There is a level of sophistication in the cannabis industry that most people don’t know of. It is operated by a lot of bright people doing smart work with organic nutrition and data gathering. Tom Regan, President of Mindful, a cannabis company in Colorado, has taken the business from growing and extracting to distributing and retailing. Coming in to the company, his biggest challenge was to balance the cannabis culture and the corporate culture which meant that respect needs to come from both sides. More than just data collection and management, he needed the company to understand the history of cannabis and its social issues, where it came from and where is it headed.

Balancing The Cannabis Culture And The Corporate Culture with Tom Regan

We have a unique treat. We’re here with Tom Regan. He’s the President of Mindful. Tell us a little bit about what you do and the customers you serve.

Thanks, Bob. Thanks for having me. Mindful is our retail and cultivation brand. We are a cannabis company located in Colorado. As President of the company, my job is to make sure the trains run on time and we serve our customers. Part of our business is we have a 40,000 square foot grow here in Denver. We have a 25,000 square foot extraction facility and a retail footprint throughout the Colorado area. On top of that, we have a B2B business where we sell our products to other retailers.

You were kind enough to give me a tour and it reminds me of a surgical suite when you come in here. The place is clean and the data gathering here is incredible. Shed some light on what you did before here.

In my prior career, I was a Director at Cisco Systems for about twelve years. For those of you that don’t know Cisco Systems, it’s not the food company, it’s the computer company. Cisco is about a $50-billion a year company now. My job was to manage the worldwide supply chain, do product integrations when we acquired companies and launch new products. Before that, I worked at a bunch of small high-tech startups in the networking space in the Boston area. A bunch of them got bought by large companies like Cisco and Intel.

You said it was a $1 billion event that you managed at the time?

At Cisco, I was responsible for about $10 billion of Cisco’s revenue from a manufacturing and supply chain perspective.

I met many people here that had significantly advanced degrees in agronomy and horticulture. We had an engineer that was a farmer that is consulting all over. The misconception about the business is profound and I would tell you that this is a sophisticated. What do you reckon one grow room would take to set up?

A 1,500-square foot to 2,000-square foot grow room would cost anywhere from $400,000 to $700,000 to set up.

I was fortunate enough to see them. If you’re a gardener at all, you’re jealous. There are misters and there are fans and there are hydroponic stuff going on and all the RFID chips to manage. Not to belabor the point, but this is a highly sophisticated operation with bright people doing a lot of smart work on nutrition, organic work, and data gathering.

You mentioned our workforce. We have about 90 employees in all of those four businesses. At the grower we’re at, the cultivation facility, we have a woman that has a master’s in horticulture. We have engineers, the whole gamut. If I had to go top of my head, of the 100 people, over 40 have a bachelor’s degree and a little less than fifteen have master’s degrees.

I was unaware of the industry but the level of sophistication, tracking and compliance, you walk into the lobby, it’s gated in, and there’s more permits hanging on the wall there than you can shake a stick at to comply. This is a real life business. It goes from growing to extracting to distributing to retailing. Talk about challenge that you have of the four distinct business models within the company.

As a cannabis company, we have a wide diversity. The genesis for a lot of cannabis companies was to start a grower, a cultivation center, and then have retail. In a lot of businesses early on in Colorado that’s where they still are. As Cannabis 2.0 started to happen in Colorado, businesses started to stand up what they’re doing. They were growing, they had an extraction facility, but they didn’t do the retail and the cultivation side necessarily. What we’ve tried to do with our company is go the wide breadth. We want to be a fully integrated, vertical company that can do anything from growing all the way to products. At our extraction facility we don’t just extract the oil, we then transform that oil using technology and expertise to create products that we sell on the market, whether it’s food, essential oils, bath salts, or smokeable items. To move up that value chain is where we’re headed, but to do that you need to control all aspects of your supply chain.

Cannabis Culture: The genesis for a lot of cannabis companies was to start a grower, a cultivation center and then have retail.

We were talking about this as we were in one of the facilities, “Over there is our intellectual property.” You guys are developing genetically your own intellectual property to add value and create distinction?

That’s right. Coming from a high-tech background, I call it our source code. At the grow, we have the various strains and that’s our intellectual property. Also over at the extraction facility, the processes, protocols, and data and analytics, that’s our intellectual property as well. I learned a lesson in high tech that if you want to do something and you want to be successful at it, you have to measure it and you have to continually go after it. Our next big project is we’re going to try to get ourselves into a lean mindset so that we’re more agile and we’re doing lean manufacturing here. That’s pretty exciting. I don’t know if there’s a cannabis company in the world that’s looking at lean manufacturing and taking data and analytics to bear on the everyday operation.

