Is a better way possible?

On May Day we dream of more for cannabis workers

Happy May Day! Celebrated more around the world than in the United States (where we have our own appropriately scammy day), May Day is also known as Labo(u)r Day or International Workers’ Day.

Labor is an interesting topic in the cannabis world seeing as, up until very recently, cannabis workers had no rights or benefits at all. Some still don’t if they’re working in the legal shadows. Meanwhile, industry workers in the licensed sector are actually getting union jobs these days, while at the same time other cannabis operators are trying as hard as they can to stymie the will of workers banding together to bargain for better terms and conditions for themselves and their colleagues.

I have sympathy for most people trying to make it in legal weed at any point in the supply chain, but, obviously, I reserve much of it for workers. So it was with great interest that last year I came across Chris Becker, co-owner of a new cannabis product company that sources and packages cannabis, as well as provides marketing for its own brand. He has a keen eye for bullshit and a defiant, upbeat and mouthy Twitter presence.

Becker wanted to tell people about his employee-owned company, The Honeybee Collective, and how he and his colleagues had been raising money for its first product line. They wanted to build a sustainable business model that would-be cannabis companies can follow, especially those starting off with little capital and no immediate avenues for licensure. A model that, first and foremost, provides quality sungrown cannabis to consumers while benefitting its employees, as well as the community the company serves. It would also benefit those who chose to invest, too, which I think makes the model more attractive for those who might otherwise turn up their noses at it. That aspect might make it more viable in the wider cannabis business world, which very much operates in a profit-driven model.

Everything Becker talked about sounded both idealistic and intriguing. He also sounded extremely economically literate and like they were starting off small, just with a product line, so I figured there was more substance here than whatever 280 characters on Twitter could produce. We started chatting and it became clear to me that Honeybee was, indeed, doing something different and succeeding at the same time.

But while it was flush with plans, there was still one thing Honeybee needed —stop me if you’ve heard this before — and that’s money. Less a problem than a goal, how Honeybee planned to acquire funds is part of its whole function.

Since they are producing a smaller-scale product line, they steered clear of the private equity, going public or venture capital gauntlet and turned to crowdfunding instead. In late 2021, Honeybee launched a crowdfunding campaign on Mainvest. The funding paid for its recent product launch’s packaging and marketing. Ten percent of the profit goes towards community reinvestment with the goal of addressing wealth inequality.

Collective ownership structures are not new to the culture by any means. In fact, cannabis collectives were the original way for patients and consumers to more formally buy and sell weed, dating back to stricter prohibitionist times when weed was illegal for everyone everywhere. With ties back to the farmers, whose product would eventually be sold at the collective’s brick-and-mortar or through its networks, these original groups almost looked more like small vertical cannabis companies than they do the dispensaries that operate today.

In California, for example, which paved the way for medical access thanks to brave activists like Dennis Perron, Brownie Mary and many others, the old collectives gave way to the dispensary model ushered in with Prop 215 in 1996. These were further solidified and changed by the adult-use legislation set forth by Prop 64, which resulted in the types of weed shops we see now. These, for the most part, are not employee-owned and are certainly not collectives as described, except for a few that retain the old model under the state’s medical marijuana laws. Honeybee, itself, is not a collective in the traditional sense described here – while the company sources, packages and sells its products in dispensaries, it does not maintain any shops nor grow any cannabis at this point. It’s purely a collective in the ownership sense.

Today, existing collectives are few and far between in adult-use-legal markets, where the supply chains in certain states are now broken up and the traditional dispensary model reigns supreme. In other states, operators are required to be vertically integrated, which requires that one company owns the entire production process from seed to sale, and has had the effect of creating an oligarchical system in which only a few companies can operate, whether by law or because of lack of capital. Even in states like California, where the supply chain has been stratified, because of the way the laws are written, it makes sense for operators to consolidate and form large companies that are vertically integrated, even though they are not required to do so.

