Episode Transcript
Speaker 0 00:00 <inaudible>
Speaker 1 00:03 <inaudible>
Speaker 2 00:08 come to the breakout growth podcast where Sean Ellis, interviews leaders from the world's fastest growing companies to get to the heart of what's really driving their growth. And now here's your host, Sean Ellis.
Speaker 3 00:24 In this episode we'll look at Navis California's largest cannabis distributor, so I'm speaking with founder and CEO, Vince Ning, and he explains that their biggest growth driver is really being part of a rapidly emerging industry so that that fits my broader hypothesis for this program. That product market fit is probably the most important factor in driving growth. Of course they have some serious execution shops as well. In fact, that's what helped them get into the Y Combinator programs. So you know that's the program behind companies like Airbnb and Dropbox and so these guys are really legit. Even though maybe there's some stigma attached to the cannabis industry, I think you'll, you'll find this as a really interesting interview. We're starting to see some, some pretty interesting network effects kick in on this business. They're doing over a hundred million dollars in wholesale product distributed, so that's really interesting. But with all this growth that it gets a bit messy. And so you kind of get a feel for that. Just even hearing some of the background noise invents his office, if they weren't growing so quickly, they probably would have pretty quiet office. So please excuse some of that background noise. But I think that that just gives you a flavor for what, what growth is really all about. So this is a really interesting story. So let's go ahead and get started.
Speaker 3 01:43 All right. Welcome to the breakout growth podcast, Vince. Thanks John. Thanks for having me. Yeah, man, I'm excited to have you on. That's definitely, uh, you're, you're in a new emerging industry, so it should be, it should be really interesting to dig into how you're approaching growth and all of, all of the challenges that you're, you're probably, uh, facing as you, as you scale in that industry. But, um, before we kind of dig into that, why don't you tell us a bit about what you're actually doing, what that industry is and, and, and, uh, what you guys are doing in there.
Speaker 4 02:13 Sure. Um, so at a high level, uh, you know, we do cannabis distribution. Um, the company is called Navis and we've been around for about two years now. And, um, you know, from there we were delivering one product at a time, um, ourselves. And you know, now we've grown the business to, um, over a hundred customers and, um, you know, shipping, uh, probably the most cannabis products in, in California. So specifically we do, we handle the logistics, so the warehousing and storage and, and the delivery process for, for brands and the vendor suppliers. And we ship out, um, packaged products out to dispensary's and retailers across the state of California. Um, and so now, you know, we, we ship over around a hundred million dollars worth of wholesale products a year, and that equates to around like one in 15 products in California. Um, and so, you know, it's been a crazy time of growth and obviously a lot of it's fueled by the, you know, consumer demand and the new legalization. And so it's a, certainly an exciting time to be in the industry.
Speaker 3 03:12 Absolutely. And then I saw you guys are part of Y Combinator. Is that, um, are you the first cannabis, uh, company that's gone through there?
Speaker 4 03:20 Um, we are the first licensed cannabis company that's gone through Y Combinator. There've been others. So there's been formulation companies, there's been, um, you know, brand companies. But um, in, in large part, you know, we, we are a plant touching cannabis company that, uh, we were sort of the first ones that why come to invested in that was such a huge landmark milestone for the industry, um, to get that type of institutional capital.
Speaker 3 03:44 Yeah. I mean, and Y Combinator, I've, I've worked myself on a few Y Combinator companies and it's a, I mean, it's a fantastic group and it's tapping into so much knowledge there that's, that's super exciting that they, they were not, uh, not afraid to, to get involved with you guys. I'm good because I know while while it's legal in California, there's still sort of the, the federal laws and there's, there's enough kind of gray areas that it's a, it wouldn't be surprising if, if there's certain investors that are, are still shying away from it.
Speaker 4 04:13 Yeah, no, absolutely. And, and overall, like the stigma too, I think having sort of respectable professional industry folks come in and really validate this space is, has been super helpful for our growth.
Speaker 3 04:24 Yeah, I can, I can understand that. So when you mentioned that you have a hundred customers, when you say customers, is that, is that the brands, what are you referring to when you say customers?
Speaker 4 04:32 Correct. Yeah, so we, we basically ship out, um, products on consignment to, you know, retail dispensaries across the state. And so we'll sign distribution agreements with brands, um, and uh, you know, ultimately we take over and handle their products and ship them out as they need and as they make sales.
Speaker 3 04:49 Yeah. And so what, what was it when you, when you looked at the industry that you, that you thought, um, there's, there's an opportunity here. Some, somebody is not doing something right.
