David Dinenberg is the Founder and CEO of KIND Financial, which provides tracking and cannabis compliance software to the cannabis industry in order to facilitate the cultivation, manufacturing and point-of-sale process. Prior to getting involved in the world of weed, David worked in finance, real estate and entertainment, and has since found his place in the cannabis industry. We ask him more about his views on where the cannabis market stands today, a little bit about medical marijuana (of course!) and what it might look like in the future …
How did you get started in the cannabis industry, and what made you want to work in the world of cannabis?
I’m originally from Philadelphia on the East Coast. I am an old real estate developer. We had a difficult time during the real estate crash in 2007/8. I was a partner in a company as a Chief Operating Officer (COO), and I stayed until 2012. Then I realized it was time to do something else, and I was really trying to figure out what it was I wanted to do.
I was watching 60 Minutes in October, 2012, and they had a segment on the emergence of the medical marijuana industry. At that time, I think it was in about 16 states and around $900 million in revenue. And if you would have coughed, you would’ve missed the 10 seconds where they said, “All cash, no banking, no financial structure” yadda, yadda, yadda …
And I turned to my wife and I said, “I don’t understand how states can be legalizing something and not having a complete thought, including the ability to bank and process payment.” From a business standpoint, from a serious standpoint and from, quite frankly, a public safety standpoint, that’s where my curiosity piqued, and I started.
What were the differences and similarities between the cannabis industry and other industries you worked in? Was it much of a shock to move into the cannabis industry?
Business is business, and I think being a business owner and entrepreneur is the same thing. I would definitely say that there is no such thing as an easy industry. There’s no such thing as an easy idea. I just fundamentally believe that anything that’s easy is not worth it. And cannabis is a great example of that. It’s probably one of the most complex industries we have in the United States, primarily because it’s federally illegal and we have 29 states with medical marijuana laws, and every state has different laws.
Not only do you have 29 different laws, but because of the discrepancy between federal and state laws – as I said earlier, we have banking issues, public safety issues, lab testing issues – we have no regulatory body at the federal level. The banking regulators don’t necessarily support the industry directly. The FDA doesn’t regulate labeling, processing or testing, so it’s become a very self-regulated industry. It’s very complex, but with complexities come opportunities.
“From ambiguity comes opportunity.”
From a business model standpoint, obviously growing, manufacturing and selling cannabis is a monster opportunity from a branding standpoint, from a market growth standpoint, but because we have these differences in every state and at the federal government level, that also creates the opportunity.
How do you use the KIND software to navigate the cannabis industry?
Fundamentally, we are a regulatory technology company. We provide a couple of different things. We provide regulatory software to the industry. What that means is that, for growers, processors, manufacturers and dispensaries, we provide seed-to-sale compliance software, which is basically inventory controls all the way from the day you plant your plant, to the day the product is sold at the cash register.
I’m a partner in a company called Link to Banking, which provides compliance protocols to financial institutions, and we provide real-time information to financial institutions to get them comfortable with taking deposits and working with this industry. We also provide states, governments, municipalities and countries all over the world the opportunity to regulate their state or federal business program through our regulatory software. Currently, we regulate one state in the United States.
We are also moving into Canada after Labor Day in September, where we’ll be launching a brand new product called “KIND Seed-to-Payment”. We’ll be the first company to have a fully-integrated seed-to-sale software tied to an e-commerce platform with the ability to accept payments on the right side of network and infrastructure. We can do that globally. We hope to be moving that product to the United States in the first quarter of 2018.
And then the product that I’ve waited my whole career in the cannabis space – which has been about four-and-a-half years at this point – is a product that we call “KIND Pay”, which will be a closed-loop payment system, loyalty-based and with the ability to load that payment system via Visa, Mastercard and American Express, and we hope to be launching that payment system in Canada by the end of the year this year.
Basically, what I concentrate all the time on is regulating the industry first of all, and then public safety. Making this an industry that can act in the same way as if you were selling widgets. I want this to be a normalized industry. I believe that the legal cannabis industry, if given the opportunity to grow and conduct business like any other business in the world, has the opportunity to create hundreds of millions of dollars in tax revenue and reduce the cost of incarceration and imprisonment through prison reform and decriminalization of marijuana …
There’s just so many opportunities that are around the plant and businesses that touch the plant and don’t touch the plant, it’s just one of the most exciting times in America!
What can the cannabis industry learn from other industries? Or indeed vice-versa: what can other industries learn from the cannabis industry?!