While the latter tends to benefit business owners more than it does the consumer and in many cases the shop’s workers, it’s still not a rosy outlook for many cannabis operators no matter where or how on the supply chain they operate. This means that workers and consumers lose out, too.

Now, all of this is even supposing operators can get a license in the first place — local control, steep competition and heavy bureaucracy in states like California provide uphill battles for would-be licensees. Meanwhile, midwestern and eastern states suffer from an epidemic of seemingly corrupt limited license schemes that favor politically connected corporate interests, locking out many hopeful cannabis business owners from participating. Many of the locked-out include people of color and others who have been harmed or criminalized by the War on Drugs, as well as those for whom their biggest mistake was not being rich or connected enough.

For those companies that do make it through the gauntlet, the fun doesn’t stop at licensing. Even if one gets a license, money is required. In a continually legalizing industry with high taxes, significant regulation and little in the way of reasonable formal banking and loan options, cannabis industry operators face higher barriers than they might otherwise when it comes to accessing capital and getting their operations off the ground.

As a result of those many regulations, which include cannabis’ federal illegality and Schedule I designation, plant-touching companies technically can’t go public, needing to list on the Canadian stock exchange or form SPACs instead while they lie in wait for the government to catch up. Or, companies can go the private funding route, courting angel investors, venture capital and private equity firms or other private lenders. Another option is just being rich, to begin with. That always helps.

A lack of funding options, in addition to difficult market conditions, is also why M&A is hot in the cannabis sector right now, particularly involving leading multi-state cannabis companies, which are colloquially known as “multi-state operators” (MSOs). Reports show that not all MSOs are benefiting from these acquisitions due to the high costs of integrating production and streamlining operating and marketing processes across state lines, which make up large chunks of deal costs. It’s no different for start-ups, which have to face those costs absent a merger or parent company. In other segments of the industry and with different funding modes, private equity deals can cause more problems than they solve when a state market doesn’t behave as investors or operators expected.

If all of this sounds unattractive and prohibitive, that’s because it is for just about everyone other than a select few. But let’s be honest. Outside of the business world, just about nobody cares about the nitty-gritty of this. The rest of the world deals with more immediate and pressing issues, like whether or not they’re allowed to smoke weed and, if not, will they go to jail for doing so? After that, the question of where to get it and for how much usually follows. Cannabis companies of all sizes and forms would do well to remember this is their chief objective: getting weed into the hands of its consumers and patients. Personally, I believe it follows that said consumers and patients also deserve their weed to be high quality and well priced, too.

For Becker, that’s where Honeybee comes in. Honeybee’s campaign was a success. It was launched on Dec. 4 and Honeybee broke Mainvest’s record for the most raised in 48 hours. By Dec. 8, the collective hit its $107K minimum. By March 1, which was the campaign’s deadline, Honeybee Collective successfully raised $250,000. They launched their first product line, which was powered by sun-grown cannabis from environmentally sustainable operators, on 4/21. It sold out in six days. That’s not easy to do in Colorado, a state that is dominated by indoor grows (much like everywhere else) and lots of product competition.

“Crowdfunding investment is just that, an investment,” said Erin Parkins, Honeybee Collective’s co-founder, managing partner, and head of marketing and operations.

“This is different from a Kickstarter or a Go Fund Me, as our investors are investing straight into The Honeybee Collective. But unlike traditional investment channels such as private investors or venture capitalists, crowdfunding is open to everyone, not just those who already have money. Our investors have invested anywhere from $100- $10,000 so far and will receive a return on their investment, anywhere from 1.75x to 2x depending on what round they invested in, once we start generating revenue.”

Here, Parkins, Becker and Sholeh Mirzai — who is a Honeybee Collective co-founder, managing partner and head of product and branding — discuss the collective’s fundraising efforts and philosophy, among other aspects of its business.

This conversation is alternately technical and philosophical but for good reason: I’m always interested in ideas; we should always be debating those. But I’m even more interested in seeing whether those ideas actually work or not and, so far, this one seems like it has wings, even if it remains to be seen whether or not Honeybee can scale up. What would happen to its model if it were to add in cultivation or manufacturing and required licensing? Only time will tell. A better future may actually be possible, but we need to start demanding more first.