When we were doing the tour, you showed me a controller box that you had built to spec to data gather.

It’s loaded with programmable logic. We had to write the code that goes with that and the logic. You talk about the grow environment, when you grow anything indoors, we’re not in a greenhouse, it’s indoors, and you do it with hydroponics, your margin of error is very thin. If you don’t have the data and information you need to stay within those parameters, you can lose the whole crop. You can lose everything. Plus, that would be catastrophic.

If we went from one room to the next, the environment was different from room to room.

Based on the grow cycle.

If you’re short of humidity, your grow facility is slow is a great place for humidity.

Different people grow under different protocols. In our environment, some of our rooms, what we’re doing are more humid. Other people go more dry.

In the data collection and data management that’s your world, where you came from, you look at it with a similar mindset. For you as the CEO, what would be useful to talk about is trying to take an established culture to an industry that was a little more Wild West beforehand.

For this industry, there are two camps. There’s a camp where there’s folks that were from the cannabis culture series people. In time there’s been serious like corporate or business types. For some reason, a lot of companies have two camps and they’re known and identified as, “They’re a corporate culture or they’re a cannabis culture.”Coming through the door, I had more of the corporate versus the cannabis. I had zero cannabis but I came to appreciate that cannabis culture is incredibly important if you’re in that industry. It’d be like going into a business Budweiser and saying that you didn’t care about beer and the history of beer and alcohol. The big balancing act for me has been how I merge those two cultures so there’s respect and appreciation for both.

To your point, Bob, we can’t just have a data driven business, but we don’t understand the history of cannabis and where it’s come, where it’s going or the social issues. It’s holistic. You have to take a whole view in this business. A lot people coming in now in what I’ll call Cannabis 3.0 are coming in with money and business experience but discounting the cannabis culture, and that’s a disaster. In the early part of the evolution of this business in Colorado, it was driven by the cannabis culture with no respect for the business side of it, and that was a disaster. The balancing act here is to meld, to take those folks you talked about with the highly advanced degrees in technology and meld them together so that the culture is holistic. It’s been a real challenge.

Just from walking around the place, you’re a highly motivated individual. There was one room that was in transition, so the harvest had happened in that room and there were some tables that were spick and span clean that the pots were on, and there were some that were in the process. I remember you saying, “By the time this was done, there won’t be a spec of anything in this room.”

We need to hold a high standard. The products that we make are being consumed. We hold ourselves to a high standard. Also the reason I said tomorrow is because time is money. If that room is not loaded for the next cycle, that’s time that those plants can’t begin their progression to harvest.

You were talking about turnovers and that you guys, like many other models, you’re looking to turn on inventory and you go, “That sounds familiar.”

Ask any farmer, if you go through a whole harvest and at the end of eighteen weeks you have a problem. It’s a big problem. Back to your point about the data and having people with data and analytical backgrounds, we can’t wait till that eighteen weeks down the road to find out we’ve made a mistake. We need to know as early as possible and correct for it.

Like any other any other manufacturing business with standards.

I would argue that it’s more challenging as farmer with a living process, with a living organism, you need to be even more aware of it.

The best news is you’re not going to get hailed out.

We’re not going to get hailed out. We could have one of our environmental controls lose power or power failure or we could have an issue like that that gets out of our control, like any other business. If you have a power outage on a production line, you better have a backup plan.

I’m a fanboy because it’s cool to see all this technology. You look at the wiring in the place and I feel like this must have kept an electrician busy for a very long time. For your perspective, where do you think the industry is going to go over the next three to five years?

We’re in an interesting political environment right now. At the federal level, you have the attorney general making overtures in a certain way, but then at the state level you have senators like Cory Gardner who wasn’t necessarily a fan of this. Now that he won the election and understands the impact to the state, saying to the attorney general in the United States, “Don’t mess with the state of Colorado. This is a business that we can control. We know what we’re doing and it’s benefiting the residents of the state of Colorado.”

The quantity of people that you have working here, how many new businesses could take and employ 90 to 100 people from varying levels of education this quickly?

It’s unprecedented. The exciting thing about this business, it hasn’t been done before. That’s what attracted me to it. This hasn’t been done before at a larger scale. This is just like any other startup I’ve worked at. It’s just moving faster and it’s tangible. You can see your results every day.

In my background, way back when, my ignorance about the marijuana culture and the marijuana plant was profound so I got a short course, which was fun, to take a look at this stuff growing. What it reminded me is a large tomato greenhouse.

