YC
Cannabis Startup Founders David Hua and Vincent Ning on Legalization, Banking, and Industry Trends
@ Y Combinator
10/11/18
Takeaways
DH
David Hua
10/11/18
@ Y Combinator
I brought a selection of my favorite bowls and flowers to showcase different terpene profiles, similar to wine tastings.
DH
David Hua
10/11/18
@ Y Combinator
The cannabis consumer experience has evolved significantly, with a variety of products now available on the market.
VN
Vincent Ning
10/11/18
@ Y Combinator
In the cannabis market, the most common products purchased are flour and pre-rolls, as they represent the base understanding of cannabis for consumers.
VN
Vincent Ning
10/11/18
@ Y Combinator
The fastest-growing demographic in cannabis consumption is actually baby boomers, who are increasingly replacing prescription drugs with cannabis.
VN
Vincent Ning
10/11/18
@ Y Combinator
CBD, or cannabidiol, is derived from both marijuana and hemp, and it offers medicinal properties without the psychoactive effects of THC.
VN
Vincent Ning
10/11/18
@ Y Combinator
The legalization of cannabis has led to the discovery of various cannabinoids, with CBD and THC being just two of many that can provide health benefits.
VN
Vincent Ning
10/11/18
@ Y Combinator
The cannabis industry is seeing a shift towards products that are ratio-based or effects-based, rather than just strain-based, to appeal to a broader audience.
DH
David Hua
10/11/18
@ Y Combinator
At Meadow, we focus on building software for dispensaries to help them manage compliance and inventory effectively, rather than manufacturing products.
VN
Vincent Ning
10/11/18
@ Y Combinator
Fundraising for cannabis-related businesses is challenging due to the legal complexities and investor hesitance towards vice industries like cannabis.
DH
David Hua
10/11/18
@ Y Combinator
The cannabis market is becoming more expensive, but consumers benefit from a wider selection and product testing due to legalization.
DH
David Hua
10/11/18
@ Y Combinator
We had a mix of funding sources, with about half coming from smaller angel investors who are forward-thinking and see the cannabis industry as the end of Prohibition.
DH
David Hua
10/11/18
@ Y Combinator
We raised two and a half million dollars on a twelve million dollar valuation after nine months of fundraising post-Y Combinator demo day.
DH
David Hua
10/11/18
@ Y Combinator
Investors needed to become comfortable with the cannabis context before committing, which involved many introductory meetings to explain the industry.
DH
David Hua
10/11/18
@ Y Combinator
In California, 80% of cannabis sales, including the black market, originated from the state, making it a significant market for cannabis distribution.
DH
David Hua
10/11/18
@ Y Combinator
The cannabis supply chain has been reconfigured since legalization in 2018, requiring growers to navigate complex licensing and compliance processes.
DH
David Hua
10/11/18
@ Y Combinator
California's cannabis market is fragmented, with no dominant brands due to regulatory hurdles and the need for local permits, which creates a disconnect in the industry.
DH
David Hua
10/11/18
@ Y Combinator
Cannabis companies often rely on cash transactions due to banking challenges, with over 90% of our transactions being in cash.
DH
David Hua
10/11/18
@ Y Combinator
The cannabis industry faces high taxation, including a cultivation tax of around $150 per pound and a 15% excise tax on wholesale value, contributing to high retail prices.
DH
David Hua
10/11/18
@ Y Combinator
Many medical cannabis patients have turned back to the illicit market due to price imbalances between legal and illegal products.
DH
David Hua
10/11/18
@ Y Combinator
Brand loyalty exists in the cannabis market, but many consumers are also open to trying new products based on recommendations from budtenders.
DH
David Hua
10/11/18
@ Y Combinator
The implementation of stricter compliance testing led to many brands being removed from the market, causing a significant supply shortage.
YC
Y Combinator Cast
10/11/18
@ Y Combinator
The cannabis market isn't sophisticated yet, and many businesses struggle to secure investment without proper licensing.
YC
Y Combinator Cast
10/11/18
@ Y Combinator
In five to ten years, I believe more states will pass favorable regulations for cannabis, starting with decriminalization and moving towards recreational use.
DH
David Hua
10/11/18
@ Y Combinator
In California, the removal of the one-acre cap on cannabis cultivation in 2023 will challenge small farmers, who must focus on genetics and sustainable practices to compete with larger operations.
DH
David Hua
10/11/18
@ Y Combinator
At Meadow, our goal is to build the best software for the cannabis industry, ensuring access for everyone, including those with medical needs.
DH
David Hua
10/11/18
@ Y Combinator
The cannabis industry is still young and faces challenges with capitalization, often ceding ownership to larger companies, which can disadvantage original advocates.
YC
Y Combinator Cast
10/11/18
@ Y Combinator
California's legalization has led to the expungement of many cannabis convictions, reflecting a shift towards social equity and justice in the industry.
YC
Y Combinator Cast
10/11/18
@ Y Combinator
Social equity programs are emerging to help disenfranchised individuals enter the cannabis industry, with some companies incentivized to support those affected by past cannabis laws.
YC
Y Combinator Cast
10/11/18
@ Y Combinator
The cannabis industry needs to educate consumers about the origins and production of cannabis products to enhance their value perception.
YC
Y Combinator Cast
10/11/18
@ Y Combinator
Building a community within the cannabis industry is crucial for collaboration and support among entrepreneurs facing unique challenges.
YC
Y Combinator Cast
10/11/18
@ Y Combinator
Y Combinator provides valuable advice for entrepreneurs, especially in navigating the complexities of starting a business in the cannabis sector.