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Jackie Bryant: Considering May Day and what it represents, why is it important to think of alternative ownership and funding structures? Is a better way actually possible in this industry?

Sholeh Mirzai: Capitalism by its nature is extractive. It’s core tenet is continual growth, which means continual extraction of natural resources and exploitative labor practices. This is destructive and ultimately unsustainable to people and the earth all in the interest of shareholders and billionaires. We need to start acting now on alternate ways of doing business that are regenerative and supportive of the environment and the general population, not just those at the top.

Chris Becker: We have a vision of a more equitable cannabis industry. And there are a lot of people who share that vision. We regularly see consumers boycotting cannabis companies for their anti-union & anti-competitive practices. As more worker-owned & union-friendly companies emerge, consumers will have more chances to vote with their dollars. Cannabis consumers are highly intuitive and intelligent. I have faith that, given the option, they will support values-aligned companies over exploitative ones.

JB: So, practically speaking, which to me means we know we live in a capitalist economic system in which one must operate even if one doesn’t agree with it, what is the value for those who choose to participate in crowdfunding? What’s in it for owners and workers, as well as those who invest?

Erin Parkins: In addition to receiving a 1.75X return on their investment (2X for our early investors), people are able to invest with as little as $100, making it far more accessible for the average person than traditional Wall Street investing. Investing is critical for building community and generational wealth, yet often restricted to accredited investors, who are already wealthy by definition (must-have household wealth $1M or above). Crowdfunding is open to all, making it a more equitable approach to investing. For many of our investors, including two of our founders, investing in The Honeybee Collective is their very first investment. Crowdfunding provides a way for people to become familiar with investing and start building wealth no matter their income. 

Crowdfunding is like Etsy or Patreon for investments. Instead of buying from Bezos, you’re buying straight from the maker, supporting their craft and investing in a community you care about. Crowdfunding also allows people to invest with their heart and soul; they can choose businesses they have a personal connection to and help them grow. It’s a very community-focused approach, where money circulates among the people that directly create and benefit from the company’s services. 

We plan to be accountable to our 100+ investors the same way we would be to a single venture capital firm and want their input on our business. We’re a community-driven brand, which means we look to our consumers, industry partners, community leaders, and investors to advise us on where the business should go next. These are the people with ties to the cannabis industry in daily life and are the best experts we can lean on to guide our business. 

One of the most attractive aspects of crowdfunding is the revenue sharing structure. Investors will begin seeing payouts as soon as the company is profitable, giving them actual dollars in their pocket on a quarterly basis until the investment is fully paid back.

Owners retain 100% equity of the business, which is really important to us as an employee-owned company. 

For us, sharing profits with individual impact investors directly aligns with our mission to build community wealth. It’s a simple business decision that can have lasting positive effects on so many people. 

JB: How did you structure the funding period? How could people get involved? Would you do it the same way next time?

EP: Mainvest campaigns are three months long and we knew we wanted to launch well ahead of the holiday season. We had a $107K cap on investments until we turned 6 months old on January 10th so we decided to aim for $107K in the first few weeks of our campaign and then pause for a couple of weeks until we could raise the full $250K. We also knew that three months straight of fundraising would exhaust us and as a sustainable business, we’re very mindful of scheduling rest and downtime.

We launched on December 4th; by December 6th we’d broken Mainvest’s record for most raised in 48 hours; by December 8th we hit our $107K minimum, just days not weeks after launching the campaign. 

We started talking about our crowdfunding campaign on social media about a week before it launched, capturing interest from our personal networks. Once the campaign launched we had a solid list of potential investors to reach through social media and email. Now, in our second round of fundraising, we’re going broader and connecting with cannabis community members across different platforms to talk about both our brand and our crowdfunding campaign.

In a future world, we’d love to include a live event element to our fundraising campaigns, where folks can network with industry experts, learn more about sustainable cannabis, sample our products, and more. The cannabis industry started as a collective and we want to honor those roots; being together in person is such an important part of building a strong community.

