Social Equity Brand Spotlight: Yes CannabisCommunity • September 09, 2021
We’re sharing the stories behind social equity brands on LeafLink, starting with Yes Cannabis, a social equity applicant brand out of CA managing two new cannabis brands, Hooga and Jenny’s Rose.
We’re excited to sit down with Matthew Martinez, CEO of Yes Cannabis, an innovative new cannabis company that has now launched two brands, Hooga and more recently Jenny’s Rose. Yes Cannabis is a social equity license applicant, currently undergoing the process of gaining a full social equity license and Matt has a lot of experience to share around cannabis laws/regulation, launching cannabis brands, and the social equity license process.
On how he got his start in the Cannabis Industry
I first became involved in cannabis back in 2010, when I started a Prop 215 delivery company out of San Bernardino (CA). We primarily serviced San Bernardino and Orange County – that was my first exposure. I was 20 years old and it was my first entrepreneurial endeavor.
My father had passed away from cancer and my younger brother was off in college, so I needed a way to put a roof over my head. I decided to start a business.
Unfortunately, that venture turned out to be an epic failure. I was arrested, went through a 15-month court battle with the county of San Bernardino. I was treated like a criminal, but when it was all said and done I was able to prove that I was operating in accordance with the law at the time. After satisfying the court's requirements the case was dismissed and they sent me on my way. I’m one of the few that got lucky in that way.
I had spent tens of thousands of dollars, shuttered my business, lost all my property, and had to start from square one again once I had my freedom back. At that point, I decided the financial upside wasn’t worth the risk of being a legal operator. But through my experience, I was able to see firsthand how law enforcement was prosecuting people within our industry and understand how to mitigate financial and legal risk within cannabis.
“I was arrested, went through a 15-month court battle… I was treated like a criminal, but when it was all said and done I was able to prove that I was operating in accordance with the law at the time.”
On how he got involved with Yes Cannabis
I started consulting and providing management services to multiple operators within the city of Los Angeles, primarily for pre-ICO licenses. Along with waiting tables, that was how I funded my way through college. After school, I became a partner of an event and entertainment company with a few buddies of mine. I was specializing in sales, marketing, and branding in the nightlife/entertainment scene of Hollywood. This helped me develop better corporate business skills, but throughout the entire time I still had my finger on the pulse of the [cannabis] industry because I was providing active management and consulting services to operators in the industry.
Around 2014, I decided to re-approach the idea of starting a brand within the cannabis industry, launching the brand in 2017. Unfortunately, that business struggled due to litigation with other organizations for breach of contract – a story that will be very familiar with other operators in the industry.
After some time, I connected with Tom Zuber of Zuber Lawler, who asked my brother and I, along with our partner Ryan, to run their cannabis holding organization known as Yes Cannabis. We said yes and started running Yes Cannabis, and at this point we’ve successfully applied for and are currently in the process of obtaining our first social equity licenses for non-storefront retail along with manufacturing and distribution, built two consumer-facing brands, and are in the works of building a few more!
On Yes Cannabis’ consumer-facing brands
I’ll start by talking about Hooga, which is an alternate spelling of a Danish word with no direct English translation. This is a very positive, comforting, and heartfelt brand that we launched to provide high-quality concentrates at a value price point. We launched that product about six weeks ago and it’s doing fairly well down here in Southern California.
We’re currently in the process of launching our solventless concentrates line, which goes right in hand with our brand in terms of providing a more clean, holistic experience to the consumer. Hooga is beautifully done, beautifully designed, inside and out and we’re working to push that forward. The other brand is a little more complex and interesting, so I’ll share first how the brand came to be then I’ll tell you about the product.
“Hooga…is a very positive, comforting, and heartfelt brand that we launched to provide high-quality concentrates at a value price point.”
So my business partner Tom [Zuber] sends me a video one day and says, “Hey Matt, check this out. Is this for real?” It was a video of a gentleman by the name of Larry Smith, an ex-Police Captain with Parkinson’s who has severe shaking and tremors. He’s in San Diego and in the video he ingests this oil out of a syringe – after 4 minutes, all his shaking and tremors just…well you’ll have to watch the video. We perceived the experience as an overall improvement.
I started doing some research into the people behind the video. It turns out that Jimmy Castillo, the inventor of the technology that created the oil was interested in getting involved in the newly regulated cannabis market, but due to the barriers to entry he was having a hard time finding a path forward. So we met him, got to see the product firsthand, hear his story, and totally fell in love with it.
“Jimmy Castillo…was interested in getting involved in the newly regulated cannabis market, but due to the barriers of entry he was having a hard time finding a path forward.”
Jimmy originally entered cannabis because of his sister who developed ovarian cancer. He wanted to provide some comfort to her at the tail end of her life as she was degrading due to cancer. That started his pursuit – he ended up losing his sister and that just fueled his passion and commitment to the world of cannabis. This led to a 1:1 dispensary that was focused largely on medical and Jimmy continually refining to provide Larry his miraculous experience.
