Big Weed

by Christian Hageseth

  Big

  Weed

  An Entrepreneur’s High-Stakes Adventures in the Budding Legal Marijuana Business

  Christian Hageseth

  with

  Joseph D’Agnese

  The author and publisher have provided this e-book to you for your personal use only. You may not make this e-book publicly available in any way. Copyright infringement is against the law. If you believe the copy of this e-book you are reading infringes on the author’s copyright, please notify the publisher at: us.macmillanusa.com/piracy.

  Contents

  Cover

  Title Page

  Copyright Notice

  Introduction

  1: Brave New World

  2: My Education

  3: First Grow, First Blood

  4: The Beauty of Failure

  5: Don’t Bank on It

  6: The Haze of Paranoia

  7: Seed to Sale to Bust

  8: The Cannabis Ranch

  9: Family: Hageseth; Genus: Cannabis

  10: Best in Show

  11: Marijuana’s Mecca

  12: Marijuana on the Ballot

  13: Looking for the Win-Win

  14: Investors

  15: The New Marijuana Economy

  16: The Cannabis Ranch

  Acknowledgments

  Notes

  Index

  About the Author

  Copyright

  Introduction

  When I left my house on a beautiful morning in February 2013, I was carrying $40,000 in cash in my backpack. The sun was just hitting the foothills of the Rockies as I drove out of Lowry, the neighborhood where I live in Denver. As you might surmise from the contents of the backpack, it was going to be a big day.

  My first appointment was the most important. I was meeting with an architect I’d hired several months ago to design a building I was planning to construct somewhere within Denver city limits. The first building of its kind anywhere in the world.

  The architect ushered me into his office and we chatted while we looked over the plans together. The model was awesome. I’d never seen anything so beautiful, except perhaps the faces of my children. And this building, in a way, was a child of mine. Any entrepreneur would recognize the feeling I was having. When you have an idea for a business, bringing it into the world takes hard work, money, and imagination. You have to nurture it, just as you would a child.

  I was a long way from actually building the place. But all I needed at the moment were detailed drawings and a scale model to sell the dream. People are funny; they have trouble accessing their imaginations. If you don’t show them a picture of what you’re envisioning, they just won’t get it. These images and models were meant to help others see what I saw. With this project, I was going to have to sell the dream to a lot of people: current shareholders, future investors, regulators, my employees, and the media. I would turn to this model again and again to show my vision to many people along the way.

  And here in front of me, my vision had come to life: a visitors’ center with 50-foot-high cathedral ceilings; a restaurant and bar overlooking the outdoor amphitheater and greenhouse; a gift shop; an engaging behind-the-scenes tour open to the public; and cottages for visiting musicians, artists, and craftspeople. The whole facility would be powered by the cleanest, greenest energy we could find. I intended to shoot for LEED Platinum status, the highest green building certification in the construction business.

  I had poured all my hope and energy into this place. Someday, when my customers walked in and were surrounded by glass and stone and light, when they were confronted with a 40-foot-high wall of living plants and heard the trickling of the indoor waterfall that flowed over the face of the Green Man—the emblem of my company—I wanted them to be struck by one awesome fact:

  This place is special. It’s a cathedral to the Mother Nature aspect of God. We are all connected to Nature. We share it together and cannot be separated from it.

  “By the way,” I told the architect, “I brought your money.”

  I started placing 1-inch stacks of hundred-dollar bills on his desk. “Whoa!” he said. “What are you doing?”

  “What does it look like? I’m paying you.”

  “Dude, we talked about this. It has to be by check. Otherwise we’re going to have a problem.” He leaned forward, his face suddenly anxious and awkward. That face? I know that face very well. I’ve seen it countless times since getting into this industry five years ago. “Chris, you know I can’t take this. It’s drug money.”

  Oh. Yeah. I forget sometimes.

  I should back up and explain something. My name is Christian Hageseth and I sell marijuana for a living. Honest-to-goodness, legal marijuana. That building my architect just designed for me? It’s destined to be the world’s first weedery. Not a winery. Not a brewery. A weedery. A $30 million tourist destination. A chance to get inside the action with America’s newest and fastest-growing industry.

  When I started my business, Green Man Cannabis, in 2009, I sold medical marijuana. My customers were people who suffered from nausea following rounds of chemotherapy. Or they had crippling migraines. Some had old surfing injuries that still flared up and threatened to ruin their days. All these people and more stopped by one of our dispensaries and allowed us to sell them some bud. With our product in hand, they were able to light up, toke away, and start feeling better in minutes.

  We grossed about $300,000 that first year. In 2014, when recreational marijuana became legal in the state of Colorado and any resident over the age of twenty-one could walk in and buy up to an ounce of weed without fear of being busted by the cops, sales throughout the state jumped. We grossed $4 million that year, and our firm wasn’t even catering to the recreational market. Not yet, anyway. I was holding back, biding my time until we were ready and I could roll out something so unforgettable that every marijuana smoker or enthusiast in the world would want to see for themselves.

