While the legalization of marijuana for either medical or recreational purposes varies from country to country, the process of legalizing cannabis only began sweeping across the United States in the late 20th century. Now, more than 11 states have legalized the use of recreational marijuana, and more than 30 states have legalized the use of medical marijuana.
Within Texas, the discussion of legalizing marijuana continues. In 2019, Texas legislation passed House Bill 3703 which legalizes the distribution of medical marijuana to those diagnosed with severe illnesses.
Additionally, House Bill 1325 recently allowed “the production, manufacture, retail sale, and inspection of industrial hemp crops and products in Texas. This also includes products for consumable hemp products which contain cannabidiol (CBD), as well as other edible parts of the hemp plant.”
With these two major advances in cannabis law, Texas startups specializing in all areas of service are gearing up to prepare for what might be one of the fastest growing industries of the 21st century.
Currently, the most common problem cannabusinesses are facing, is being able to operate within the realm of diametrically opposed laws. While some states are decriminalizing cannabis, it is still illegal throughout the United States on the federal level.
Many cannabis companies encounter unusual barriers that non-cannabis startups do not typically face. Until regulations such as the Secure and Fair Enforcement Act of 2019 are in full effect, utilizing financial banking institutions, acquiring insurance, and creating a vetting system are all challenges for the average cannabusiness.
Despite being in a 21st century Wild West, three of 2019 MassChallenge Texas in Austin finalists are Texas pioneers paving the way for cannabusinesses.
Tyler Sickels, is the founder of SolGro, which increases greenhouse crop yields by converting photosynthetically inactive sunlight (O,Y,G,I,V) into photosynthetic light (R,B).
Farhaj Mayan is the founder of Kanna, a marketplace that provides gigs in the cannabis industry.
Karla Johanning is a scientist and founder of KJ Scientific, and she is also co-founder of the subsidiary, KJ Scientific Independent Testing Labs. Each of these startups have created a solution to the various problems that the United States cannabis industry has not yet resolved.
SolGro: Helping Farmers Increase Their Crop Yields
For the last two years, SolGro has focused on developing sunlight-enhancing greenhouse films that enable farmers to increase their productivity and profitability. They started by catering to traditional horticulture farms, but with traditional farms, the owners had been in business for generations and were more inclined to stick to systems and methods that were already successfully in place. SolGro then decided to focus on the cannabis industry due to the shorter growing cycles, and the willingness of farmers to allow testing of their product.
As one of the top 14 MassChallenge Texas in Austin finalists, Tyler has made the most out of the program by collaborating with fellow startups in the cohort, connecting with mentors, and being on the MassChallenge Texas in Austin Save Mother Earth panel during Austin Startup Week.
Tyler Sickels of SolGro at the MassChallenge Texas in Austin “Save Mother Earth” Panel
After the conclusion of the MassChallenge Texas in Austin program, SolGro has plans in the next year to broaden their team, and penetrate the Canadian, Alaskan, and Oklahoma markets. Outside of their North Texas headquarters, SolGro has already formed partnerships in Oregon, California, and Colorado. With very little competition and a product that is easily scalable, SolGro is on its way to making a major impact in the agricultural sector.
Kanna: Creating gigs in the Cannabis Industry
Kanna is a relatively new startup that was conceived this past summer. Initially, the founder, Farhaj was accepted into the 2019 MassChallenge Texas in Austin cohort as Fade, a mobile platform that connected local barbers and their clients. During the cohort, Farhaj soon realized that due to outside competition with a similar product and service, he would have to shut his two-and-a-half-year business down and pivot to a new idea.
After having a conversation with his longtime friend, and future co-founder, Ziljian Aguirre, who owns a vertically integrated cannabis operation in Oklahoma, Farhaj listened to Ziljian’s grievances for needing trusted workers in his area and soon became inspired to embark on the creation of Kanna.
Farhaj had the revelation that if he applied the technology that was for Fade, towards Kanna, then he could create a safe and vetted marketplace for those seeking employment with cannabis farms or dispensaries.
Since the rise of cannabis farms in the United States, many people left their regular employment to pursue what they thought to be, an attractive job opportunity in the cannabis industry. However, in such cases made popular by the Netflix documentary, Murder Mountain, an influx of workers in California were found missing or murdered, due to poor vetting systems and regulations.
In the last decade, Humboldt county has yielded billions of dollars from cannabis cultivation. Yet the county has recently gained international attention because the documentary depicts that within the state, the area has seen the highest amount of missing persons, ranks the second highest in homicide, and has had a steady rise in human trafficking.
This recent surge of violence and crime is largely attributed to black market operations that were being conducted in the Northern California mountains long before the state legalized recreational marijuana.
Outlanders that choose to make the dangerous trek to the area risk being exploited by such operations because they are unable to confirm the legality of the farms.
Farhaj hopes to eliminate this issue through Kanna. With Kanna, the vetting process is simple. If you are a farmer, you must keep your licenses up to date. If you are a worker seeking a gig, you must submit your application online. Once the application has been accepted, you have a personalized video interview, and after the interview, a partnered company completes a thorough background check.