Speaker 4 04:58 Yeah. So I think, uh, looking into this industry, actually it was, it was, it was pretty fortunate that there, there were actually a plethora of opportunities just knowing that, you know, January 1st was when, uh, 2018 was when, um, you know, cannabis truly legalized recreationally and all the licenses got implemented and rolled out. And, um, it was, it was so, it was like, it was such a wild West economy. Um, and it was basically, you know, people who trusted each other back in the day working in the medical market or even in the listed market who, um, are sort of entering the legal recreational market and trying to reinvent their businesses, meaning that there was just going to be so much opportunity, um, to help out and, you know, just knowing sort of how much consumer demand there was going to be for cannabis products. Um, you know, giving, given that, that's like the fundamental assumption.
Speaker 4 05:50 We knew that, you know, this sort of industry at the bare bones level wasn't going to scale. And, um, you know, as we were getting into the industry, uh, I had a few friends who were, uh, you know, own pre-roll brands and other cannabis products and, um, you know, back in the day, just because of the, uh, you know, the regulatory climate as you mentioned, um, sort of restricted a lot of access to products and then scaling across, you know, different regions. Um, a lot of them ultimately like self distributed, their products. Um, they had their friends, their family, their own employees go and ship products out across the state, which is, you know, super unscalable. Um, and, uh, we, we just started, I mean, I basically got into the industry, um, through through them and, uh, I, I just sort of did deliveries, not really as a business model.
Speaker 4 06:39 It was mainly to meet people in the industry. Um, and, uh, you know, we would meet the cultivators, we would meet the manufacturers, the retail partners, and ultimately, um, you know, it became a thing where, uh, people started just referring us, referring to us as the guys who would just drive around products across the state to like, you know, meet your friends. And so, you know, and we were just trustworthy. They pay us a cost. It wasn't really a moneymaking business at the time. Um, and, and ultimately that, that became the business, um, you know, more and more people needed the service.
Speaker 3 07:11 So it was kind of almost customer development, just more out of, of being curious and, and, um, the wild West part of it, just, just getting involved kind of on the fringes. And then, and then as you, as you connected, you started to see that opportunity that it's a, it can be done a lot better.
Speaker 4 07:28 Exactly. Exactly. I mean, you know, my background's in technology, you know, I build a enterprise B to B SAS products. I used to work at Microsoft, helping them build out certain financial tools. And then, um, you know, before this I started my last company, which was called scaffold and, um, we built a developer tool as a backend, as a service. And, um, you know, through that I wanted to sort of apply what I learned there in my experience to this whole new legal market. And it was, uh, you know, it's something that's, that was pretty exciting to me. And, um, just kind of diving in head first, just seeing what was out there, um, found really like an amazing niche, um, that we can sort of leverage both our tech experience to help scale the logistics aspect of it. And you know, the fact that there, there wasn't any competence at the time.
Speaker 3 08:13 All right. And then at what point did, did Y Combinator get involved?
Speaker 4 08:17 Um, so Y Combinator got involved, um, like a year two, a little over a year in. Um, so we started this business late 2017 right before legalization of recreational products happened. So we were working medical market and uh, just sort of feeling out the space and meeting people.
Speaker 3 08:34 But the legalization had been approved. It just hadn't been rolled out yet. Right?
Speaker 4 08:38 Correct. Yeah. And the medical market was thriving already. Um, and so, um, you know, from there we sort of grew the business for about a year, um, raise our own round. And then from there we knew that like, you know, Y Combinator was one of those, uh, we actually weren't sure if we wanted to do or not. We had gotten in almost a kind of a, it was, you know, for us, I had gone through the program before. Um, and so I felt as though I could continue building this business without it, but, um, you know, I, I thought that with this industry, this market and sort of the stigma around it and, you know, the sort of lack of capital and a lot of areas because it's such a fresh new market that it really takes a, you know, an appetite of risk to get into it. Um, you know, getting, getting that sort of branding of Y Combinator, the sort of learns there would help our business grow and scale past where we were that day at that time. Yeah.
Speaker 3 09:33 Yeah. That makes sense to why they, why they would have a little more trust in you if you'd been through the program before with another company. So it wasn't, it wasn't like a, I mean, again, the stigma that you talked about that, you know, the probably there's this perception that it's a bunch of stoners starting a company knowing that, okay, this, this is, this is a, a person who's a professional and has been doing this and, and has an interest in, in this space. And, um, it like probably helped with some of those stigma issues, I imagine.
Speaker 4 10:03 Yeah. Yeah, absolutely. I mean, I think as this industry continues to grow it, you know, before it was, it was also under the cover of darkness and no one really knew who operated the space. Um, but somehow products came out and now there's, you know, headhunting agencies, there's legal firms, professional services all jumping in, um, in helping out, um, to, to grow this industry because people sort of see it now is, um, you know, converging into something more like alcohol, um, traditional market.
