And then on the Washington market, there’s also a shortage of extraction material. We’re coming out of it now, just because a lot of the early harvests are coming down. But prices rose from, you know, an average of 8 to 10 cents to 25 to 30 cents a gram on extraction material in Washington. That’s, that’s a 3x increase, that’s a huge impact on the market. So, being able to actually see that happen on the platform, it’s just, it’s really exciting to be able to…We get to see it, because we pull, we pull the numbers and we run all the analytics on it pretty regularly. But now we can do it in real time in a publicly consumable way that the rest of the market can see those trends as well. So they can make their own decisions, and they can make their own assumptions faster, be able to time the market on when to buy and when to sell.
Jay Clouse 39:50
So you mentioned that you have 8,000-something people that you want to onboard. If you created a process for vetting and onboarding these, all of these people really quickly, the people that match your criteria, and made the marketplace even more efficient, I would imagine that prices would drop because there’s more supply. Do you have to think about that dynamic in terms of, if prices drop for the, you know, all of the suppliers, that would probably take your per-transaction fee down. How much do you think about that?
Chase Nobles 40:20
You know, we would be doing more volume, I would assume. But we don’t think about the speed, we don’t try to control the market and the speed that we onboard. We actually don’t try to control the market at all, we try to let the market do its thing. For us, we’re going as fast as we can with validation, and we continue to make innovations there. There’s a max speed at which we can go on that front without just hiring a ton of people, which we’re not going to do, because we really want to get it right. And if we get it right, then we can hire a ton of people to make sure that it works really well. But right now, we don’t want to disrupt the marketplace by onboarding a bunch of users that, you know, we may not have a high confidence in their ability to do good business. And so for us, at the current rate that we’re onboarding people, the amount of activity on the platform is actually feasible. So we have to balance. It’s not just the number of people that we onboard that changes supplies, that they changed the sheer volume of deals that happened through the platform. We have a high level of customer service on each and every deal that happens on the platform. If we 10X that overnight, it would be a really bad negative, like negative user experience. We couldn’t do that to us or the company unless we made some serious moves, which we are, probably coming this fall, but for right now we need to make sure that it continues to be a high quality experience. I think that’s kind of the, we’ve hit this kind of breakout velocity, and making sure that you have a really solid plan on how to handle that, without breaking the company, is so important. We need to make sure that we handle that in a responsible way that also maintains the level of, you know, the experience on the platform. A lot of times you see, the bigger you get, the lower your net promoter score goes. We want to avoid that at all costs because our reputation is the platform and the platform is our reputation. And it’s so connected to our brand.
Eric Hornung 42:20
What are the largest costs of your business right now?
Chase Nobles 42:23
That’s a good question. I would say payroll, for sure. Payroll. I think that’s the largest cost for most people. We’ve got a great office up here, but, you know, we’re a team of like 35 now. And it’s not cheap to have that many people working at a company. We have the growth to support that. But it’s a giant expense for any business as they hire people.
Jay Clouse 42:45
When we talk to investors, and they talk about the cannabis space, they often seem most interested in businesses that are, you know, sort of adjacent, like what you’re doing. You’re not touching the plant, you’re not touching the raw materials. So it seems like, if you were to go and raise a ton of money or wanted to raise a ton of money, you probably could. How do you just think about, you know, you have this self-certification of Hardcore Bootstrapping. So, what does investment mean to you, at this point, having raised a convertible note? How do you think about that in relation to, well we could just continue to self-fund this if we wanted to?
Chase Nobles 43:19
Well, so, we haven’t necessarily been self-funding in the bootstrapping sense for probably two years. We raised a little bit of money out of Silicon Valley and then raised a much bigger round last August. And so, we are on that track right now. For us, when we think about fundraising, it’s about, you know, what does the next eight months look like? And how much progress can we make between now and eight months? And right now, we’re at a point in our company where we look and we go, there’s so much we can do between now and eight months from now, let’s not worry about fundraising, let’s not worry about anything else other than building a great company and really showing that we’ve hit escape velocity, and, you know, we don’t know where the top is. And so for us, it’s a matter of like, how big of a change can we make in the company between now and however many months from now. And what impact does that have on future financing, because financing is restricted by the evaluation of your company, you don’t want to sell your whole business in a single round of financing, unless, you know, like, which can happen if you’re not showing traction. But, if you are showing significant traction, it’s a matter of, how much money are you comfortable raising versus evaluation to drive this business to the next level. And what is that next level? And then what is it going to take to actually reach? I mean, it’s a huge calculation when it comes to, how much money do we actually need? Do we actually need it, first off? How much money would we actually need if we wanted to hit whatever the next business growth trajectory is? And what is it going to take to prove that we can get to that point? I think there’s a lot that goes into it, and right now we just, it’s not even, it’s not even in our sights. We’re looking at…I think we’ve just seen so much opportunity, and we’ve made so many really positive changes on the platform, and we’re going on a couple of really big projects that are going to be a huge growth channel for us. It’s like, why would we consider fundraising now when we could wait six-eight months and have a much bigger conversation about fundraising or big around?
