Editors’ Note: This is the transcript version of the podcast we published last Wednesday with Scott Sundvor. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy!
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Rena Sherbill: Welcome again to the Cannabis Investing Podcast where we speak with C-level executives, scientists, and law and sector expects to provide actionable investment insight and the context with which to understand the burgeoning cannabis industry. I’m your host, Rena Sherbill.
Hi again everybody, welcome back to the show. Happy September for all of you back in school or sending kids to school, good luck if it’s been done remotely or in person. Really excited to bring you today’s episode. We have Scott Sundvor from Space Coyote,, a celebrated pre-roll brand based out of California, selling in California. What’s interesting about Space Coyote and why I’m really happy to talk to Scott is; one, Scott is an entrepreneur, has created products, and developed businesses and scaled them. So, he brings that side to the table, but also he is a stoner and talks about that. And suffers from Crohn’s Disease and his partner Libby who he founded Space Coyote with also has health issues and they together are focused on bringing new definitions of health and wellness based from cannabis, but also broader definitions in general and he speaks about that today. How that helped lead him into the cannabis space and leaning into being a stoner of forward company, for stoners, by stoners as they like to say.
At the end of the show, we get into some fun topics about strains and best tips for joint rolling, but before that we focus on profit and why that’s salient number one step for any company and why doing that with Space Coyote enable them to avoid the capital crunch that so many cannabis companies are suffering from now and Scott gets into where he sees the industry going from here.
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What parts of the space he likes. How to best succeed in this space. That 2020 is the year of survival and beyond surviving who can thrive beyond that? We also talk about getting away from venture dollars, learning the lessons from COVID both spiritual and financial. Just a great conversation with a great leader of a great company, which I always love to bring to our listeners. Hope you enjoy this conversation as much as I enjoyed having it.
And before we begin, a brief disclaimer, nothing on this podcast should be taken as investment advice of any sort. And in my model cannabis portfolio, I’m long Trulieve, Khiron, GrowGeneration, Curaleaf, Vireo Health, and Isracann BioSciences. You can subscribe to us on Libsyn, Apple Podcast, Spotify, Google Play, and Stitcher.
Scott welcome to the Cannabis Investing Podcast. Really happy that you are on the show. Thanks for joining us.
Scott Sundvor: Thank you so much for having me.
RS: So talk to us about you – I love when people come on that have really fascinating, interesting diverse backgrounds, talk to listeners about how you got to the cannabis industry and what you’re doing now?
SS: Yeah, I have a long winding path that got me here. So, before working in the legal cannabis industry, I was actually running a consumer hardware company. So had started that about seven years, before that was – rebuilt the world’s first food sensors for people that had food allergies, so they could make sure that their food was safe to eat. And so, I had just, I mean a lot of interest in health. I have an autoimmune disease, Crohn’s Disease, and so that was one of the big reasons for starting my last company, and also is one of the big reasons why I had been drawn to cannabis for a long time because cannabis was one of the core things that I would use to just help keep myself healthy. And so, with that experience in, I mean a lot of supply chain, operations, understanding how to grow a business very – to a large scale and supply chains. I mean, in that case, it was across multiple countries, but I saw what was happening in the cannabis industry and my partner Libby. She was working at ease at the time, which was then the largest delivery company in California for cannabis.
So, seeing that and just seeing what was happening in the industry and just my love for the plant from the time I was in high school on a recreational level and then also to some medicinal level for so long, it was something that I knew that I wanted to get myself into. And so, Libby and I decided to – that we wanted to start a company in the Cannabis space together. It was a perfect collaboration. She’s incredible at the design and marketing and all the creative side of things. And my expertise is really on the supply chain manufacturing business operations finance side. So, it was a really great partnership and we just decided to dive in.
RS: That’s awesome. I founded it interesting and entertaining, I liked how a lot of your materials about yourself and about Space Coyote, it’s very stoner forward. You know, you’re making no bones about like the fact that we’re consuming cannabis. And you know, it’s very upfront and I’m curious to talk to, you know, a lot of the guests that come on the show, have been involved with cannabis for many years, but many others are from the finance backgrounds or different sectors, some are from the law background. So, it’s not, even though I host a cannabis podcast, because we have the investing angle, it’s not often that I talk to a stoner forward type of business person.
I’m interested in hearing your thoughts on just the plant itself, like the arc of your relationship with cannabis? Will you talk to us about that for a minute or two in terms of, you know, everybody’s talking about getting rid of this stigma, but I think even people that consume cannabis, and have for quite some time have their own kind of self judgments about that, so yeah, I’d love to hear your thoughts on your relationship with cannabis?