Speaker 3 10:31 Yeah. And when you're, when you're talking about moving $100 million worth of product legally, then, then that's going to attract a lot of, of probably very interested business people because there's, there's clearly a good business opportunity there. And, um, and, and I think because of the, the medical side and some of the other, there are actually benefits that, that, uh, legitimize it as well. And, and that alcohol doesn't have that stigma. And you know, in the big picture of things that at the open minded people, part of the reason why it got legalized in California is that open minded people just, just recognize that it's not really that different from alcohol anyway. And, and so hopefully as time goes on that, uh, you know, and, and, and in many ways probably healthier for you, particularly if you have liver issues or something.
Speaker 4 11:14 Exactly, yeah. Yeah. There's so many more, I guess like, you know, like tailwinds to the growth of the cannabis industry. Um, you know, more and more so like people are realizing that like you said, you know, alcohol is not as good for you as, uh, you know, as cannabis is. And so know there's, there's other health and wellness benefits that make the, they make cannabis products a little bit more, you know, attractive as like a, a product.
Speaker 3 11:41 Yeah. So, so how did you see, you mentioned that you, you had kind of, you were doing some sort of informal deliveries initially and then you, you sort of, you scaled up from there, like it did it, um, when did it start to feel like you had product market fit?
Speaker 4 11:56 Yeah, it was interesting. I mean, I guess it's, it's, it kind of goes back to how you define product market fit, but ever since we were doing the deliveries, um, just felt like that, that was like the neat, um, whether, whether you sort of build a software solution around it or, you know, you had, uh, you know, you had a warehouse or not. Like, it just felt like, uh, you know, at the end of the day, people just needed to get their products out there. Scalably and you know, at a, at a, you know, low cost solution, um, you know, across, across the state. And, um, and so that's what we're there to do. So ever since the beginning, when we were doing delivered as we, um, you know, we always just made a margin on everything that we delivered. Um, and, uh, you know, it was just something that it was, it was just a matter of how you want it to make the delivery happen the most scalable way.
Speaker 4 12:46 Um, and that's when we sort of brought in the technology aspect and we sort of started thinking about how we wanted to set up our distribution warehouses and, you know, the logistics network. Um, but yeah, but, but ever since the beginning really, it was, uh, it was almost like it was needed. And you know, another thing to note is that it's actually legally required to have a distributor, uh, you know, ship your products out across the state. Um, and, um, yeah, and so, you know, it's, it's kinda follows this generic, uh, sort of three tier system that most regulated industries and markets have. Um, and, uh, it just basically means that the state wants to hold one part of your channel for, um, you know, certain compliance needs or like tracking and tracing the product. And so, um, you know, it was, you know, brands were sort of like self-distributing and they could obviously go get their own distribution licensed by it. You know, there's sort of, there's both a legal and an economic incentive to go use this product.
Speaker 3 13:42 Right. And so the, for the customers that you've brought on, were most of them self-distributing or were they switching from other distributors when they, when they became your customer? Yeah, most of them were self-distributing
Speaker 4 13:53 and even to this day, I would say our biggest competitor, if you will, is self-distribution. Um, you know, people have, uh, over the past couple of years have built up, you know, they might've gotten, you know, six trucks and a couple of drivers that they hired to go deliver their products across the state. And ultimately it's once the market starts picking you up and they realize they as a brand, they need to compete and get their messaging and marketing out there and their products further out. Um, for instance, you know, a brand might be only in Northern California, but they want to go into Southern California at that point they sort of make an internal decision amongst their executive team saying, Hey, like I need to either buy six more vehicles to service that market or, uh, use a service like Navis. Um, and a lot of times people end up choosing us cause it's a, it's a much more scalable pay as you go kind of model.
Speaker 3 14:44 Right. Okay, that makes sense. And then so clearly you've come a long way from those, from those early days and, and um, so what, what do you think's been the most critical in, in getting there? Like as you, as your <inaudible>
Speaker 4 14:55 product? Or is your distribution that, that differentiated or is it, has it been really just more, more tactically or a combination of a bunch of different things? It's a, it's a combination of, I think like two things. One is, um, you know, the, the market itself is just so big, um, that, you know, I can't take all the credit for myself here. I think the market is just booing and it's such an emerging market that, you know, it's, it's one of, you know, people say a rising tide lifts all sails. Um, there's so many, um, so many distributors that started back back at that time, um, and everyone was doing fantastically. Everyone just because everyone was starting a brand or like growing and manufacturing and distributing. So the market itself was just continuing to grow. And we were just, you know, one of the, one of the people that were growing with it and ultimately how we sort of differentiated was, um, you know, really through our technology.