With Jimmy, we developed a brand called Jenny’s Rose in honor of his sister, Jennifer Rose Castillo, using the technology that he invented. Over the course of about two years we submitted around 7 different patent applications around technology ranging from extraction and decarboxylation to formulation and have successfully been granted 3 issued patents. We have several more that we’re in the process of going back and forth with the US Patent and Trademark Office on, so we say there are more to come.
“We totally fell in love with it…. With Jimmy, we developed a brand called Jenny’s Rose in honor of his sister, Jennifer Rose Castillo, using the technology that he invented.”
We felt it was crucial to the path forward for the brand to develop these patents and protect the intellectual property because the product is so powerful and helps elevate and provide relief to people’s lives.
On bringing Jenny’s Rose to market
After that, we went on a hunt to find manufacturing and distribution partners that would work with us on creating the complex product. We found a group out of Coachella Valley that was willing to collaborate with us on commercializing the product, which we did and we successfully launched the brand around two weeks ago. Jenny’s Rose is in four retailers at this point, and we’re in talks with a large retail chain to expand throughout the state of California. It’s generating a ton of traction, which is really great for our vision, which is to provide as much relief to people as we can and that’s all about access. So that product itself is a tincture line, which is the first product category we’ve launched with.
“We already have countless testimonials to support it… Jenny’s Rose is our flagship project that we’re putting a lot of love and attention into right now.”
The formulations for the tinctures are very complex and made with a whole plant extraction and a whole lot of thought. Inclusive of major cannabinoids, many rare minor cannabinoids, and specific original plant terpene profiles, our variety of ratios are designed for specific effects. As a bonus, we keep a lot of plant fats, lipids, and other plant materials in there as we believe these formulations result in additional benefits to the body.
All of these things lead to exceptional product efficacy and hyper effectiveness. We already have countless testimonials to support the basis of our theory, creating an effort to design new tests on bioavailability and other magnificent impacts to the body. As our anecdotal data scales, we will be pursuing clinical research with these products. Something our total team is very excited about.
On the mission of Yes Cannabis
“Helping [Jimmy] execute his vision for his brands and products is what brings us a lot of joy.”
The high-level goal for Yes Cannabis is to positively impact as many lives as possible. I think doing that stems from product efficacy, reliability, and consistency.
In our experience over the past several years, we’ve been able to build relationships that allow us to effectively take products to market with a lower barrier of entry than a new participant in the industry would encounter. Jimmy is frankly a genius, a brilliant and passionate individual, so helping him execute his vision for his brands and products is what brings us a lot of joy.
That definitely aligns with our vision of making a positive impact on as many lives as possible – and California is just the start. We’re looking at moving into other states domestically but also having an international conversation, because I do believe this is a global industry and that the plant can be applied to so many lives. The benefits it brings are really astounding and inspiring.
I first entered this industry through necessity or survival, to build a business that could keep a roof over my head. But since then, I’ve seen this plant transform so many people’s lives for the better, and have seen the industry grow to the point where I am extremely passionate and positive about its forward progress.
We take our responsibility as operators within the industry very seriously, and that stems from the idea of making a positive impact on as many lives as possible through our actions, right through to the products we put out, the way we conduct ourselves in business, our partnerships – it all has to align with our vision and goal, otherwise we as business operators aren’t offering our true capabilities. In our opinion, it’s all about developing an ecosystem of like-minded individuals who operate from a place of integrity and enjoy doing what they’re doing, and love to see the good that this plant can bring into the world. They tend to survive much longer than the quick buck players.
On Social Equity licenses
I qualified for a social equity candidacy based upon the criteria of my prior arrest and conviction, which allowed me to apply in the City of Los Angeles. I was approved as a social equity candidate through a verification process, and then once you become a candidate you can start the process of applying for a license. There’s a lot that goes into applying for a license, specifically in this municipality you have phases that introduce different windows to apply. Phase one focuses on storefront retail and phase two is directly for additional storefront retail and delivery. The process is not the easiest to follow and as a whole reflects the difficult-to-navigate industry.
Our team finds ways to be effective through our years of operating cohesively and embedding ourselves into the mix with a strong finger on the pulse. If you don’t eat, sleep, and breathe this industry and you’re someone new walking in, it’s pretty hard to figure out what’s going on and how to get it done, and once you have, there’s a chance you’re already behind. There are so many facets and nuances to what needs to be done, it can become overwhelming. I’d say that our experience is a bit different given our background, experience, and blessings the industry has shown us, so our journey has probably been a little easier than most.
“There’s a lot that goes into applying for a license… as a whole reflects the difficult-to-navigate industry.”
But that’s not to say it hasn’t been challenging. I want to say it’s been over two years since we submitted an application and we are yet to receive our final approval. We’re actually going through our walkthroughs currently, but I would say we’re still at least a few months out from actually being operational.
On the Social Equity application process
Becoming a social equity applicant is not that difficult. You’re uploading documents into a web portal, and they’ll approve you as a social equity applicant. After that, you can apply for licenses under the social equity umbrella. The main legwork before applying is getting court documents and records, proof of income and residency, conviction, so you’re going to courthouses, calling old landlords, looking through old records. Then you have to aggregate all of this information and submit it to get the approval – this is the easy part.