If you go through a greenhouse, it’s very similar to that operation. The greenhouse have natural light and they’re augmented it with artificial light. We only have artificial light. Back to those tolerances, it’s much harder to manage. I came into this business with the same level of understanding is you did as it relates to cannabis. It’s a steep learning curve, but in this industry there’s room. A lot of the folks I worked with at Cisco and managed in California, in Massachusetts, in Texas, are saying to me, “How do I get into this? I want to get into this business.” I’m talking about people with engineering degrees, software designers.

You get what you get from the workforce because you're asking people to take a jump, a leap of faith.

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I’ve heard that more than once where the presumption is that maybe people would take and not be interested in the business but the challenge. From what I understand, the demand to come into the industry may outstrip supply.

Early on, like any industry, it’s in its early stage. You get what you get from the workforce because you’re asking people to take a jump, a leap of faith. Once there’s momentum behind it, you see those folks that are more of the settlers, not the pioneers, come in and they want to be a part of this. As I talked to the folks that I know from my high-tech background for 25 years in high tech, they’re like, “How do I invest in this? How do I get a job in this? How do I do this?” Unfortunately, my networked there is not Colorado-based, it was based back East California and Texas. California’s starting to sort it out, as is Massachusetts. Texas, we don’t know. My pitch to those folks is, “Move to Colorado.” They’re like, “No, this is going to happen to my state. How do I get it?”

I’ve had a few highly successful people from Cisco and startups that I’ve worked with that have come out here on their own dime and I’ve let them come out here and shadow for a week, they’ve gone back and now they’re driving me crazy, “How do I get a job?” “Move to Colorado.” “I don’t want to do that,” but on their own dime flew out here, shadowed me, took a week off from work, and then now they’ve got the bug because they see the opportunity. You talked about the systems, the analytics, the processes, everything is new. Everything we’re doing is new. I don’t mean to say it hasn’t been done before, but doing it at the rapid pace this business in this industry is growing, it’s new. It hasn’t been done.

The state’s benefitting greatly from employment, tax revenue and job creation. It’s been an extraordinary boom.

It has for the state. To see a representative of the people like Cory Gardner before election saying, “I don’t know about this,” and then same with Governor Hickenlooper, both of them now are strong advocates. As soon as the attorney general started to talk about taking measures at the state level, both of them rushed to Washington and said, “We’ve got this. Leave us alone. We know what we’re doing. Do not interfere.”

If there are folks out there that are interested in the industry, is there a website that they could go to reach out to you and say, “I’m interested in chatting?”

We have a website that is our retail and cultivation website and it’s at BeMindful.Today. You’ll find us there. We have a query page where you can send in a submission. We have another brand, one of our extraction businesses, TR Concentrates, and it’s TRConcentrates.com and you can see what we’re doing there. There are tons of resources if you’re interested in the industry. There’s tons of resources, just type “cannabis” into Google. You’ve interviewed Steve Urban. Steve Urban’s company, Riderflex, has been doing an amazing job for us sourcing highly qualified employees. Steve’s making a dent. Steve is probably part of our middle management team. Our sales VP is an executive that spent his whole career on alcohol, twenty something years in the alcohol business. He’s amazing. He’s drawn our extraction in wholesale business from almost nothing to over $500,000 a month, and that came through Steve. Money well spent. Steve should be charging more.

Part of the podcast, part of the idea here is to try to take and memorialize some of the wisdom that you’ve accumulated over time. To that end, most of us are pretty active readers, and in that bent, what’s the most recent book or influential book that you’ve read lately that’s impacted what you’re doing?

Free to Choose: A Personal Statement

The book I’m reading now is Free to Choose by Milton Friedman. It talked a little bit about state rights and federal government. Somebody said, “You should read Free to Choose by Milton Friedman.” He’s a free market economist from the University of Chicago. It’s a fascinating book. I love it. It’s thought provoking.

Looking back, we all have challenges periodically. What failure, or at the time an apparent failure, has served you or your company best or set you up for future achievement?

In this specific example, and it’s a theme throughout my career, it’s cliché but it’s so true, finding the right people and making the decisions around people earlier. Somebody once said to me and I didn’t listen to them, and it took me five years of being a manager when I was new, that when you get a stock portfolio, you spend time on the 80/20 rule. 20% of your stocks give you 80% of your return. The same is true of people. A lot of managers when they get first in management, and I’ve seen VPs do this, they spend 90% of their time on the bottom 10% of their performers. That makes no sense. I’ve made that mistake again and again. I’d encourage your audience to think about that. If you’re spending 80% of your time...