BEN LARSON MET his co-founder Carter Laren in 2014 while they were both at Founder Institute, an entrepreneurship training program in Palo Alto that seeks to “globalize Silicon Valley.” Legalization caught both partners’ attention, but when they began their research, the companies they encountered were, Larson said, “far from the quality that you might see in the typical Silicon Valley pitch session.” They lacked professional polish and what he called an “understanding of what makes a viable business.” Gateway, the cannabis incubator the pair started in response, takes a 6 percent stake in early stage startups and, in exchange, gives them a months-long boot camp and a chance to pitch investors. Basing Gateway in Oakland was an easy call. “We see it as the capital of the cannabis industry,” Larson said.
Gateway received more than 100 applications for its first class, which began with seven companies this past spring. Gateway is housed in a bayside industrial building called Leviathan, whose façade evokes a ship and a sea monster in battle. Some of the walls are covered in copper-colored scales, like snakeskin.
When I visited in June, presentations to investors were still months away, but the founders were already honing their language and slide decks. Over a pizza lunch, they practiced their pitches for one another, a few guests, and a video camera. Laren paced the barren room like a stern grade school teacher, encouraging “candid, Simon Cowell–style feedback.”
Most of the Gateway companies had developed software aimed at professionalizing the outlaw industry. One startup, called Charge, wanted to simplify payment processing; since many banks won’t give cannabis companies accounts, they still often operate in cash. Another, Trellis, had developed compliance and inventory software for growers. Of the five founders who presented, two, Khari Stallworth and McKinley Owens, were black — roughly as many black entrepreneurs as I’d met in the previous year and a half covering cannabis from Denver.
Twenty-four-year-old Owens, dressed in a jean jacket, untucked shirt, and pointed leather boots, went first. He’s the CEO of Flora, a company he started with two friends from the University of Michigan. Flora plans to digitize and study the cannabis genetics data that underground growers have accumulated over the years. For now, growers use “20 years of intuition and maybe pen and paper if they’re super advanced,” Owens told the room. He quoted one grower: “‘If those notes got wet or caught fire, we’d be fucked.’”
Flora had attracted interest on Reddit, but like any tech startup, it faced thorny questions. One was how to convince growers — a generally self-protective group — to share their data, especially with, as Owens put it, “carpetbagging hipsters.”
When Stallworth’s turn came, he stood up and said, “My wife and I don’t know shit about cannabis. We know food.” He wore a sport coat over a Sriracha T-shirt, and a few days of stubble. After high school, Stallworth lived near Chicago with a roommate who was studying to be a chef. When they got high, they feasted on his roommate’s homework assignments — foie gras and crème brûlée — instead of chips and pizza.
Years later, after studying cooking and cinematography, he was living in Los Angeles working as a unit technician on Hollywood blockbusters when he met Sascha Simonsen, an expert baker from Denmark who catered movie shoots. On the set of Inception, Stallworth boasted, “Leonardo DiCaprio himself” requested her cookies. The pair married and now have two young children.
The edibles market is crowded, but the couple thought they could differentiate themselves with treats that masked the plant’s unappealing taste. “We knew we were on the edge of a problem we could solve,” Stallworth said. Early this decade, their company, Buddha Bakes, placed products in 75 dispensaries and had more orders than they could fill. But as they started having kids, they became worried about the risk of criminal prosecution and eventually scaled down and then shuttered the business. After Gateway invited them to join its first class, however, they decided to try again. They moved to Oakland and renamed their company Kamala.
Unlike Gateway’s software companies, Kamala, if it stays in Oakland, will have to get licensed by the city. Over the summer, Stallworth told me, he got into a tense exchange with Council member Brooks at a mixer for those interested in equity licenses. When Stallworth said that entrepreneurs with criminal backgrounds would struggle to raise venture capital and that the city should figure out ways to support them, Brooks accused him of, as he recalls, “trying to cut people out.” (Brooks has no memory of this exchange.) “I definitely recognize the injustices,” Stallworth said. “I am a black man.” But as a new arrival, Oakland is telling him to take his business’s jobs and tax dollars elsewhere. The city should “put something together that just makes sense for a business owner,” he said.
by Alex Halperin
Full Article: California Sunday Magazine