SS: Yeah, I’m glad you brought that up. And yeah, we are very proud as a company to be stoner focused and to really just celebrate that as I mean, that’s where the industry came from. So, yeah, my path with [the plan] was, I was first introduced to cannabis in high school. I think, I smoked some weed out of an apple that someone had turned into a ball. Yeah, exactly. Just classic high school story. At the time, my parents were extremely against cannabis and so I mean, I kept it quiet on the down low, went to college, I went to school at MIT, and there, I mean, I, my consumption just increased hugely. I mean, I was then, I mean smoking almost every day. I remember trying to do just a little catalog of how often I was consuming.
It was probably six out of seven days. I was smoking cannabis then, but what I found that was really interesting, and also just really amazing was that it was – while it had been this thing that was stigmatized, and I remember, I mean learning in high school, or middle school or whatever that, you know, marijuana would cause schizophrenia and it was a gateway drug and all these things and all that stigma and as soon as I tried it, I just connected with it on such a deep level and I don’t know, maybe it was even back then I recognized that it was having an impact on my health, but also just the social nature of it and just how beautiful it was in terms of being able to drop into conversations with your best friends and just giggle and laugh and have a great time or how much it enhanced being in nature, or listening to music or doing art or anything like that. It was just this. Yeah, I mean, whether you want to call it a drug or a medicine or plant that just it felt right to me. And that lasted for a long time.
I mean, I kept smoking, smoking weed through all of college after that it was always something that I used both as like a recreational, social fun thing, but also for stress relief. There was, I remember a period of maybe a year or two where something changed in my body and I just didn’t react with it that well and I wasn’t able to be that social or hold a good conversation. Maybe I just got a handful of bad strains in a row, but there was – I mean, maybe that one little gap in my early 20s, where I didn’t consume that much, but other than that it’s been, yeah, just I mean, really a core part of my life. And I think in a very positive way, I think the stigma that I learned as a kid was that you know, stoners are couch potatoes, they’re not ambitious, they don’t do anything. And meanwhile, I’ve been a stoner since I was 17. And have started two companies, got Forbes 30 under 30, have done all these things.
So, I try to think of yeah, think of, I mean, all the positives that that can come from it. Also, and I’m glad that you mentioned that there’s a lot of people in the industry that, you know, don’t really have that stoner background, and it’s something that I see a lot and actually have a bit of a [grape with] because I don’t believe that you can be a good operator in any industry unless you’re really passionate about it, and really believe in it for yourself. So, I mean, that would be like someone investing in Facebook and never using the internet. Or, like if I had started this past health focused company and had no connection, no family members or friends or anything that had any food allergies or health issues.
So, my belief is that you really do have to be connected with that, you really have to believe it, you have to be a user to be a really good operator and investor. And that is also part of the reason why we have taken this approach to our branding and the way that we run Space Coyote and being really proud of being stoners in that, you know, there’s a huge market in stoners, because, especially in today’s world, when you know, there’s all these new low dose products coming out and vapes that don’t get you as high and all these things, we want to make sure that people still believe and feel and recognize that, you know, being a stoner is great, it’s awesome. That’s where the industry came from.
RS: Yeah, right on. That’s great. You know, it’s funny, I read this interview, I think last year with Kevin Smith, the filmmaker turned cannabis entrepreneur and he was saying, he got into cannabis, I’m pretty sure if I remember this correctly, pretty late in life, but really responded to it and loved it and took on that notion that, you know, prejudice against stoners that they’re lazy and don’t do anything and unfocused, that he feels like that prejudice drives him to be super productive. So, he can, you know, tell himself that no, it’s not true – it’s not true for him. So, totally, you know…
RS: Yeah, changing that prejudice, salient, and also something I think that doesn’t always get talked about and it’s an interesting point you make, like, the difference between, you know, the legacy, I guess, consumer and producers versus the new consumer who was, you know, maybe interested in the micro dosing, the low dosing the you know, the less THC or the CBD forward, you know, but for the people that are looking for THC be it rec or medicinal, I think it’s interesting that it doesn’t suit everyone. You know, I do think it’s a miracle plant and – but it doesn’t affect everyone in the same way.
And so, I think it’s very specific for people. And I think a lot of those prejudices come from the fact that it’s like, the days of one size fits all cannabis. It doesn’t fit everybody. So, I think it’s – the evolution of the industry I think in terms of, you know, just general weed to now very focused products and edibles and a whole bunch of other things. What’s your, I mean, you mentioned the fact that there’s people coming in from outside the industry that you feel like maybe dilutes some of the ecosystem? And I think that’s definitely true. What are your thoughts about the evolution of the industry since you’ve gotten into it on the business side?