Once you’ve done that, you can apply under the social equity umbrella. You can’t just freely walk in and submit an application whenever you want – they open up windows that allow people to apply for a set amount of time. Then they close the window, review the applications, issue those applications, then they’ll open another window for similar, related, or even the same license type. You have to apply in those windows, and for most license types and most scenarios that license is tied to a physical location. So you, as a social equity applicant, must secure a physical location via purchase, a lease agreement, or know someone who has a building that will let you use it in order to apply for that license.
I’d say there are very few social equity applicants that have a friend who owns a qualifying building in a specific zoning area in the city that will just let them use their building to submit an application. So there’s an extreme cost associated with the pursuit of an application outside of the application fees. Securing the building, let’s say you have that building for 18 months or two years before you’re operational. You’re asked to absorb the cost of your rent or lease or mortgage over the course of that time.
“There’s an extreme cost associated with the pursuit of an application.”
Before you become operational, you have to complete your build-out. So you get your building, the city will approve the location. You’ll have to submit a general overview of your business plan, the model, the floor plan, and layout of what you’re intending to do. Once you do that, they’ll approve you. You pay a fee, get to submit your actual application – which has a bunch of the standard operating procedures in your business like a floor plan, security plan, fire evacuation plan, etc. It’s very detailed, and you must submit this to them as well as go on a walkthrough validating that you have made the improvements to the facility that were outlined in the application that allows you to conduct this type of business.
“You’re talking about a year and a half to two years, some almost three years that they have been going through this process to get approval.... A lot of social equity applicants don’t have the money or resources to continue.”
All of these things take time, or someone else’s time that you’re generally paying for, or a high-level knowledge which most people don’t have – so they have to pay for it. We’re talking about resources, it’s an extreme level of resources needed to make it through this process. Throughout this time, you’re bleeding money because you’re on the hook for your lease or mortgage. Once you’ve satisfied the city’s requirements, and I’m not saying they are unrealistic requirements, I’m just saying that there are requirements that must be satisfied for this to happen.
Once they give you the certificate of occupancy, you can start operation. So for most people under the social equity umbrella, it has been anywhere between 18-24 months, some even longer since they submitted their applications, and they’re still not operating. You’re talking about a year and a half to two years, some almost three years that they have been going through this process to get approval.
“I don’t think adequate resources have been provided for social equity applicants to navigate this process successfully, because of how complex and nuanced it is. It’s very challenging.”
It gets to a point where a lot of social equity applicants don’t have the money or resources to continue. And you start seeing corporatization of the social equity pool, right? People partner with larger corporations because they need the money and they’re not always given the best deals. It’s not the golden ticket that everybody thought it was going to be in 2017. Operating a cannabis business is just like operating any other business that needs to generate profit and be sustainable. If you can’t do that, it’s going to be very difficult to have a successful business, even in cannabis. What makes this even harder are all of the regulations and compliance you must follow in order to operate that business and the nuances of specific cities.
Each municipality differs, different tax structures here, various operating protocols there. For example, if you’re selling into certain municipalities you have to pay their taxes so it becomes very complex and overwhelming. You don’t just print money, but it’s very possible to be successful. It’s a lot of hard work, a lot of dedication and patience, and you can build a successful, sustainable business. I think a lot of people that were applying for social equity thought that because they got a social equity license, it was worth millions of dollars and soon found out that it’s a marathon, not a sprint.
“People partner with larger corporations because they need the money and they’re not always given the best deals. It’s not the golden ticket that everybody thought it was going to be in 2008.”
We’re starting to see that now because social equity applicants are selling off interest in their license types for sub-million dollar valuations, others have to take smaller deals. And the deals are not in the best interest of the social equity applicant, it’s in the best interests of the business. It’s a very complex system and I don’t think adequate resources have been provided for social equity applicants to navigate this process successfully, because of how complex and nuanced it is.
On tips for other social equity applicants
“Don’t take it lightly.... Try to become educated and knowledgeable about the industry from people in it, or people who are experts in the area you’re looking to participate in.”
For social equity applicants or really anyone looking into the cannabis industry, don’t take it lightly. It’s like a lot of other things in life – the only way that you’re successful is through hard work and discipline, and then to have a lot of patience. It’s not going to happen overnight. I think everybody is capable of learning this industry and figuring it out, but very few people are going to apply themselves and take the time to understand all of the nuances.
I think it’s very difficult to learn everything before you jump in, but try to become educated and knowledgeable about the industry from people in it, or people who are experts in the area you’re looking to participate in. So if you’re a lawyer and you want to practice law on cannabis, talk to other lawyers and learn the nuances. This industry touches many different types of people and even license types are all different. So if you want to get into cultivation, you should be picking the brains of people who own and operate cultivation businesses. They understand the day in and day out of running a business, so listen to the experts and always keep learning.
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