  When the weedery, which we will hereafter call the Green Man Cannabis Ranch, comes online, we anticipate doing about $97 million in revenue in our first year. That’s the radical leap in revenue that all businesses hope for but few ever realize. We will be able to do it because we were in the right place at the right time, operating a business that was doing things the right way. Everything in our company’s past had led inevitably to this big moment.

  We weren’t alone. Since marijuana first became legal in 2000, the state of Colorado has issued nearly a thousand marijuana licenses. People are fond of saying that there are more places to buy legal marijuana in Colorado than there are Starbucks. But despite its seeming ubiquity, the cannabis industry has a long way to go. It is still a little rough around the edges. Still has a lot of kinks to iron out. One of those kinks is what to do with all the cash the industry generates. Cash that makes people like my architect nervous.

  What he’d just said—It’s drug money!—hung in the air between us.

  “Look,” I said. “You don’t have a problem. You’re being paid for your architectural services. I’m the one who’s being paid for marijuana. You don’t have a problem—I do.”

  “When we first started working together, we agreed. You agreed to pay by check.”

  Yeah, I did. And I had wanted to honor that request. I really did, just as I have for every vendor of ours who made the same request. But the law of the land at the time didn’t allow us to enjoy the benefits of banking. In my business, marijuana and banks don’t mix.

  In 2009, the state of Colorado racked up such a huge marijuana slush fund
that it was able to reach in and help itself to $3 million to balance the state budget. In 2010, it used $9 million from the same fund to do it again. The state was facing a $60 million shortfall because it was not receiving as much federal Medicaid assistance as it had in the past. (This had nothing to do with the world of medical marijuana, by the way; it was just federal budget cutting as usual.) Governor Bill Ritter admitted that he had opposed making medical marijuana legal, but when the chips are down, cash is cash. Thanks to more than 150,000 state residents who had paid fees into the medical marijuana program cash fund to be allowed access to medical weed, and we “ganjapreneurs,” as we were sometimes called, who supplied the product, the state’s butt was saved. Capitalism had ridden in on a big, green, sticky horse and saved the day. Yay, weed.

  But those of us in the industry were still not allowed to carry a checkbook.

  Oh, I could convert our hard-earned company cash into a paper check if I tried hard enough, but it was always a hassle.

  “I did promise to bring you a check,” I said, “but we just can’t make it happen right now. Sorry.”

  “Let me call my lawyer.”

  The architect dialed and talked while I studied the sunlight streaming through the windows of his tony office. I didn’t wait for his lawyer’s reply. I already knew what it would be. I just stuffed the cash back into my backpack.

  Well, it was certainly worth a try. But now I had a problem. I was downtown for the rest of the day. I had a raft of other pressing appointments. It would be hours before I reached one of the safes I had sprinkled around town to safeguard my company’s cash. Shoot. And at lunch I was taking my usual yoga class.

  What was I going to do, stuff the cash in my yoga locker? Even yogis aren’t that honest.

  For thirteen years—from 1920 to 1933—alcohol was banned in the United States. The government cracked down on the production and consumption of a host of intoxicating beverages. Law-abiding Americans who used to drink and still managed to hold jobs, pay taxes, love their children, and have decent lives sat back and watched as their nation expended a good deal of fruitless energy cracking down on a product that—in the hands of responsible adults—was less harmful than trying to enforce draconian laws of absolute abstinence. In the absence of legitimate businesses distilling and selling alcohol to the American public, organized crime sprung up to supply demand. Finally, the American government saw the error of its ways. Prohibition was repealed, and the booze started flowing again.

  The legalization of marijuana is like the ending of Prohibition.

  Right now, as I write this, medical marijuana is legal in twenty-five states and the District of Columbia in the United States of America. More than 50 percent of the American population could, if they qualify and are inclined to do so, get what amounts to a prescription from their doctor, walk into a state-licensed dispensary, buy some marijuana, go home, and get high without fear of arrest and prosecution.

  Four of those states—Alaska, Colorado, Oregon, and Washington—currently allow or will soon allow the purchase and consumption of recreational marijuana. That means if you’re an adult, you can buy and use marijuana the way you buy and use tobacco and alcohol, or the way grown-ups walk into a casino on a weekend getaway and play the slots without worrying about cops raiding the place. Recreational marijuana initiatives are on the ballots or being considered by legislators in at least five more states. The handwriting is on the wall. Recreational marijuana may very well be coming to a state near you.

  Maybe you love marijuana. Maybe you’re against it. Regardless, you have to admit that we are watching history in the making. We are privileged to watch a profound shift in the American way of life. Remember that old saying: “May you live in interesting times”? Well, we are doing just that, and we should sit up and try to understand what those times are telling us.

  This book is about my time on the front lines of the cannabis movement. It’s the story of a nascent industry that is experiencing growing pains. It’s the story of lawmen, politicians, bureaucrats, and judges who are dealing with a whole new set of rules governing public behavior. It’s the story of vacationers, partiers, hobbyists, and fun seekers who have a new toy in their arsenal to use, abuse, experiment with, and decide if it’s for them. It’s the story of athletes and businessmen who are itching to invest in the Next Big Thing. But mostly, it’s the story of a business guy trying to chase a dream and the entrepreneurs and investors like him who are dying to leap into a new world of opportunity.