SS: Yeah, great question. So, we – I think we’ve seen a lot of, I mean, in 2018 specifically, there was a lot of money being poured into the industry. So, a lot of venture dollars, a lot of investment. A lot of companies that got started and really we’re going for growth a lot. And with that, I mean, I sort of think of it as like the, you know, the Bud Lights being born. These larger brands that could supply mass quantity, but just weren’t really quality, it was that kind of lower tier. And I’m always a little conflicted because, you know there is market for Bud Light and Coors Light and all that in the beer industry and there’s going to be that in cannabis also. But I think a lot of what we saw was that all of these people came into the industry because they saw the opportunity to make a quick buck in an industry that was rising, and that’s going to keep rising.
And so they came in more with the perspective of how can we make money rather than what do the customers want? What do people really want to consume? How can we respect this plant? And I mean, we see it everywhere from the brands, even to one of the huge grapes that I have with cultivation in general is that a lot of strains are designed for what is easy to grow at mass scale, rather than what provides the effect that you want or what provides the flavor that you want. And so, we’re seeing more and more that things are kind of converging into everything’s a hybrid, rather than that we have things on like the city or like a spectrum. And so, I see a lot of decisions being driven solely by profit and solely by growth, rather than through that respect for the plant and respect for the person who’s going to be consuming the plant.
And that’s where I think there just needs to be a little bit of reframing. And, you know, yeah, people can come into an industry if they haven’t been a user before, but I mean, in my opinion, then, you know, they should try to be, they should try to understand that, and if they’re not doing that, at the very least, they need to be talking to a lot of customers doing a lot of customer interviews, really understanding the people that they’re serving, because I mean, in any industry, that is the base of designing a good product, and I think that this has been viewed a little bit less as, okay, we need to design a good product for our customer base and more as, oh, this is a commodity that we’re going to take advantage of to make a lot of profit.
RS: Right. You know, I was talking to Dale Hunt yesterday. And, you know, Dale Hunt, he’s done a lot of work on the plan and on the law side as well, but he was talking about, you know, in terms of, yeah, I was asking him, you know, what’s the best way to grow cannabis? And he was saying it really depends on what you’re looking to grow, like, what the effect is that you’re looking to grow? It’s not a uniform answer. What would your answer be to that question? And how did you focus Space Coyote? Like, how did you decide how to grow your cannabis?
SS: Yeah, good question and a clarification on that. So, we actually did not grow any of our own cannabis. So, this is another I think, difference between the way that we’ve structured business than, at least what a lot of companies were doing from the start. Now, I see more people structuring more similarly to us, but we basically decided that you know, we don’t want to be cultivators. We don’t want to be vertically integrated.
We don’t even want to run our own manufacturing operation because when I was in the hardware industry, I saw the difference in companies that tried to take on a lot of those things themselves. And the ones that said, you know what, we’re really great at design. And so, we’re going to do that, or we’re really great at science. And so, we’re going to do that and not take on all these other thesis because if you try to do cultivation, a brand, and manufacturing and your own distribution, you’re not starting one company, you’re starting four companies within one company. And it’s hard enough just to start one company.
So we, yeah, we work with a lot of cultivators throughout the state that we really respect their quality and their process and the way that they do business and the way that they grow their plants. And I mean, like Dale said, it is completely different depending on who they are and what they’re growing. Up in Humboldt County, we work with a couple of cultivators that do dry farming, were – that means that literally they water the seedlings at the very beginning, and when they put the plants in the ground, they don’t water them at all anymore after that, because they’re close enough to river bed or watershed where the plants can grow these really deep tap roots and actually gain access to water without watering. If you’re growing in a greenhouse in Santa Barbara, it’s the opposite.
They have extremely well controlled watering systems and they recycle everything through – back through the greenhouse, they take care of not losing any nutrients. And it’s all, I mean, completely different depending on the area that they’re in. And so, that’s one of the things that we always look for when we do work with cultivators is just how are they doing it? Are they really respecting the plant respecting the craft? And I mean, what is the quality of their output?
RS: Yeah, so all the cannabis that you’re using is sourced in Humboldt County?
SS: No, we work with cultivators throughout the entire day. So, a little bit comes from Humboldt, but we have partners in the Santa Cruz area, some actually directly in San Francisco, some down from Santa Barbara. So, we work with cultivators throughout the entire state.
RS: Got you. Got you. You know, one of the – when I was, I think at the beginning of this year, there was a documentary I saw in the growers in Humboldt County, and I’ve – this podcast is a little bit more than a year old. So, in that time, you know kind of trying to teach myself about the sector and learn about the sector. And it was such a salient moment for me kind of understanding the growers that have been existing up in Humboldt for so long and kind of what we’ve been talking about, about the legacy of the market beyond just the business aspect, kind of the salience of their presence and how and how that affects the ecosystem at large. How much have you learned from people like where have you done most of your learning from? I mean, it can be a different, it can be different sources, of course, but where have you gained the most I guess?