Eric Hornung 45:28
So my last question is, if you’re looking at your business, and it’s growing very quickly, what are the three kind of numbers or indicators you would look at — it could be finance, it could be product side — to know how healthy that growth actually is?
Chase Nobles 45:43
So there’s API’s for every role at our company. And those KPIs roll up into, you know, API’s that our Director of Marketing presents and that our VP of Marketing presents and our VP of Sales presents. You know, we see those every single day. So those obvious KPIs that departments are built around — you know, user growth, or validation, or revenue, or deals closed, things like that — those are kind of the obvious ones. When it comes to kind of the less obvious ones is, there’s always new things that you’re working on in a company. And you can do it on a one-off occasion. You can do it here or there, you can you can make certain things happen with enough effort, right? But I think it’s more, you know, and I wish I had a number around this one, but I wish there was a — and maybe I should go back to work and get a number around this one — but it would be what are the steps to make certain things repeatable, scalable, and an industry wide solution? And how far down those steps are we so it’d be kind of, it wouldn’t be like a, necessarily, a KPI would be more of a progress bar. And that’s how we think about it in our meetings, but I guess it’s not as as formalized as a progress bar on some of the larger projects that we work on just because, as we get exposed to more companies doing more significant purchasing, we realize there are certain things that we were building to serve those needs that have exponential returns. We could do it in a one off occasion, but how do we make it repeatable, scalable, and a solution for the greater industry? That’s, that would be probably, like, the long term biggest number to track.
Eric Hornung 47:24
If your board of directors sees a repeatability and scalability progress bar in their next update, they can thank me.
Chase Nobles 47:30
I got you, Eric; I’ll call you out.
Jay Clouse 47:32
Chase, thanks so much for your time here today. If people want to learn more about you or Kush.com after the show, I’m assuming they go to Kush.com. But is there anything else that you would point them to?
Chase Nobles 47:41
Yeah, check out our blog. If you’re not in the industry, don’t register, we don’t need that. But if you’re in the industry, register on our platform, we create a ton of value for the network. And you can read all about the industry on our blog. Then we’d love to hear from you. If you’re looking for a position in a legal market, or if you’re looking for a position in Seattle, where our headquarters is definitely hit us up, email@example.com with your resume, and we’ll take a look at it.
Jay Clouse 48:09
All right, Eric, we just spoke with Chase Nobles, the co-founder and co-CEO of Kush.com. Where do you want to start today?
Eric Hornung 48:16
Do you think you would pay half a million dollars for Jay.com?
Jay Clouse 48:20
I do not think I would pay a half million dollars for Jay.com, and here’s why, Eric. While it would be cool to have Jay.com, it would be incongruess…incongruess…incongruent with the rest of my digital identities because then I would have to be shelling out for @Jay on everything. I would rather have everything be uniform Jay Clouse.
Eric Hornung 48:40
It’s amazing how often we just, like, mess up on words on this podcast.
Jay Clouse 48:43
Well, we make words up a lot. I think by virtue of having a microphone in front of you and a camera in front of you, I think it makes you bold and also makes you want to kind of flower up your language a little bit. And so, we are constantly making up words on the spot.
Eric Hornung 49:00
My English teacher, who didn’t think I was very good at English in high school, used to tell me that making up words was a sign of genius. So I think he just said that to make me feel good. But I’ve really taken it to heart over the course of my life.
Jay Clouse 49:12
It’s a lot easier to tell somebody that they’re doing fine than to go through the effort of coaching them to be better.
Eric Hornung 49:18
Thank you for that backhanded insult.
Jay Clouse 49:21
It’s a pretty straight-handed insult. All right, Eric, well, you’re avoiding my question. Do you want to talk about Chase the founder? Do you want to talk about the market opportunity? Do you want to talk about the business itself? Where do you want to start here?