Let’s start with the vice-versa. I would say, the rest of the world should look at the cannabis industry, because we stand together. We are not only fighting for our businesses, but we’re also fighting for respect and we’re fighting for credibility. It’s very unique … I’m 45 years-old, and I’ve never seen a social movement become a business. I’ve never seen a social movement become an industry before.
If it wasn’t for the protestors in the 1960s and throughout the 70s, 80s and 90s, to push this envelope of marijuana legalization, you know, I don’t think we’d be on Skype right now talking about legal marijuana in America. So, it’s a grassroots effort that created this booming economy. So, what I guess I’m trying to say is, that the rest of the world should look at the cannabis industry and say, “If creative, hard-working people unite, you can really accomplish anything.” So that’s my first comment.
My second comment on the vice-versa side of that. You know, I think we need to take ourselves very seriously for all the reasons I’ve just said. Meaning that, we’re under the microscope. We go to work everyday under what’s a quote-unquote “federally illegal” industry. We need to take ourselves seriously. We need to welcome compliance and regulatory structure. If you look at pharmaceuticals, gaming, tobacco, alcohol … They all have regulatory frameworks that allow those industries to work in a global economy. And I think the marijuana industry needs to be open to that in the future.
Could you give us some advice on how a small business can get started, how they can make an impact and the sort of legal and commercial issues they have to look out for?
Yeah, I think any startup in this industry, the first thing you have to do is hire the right law firm. I think a lot of people take for granted the idea that any lawyer can do these types of structures and advisement. I would just say that, “This is a very specific industry. The rules and regs are very specific. Any startup should hire a lawyer first. A very smart, sophisticated business attorney.”
Second, “Raise more money than you think you need.” If you think you need $500,000, raise $750,000. If you think you need $1,000,000, raise $1,500,000. Everything costs more than we think it does, and it takes more time we think it does. I can write about a lot of different things over my career so far in this industry. But one thing that I’m always wrong on, and it happens time-and-time again, is “Timing”. It’s very difficult to predict timing.
Well, if we could do that, we’d all make a lot of money, I’m sure! There are a significant number of people in the cannabis industry who feel that marijuana will become monopolized by big business. How well-grounded do you think these fears are?
You know, I hear this all the time. People are scared of this, and people are scared of that. It’s the same in any industry. It’s the same in any emerging business. I’ve done a lot of research to understand the parallels of industries to get myself comfortable, and trying to predict the future of what the cannabis industry will look like.
Everyone wants to compare it to alcohol prohibition or the dot-com boom, and I think those are incredible parallels to compare-and-contrast. But the one I always go to is the evolution of the home computer, and you know, if you think about it and you research it, there were one or two people making the home computer in the beginning – and I think we all know who they are – and then we had this flood of activity that came into the PC business. And one of the quotes that never leaves my head, which is, “You have 1,000 companies who want 10% of the market share.”
And I think that’s just the evolution of any emerging business. So, to be fearful of the future. To be fearful of consolidation, quite frankly, my own opinion’s a waste of time! You should be concentrating on your business and your business model, and your growth and your team and your people and your products. And, you know, if you get bought out in the future, I don’t necessarily think that’s a bad thing! If you’re the one buying out people in the future, that’s not a bad thing, either!
We live in a capitalist world. We live in a society that, you now, where things are never the same. Who would have thought that Time-Warner would buy AOL, and no one would be using AOL 10 years afterwards? I watched something on TV last night, about the emergence of the internet. Basically, you had a multi-billion dollar company created that Microsoft took out overnight by giving away the software for free!
So, nobody can predict the future, but we should not be scared of consolidation. I think the early adopters in this industry were very territorial and were very proud of the risks and are very proud of what we’re able to do today. But, if we create this industry and there’s revenue, volume, customers, people, data, it’s just inevitable that consolidation is going to happen.
So, I don’t think it’s an “if”, but a “when”. I don’t think it’s a bad thing. I don’t think it’s a great thing. I’m just saying, “It’s inevitable, and as an entrepreneur in this industry, I believe it’s your fiduciary to your investors and to your partners to embrace it, to look at it and to plan for it.”
As is per usual in our pre-ETC chats, we talked for quite a while longer, and we like to leave at least something for the show. However, it’s obvious that David is very passionate about the cannabis industry, and clearly loves it. His enthusiasm for the world of cannabis and medical marijuana is infectious, and we highly recommend you tune into UBN Radio or Facebook Live on Wednesday 09/06/2017 to catch some of the awesome and inspiring information he’s spreading!