Speaker 4 15:50 And that's where sort of our background comes in to help scale what we do. Um, you know, a lot of people end up just building a traditional distribution businesses and that don't really scale just because this industry has lot more overhead of, you know, security and compliance. And that's what our, you know, what we noticed was really bottlenecking our business. Um, in order to scale. So the technology piece, you know, automates all of the order management and inventory management and those sort of financial collections and payments side of things that made it super easy for the order, uh, for orders to go out. So now what we offer is, you know, basically Amazon prime level two day shipping across the state, um, with a 98%, you know, on time, in full delivery rate. So those are our two sort of main metrics. And ultimately what that boils down to is how many words can we ship on any given month. Um, you know, we just keep trying to push the envelope of those metrics and, um, you know, that's what's, that's what's given us a lot of, uh, ability to grow past our competitors to this day.
Speaker 3 16:53 And then how much transparency into like the location of an order do they have to, when you talk about the tech, there's obviously some things you could do with, with GPS and other things. Is that right?
Speaker 4 17:03 Part of the solution? Yeah, absolutely. So, um, as far as transparency goes, do, you can basically see, you know, what warehouse it's coming out of, what region and um, you can track, you can sort of audit like everything that has happened with your orders or whether it's, you know, getting packed out, whether it is, you know, getting checked or getting delivered or you know, it's already delivered. But there were some issues or contents needed to be changed and you can see sort of why that is super helpful for them just because before they had that, when they were self-distributing cause they could just call their driver up and ask them where they were. And then now when they're switching over to a third party distributor, sure it makes more sense on like a cost basis. But then you sort of, a lot of other distributors didn't have that level of transparency in their system where they can just log in and see in real time where all their products were. Um, you know, that's where they fell short is because then they couldn't scale. And people started, people stop trusting their own distributor in a lot of ways because they weren't sure where their products were. And this is, it's not a small amount of products, it's like wholesale volumes. You know, oftentimes they'll drop off a couple of million dollars worth of product in your warehouse. Uh, and, and for some reason, you know, other distributors with other distributors and might have just vanished and no one knows why. And
Speaker 3 18:17 yes, but not a huge surprise though. I mean, given, given the industry and, and I mean even, you know, historically alcohol was not that different as well, where, where, where trucks are getting hit by the mob and <inaudible> or at least there's the, that's the perception for movies anyway. But, uh,
Speaker 4 18:33 yeah, no, it very much is like that. It's, uh, when I say wild West, I mean we're doing deliveries back in the day, uh, my cofounder and I basically would just drive from Oakland down to San Diego and drop things off in the back of a shop. And there was really not that much paperwork that you had to have. We just had, you know, a seller's permit and we had a manifest and the products were just sitting in the back of our car. And now, now there's more, now there's much more regulation around how things need to be distributed. But back in the day it was, uh, people were just texting each other.
Speaker 3 19:06 Yeah. And I imagine, I imagine even like insurance on, on, on loads and things like that is probably probably, you know, given that like credit cards and the space are, are, are tough to do. Like I, I imagine the insurance is probably pretty tough there too. And, and uh, yeah. So having, having a trustworthy, um, distributors gotta be gotta be a huge factor for brands that have invested a lot of money and, uh, moving a shipment somewhere and making sure that they're not gonna not gonna, you know, lose a ton of money on it.
Speaker 4 19:38 Yeah. 100%. I mean the, the trust is really what we're building. Uh, at the end of the day, like everything North star metrics, um, you know, growth of these numbers. Um, ultimately it's like, do you trust this partner that you're working with? I think that's so important in our business where we're selling like a B2B enterprise service, um, in like a new market where, you know, trust is so key. I think that's, that's ultimately what we try to convey to our partners, whether it's a brand or like, you know, dispensary who's receiving our products that, you know, they know that the products is products. We're going to get there on time and safely.
Speaker 3 20:11 Yeah. So, so how much have you, so it sounds like you've, you've innovated a ton in the space, so when you looked at the space, did you, did you think, okay, we need to conform to the space as it is? Or like how much did you feel like you needed to just write out, say, Oh my God, this could be done so much better and start innovating. And did you look to, to alcohol and some of the more mature industries to, to borrow ideas from there or just sorta, how did you even kind of start to visualize what it could be?
Speaker 4 20:39 Yeah, that's a fantastic question. Um, you know, we did all of the above. Um, you know, we sort of looked into logistics businesses like FedEx and how they structured their P and L statements and you know, where they were investing or to scale. And he looked at alcohol distributors like Piaggio and you know, all of the above. We sort of like tried to borrow what we could, um, but then ultimately realized that the industry just wasn't mature enough to have a service that looks quite like that yet. And so, you know, ultimately there's a lot of like, cultural, you know, inroads and things that, you know, we have to, we had to sort of learn about. And that was really just through like meeting people and, um, ultimately, you know, the growth, our service has been through word of mouth. We don't really do that much like paid marketing or anything. Um, and, uh, you know, that that just goes to show how much of a tight knit community this industry is. Um, and I think that, I think, you know, that that goes to speak to sort of like how new and emerging this industry is. Um, yeah,
Speaker 3 21:42 absolutely. Absolutely. So I got to assume that there's been some probably pretty big growth challenges along the way as well. Getting, getting to this point. Is there any the thing that comes to mind as a, as a big challenge that you had to overcome?