Eric Hornung 49:30
I want to start with the business because I think it is a unique business model that we kind of hinted at with Periodic Edibles, which is this state-by-state nature of the business model, which, in today’s world, is almost unheard of, but was pretty much the way that America ran until, like, the 19, until, like, 1900. So you have to kind of, like, go back and think about, all right, state-by-state regulation and expansion, that’s a very cumbersome way to expand. So this business is essentially 51 different businesses. You have, every state has their own marketplace, which has their supply and demand for cannabis. But then once you touch hemp, which is now federally legalized, you can have one national marketplace with supply and demand, even though it’s made up of all of those states. So, depending on the crop, there’s two different business models. But the baseline is, hey, you need supply, you need demand, which gets us back into this idea of marketplaces which, you know, Jay, we’ve strayed away from a bit here on Upside.
Jay Clouse 50:32
Yeah, and I like marketplaces. I would talk about more of them. Something that really lodged in my brain after our conversation with Wayne of Periodic Edibles — and if you guys haven’t listened to our Periodic Edibles episode yet, I do recommend it, there are a lot more puns than we brought out in this episode — but something that lodged in my brain with Wayne’s interview was talking about how difficult it is just to handle money as a business in this space. And so when Chase said that they do not take a transaction fee, they don’t touch money on the transaction itself, that kind of blew my mind, because my first thought was this requires some trust on both sides of the marketplace to properly report the deal that was done, the transaction that was done, and compensate the marketplace for their place in making that transaction possible, which, naturally, there’s going to be some number of bad actors who just don’t do that. But he didn’t seem to be concerned with that at all, which I do, I mean, maybe he’s right. Maybe it’s, maybe it’s that because they are the leading marketplace in this space, and they’re making things possible that weren’t possible before in that, it seems like the farmers in this industry don’t appear to, you know, be anything other than good guys making a living? Well, arguably.
Eric Hornung 51:42
I think, I think it’s different. I think it’s that they already have skin in the game by nature of how you get onboarded onto this platform. So when you get on boarded on, you have to have your licenses, you have to be a registered entity. It’s very hard to, like, get all that stuff up and running. So if you think about, like, eBay, and remember how everyone on eBay was, like, so concerned about having, whatever it was, 99%-plus seller ratings, and your seller ratings mattered so much because that specific username was tied to that celebrating with how many you had. But if you, like, messed up on eBay and you got too low, you could just create a new name. In this space, you can’t just go create a new entity, you can’t just, like, jump back on, because there’s all this validation that you talked about on the front-end, where it’s, hey, do you have the right licenses? What is this, what is that? Let’s do background checks. All this stuff that, if you get a, like, smudge against your…against your name or your reputation, then getting back on the platform, which might be your source of liquidity and a growing source of liquidity for your business, there’s definitely skin in the game on both sides here.
Jay Clouse 52:42
Something else that stuck out to me about Chase as a founder is, it was clear in the video that he had on his website, which I referenced a couple times, it was clear in the conversation we had with him, he very much makes the intentional choice to go out and meet these individuals on both sides of the marketplace whenever he can, which is one of those things that just doesn’t scale. And that’s okay. You know, this is something that you hear time and time again, especially with the beginning of marketplace businesses, is that at the beginning of marketplace, businesses do things that don’t scale, get to know your customers. It’s hard to spin these things up and spin up both sides, but one of the best things you can do, it seems, is create this fierce, fierce loyalty and connection with the early members of the marketplace to kind of make it through the turbulent times until you get to this equilibrium that works for everybody.
Eric Hornung 53:32
It seems like that’s going to be an even longer runway here because, as you roll out new states, new states get legalized Chase is gonna have to be pounding the pavement on those new states to become the market leader in that new state for cannabis. The hemp is going to be very beneficial for them because it gives them that broad reach. But if Indiana legalizes for — or maybe they already are, I can’t remember which states are and aren’t, I’m just throwing one out there — let’s say Indiana legalizes and they weren’t previously legalized. Well, now, Chase has to get those early adopters in that specific marketplace as well. So that’s why I said there’s essentially 51 businesses under this one business right now based on the current regulatory environment.
Jay Clouse 54:13
Two other things that’re impressive to me about Chase as a founder. And again, in this, in this third section of the episode, we’re always talking about our four questions, three of which pertain to the founder. Whether by luck or vision, he came into this business at the right time, and he realized it was the right time. He realized this is something, and it started with cannabis tourism, this is something that people are going to learn about, and it’s going to be new, and nobody’s doing it yet, let’s do that. And then, as it became an opportunity that he saw through that business, to create a marketplace around the community he had built, he jumped on that. And not only did he do the right business at the right time, which the more investors we talk to in our coffee chats, they bring that up more and more, he had the wherewithal to think about brand as well. And we’ll talk a little bit more about Kush.com. here in a second. But I wanted to point out the timing there, Eric. Did that strike you, too?
