After an Epic Failure, a Group of Marijuana Startup Employees Launch a...

After an Epic Failure, a Group of Marijuana Startup Employees Launch a New Company

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What do you do when you work at a promising startup, but one of the founders quits after an LSD-induced religious experience, the other gets wrapped up in sexual harassment allegations, and a new executive steers the company away from its original vision?

Reincarnate.

That’s exactly what Rob Fess, John Manlove, and Willy Wheeler are doing. The three met while working at Tradiv, once pitched as the “Amazon of the cannabis industry” in Colorado’s market. They’re now running Apex Trading, a Denver-based software company that helps growers, brokers, and dispensaries manage their wholesale marijuana business.

The concept is similar to what Tradiv originally sought to do–although this time, the co-founders hope, there will be less drama. Tradiv, founded in April 2015 by Aeron Sullivan and Geoff Doran, allowed growers and dispensaries to buy and sell wholesale marijuana from each other online. The idea quickly took off and attracted $3.4 million in venture capital. (Sullivan was named to Inc.’s 30 Under 30 list in the spring of 2016.)

And then, in short order: Sullivan resigned after having a religious awakening. A new CEO abandoned the company’s profitable niche in Colorado to focus on cannabis distribution in California. And a former employee brought a lawsuit alleging wrongful termination and sexual harassment.

“None of us wanted Tradiv to fail,” says Fess, who was Tradiv’s director of marketing. “We  all wanted to keep it rolling, but the lawsuit and other things made it impossible.”

This past December, Tradiv closed its doors. And two days later, Fess, Manlove, and Wheeler got to work on Apex Trading, with help from another former Tradiv colleague and investor, Micah Tapman, who now serves as chairman.

While Tradiv was riddled with problems, this group of its former employees felt the original idea–a wholesale marijuana brokerage software platform to connect sellers and buyers–still had legs.

Manlove, who says he sold over $10 million in cannabis product as lead salesman at Tradiv, called his roster of clients–cannabis growers, retailers, and manufacturers–and told them he was starting a new business.

“We had to do it quickly–if you’re not there one week, your clients will have to find another service provider,” he says. There are at least six rivals in the space, including a startup that has attracted $10 million from hip-hop artist Snoop Dogg’s fund and other backers.

When the company launched in January, Apex didn’t have any software, so the product was basically Manlove, his client list, and a phone. The team, which is releasing a beta version of its software to a limited group of clients before formally launching next month, is still scrappy–it uses a Google document on which sellers list their product menus, from which buyers can submit an order through Manlove or another salesman.

In March, Apex started raising seed from friends and family. It has raised $130,000 to date from Sand Hill Angels, Tech Coast Angels, and TL Partners, all firms that originally invested in Tradiv. It expects to raise an additional $470,00 within a few months. The founders plan to use the capital to finish the software and pay the six-person team.

Paul Swartz, an angel investor from Sand Hill Angels, say he feels this is a second chance to “recoup” the losses after Tradiv shuttered. “The Apex Trading team has understood the lessons of that experience,” he said in a statement.

Despite subsisting largely on Google docs, Apex is building a small, yet dedicated following. Since January, the company surpassed $1 million in gross merchandise volume by brokering 191 deals between 52 buyers and 50 sellers. The company has made $18,687 in revenue from its subscription model–sellers pay a flat fee for Apex to sell their product each month. (Buyers use the service for free.)

John Snyder, the general manager for a 45,000-square-foot cultivation site in Pueblo, produces about 40 pounds of cannabis a week. With no sales team, he uses two different brokers, one of which is Apex, to sell his product. 

“It’s about the ease of doing business–I put my inventory on Apex’s system, and half an hour later I have sales coming in,” says Snyder, who works for Soma Colorado. “I don’t need to tell them anything, as they are already working for me.”

For cultivators, brokerage platforms like Apex act as an out-of-house sales team. Traditionally, marijuana brokers charge a flat rate of $100 per pound of marijuana sold. But as the price per pound continues to decrease in the legal market, traditional brokers are now expensive, says Synder. In the past three months, Synder’s average price per pound of cannabis dropped from $1,200 to about $850.

“We don’t know where the price per pound is going to be in a month, but John [Manlove] can sell for me and it costs about half what I would normally pay,” says Snyder.

Apex is way behind some of its competitors. LeafLink, which helps cannabis brands sell to dispensaries, has 1,700 dispensaries and 400 marijuana brands on its platform in California, Colorado, Oregon, Washington, Nevada, and Arizona. Co-founder Ryan Smith says the company has hosted over $100 million in sales orders since founding in March 2016 and expects to do $500 million in sales orders by the end of this year.

But Manlove says he’s focused on one thing–keeping his sellers happy and keeping the shelves of his buyers full.

“At the end of the day, our clients know that… I will pick up the phone, and they can trust that we will deliver,” says Manlove.

By: Will Yakowicz, Inc.

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