JB: Did you hit your goal or exceed it? Why was $250k the number?

EP: We hit our goal of $250K just before March 1st!

We set our target amount at $250K based on a variety of factors, most notably the cost of practically sustainable packaging and our projected marketing costs, which is where the majority of our first raise will be spent. As a company committed to paying a research-backed local living wage, we wanted to ensure we could pay designers, content creators, creatives, and other freelancers a competitive wage for their work on our marketing campaigns. This was a big factor in setting our target raise amount. 

To be nimble and strategic in how we scale, we want to operate on a bootstrap budget so we’re purposeful in where we spend our money. 

JB: How will that capital be used, specifically? Are you trying to stretch it in any creative or innovative ways?

EP: We’ve purchased half of the product packaging we’ll need for 2022 based on our sales projections, so about $32K will be allocated to purchase the rest of the packaging we need. Our packaging costs are significantly higher than the average cannabis product because of our practically sustainable standards; many materials marked as recyclable or compostable can’t be put in home recycle or compost bins, so they end up in the landfill. Our tubes are home-compostable and our tins are plastic-free and recyclable right at home. We’re happy to pay to ensure our products are planet-positive.

A large chunk of this raise will also go to employing new members of the Collective. We’ll be looking for a full-time salesperson to build relationships with dispensary and delivery partners and find opportunities to get The Honeybee Collective products into consumers’ hands. We’ll need a part-time finance associate to help us stay on budget and we’ll also continue building our network of freelance contributors local to Colorado, such as photographers, content creators, designers, and more. This raise will support paying these folks a fair and competitive wage for their talents.

JB: How does crowdfunding shake up the current popular avenues of funding start-ups?

EP: Crowdfunding challenges the concept that investing is for the rich. No matter how much money someone has, they can access profitable investment opportunities through crowdfunding platforms like Mainvest. 

It also disrupts the startup culture that says you need to compromise your values or dilute your company for VC or PE money to start a business. We don’t want to ever be in a position where our investors’ interests aren’t aligned with our community’s interests, and crowdfunding closes that gap by letting our community members be our investors.

JB: Would you encourage other founders to look into crowdfunding? Why or why not?

SM: When someone invests in your business they’re telling you they believe in you and your idea, validating that it’s worth spending their own money on; wouldn’t you rather hear that from hundreds of people than one? 

Like with any business plan and proposal, it does take a lot of upfront work to get ready to launch on Mainvest. You need to make sure you have your financials in order, a clear business plan and a compelling product to make sure you’re set up for success in the long term as this is what your community investors will want to see to trust you. The last thing you want is to not be able to deliver your return on investment to your community investors. But we would strongly encourage any business that is serious about launching and that wants to take a non-traditional route that deeply involves their community to explore crowdfunding.

JB: How is it possible to scale start-up capital with crowdfunding long-term?

SM: The narrative around founders and startups is so often skewed to make us believe that those founders started with nothing and worked their way to the top when in reality they were able to lean on a wealthy network of friends and family from the beginning. We understand that the vast majority of Americans don’t have access to those types of networks, which leaves them vulnerable to trying to start a business through loans or investors that are offering unfavorable terms. With crowdfunding, people are able to lean on their network of people to jump into the game with the people they do know and to validate their idea with the masses so that they can take that info and that first-round raise and approach larger organizations to help them scale in the future. It’s giving people access to that first step.

JB: What's next for Honeybee?

SM: Our first product launch successfully took place on 4/21 and sold out in six days! We’re currently in World of Weed Dispensary in Commerce City, CO, and will be announcing more dispensary partners soon.

Over the next few years, we are looking to expand into multiple states.

Long-term, we’d like to see a transformation of the cannabis industry, one where cannabis is setting the example for other industries for worker’s rights, sustainability, and community involvement and we hope to be doing it alongside many other amazing cannabis brands.

This interview originally appeared on Forbes.com. Thank you for reading Cannabitch!