Eric Hornung 55:04
It really did. I mean, you have to be on the right wave at the right time to use the Mike Maples metaphor: the right founder, right wave, right…I think it’s just right founder, right wave. That would be the golden kind of scenario. And yeah, like, you have to be able to make those pivots. I love that they started with brand and a media company. I think, Jay, that’s something that you and I talk about all the time as, hey, if you start with this brand and this reputation, can you pivot into the opportunity? Or do you have to start the opportunity and then build a brand on top of that? I think you and I both think it’s easier to start with brand than it is to start with an opportunity. But yeah, I think everything about the timing seems right. There seems to be a momentum across the United States in this space. And it still seems early.
Jay Clouse 55:48
Well, on the brand side, your brand lives in the minds of other people, and you create a brand through their experience with your product or your service. You look at Airbnb, that’s a recognizable brand that is the category defining brand of shared housing. But what’s impressive to me about Kush.com is, not only do they seem to be a category leading company in this space, but their brand is just so obviously aligned with what they do. Airbnb is not necessarily an intuitive word or thought or meaning around what that company does. Kush.com is. It’s hard for me to imagine a marketplace springing up that becomes more efficiently, after, you know, this moment in time where he already has a head start, and then also overcomes the name brand nature of something that is just so perfectly aligned with the business.
Eric Hornung 56:40
Are you aware of, as we look into the future, are you aware of any comparable marketplaces for commodities that exist on previously legalized commodities?
Jay Clouse 56:52
Previously illegal commodities?
Eric Hornung 56:54
Legal, legal commodities. So, like the tobacco industry, for example. There’s no tobacco marketplace, there’s just tobacco producers who vertically integrated and make, own all the plantations and make all the cigarettes. This feels like it’s not like that. And I wonder if this is just a macro shadow? Is this industry going to move to a more vertically aligned, couple big winners, eventually, when everything is legalized? And this is an opportunity for the next 20 to 30 years? But after that, it’s just going to be bought out? Or, how does that all look when this all gets flushed out? Is the opportunity big for the next 10 to 30 years and then kind of disappears? Or how do you think about that?
Jay Clouse 57:35
That’s a good question. I do think that the window, if it was a window, let’s say it is a window, and someday there will be united regulation across the country, and you can do whatever you want across state lines, and so, you have these vertically integrated cannabis brands. So let’s assume that’s a future that can happen. I do think that the window of time in that scenario between now and then is a large enough window that this will become a very valuable business for, I don’t know, a decade? Seems like it could take a long time before we see that type of equal playing field across the country. And, in my mind, if you have a window opportunity — this is me totally spit balling, I’m making all of this up — but in my mind, if you have a window opportunity that is that large, that is more than, you know, five to ten years, my presumption would be innovative people will follow the trends that they’re seeing in that space and continue to find ways to create value in that space, even if it’s not their original business model.
Eric Hornung 58:35
Yeah, I agree. I think that makes a lot of sense. And we’ve seen them demonstrate that already. I mean, tourism and a media company, and a marketplace, and, now, the whole shebang.
Jay Clouse 58:46
So, Chase talked about his KPIs being user-growth, revenue deals closed. Eric, I just want to give a quick overview here. What do you think about the market opportunity here for Chase? Let’s just get some, some hard feelings here. We’re talking very highly about this. Is this an investment that you would be excited in, if you were, excited about, if you were wearing your investor hat?
Eric Hornung 59:06
Yeah, I think the entire cannabis space in general is very interesting to me. And I know it’s cliche at this point. But whenever a VC talks about cannabis, they’ll always say, yeah, we want something that doesn’t touch the plant. I know there was recently a back-end ops, accounting purchase-order-type platform that was built specifically for the cannabis industry. And that just raised, like, $10 million in a seed round. So it’s really hot right now to be in cannabis but tangential to cannabis. So, it’s cliche, but I love that about this business model. And I like that hemp is getting legalized, so, macro-economically, it makes a lot of sense. And they have a leadership position that they can exploit going forward.
Jay Clouse 59:51
How surprised were you to hear that their team is 35 people?