One particularly unique aspect in the background check is that candidates who were unemployable due to past drug felonies, are now employable as Kanna wants to provide job opportunities to those that were previously incarcerated for marijuana charges. Although there are job boards and temporary staffing agencies geared towards cannabis gigs, they receive far too many unqualified applicants, and are unable to properly vet the potential workers.
Within months of launching a brand-new team and product, Kanna is gaining traction and have already won several awards. In a strategic decision to focus on the Oklahoma market, Farhaj has begun working with over 68 gig workers, five paid pilot farms, and has plans to add four more farms at the end of the year.
Farhaj made the decision to launch Kanna in Oklahoma because the state has surprisingly issued more cannabis business licenses than California. According to Farhaj, "There are more than 3,800 farms, 1,700 dispensaries, 700 processors, and the numbers of each are growing every day. There are thirty-four other states that have legalized medical marijuana and I plan to hit New Mexico and Colorado next.”
Because Kanna is a new startup, there are still an array of challenges that Farhaj must confront. Many plant-touching businesses are high risk and are unable to get federally backed, therefore many cannabusinesses are forced to explore other payment outlets.
Until the SAFE Banking Act is in full effect, Kanna will help oversee payments between the workers and farmers through a partnered company called, Alt Thirty-Six, which is a compliant banking solution built to handle payments. Thanks to niche companies such as Alt Thirty-Six, these businesses can help vertical cannabusinesses become safer with less liability.
In the next five years, Kanna hopes to help build a safer more reliable ecosystem for those seeking employment in the cannabis industry. Farhaj plans to build out the organization by making Kanna part of the long-haul gig economy. Ideally, Farhaj would like to have a career platform, where part-time workers can gain enough experience in the field to grow and become managers or directors.
Kanna is aiming to address not only a cannabis problem, but an unemployment problem as well.
KJ Scientific Independent Testing: The Regulators of Hemp
For Karla Johanning of KJ Scientific, her passion is to study how we affect the environment and how the environment affects us. Karla is a long-time scientist who has worked in many different fields including environmental, cellular, molecular, and human research.
With KJ Scientific, the company focuses on environmental toxicology by testing compounds that end up in the environment. These experts are protectors of human health as they test for pesticides in fragrance materials for large companies.
In the entire world, only two other main competitors exist. One lab specializes in services and the other specializes in products. With KJ Scientific, this sets them apart as they are the only company that specializes in both. Additionally, KJ Scientific prides themselves in that they do not test on animals.
Karla has been taking a regulatory approach on cannabis by analyzing and testing hemp, extraction oils, and other products. Karla and her team will be testing the potency of THC and CBD, pesticides, toxins, and terpenes, so that the hemp growers can comply with the Texas hemp regulations.
By law, hemp must be less than 0.3% THC. As testing for hemp is a growing need in America, Karla saw this as a new business opportunity and has recently co-founded a subsidiary called, KJ Scientific Independent Testing, which is dedicated purely to this service. With plans of officially launching at the end of 2019, the lab will primarily focus on the Texas market and will eventually expand nationally.
Karla stresses that it is very important that people know what they are doing when they purchase CBD products. As cannabusinesses take off, regulations are always behind. There are no current legal standards, and it is very important for the consumer to understand what they are purchasing.
Karla believes that this expansion into a new venture will align perfectly with their mission, which is to ensure the safety and quality of a product, as well as sustain and protect the quality of the environment. Karla emphasized that, “For hemp, we can begin using our technology to start asking the questions. What will the impact of the hemp industry be in a few years? Should we worry? What will the growing impact of marijuana and its disposal be? Nobody else has yet addressed this. So, let's discuss.”
Since joining the cannabis industry, Karla has noted that surprisingly, many females are leading the movement. After attending her first cannabis conference in New Orleans, Karla found that there were women in trade associations and organizations dealing with hemp at the national level. Lawyers, entrepreneurs, and businesswomen were all gathered to connect and learn about the rise of cannabusinesses.
Karla stated, “it was nice because as a female scientist, I find many more women nowadays. The male dominated world is rapidly changing. It’s always a struggle. But here I am a founder and CEO of a startup, moving along. So being new in the hemp industry and seeing more women is very refreshing.”
When asked about the future of KJ Scientific and KJ Scientific Independent Testing, Karla said she aspires to be the most recognized lab that has the reputation for conducting the highest standards in testing. Karla stated, “This is my passion. I don’t have kids of my own but just because I do not have kids, it doesn’t mean that I am not concerned where the world is going. My generation, and older generations should be in front of you, saying, we are here. What do we need to do in order to have a better future? It’s not all about money for me. I’m an older woman and I’m still very idealistic.”
When starting a business, Karla advises other entrepreneurs to, “always be fearless. Always think, what is the worst thing that can happen? Nothing. You are in a good place. Be fearless. If you believe in something, go for it. As an entrepreneur you will jump from one idea to the next until you hit it. Fine. That doesn’t make you a failure. Enjoy the process. The process is very hard but rewarding. You will not only learn about people and business, but you will learn a lot about yourself.”
To say that these Texas pioneers are simply working in the cannabis industry is an understatement. Each startup is making it their life mission to address greater environmental and socio-economic issues. As the United States sits on the brink of being a fully legalized cannabis nation, it is essential to support innovative entrepreneurs that strive to improve the quality and standards for a rising market.