SS: Oh, yeah, that’s a great question. I haven’t thought about that, but yeah, I mean, there are so many incredible people in the industry that have been around for a long time and just have a lot of this legacy heritage. And so, I mean, I think you’re probably referring to that, was that the Flow Kana documentary, the short series?
RS: Yeah, exactly. Exactly.
SS: Yeah. Yeah. That that was so beautiful watching and I think one of the people in that was Tina from Moon Made Farms and there’s a hash brand in Humboldt that we work with, Nasha Extracts and the founder there has been up in Humboldt for a long time and he also went to India and learned how to make hash there. And so, I mean, there’s so many incredible people in the industry. And I think, for me, one of the big things is really just respecting the people that have been in the industry for a long time.
So, I recognize that, at least in California, I’m new to the industry. I mean I’ve been exposed to the industry in college, we used to, you know, get flowers shipped out from Santa Cruz and worked with some people there. But I just – I love being able to just have access to all these incredible people and especially the cultivators, because I think back in the day, that really was the – I mean, the foundation of the of the heritage industry.
And so working with these cultivators and some of the people that we’ve met, a woman named Sunshine up in Humboldt, who’s been dry farming for I think, 30 years and I’m just hearing the stories that they have and really, I’m doing our best to make sure that we learn the history and respect the history, has been, at least from my perspective, really important, and there’s just a lot of people in the industry that I respect that I’ve been doing it for a long time.
RS: Yeah, yeah. So, bridging that with that intention with the business side, you know, we’ve seen with COVID how it’s kind of, I think there’s the yin and yang of COVID, which is the positive side that’s affected cannabis, which it’s been deemed essential, a huge thing for the industry, huge thing for consumers and patients. At the same time, there’s all these other problems that are being exacerbated by the fact that, you know, the world is in the midst of a pandemic, you know, in terms of the capital crunch, you know, is now exacerbated. There’s really hard to get access to good capital on good terms. And, you know, a whole bunch of other things.
What are your thoughts on kind of what COVID has affected, how it’s affected and how businesses and kind of how it’s shaken out some of the businesses and how – what we can look forward to kind of like, as COVID is kind of working itself out and then even beyond, like, how it affects things beyond?
SS: Yeah. So, I think that COVID has been, just in many ways, a big game changer for the industry. So, I remember when the lockdowns first happened before cannabis was deemed essential in California, it was, I mean, so much fear in the industry. So many people thought they were going to be going out of business. It was deemed essential. And I think that is huge, just in terms of legalization and decriminalization across the country. We’ve seen just the impact that it has also on, you know, helping release nonviolent cannabis offenders from prisons and prison reform. And it’s really just having this ripple effect across so many different things, but I think one of the big things from kind of the politics and the law maker side is that, I think politicians realize two things.
And one is just the vast money making potential this has in terms of tax revenue, and there needs to really continue allowing it. And I think the other side or there’s also, of course, the health side of it that you know, it isn’t for a lot of people, but I also think that oh, man, I just totally, totally lost my train of thoughts. Sorry. We had the lawmaker said, oh, of course, the black market. So, I think the other reason why it was deemed essential is because so right now in California, it is estimated that about 75% of the market is still black market. And if cannabis was not deemed essential, that would take over even more.
So, this has been one of the big things that I mean every state has been fighting against transitioning the black market to legal market and if it was not essential if we didn’t have access to the cannabis for, you know, the past three, four months there that would be so difficult to recover from. I think on the business side, it has been, I mean, we are all so thankful that this has been deemed essential and that we can, you know, keep employing people keep, you know, providing paychecks for people and their families, keep providing health care and keep providing this plant and service to all our customers. And I think that we’re going to see a lot of changes in the industry after this.
We’ve already seen you know, a lot of shifts to rather than in-person trainings for bud tenders to being digital to having less people in the field, having just you know, really transitioning a lot. I mean, even similar to how we’re seeing intact, so many people are now going remote and working remotely and that’s going to have an effect for many years to come. I think we’re seeing something really similar in cannabis that some of these changes that are happening now even know online ordering and curbside pickup that a lot of that is here to say. And that means that companies now need to adapt to this new reality of even post-COVID. It’s not going to be the same playbook in terms of marketing and sales and everything else that it was pre-COVID.
And then you touched on the capital crunch, I think that’s the other the other big thing, and so, at the beginning of COVID, I thought that we were going to have a ton of companies go out of business because we couldn’t keep selling product, as soon as it was deemed essential, I still thought we’re going to have a ton of companies that go out of business, but now it’s because of the capital crunch. And both I mean, it started happening at the end of last year, when the public cannabis market started going down and we sort of saw the writing on the wall and very quickly shifted all of our priorities and all our goals to being profitable rather than going for growth, but a lot of companies didn’t do that.
