Patrick McMahon
Co-founder
The OG Collective
Cathedral City, CA
This month I wanted to describe one of the more interesting challenges of operating in a completely new industry and environment. We have been reflecting on this process of making our way in the crazy world of legal cannabis for almost three years now. But anyone with insider knowledge of the cannabis industry can tell you that California, especially the Los Angeles market, has been the “Wild West” for almost 15 years.
For investors and entrepreneurs coming into the industry from “conventional” businesses, one of the most surprising elements of the cannabis business is how deals have been done in the pseudo-regulated “gray market.”
Growers and retailers would be doing business together for years on end, exchanging large sums of cash with neither party knowing the other’s last name — referring to each other only by nicknames such as Spider and Fat Pat. There were no receipts or contracts to represent transactions. Trust was built by doing one deal at a time and being a guy that does what he says he’s going to do.
Essentially a billion-dollar industry, with cash flowing in incredibly large amounts, was entirely based on handshakes and gut feelings.
Unfortunately or fortunately, depending on your view, this will not be the way in which legal cannabis will operate. Legal cannabis, like every other business, must introduce things like receipts, invoices, contracts, consultants and licensed contractors. This aspect, especially in the Southern California market, is incredibly challenging for so many “gray market” operators. If you don’t build a proper team around you, including accountants and attorneys, then you will be left behind.
Most other industries can provide you with examples of how to structure a joint venture between two companies. You can lean on previous deals to see what an even equity split would be. But we, unfortunately, do not operate in that environment.
We are essentially creating and setting the standard at the same time. There is no “set way of doing things” in the legal cannabis market. As frontier business people, we are creating the platform on which people in our industry will operate 10, 20 and 50 years from now. P&S Ventures has been in the midst of this environment for some time now; what a world we’re living in.