Speaker 4 21:56 Yeah, I mean, I would say it was the fact that, you know, we were sort of starting out like shipping all these products and there was, there were no, um, you know, we try to look at existing models as I described earlier, but ultimately in cannabis with new reds and laws and sort of a whole different set of people and culture that it was, it was really hard to apply those things. And so a lot of the challenges were, uh, really just like being creative about our solutions. There wasn't a playbook for how to grow a cannabis distribution business. Um, you know, across California, let alone the nation, which is our eventual goal. So that'll be probably our next challenge is to really think about how we scale state by state. Um, but you know, it's really, you know, how do you figure out the sort of legal landscape and make sure you're operating compliantly because that is ultimately, you know, apart from, you know, selling your service, it's all about how do you retain customers and like build your product irritably fit the market.
Speaker 4 22:56 And so, um, even tying back to like product market fit, I feel like that is probably hard to fit in in, in my eyes. And this industry has been such an elusive term because you might've fit a certain stage of the market, but the market's like such a moving target that like, you constantly have to like, um, essentially iterating your product over time to, to grow with the market. And you can't just go raise a ton of money and then build something that looks like, you know, McKesson in the pharmaceutical industry and just think that that's gonna work because it's, you're overfitting the market at that point.
Speaker 3 23:28 Right, right, right. You got, you get too far ahead of the market, then it's, it's not reality. And so I, I think the fact that you started just as, you know, delivering for some people, God gave you, gave you that, that super low tech insight into things and then, um, but also being able to look ahead and saying this is a quickly maturing market. I mean, you can just, if you go into any dispensary, you can see how, how they've evolved from the, you know, early days in Washington. It was, you know, very different than what you see in a California dispensary now where it looks super commercial and you've got to imagine that everything else is kind of moving in that professional direction as well.
Speaker 4 24:07 Yeah, no, absolutely. Absolutely.
Speaker 3 24:10 So, um, let's talk a bit about, of how, how the organization has changed. So how many, how many people do you have in the company now?
Speaker 4 24:17 Uh, so the company has about 120 people now.
Speaker 3 24:20 Wow. And then, so that's, that's a long way from, from a couple of guys in a truck. So what, um, what, what sort of the breakdown of, of kind of where, where are the majority of those people or is it mostly kind of the delivery network or are there a lot of,
Speaker 4 24:36 all right. Yeah, so I would say like two thirds of the company is operations people. Um, you know, sitting under the roof and the warehouses are on road delivery products. Um, and uh, you know, the other third of the company is um, you know, they start our corporate staff. So myself and a co founder, HR sales, engineering, marketing, um, and so it's really come a long way. And now we have, uh, three offices, um, you know, our corporate headquarters in SF and we have two warehouses, um, one over in East Bay, Oakland that helps service the North top market and then one down in LA servicing, uh, Southern California. Um, and so it's, it's been interesting to just grow the number of people, but also, you know, how does that, how do we figure out, you know, this sort of, uh, asymmetry in culture and sort of nature of work as well and try to patch it together into one cohesive organization with one goal.
Speaker 3 25:32 Yeah, I can imagine it. And it sounds like you're having growing pains even even now in the sense that it's hard to find a quiet room for this recording it looks like.
Speaker 4 25:41 Yeah, yeah, exactly. It's, uh, we, uh, we're, we're constantly just growing and sort of pushing out. Uh, we, so I mean, just to share an anecdote, we, uh, when we first started our warehouse in Oakland, we were, we just <inaudible> our whole culture about building products and growth is just that you need to be iterative about it. Um, and, uh, you know, we started out in, uh, a little 500 square foot room in like a business park and we ended up just growing our volumes so much that we ran out of space pretty quickly and we had to continuously, um, we had continuously ask for a landlord to kick out the neighbors and say we could pay more per square foot. And we ended up taking out like an insurance business, a DUI school, a massage parlor, and then we ended up just breaking down the walls and then just adding more square footage to our warehouse in order to continue scaling. So, um, yeah, that's sort of been the story of our, our internal growth piece.
Speaker 3 26:36 So you mentioned that, um, about a third of the people are, are more on the kind of management side of things. What, how does, um, if that's even the right word there, but the <inaudible> kind of delivery and warehouse kind of end of things. So what, uh, what does the growth function look like? Is it, is it a lot of kind of outbound sales people? Is it, is it, you know, do you have, you mentioned it's a lot of word of mouth driven, so is, is there really much of a need for much marketing?