And so, I mean, at the end of last year and beginning of this year, pre-COVID, we had actually started an internal spreadsheet within our company to keep track of all the companies that we knew that had done huge layoffs or had gone out of business. And once COVID hit, we just re-stopped managing the spreadsheet, because it was – there were too many companies to keep track of. And I mean, it’s really sad, it’s really unfortunate, but also in a way like this is natural selection and if you run a company with bad business practices, and you’re only relying on follow on funding, like, at a certain point, yeah, you should go out of business because you have to run a sustainable business and it doesn’t make sense to run or sell a product with barely any margins just to gain market share, and require additional BC dollars every 12 months to 18 months, and not have a path to being a sustainable company.
And that was really, I think what we were seeing a lot of. And I think that a lot of those companies have started going out of business and will continue going out of business unless they were able to make the really big changes that they needed to focus on profit. And we’re going to see that continuing through the end of the year. There is more money coming into the market again now, but investors are being a lot more careful and doing a lot more diligence just on the state of profit and margin EBITDA than they were before this.
RS: Yeah. Yeah. It seems like there’s going to be companies that fall by the wayside, and then it seems like there’s going to be companies like you said that have been planning to be profitable that have been getting their financial house in order that have been focusing on that side of things and that I think will be even bigger, you know, they’re going to be able to pick up, you know, company’s distressed assets. They’re going to be able to kind of fortify themselves, what are your thoughts in terms of like, who’s going to rise to the top aside from the people that have been getting their finances in order? What parts of the sector or what types of companies do you think will be the ones to kind of succeed? And how much do you think that’s going to maybe change or affect how the successful companies even do business?
SS: Yeah, good question. So, I mean, we’ve seen through history, just that, in many situations, some of the strongest companies rise out of recessions or big dips or bad Financial Times. So, I think that this is, I mean, just like you said, a really great opportunity to have some of these stronger companies really rise to the top and yeah, it will be interesting to see, I think that right now, cultivation in general is really hurting in the state, just through the taxes, I mean, the tax situation really has to be fixed also to combat the black market. So, I think that’s a big issue right now, that’s really hurting cultivators.
I think that, in general, at least my opinion is that being a brand is what is going to be the most valuable in the long-term. A lot of companies have vertically integrated many times for tax reasons. And once, I mean 280E provisions are rolled back or there’s more financial law changes that are done that will be less necessary. And so, really, I think it will be the companies that have focused more on how can we run a lean operation? How can we grow sustainably? How can we grow a profitable business? And really, I think that we will be able to see that through all the sectors I think that there’s going to be maybe two or three distributors that survive and really succeed.
Of course, there’ll be smaller like mom and pop ones that do maybe more regional work. I think, on the brand side and manufacturing side, we’re going to see a bunch of players come out, that will do really well. And internally, we talked about this a bit as a like, this is a year of survival, whoever can survive through this year, and that means that they were able to really tighten up their operations to be smart, and to figure out how to continue in this new reality that we are in. And so, I think that a lot of the companies that survived this year will have a very good opportunity to continue and grow and just become household names in the future.
So, I don’t necessarily have any specific names of companies that I want to throw out in terms of who I think will do well, but I think that we’ll see it across all sectors. And I think we’re also going to see a lot of companies go out of business across all sectors, but it really does come down to who, yeah, who’s being really logical and frugal and prioritizing long-term health over short-term profits and short-term comfort.
RS: And I’m curious like, when you started your – when you started Space Coyote, what were some of your kind of intentions in starting that company? Like in terms of, you know, you’re saying raising capital and having building yourself towards profitability? How much was that built at the outset?
SS: Yes, that was from the very start. So with my last company, Nima, we raised over $20 million in total, took on a lot of BC money, and we were building also an extraordinarily complex product that had never been done before. It took about, I think, three years of research and development a full chemistry team, a full engineering team, and so I saw that experience, how, just how much of a hole it puts you in to raise that much money before getting profitable, also just how much of your company you have to give up just how much control you give up. And so from the very start, when Libby and I started Space Coyote we knew new that we would have to raise some money, but we actually built our first couple batches just out of our own savings to make sure that we had proved our idea before we went to raise money.
And when we did raise money, we decided to raise an initial round that was just under a million dollars instead of a big round. Because again, we wanted to just have that focus on let’s do this small to start with, let’s focus on our margins from the very beginning. I mean, that was another thing that I learned from Nima was we built a product that, you know, we built it to get to market and it is just really difficult to have a good margin in hardware like that, and the companies that don’t go out of business. And so, we knew from the start that we did not want to be in the, like race to the bottom segment.
