Demystifying the Cannabis Entrepreneur
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5 Leaf Lab

Green Check Verified: Hi Catherine and Leon! Could you share what brought you to the Cannabis Industry?

Catherine Young: I’ve been in a number of different industries in the past, and started researching the cannabis space about 5 years before HB788 passed in Oklahoma. Quite frankly, we were surprised that it did pass, as it was the second time it was up for vote, and we really didn’t think we had the votes for it. Leon and I weren’t that far along in what space we wanted to be in because we didn't think it had a chance. But when it did, we went into fast-forward to get things rolling quickly! It was industry that I thought would be a great place for us to get involved in and grow at a ground floor level in an industry that seemed pretty exciting.

It was industry that I thought would be a great place for us to get involved in and grow at a ground floor level in an industry that seemed pretty exciting.

Leon Wunsch: I was in the MBA program at TU in 2016-17 and was focusing on entrepreneurship. After I was done with that I had a tool belt for how to start a business, plan for it, raise capital and more. Around that time, I had been working for the university, then the bill passed. We started creating materials on how we were going to crack this narrative of the business, what kind of impact we wanted to make, from that, how much money we needed to do it. We wrote some presentations and started to raise a healthy amount of capital to be able to launch the lab. We did all the research in Colorado, with a number of industry experts, extraction experts, and that certainly shortened the learning for us on a manufacturing level of how we were going to operate our lab.

We started creating materials on how we were going to crack this narrative of the business, what kind of impact we wanted to make, from that, how much money we needed to do it.

Young: I think that was important for us when deciding what space in the industry we wanted to enter into. We sought out experts in the industry in mature markets to help us get where we wanted to be.

GCV: We speak with a lot of business owners who decided to enter the market because they were excited by the opportunity of this new market.

Wunsch: It was unique for us in that Oklahoma limited out-of-state ownership to only 25% which allowed for the little guys to create a mom and pop environment and to have enough runway to create a good brand before the big Walmart-type players started coming in and pushing everybody out.

And that’s our desire, to create a craft brand, much like the craft beer industry.

Young: And that’s our desire, to create a craft brand, much like the craft beer industry. We're following that same model. Our attorney has a lot of experience with craft breweries, and we're interested in that lane.

GCV: Out of curiosity, do you know anybody whose life has been positively impacted by the use of medical cannabis? Did that play into your desire to enter the industry?

Wunsch: My favorite story that you tell is the welding guy and the hand cream.

Young: So, we develop this topical cream that's a high-CBD with THC mix. We spoke to a few clients who purchased it and one of them was a welder. His hands hurt every morning, and he had to spend 30 minutes per day stretching just to be able to move his hands. He started using the relief cream and it greatly shortened that timeframe. In terms of cannabis as a whole and on the medical side, Leon and I both worked with the adult disabled for many years, I had probably been doing it for 20 years. So when Leon was growing up volunteered in that sector quite a bit. There's significant research that has been done in regards to minimizing tremors and pain and aiding cognitive ability that THC and CBD provides, and that's what we're really excited to explore for our patients.

GCV: The benefits certainly sound real for your patients!

There’s certainly recreational value but there’s exponentially more value in the medicinal benefits.

Young: A lot of people think the medical market is a fake recreational market.

Wunsch: But I think both schools of thought are right. There’s certainly recreational value but there’s exponentially more value in the medicinal benefits. And I think we’re just scratching the surface on that because we've been barred on research for so long. With us being able to do fractioned and really isolated extractions just using CO2, we can find plant genetics that have these minor cannabinoids that are present, whereas with hydrocarbon extractions you’re targeting THC. There is value in that, but that's not the only value of the plant.

GCV: Can you tell us a bit more about 5 Leaf Labs? What you do, what you're all about?

We also wanted to find a niche in the extraction community to be able to differentiate ourselves early.

Wunsch: After doing all of that industry research in Colorado we landed on CO2 extraction because we wanted to find a methodology that was repeatable and scalable, so we could be confident that every time we created something we could replicate it. Growers are able to mimic the genetics every time, making it a repeatable process. We wanted to be able to mimic that on the extraction side, and we also wanted to find a niche in the extraction community to be able to differentiate ourselves early. As far as we know we are the only lab in Oklahoma that doesn’t winterize their CO2 extracts. We have a top-tier extractor that treats CO2 in a way that makes it the most efficient solvent for extracting terpenes, or cannabinoids, and it won't start pulling other parts of the plant that make your extract not as clean. Our vaporizer cartridges are cleaner because of this CO2 methodology. No chemical filtration is used and we have a gentle and precise which process, which is where the “craft” mindset comes in. We're the only lab in Oklahoma that's doing this and we take a lot of pride in it.

We're the only lab in Oklahoma that's doing this and we take a lot of pride in it.

Young: From a "green" standpoint, this CO2 method does not leave any type of residue. There is no CO2 waste because we are able to re-capture and re-use it over and over again, which was also very important to us in order to maintain a "green" process. We wanted to make sure that whatever we were doing, the end result would be the a safe as possible.

GCV: Why such an emphasis on quality?

A lot of players are racing for the cheapest product with artificial flavorings that are saturating the vape cartridge market.

Wunsch: Different extract methods will result in different quality in vape cartridges. A lot of players are racing for the cheapest product with artificial flavorings that are saturating the vape cartridge market. For us, we're differentiating on the total opposite side of the market in that we're all extracted in-house, we're sourcing the highest tier material at a higher cost, and thus making really quality outputs.