Eric Hornung 59:54
I was surprised that it was that big already. I wasn’t surprised they could sustain 35 people. To me, this is a capital-light business, right? He said their biggest costs are mostly people, which makes sense to marketplace. And this is just a cash business in general, like cannabis. They’re paying higher fees than, you know, your traditional commodity business. And they don’t really…From what I’ve heard and talked to people in the cannabis space, look, if you’re going to pay x% at a bank just to even, like, bank there, and you’re going to pay all these fees on top of it, and everything you’re bringing in is in cash, and you’re not worried about paying more in fees, that’s great for a marketplace that, hey, look, if you can’t place your liquidity, yeah, I can charge whatever percent it is in fees — and we didn’t get a lot of numbers there, so I’m being a little vague — but I could see the fees here being, call it — this isn’t a real number — but call it 5%, whereas maybe, when you’re placing something on, like, the commodity’s future exchange or whatever, it’s pennies on the dollar, which I guess 5% is technically pennies on the dollar, so that was a terrible comparison. But you get what I’m saying. So I think that, as the industry matures, those fees will probably go down. But right now, it’s so valuable to have this liquidity, that you’re going to see higher fees in this space, which is awesome, especially if you’re the market leader, so the cash just has to be pumping through the business right now. And they’re putting it all towards labor. And as they raise to grow, it’s purely to grow.
Jay Clouse 1:01:26
Yeah, I was both surprised and impressed that they are 35 people strong already. Because, like you, I’m not surprised they can sustain that size of a team to have that many people. You know, it seems like they’re really investing in sales and account management, would be my guest, my guess, which means they’re in very much a growth position already, which puts them in a great position to fundraise if and when they want to.
Eric Hornung 1:01:52
They also have a huge compliance side of the business, which is, maybe you’re calling that account management, but it’s getting people onto platform, which is difficult, because, like I said, with those 51 models, all right, if you have someone come on from Massachusetts, that’s a whole different process than someone coming on from California. Like what licenses do you look for? Where do you go? How do you do all that? How do you get them on? How do you interview them? Like, so, I think that side of the business and onboarding is critical to them growing going forward. And I would expect that a lot of hiring happens there, because you got to get that flywheel continuously turning.
Jay Clouse 1:02:28
On that note, Eric, what are you looking for 6 to 18 months from now from Kush.com?
Eric Hornung 1:02:32
That backlog. I want to see how are they getting the scalable, repeatable processes in place to get that backlog down from, I think he said it was, 8,000, at this point, down to a point where either, okay, we have a backlog of 2,000, but we know that those are all “no’s”, or we have a backlog of 8,000, but we know that those are all “no’s,” because, like, they just haven’t, they haven’t gone through that, so they’re not even in our system. But to have all of the ones that are ready to be on the platform on the platform. I think that the more you get on this platform, the more liquidity you’re going to create. And the larger the opportunity comes, the more people rely on you. I just think it’s a, get people on, you found product market fit, let’s grow.
Jay Clouse 1:03:14
I will plus one to that, and I’ll add on to that. We didn’t get any numbers for this in the interview, but what would be interesting to me 6 to 18 months from now is looking at their repeatable playbook for when a new state comes online, how they grab that state as quickly as possible, and fill both sides of the marketplace, and onboard people quickly, and maintain their market-leading position in that new state.
Eric Hornung 1:03:38
Awesome. Well, look forward to seeing what Kush.com is doing in the next 6 to 18 months. Jay, if people want to find out more about us, where should they go?
Jay Clouse 1:03:47
You guys can email us firstname.lastname@example.org, and write us a love letter or a long list of feedback. We’d love to hear that, we love receiving those. Or you can tweet at us @upsidefm, and let us know what you thought about this episode. We’re trying to turn this cannabis line into a cannabis series. So if you have a connection of someone else in the cannabis space to talk to, shoot us an email email@example.com or tweet at us @upsidefm. We’ll talk to you next week.
Debrief begins: 48:09
Chase Nobles is a co-founder and co-CEO of Kush.com.
Seattle-based company Kush.com is a platform that allows entities within the hemp and cannabis industries to interact and buy and sell product. Kush.com has become one of the principal sites in the trading of cannabis and hemp goods and continues to strive to lead these markets.
Chase tells us how Kush.com has progressed from a tourism and media business to the platform it is today. He walks us through how he and his team have built a thriving network based in quality relationships and legal product, as well as some of their focuses for the future.
- Chase’s experience at the Air Force Academy and how this brought him to Seattle (5:40)
- The start of Kush as Kush Tourism (10:13)
- Kush’s transition from tourism and media to marketplace (16:20)
- The Kush.com domain (18:00)
- The evolution of Kush.com as a marketplace (21:00)
- Maintaining trust and quality relationships within the marketplace (22:45)
- Transactions made on Kush.com (25:28)
- Regulating products and onboarding new customers in different market locations (28:00)
- Kush.com finances and fees, and finding marketplace balance (31:28)
Kush.com was founded in 2016 and based in Seattle.