We did not want to be building a super value brand that was just going to be as cheap as possible, because then again, you’re just squeezing your margins so low and like, yes there’s the Amazon’s of the world that can do that, and can build massive companies by doing that, but that’s the exception, not the rule. And so, we from the start wanted to make sure that we’re always focused on a healthy margin, and that our goal was within a year or two that we would become profitable.
When we started seeing the public markets decline at the end of 2019 then we realized, hey, you know what, like, there might be funding available next year and our plan is still to raise a little more money next year, so that we can continue capitalizing on growth, but we’re going to design everything that we do with a path to profitability first and get profitable first and then once we are, we can decide if we want to take on more money or not. So, we were already on that path when COVID hit. And so, we thankfully were in a really good position where we weren’t profitable yet, but we were very close.
And then even with the slowdowns from COVID, I mean, we had to furlough our entire team, we furloughed ourselves, Libby and I, a few weeks before the rest of the team to just see if that would have enough of an impact, but then quickly after that, we were able to bring employees back on. We were able to, you know, adapt to those changes. And so, I’m just really grateful for, you know, having those past learning’s from a past company and being able to structure this company in a different way and also just having good mentors and friends within the industry and another industry is that had similar mindsets.
And so, I mean, there’s a few other CEOs in the cannabis industry that I talked to on a regular basis who have also tried to build their companies with very little funding and focus on profitability. And it’s just been really refreshing to have that perspective versus what I had in tech where everyone was addicted to venture dollars. And I mean, even we saw it with all the [field IPOs] and companies like Uber and Lyft. And we work that never got to profitability, even with massive revenue, and I just did not want to be playing that game again.
RS: I’d say that’s a wise choice, looking back.
SS: Yeah, thank you. We like to think so.
RS: So, when you say that you got to take your team back after having to furlough them and yourselves, does that have to do with kind of soaring sales during this period?
SS: Yes. So, we have seen an uptick in sales now in this past month, but the big impact that COVID had for us on an operational level was that there were announced social distancing requirements in place, everywhere. And so, where our manufacturer previously was able to run full shift, we work with a couple different manufacturers that say that they normally had 40 people working, they now could only have 10 people working at any given time, because everyone had to be spaced out. And so basically, all of our partners had hugely reduced capacities.
And so, the impact it had for us was that basically everything got delayed by three or four months. And so, we had a couple months where we basically had no revenue because our – I mean, our revenue comes from the product that we’re able to produce not necessarily even just the sales that we’re having in that particular month. So, our sales didn’t – they dropped a little bit at the beginning, then increased a little bit and then have been fairly flat. One of the big impacts also that COVID has had is that many retailers have been more hesitant to bring on new brands. And so, really, when you when you have a business model that is based on growth, and then retailers stop bringing on new brands, then you’re not going to have too much growth.
So that coupled with just this big manufacturing slow down. We knew that we needed to make decisions very quickly to be able to, you know, make sure that we had money three months down the road. So, we had furlough team, unfortunately we had to lay off all our brand ambassadors, there was just no more field work to be done. And so, you know, that’s part of also being a founder and being an executive in a company is, you have to make those hard decisions and it really sucks when you know that you have people’s livelihoods in your hands and the decision that you have to make is, okay do I pay people in the short-term and risk their long-term job? Or do I furlough some people now and we lay off a few people to try to make sure that the majority of my employees will have a job for the long-term.
And so there were a lot of difficult decisions that we had to make. Thankfully, now, we finally made it through all of our backlog of manufacturing. We’re back to more of a steady state. And so, we’re able to start having a little bit of growth again, but it has been, yeah, it’s been, I mean, a lot of disruptions and just a lot of adaptation that we had to do really quickly.
RS: Yeah, yeah. And it’s, you know, that – what you talk about in terms of the price you pay as a founder, as a company executive, you know, it’s – those I imagine are really tough things as everybody in the world is dealing with this like uncertainty and especially, you know, at the beginning when, even though there’s a lot of uncertainty now, too, but you know, especially at the beginning when it was really unclear what was happening and how long it would be happening and the parameters of it, you know, as a business owner, I imagine there’s so – the scope is just so much wider in terms of the fears and uncertainties because it’s not just about you and your family, but it’s about other people and their families.
SS: That’s always been a tenant of our company also, from the very start is that, we, but so yeah, both Libby and I have a health condition, she has celiac disease, I have Crohn’s Disease. And because of that, I think both of us just personally in our lives have focused a lot on health and have gained an understanding through not focusing on our health, just how detrimental working yourself to the bone can be both, I mean, mentally, physically, and also just in terms of the productivity that you get out of people. And so, from the very start, we with Space Coyote have been focused on. This needs to be a healthy environment for people to work in. This needs to be like people’s health and prosperity and everything needs to be a focus before any company profit.