Speaker 4 27:05 Yeah, no, not really. I mean, I think for us as like a B2B service, um, it's really about communicating trust and, uh, like I said earlier and that's, that's sort of communicated in many ways. In a lot of ways. It's like a, it's like a cultural value. And so, um, in that sense it's delivered that that sort of message is delivered through the service that we provide. Um, the communications on a day to day basis. But also, you know, the word mouth and, you know, it's interesting, we, we sort of tinkered with having a growth team at this, at this company, but ultimately, um, you know, we just have like a business development partnerships and sales team and that's just, it's, it's been, you know, we have one director and then, uh, we have, you know, my cofounder and I, it's basically it and everyone else sort of helps out too.
Speaker 4 27:48 He goes to conferences and meets people, but largely it's word of mouth and, um, you know, signing these enterprise level contracts. Uh, and so it's, it's, we haven't had to have like a, a massive growth team or, um, anything like that. I mean, I think the, we were very fortunate to have a, a market that was just coming up out of the ground. And so a lot of the businesses, um, you know, when you, when you're thinking about like B2B enterprise sales, you're, you're trying to find that decision maker at the top that will sort of cut you the check and put it in the budget and, you know, finally make the decision to go run your service this way or run their service this way. And, um, you know, when, when the market is still early, pretty much every operator is the decision maker and, and also uses your business and also uses your service. And there was everyone, you know, the hierarchy of every business at that time was just like maybe two or three, you know, um, stacks deep. And so it was pretty easy to find, you know, the C level person that was going to make the decision. Um, everyone was trying to move really fast. And so it was, uh, it's been, it's been very fortunate for us to be able to, you know, find our way and network in the industry and, um, you know, find the right partners to work with.
Speaker 3 29:02 Yeah. And then how does the, how does the word of mouth piece work? Is it, is it brands telling other brands or is it the retailers telling brands, Oh, these guys are good to work with or a combination?
Speaker 4 29:14 Yeah, no, that's a, that's a good point. So when we first started, it was just one brand at a time. Um, sort of, again, on that iterative approach, we were, um, basically just going one at a time and you know, doing things on scalably, um, up until a point where we sort of hit like a critical mass and started reaching some network effects with our distribution business. And, um, one of the nice things about, um, you know, having the actual delivery network under our hood, um, is the fact that, um, you know, everyone basically gets some like tangible, you know, ask, uh, I guess like, uh, um, you know, they get to touch our business in some way. Um, and so, you know, like as a, as a brand, you get to log on to the software portal every day and there's people trained up on how to use it and they go horrors every single day and all of a sales rep do too.
Speaker 4 30:02 And they get their reports and they get to see everything. And then, um, from like the dispensary side, um, you know, drivers would mean out fulfill several thousand orders a month. And so, you know, basically drivers will show up at dispensary doors all across the state. So, you know, it's all like, they, like they, the dispensary owners that sort of built relationships with our drivers. Um, and it's, it makes it easy through that kind of, in a way that's not marketing for us to get our name out. And, you know, you made the point earlier around how, you know, retailers can be a good referral network for us. And that's been largely true. You know, they, they don't want to, you know, in a way, like as a distribution business, we're basically a marketplace and so you kind of suffer the chicken and egg problem. But, you know, we sort of targeted the brands first and ultimately from there we, uh, you know, we developed a critical mass of some of the best brands across California state.
Speaker 4 30:57 And that just meant that as a dispensary you really couldn't not work with us because if you wanted some of these products, you just had to come talk to us. And so as we continue to develop our brand portfolio and strengthen that, retailers have often times, uh, just refer new brands to us who are trying to sell directly into their stores. They want to centralize their procurement and, uh, you know, all of their intake processes. Um, but you know, there's, there's more to it than that. Obviously you have to make sure that you're delivering good service, um, and you're delighting the customer. But, um, you know, all of those sort of comes together and you know, now there's sort of this nice little echo chamber that's going on across all of our vendor supplier partners and retail partners that are just telling people to just use Navis as like the service and you know, that's helping us like consolidate the distribution market quite a bit.
Speaker 3 31:46 Yeah, that's great. And I, and I can imagine again that, that, you know, having, having relays if a, if a retailer or, or a dispensary has, has, you know, 50 deliveries a day coming from little micro delivers, it's, it's gotta be a huge pain in the butt for them versus if, as you said, as it consolidates, if it's one or two or three main distributors that they have to deal with, that's probably
Speaker 4 32:09 way easier for them. Yeah, yeah, exactly. And I think you know, that that's sort of what, you know, the niceties of our business model is that ultimately consolidation will happen and the network effects are pretty strong for a distribution business.