  I call it the world of Big Weed because it’s a whole new way of thinking about a product that was once the scourge of the nation. Marijuana is an ancient plant whose cultivation by humans stretches back at least ten thousand years. But for our purposes, the “Old World” of marijuana only reaches back to the 1930s, when propaganda films such as Reefer Madness tried to scare Americans away from a plant whose use, it was said, would drive them insane and turn them into murderers, prostitutes, or worse. The Old World was the age of President Richard Nixon, who ignored the scientific consensus on this relatively benign plant and instituted a wrongful drug policy that would doom millions of Americans to prison for possession—and is still in effect today. With the stroke of a pen, millions more non-Americans were sentenced to die as a result of drug cartel violence that sprang up to circumvent the American war on drugs. The Old World, then, was a mix of good and bad. On one hand, it was hippies and stoners, psychedelic art, Woodstock, marijuana-leaf posters, and getting high in your parents’ basement. On the other, it was also the beginning of untold violence and lost opportunities for the American underclass.

  The “New World” of weed is a far cry from all that. It’s a world in which private equity firms carefully study the historical financials and business plans of marijuana start-ups to see if they would like to invest a few million dollars of their money on this hot new industry. It’s a world in which law-abiding citizens check into pricy bed and breakfasts for the weekend in the Rocky Mountains and legally smoke a joint while relaxing naked in a hot tub. It’s a more compassionate world, where chronically or terminally ill patients have access to a natural product that can help safely ameliorate some of the symptoms of their diseases. It’s a world where the company that wins the public relations challenge, and sells America its favorite marijuana, has a very real shot at being a lifestyle brand, as big and as warmly embraced as Sam Adams, Apple, or Starbucks.

  The industry is about two years away from beginning to see record profits. Imagine if you had been about to buy into the world of gourmet coffee (Starbucks), online retail (Amazon), or personal computers (Apple) two years before these businesses revolutionized the world. Would you have done so? Would you have sat up and listened to what Howard Schultz, Jeff Bezos, or Steve Jobs had to say?

  The New World of marijuana has some monster players too. After all, if marijuana is legal, Big Tobacco will want a piece of the action. So will Big Pharma and Big Agra, companies that will want to study and quantify and possibly patent various elements of this precious plant’s genome. In fact, it’s already happening.

  As I write this, I’m forty-five years old. For years, I went to work in a suit and tie, but these days it’s mostly cargo shorts, a comfortable shirt, flip-flops, and my mala beads. And yeah, I smoked marijuana as a kid, and I smoke it now. I’m sorry if that’s a problem for you, but it’s integral to what I’m about to tell you.

  But that’s not the whole of my story. In college I got hooked on a different rush—greed, status, and ego—and I ended up channeling it all into business. I did well in whatever businesses I started, like a lot of people who are driven by the same things. I didn’t implode the way some folks do, but I came close.

  Eventually, my eyes were opened and I saw my greed for what it was: the empty, vain pursuit of a hollow man. These days, after two decades of running different types of businesses, I like to tell people that marijuana has been my
salvation. I mean that. The cannabis business appeared on my horizon when I needed it most, when I was at a difficult crossroads in my career, and the business has given me nothing but joy.

  What success I had in my earlier businesses was probably due to the fact that I am restlessly creative. Following other people’s direction has never worked well for me. I had to find my own way, my own path in business. They call people like me entrepreneurs. Entrepreneurship is what I know, what I do, what I breathe. In fact, it’s all I’ve ever known since the day I graduated college and opened my first company, a string of ice cream shops. I don’t make music, paint, or tell stories—my creativity is expressed through business, through making deals, through working with other people. Entrepreneurship is my creative expression and my passion.

  Today, my indoor grow facilities are brimming with tall, beautiful plants. Some of our marijuana strains are seven times more potent than what the hippies smoked in the 1960s. I sell our harvest at our two medical dispensaries in Denver. Green Man Cannabis has twice won the Cannabis Cup, the highest award for excellence in the legal marijuana industry. These days I’ve gotten comfortable with potential investors asking me if I can send them a business plan. If you think it’s strange that a “drug dealer” would be handing out prospectuses, then you’ve got a lot to learn about the world of legal weed.

  As I go about my business every day, a lot of honest, law-abiding people can’t help asking me a ton of questions.

  “You’re in the legal marijuana business?” they say with a grin on their faces. “What’s that like?”

  This book is my attempt to answer that question.

  Because it was one of the first states to legalize marijuana, Colorado makes a nice case study for what will or could be soon happening in a state near you and around the globe in places like Uruguay—which just became the first country in the world to make marijuana completely legal within its borders—and Israel, which is funding serious research into the healing properties of marijuana. I’m going to share how I got into the business and how I turned Green Man Cannabis into the success it is. You’ll watch my ups and downs, my outright failures, and you’ll get a feel for the pros and cons of the new world.