And we even told our investors that before they invested anyone who put in money, we told them that, hey, we want you to know that we will make decisions where we prioritize health and work life balance over profit. And the amazing thing that what actually surprised me was that the biggest investors that we have said, oh, you know what, I think that’s great, because I think that you’ll actually be more profitable as a result of having that type of focus within your company. And so, it was really awesome that we got alignment on that. And it’s, I mean, even just yesterday, one of my employees had an issue and I told him, hey, you know, the health comes first.
That’s the number one thing, and his response was wow, you know, it continues to surprise me that [as a boss], you will have my health and best interests at heart over other things just like based on the past experiences that I’ve had. And so that has been really, I think that’s beautiful for us to see that we have been able to build this culture. And I’m really just like, bring that into a company in a successful way, because we’re still growing and we are becoming a well recognized brand and continuing to expand. So, it’s really beautiful to see that we can have a different perspective like that then what a lot of people have been exposed to before and still run a very successful company.
RS: Yeah, that is so amazing and inspiring to hear. It really is, you know, reaffirmed some faith in business models. It’s so nice to hear that you took that as an intention and people were on board and it’s even serving you, you know, for success. I think the more that people talk about that and are open about that and are – inspire other people to do that, I think hopefully we can, you know, the sector can kind of improve through that, and not just the cannabis sector obviously. I mean, there’s room for improvement in many different businesses.
SS: Many places. Yeah.
RS: Yes. So going forward, what’s your vision for Space Coyote in the ecosystem?
SS: Yeah, so we, so we feel like we have crafted first of all, a brand that people can really connect with. Libby is just such a creative genius and we hear continuously that people love our brand, like when we go to big Trade Shows like Hall of Flowers, we have people come up to us all the time and say, oh, your brand is the best one that we see, like we love this, we want to wear your logo and all these things. So, we are really happy with the – how will people connect with what we’ve done. And also the quality of their product. So, as I talked a lot about, or a little bit about, that there’s been this race to the bottom, and people really focusing on, you know, cost over quality. And that’s something that we just do not want to do, we want to produce products that we want to consume.
And I mean, even now, whenever if we have, or I guess, pre-COVID, if we had a party or people over that type of thing, whenever there is a nice occasion, we always hold our Space Coyote because it’s the nicest weed we have. And that is what we want to continue doing and we’re not going to compete on cost, we do have a product that is still reasonable, it’s not a high cost product, but we always want to focus on that and through that we really think that we can win the market and we’re getting a lot more name recognition now. We are starting to grow a lot more now. We’ve been placed in close to 300 dispensaries throughout the state. And so now, we really feel like right an inflection point, we’re doubling down on our sales efforts. And very soon, we will be expanding to other states also.
So, we think that there’s a lot of potential there. And also, just really bringing a California brand to other states, we’ve seen a few companies do that successfully. And so, we’ve been in the process of, you know, starting the conversations and the research for the right partners to work with in other states, but it will always be with that focus on, you know, great branding, really making sure that we’re connecting with our core customer, celebrating that stoner heritage, and just making a quality product that speaks for itself.
RS: And the plan is to stay not in the public markets, is that right?
SS: That’s right. Yeah. So, definitely for now, we’re going to stay private. We will likely raise some more funding, but we don’t need to, it will only be to help fuel growth, and our focus is always going to be on being profitable. So, even when we bring on more money, of course, like, if you do bring on more money and you’re going for growth, there will be those fluctuations of having a few months where you spend more than you make, but our goal always will be to run a profitable business.
And we just think that that is the best path to success. And the best way to withstand any future storms that happen. I think 2020 has been a big wake up for a lot of people and realizing that crazy things like this can happen even in America. And this is just, you know, a good lesson, I think, for everyone that you always have to be prepared to weather whatever storm comes around. And I don’t know if it’ll be another pandemic like this, but I’m sure that there’s going to be other issues that we face that we’re going to make sure we’re prepared for it.
RS: Yeah, I definitely think the number one takeaway from this period of time in all of our lives is sometimes there’s literally nowhere else to go. So, you just have to deal with the situation that you’re handed.
SS: Exactly. And I think it’s really good for people to learn this. And I think that, you know, even with all the negatives of COVID, and how much it’s affected people and like, you cannot discount the loss of human life, but I think that in many ways, we have learned a lot from COVID also, and we’ve seen how big of an impact the slowdown had on the environment and on people’s, yeah, I mean, even just mental health and just everything that this is doing. So, I really hope that everyone takes the time to reflect on this and especially business leaders, especially lawmakers to really see okay, what are the good things that we can take from this, what can we learn from this? Because if we can do that, then it’s – we’re going to make this a better world afterwards. And I think that we always need to embrace those opportunities.