Young: It’s a crowded playing field. As in any type of industry where you’re manufacturing something, there are a lot of people who make the same thing. We could be either the least expensive out there - which we figured would be a crowded space once you bring in national players - or be one of the few focused on top quality inputs and products. That’s really the process that Leon has developed.

We have a slow-growth model where we don't want to get worse when we get faster.

Wunsch: It’s a combination of high quality inputs and optimizing the extraction process. 1% is a large difference in quality to both the processors and the patients. We have a culture of paying attention to all the small details and making adjustments based on those findings. It's a true scientific process. We have a slow-growth model where we don't want to get worse when we get faster.

There are so many inexperienced players in the space because the barriers to entry were so low. Anyone with $2,500 that lived in Oklahoma could get a license, but that didn't mean you would do well. I think there are a lot of people who are just checking the boxes and getting the job done, but not creating the best product.

GCV: How big is your operation?

Wunsch: We have about 2,000 sqft in the lab and 3 part-time employees, and I am the only full-time employee. In the next quarter we'll probably have another full-time employee, but the team is less than five right now. But it honestly doesn't take a lot of people. While the extractors are running we can do something else, and we can stack the flow with timers and all of these things to get the most out of every hour. We don’t need to monitor the extractor - it’s a set it and forget it machine and it makes adjustments in real time.

We want this to be slow, dial in each product and have it be the best it could possibly be.

Young: Our thought is, in any business you need to find the right employees. It’s not yet like the tech industry where there’s a pool of employees. Part of our slow-growth mindset is to train people along the way to do every task in the most efficient way possible in regards to the space and resources we’re have. It's the same reason we only have three products right now instead of blasting out with ten full product lines. We want this to be slow, dial in each product and have it be the best it could possibly be.

I think we’ll employ five to ten people over time, but we thought this would be the best thing to do since we’re learning as we goo, too. There's a lot to manage. All the record-keeping that you have to do, the different type of insurance, and so there's a lot to do to make sure that we're doing everything correctly and above board while keeping the quality that we want.

We applied for our license as soon as the state launched its program, but we were in a holding pattern for a year with the city of Tulsa. While we've had our license for a long time, we've really just been creating products since February.

GCV: Definitely sounds like this industry is not without it's own unique obstacles. How has your experience been with banking?

It was an extensive application and we had to build specific policies just for the application.

Wunsch: Early on we applied at a local credit union; it was an extensive application and we had to build specific policies just for the application. All kinds of internal documentation that we’d never thought of. The day we turned in our application they told us, 'we’re not taking any more clients.' So we worked on that for a several weeks just to find out there were no options. Luckily, we were pre-revenue but we wanted to be ready for the day. When we were going back and fourth with the city of Tulsa we kept thinking, 'any day now' and it took 9 months. During that time, we were making sure everything else was set up.

The day we turned in our application they told us, 'we’re not taking any more clients.'

We applied to that credit union, and that didn't work. Then, we found our current bank from our attorney who said they were taking clients in the cannabis space. We went in and they were super sweet and welcoming, and I knew it was a good fit from the start - everything that the other credit union was not. We needed a banking partner who we could trust who we knew wasn’t going to make things harder than they needed to be.

In all areas of our business, we’re working with players who are above board, and banking is one of them.

Young: In all areas of our business, we’re working with players who are above board, and banking is one of them. We are certainly lobbying for the fair banking act to pass. It would really be beneficial to smaller players like ours. In every other industry you can get a checking account without exorbitant fees, but in this industry you can't because of the level of compliance the banks have to provide for a cannabis business. We understand the reason for the higher fees, but we do think our bank has been a great partner, particularly during COVID. And we want to be a good partner back! They've been here, we walked them through our process, and they seemed really interested in it. It's great that they care about our success in this industry.

It's great that they care about our success in this industry.

As this industry matures, there will be more and more regulations that we have to abide by, particularly on the banking side. When you first start those new processes, sometimes it all runs smoothly, but sometimes it's not so smooth. We're happy to have you as a partner to help us navigate the requirements and reduce any anxiety because we want to maintain our banking relationship!

GCV: What's one thing you would tell the world about what it's like being a cannabis entrepreneur?

Young: In Oklahoma particularly, as an emerging market, there are a lot of choices, but they’re not all created equally. They’re presented as being equal by a lot of the players, but they’re not. Similar to other industries, you have people that really care about what they're doing and are bringing the best product possible to the market, and there's others that are not, that are looking for the cheapest way to do it. They're going to make a much larger margin on it, but they're not as concerned about the end user. For me, that's the most important thing.

Similar to other industries, you have people that really care about what they're doing and are bringing the best product possible to the market, and there's others that are not.

Wunsch: One thing that I didn't anticipate before getting into this space is the overwhelming feeling of community. We see it B2B with the growers and dispensaries that we get to work with., but - as our brand grows -we're also getting contacted by a lot of patients using our products, which has been overwhelmingly heartfelt. The feedback about quality is great, but more what's more touching is the response to our relief creams, our gel caps, and what those products are doing to enrich people's lives. Social media is a great way to communicate in real time with these users. I didn’t expect this to happen so quickly or being so robust.

Young: Leon has really dialed into working with our growers in particular, and I think these relationships make a huge difference. It affects what we're able to produce because of their high-end products.

July 28th, 2020

About 5 Leaf Lab

5 Leaf Lab is a Tulsa, OK based botanical extraction lab, specializing in full-spectrum cannabis oil. The company values top-quality and has created a truly clean extraction process that produces the safest products while also minimizing their CO2 footprint.

License: Processor

Company Size: 4 employees

Location: Oklahoma

www.5leaflab.com

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