Speaker 3 32:23 Yeah. So do you, do you think of, I think you use the word mission at one point. Do you feel like you've got a, a mission that you as a business are, um, kind of trying to align around?
Speaker 4 32:33 Yeah. Um, I think so. I mean, we actually just revamped our core values and our mission. Um, and I think those are something that just evolves over time. Always. When we first started this business, it was just about, you know, how do we deliver the best products across the state? Um, and how do we give the most wide reaching access to these brands. So ultimately what we want is for a brand to make it easy for brands to get up and off the ground, um, and get, you know, statewide access, um, without having to build their own distribution. And now it's sort of evolved into something where we want people to discover cannabis products and that means providing, you know, choice, providing access, providing, you know, variety and, and sort of quality of service as well. Um, where we're more than just like a trucking delivery company.
Speaker 4 33:22 We offer, uh, you know, over, you know, overdoing like two years of deliveries through, uh, you know, our software platform that tracks everything. We've sort of developed a, a well of resources and data that helps guide sales strategies for brands to be able to target different markets. And so ultimately our, our, our one sort of service that we use to provide, which is still the backbone of our business is uh, affording us the ability to evolve it into a more, more of a platform that gives, uh, you know, brands, all the data and access that they need across the state and for dispensary is to be able to find the best products all in one place and not have to sort of search around and scour the market for, um, you know, the latest new thing.
Speaker 3 34:05 <inaudible> and then what, um, like if, if there's a specific brand, uh, and you're trying to find the retail distributions or retail locations where you could buy that brand. I'm thinking, for example, a, um, I know someone with, uh, our arthritis and they really like to use a THC cream for example. And I was supposed to pick some up for them and, and they had it in Northern California and I needed to pick it up in Southern California when they were visiting. Um, but it's, it's kind of, there's not necessarily a lot of transparency that way. What, um, are you kind of helping to helping to connect consumers with the locations or would that really be more of the brand, a responsibility to try to help them find the brands they want?
Speaker 4 34:51 Yeah, so it's kind of a hand in hand. I mean, I think a lot of it is done by the, uh, by the brand side where they use, you know, other services like Weedmaps or, um, you know, things that are kind of like Yelp basically. Or consumers can go find, you know, their products across the state and so they'll manage their own listings. Um, but, but for us, like we, we helped the brand sort of target which regions that they need to be getting into just because we see that, you know, there is sort of a lack of this niche here in like Southern California in Palm Springs. And so we'll, we'll sort of be the, in a way like the puppeteer in the back that helps guide the brands, plug their products and across the state. Um, but ultimately it's the brand that wants to own the messaging and marketing of their, uh, of their product. Um, you know, across California.
Speaker 3 35:38 And then your, your overall success. So you mentioned you're, you're moving a a hundred million dollars in product now. What I'm, or over a hundred million, what, um, is that kinda the, the main metric that you're just focused on? What's, how do we, how do we increase the amount of, uh, you know, the dollar value of the product we're moving?
Speaker 4 35:56 Yeah. So I would say that's like at the top, top level, you know, how do we, uh, ship, you know, ship the most of the market. So, you know, we, I said earlier, you know, we shipped one in 15 products in California. Like how do we keep pushing the boundaries there and ship more and more? Um, just cause that gives us that much more negotiating leverage in the supply chain, um, and also squeezes out other competitors. Um, but, uh, you know, over time, I think what we're also starting to look at more now, I mean, ever since the beginning of the company, we've always been focused on unit economic profitability and, you know, by unit economics, I just mean that, you know, how much we shipped versus what our cost of goods are. Meaning like how much does it cost to driver on gas, on their time, our vehicle, depreciation, all that sort of stuff factored in.
Speaker 4 36:43 And, um, you know, we've always tried to have a healthy unit economic margin as we continue to scale. And that's sort of like the, again, going back to that iterative approach to growth, um, how we've sort of made sure that we don't create the issue where, you know, we go raise $100 million and then just go deploy it all and then buy, you know, a hundred trucks and like five warehouses, then we don't even know how to manage. And all of a sudden you've like overfit the market. Um, you know, we're, we're, we're sort of always, you know, it's almost like, uh, I tell my team, you know, it's like a, it's like a canvas where you're trying to draw the Mona Lisa. It doesn't just happen in one broad stroke. It's like sketches along the way to make like this perfect image. Um, and so, you know, as we continue to grow and iterate, you know, how do we get profitable as well as like a company?