RS: Man, could not agree more. Somebody said to me, kind of at the beginning of the lockdown period, if you can’t go-out go-in and that has really stuck with me, I think about it pretty much every day, you know, especially when I’m getting snooty about things that are beyond my control. That notion of okay, like, go inside, learn the lesson, feel the feelings do the work. I mean, that’s really that’s the trick of life in every respect.
SS: Exactly, I couldn’t agree more with that. And I love that. If you can’t go-out go-in, and yeah, I think I mean, also, as people are, you know, locked at home, it’s a great time to focus on your personal self care routine, do in your meditation practice, anything like that, that really helps you go in and I’ve seen a lot of people doing that to really great effect. And, of course, I mean, I think we’re all feeling a lot of stress, and a lot have built up tension, but yeah, like you said it’s an opportunity to look inside a lot more.
RS: Yeah, absolutely. Speaking of taking care of yourself and personal meditation, I saw that you won some awards for joint rolling.
SS: I did, yes. That was – I had a, I believe it was at a private party a few years ago. We had a couple competitions. One was for the fastest joint rolled and one was for the nicest joint rolled. So, I was actually amazed with myself, how quickly I could roll a joint. There was nothing to do with quality, I was just how quickly could you twist up a joint, light it, and blow some smoke out of your mouth and I think I did it in maybe 10 seconds. So, it was a skill I did know I had. I knew I could roll nice joints, but I did not know that I could roll a joint that quickly.
So that was a lot of, I was, you know that was, you know, several years after college or like any organized sports that I played and, you know, I get that adrenaline rush again. And it was, it was a lot of fun. I think, yeah, having your fingers a little bit moist to help tuck the paper in, definitely. I know some people really like to roll a joint with a crutch, some don’t. I think again, like matter of preference, try what you like. I find it a lot easier actually to roll a cone-shaped joint than more of like a cylindrical cigarette shaped one, because then I can start tucking the paper in at the very end.
And then I kind of work my way down and it turns into this nice cone that I’ll use. I always keep, I mean, either a clipper lighter has a little poker, I keep a pencil around. I think can poke that in a little bit and I just – I really like the feel and look of a cone. So, that’s my preferred method. Start at one and kind of keep your fingers a little bit moist. Tuck the paper in and work your way out.
RS: Love it. Love it. Love it. Love to hear it. Well, would you – Scott, do you want to leave listeners with how they can find Space Coyote and find your products?
SS: Yeah, so we currently are only in California. So, you can find us in, I mean over 200 dispensaries throughout the state. We – on our website we have a dispensary locator map. So that is spacecoyote.org. Also, people should definitely check out our Instagram at Space Coyote, and we post a lot on there about new product releases that we have where people can find them. And also, we have been very active also just in sharing resources for people that want to help support the Black Lives Matter movement. And also, we’re very passionate about helping non-violent cannabis offenders get out of prison.
So, we share resources about that there also. But definitely check us out. If you’re in California, you go pick up some Space Coyotes. We just released a five pack of mini coyotes. So, these are half gram joints instead of the normal one gram joints that we made. So, they had been in the works for a while, but they’re very COVID appropriate. Mini joint that you don’t have to share, it will still get you very glazed, joints for stoners, but it will definitely be the most delicious joint that you’ve ever had. So, go get one.
RS: That’s awesome. What’s your – just out of curiosity, what are your more favorite strains that you’ve worked with?
SS: Oh. So, this has actually been really interesting too, because we’ve found on our team that it’s strong just like matter of personal preference. My favorites are, I love, so I tend to smoke more sativa’s than indica’s, and so I love haze strain so like a Skunk Hill Haze or Ghost Train Haze or Super Silver Haze something about those strains really connects with me. I also really like a lemon tree or golden lemon. Something about that like citrusy, the terpenes there really connect with me. And then on the indica side, I love OG’s, those are – technically are more in the hybrid range, but I just – I love the feeling of a good OG or like an SFV OG, those just really mellow me out.
So, we have – actually our new packs have – this was completely unintentional, but the flower that’s in it, it’s called Scotts OG. So, I’m really excited about that, and we have, yeah, we have some amazing collaborations also. One of my favorites is, a collaboration with Gold Seal, that’s a cultivator in San Francisco, and they have a landrace sativa called Red Congo that we have in one of our hash infused joints right now. That is just incredible. And for sativa lovers, it is one of the purest sativa’s that you can find on the market. So, those are some, yeah, those are really, really tasty and really great effects that you get out of it.
RS: That’s awesome. I’m going to check that out because honestly, when you were describing what your personal taste is, we have very similar palettes I think. So, that’s exciting to hear about that new one. This has been such a fun conversation. I really appreciate you coming on the show. Thanks for joining us.
SS: Yeah, thank you so much for having me. Rena. I really enjoyed this.