Speaker 4 37:34 Um, and how do we continue to squeeze out more and more margin and how do we, not just, you know, but, but obviously not in like a self, uh, I guess like a one sided way. We're also thinking about, you know, it has to be win-win like with our partners, with, with our brands. So it's like, you know, now one of the things we're thinking about is how do we sort of create dynamic pricing with, uh, you know, shipping days just because we have quite a bit of data now around, you know, how our logistics is working in the seasonality of the business. Um, and, uh, you know, ultimately that'll benefit the brands too, just because they'll be able to ship things for much cheaper on certain days. And for us, it'll even out balance out our volumes over time. So that way, you know, it's easier for us to staff to, um, and ultimately, you know, it's, it lowers costs across the board, um, with the sort of economies of scale.
Speaker 3 38:22 And then when you think about kind of the biggest levers for increasing your, not necessarily the margin piece, but just the, the, the total volume piece is, is it more around adding additional brands or adding additional retailers or you know, the, the average, uh, average amount of product per brand, or what's what, what's kind of the, the biggest lever there for driving growth?
Speaker 4 38:48 Yeah, I mean, I would say the biggest lever right now is, uh, you know, just adding more brands. Uh, you know, what we, what we kind of offer right now is, is, is, uh, sort of, I guess like some, something more like a market place where we're turning into, um, you know, a place where people can shop and buy and discover new products. And so ultimately that just means how do we sort of create as much quote unquote, like virtual shelf space as possible on our menu, um, to be able to, um, you know, ship as much product out across the state. And that, that's sort of what pushes that gross merchandise volume number up is just bringing on more, you know, more and more brands and more and more variety. Um, cause, you know, cause then like retailers are incentivized to purchase more from us as well cause they know they can just come to us for all the best products.
Speaker 4 39:37 Um, and then the second is actually increasing the average order sizes too. Um, and I think that's a very key point because, um, it not only helps our sort of like operating profit margins, um, to be able to deliver, you know, a max out vehicle and with a hundred percent utilization rate to one location, um, to like bundle things up. Um, but, but at the same time it's also, um, you know, for, for a brand it, it creates a lot of, uh, you know, brand value for them to just because they know that they're going to have their shelf space always stocked. They're not going to sell out. And that's what for a brand, you know, how we're thinking about it is like we need to always make sure that no shelf space at a dispensary ever goes empty. Um, and so, you know, how do we keep brands on the same page about producing inventory, um, you know, at the right quantities, um, and how do we ship it out as fast as possible and how do we remit payments back to them as fast as possible. And so really improving that cash cycle is going to help our gross merchandise volume as well. Cause you know, it's, it's, it's, it's ultimately in a large part, um, you know, the merchandise volume that we ship is driven by consumer demand. But what we can help is, um, how do we sort of increase this sort of treadmill cycle that, uh, you know, inventory goes out to the dispensary and money comes back in
Speaker 3 41:01 <inaudible>. And then how, how do they increase consumer demand for a particular brand? Is it, is it mostly like in dispensary advertising or what's the, what's the way to, uh, to do that?
Speaker 4 41:12 Yeah, so there's a lot of ways. I mean, I think dispensary's are creating even new ways. So there's obviously dispensary advertising. A lot of them are, uh, you know, using billboards. I don't know if you've see them across the highways in California, but they're all sort of turning in from, from AI billboards into, uh, cannabis product, billboards. Um, and, uh, you know, a lot of them,
Speaker 3 41:33 I've seen it for the dispensary's, but not necessarily for brands.
Speaker 4 41:38 Yeah. Yeah. I mean, I think, you know, it's interesting because the, uh, for brands for dispensary is like cannabis businesses actually cannot advertise legally, um, due to compliance reasons on Facebook, on Google. And so the traditional, you think of like SEO, marketing, all that sort of stuff just doesn't really exist here in this space. And so you really have to go analog and, um, you know, use billboards and go into stores and put up posters and do activation events and, uh, oftentimes like dispensary's will even ask you to purchase and reserve shelf space as like a, almost like a rent fee. Um, and, uh, you know, ultimately that's what that those are the sort of levers that a brand has to get their products out there, um, and create stories around what they're doing. Cause, you know, coming out of, uh, 2018, there, there weren't really like massive brands as you would think. Like in alcohol there's like Johnny Walker, um, and, and, uh,
Speaker 3 42:35 you, even in cigarettes like that, like in a lot of different sectors that's brands ultimately are, are where the real value is.
Speaker 4 42:42 We're the real, exactly where the real value, where the real, like, mature, longterm consumer loyalty is as well. Um, and so what everyone's doing right now with their marketing is just telling stories about how their products are being, uh, how they're better, you know, how they're being distillated, how they're being, uh, you know, eco-friendly or, um, like why the this product is specifically good for you. Um, and uh, and so, you know, a lot of that is, you know, obviously still servicing the existing market of cannabis users that have always used it. Um, and th the, there's sort of a whole new emerging couple of markets, uh, in the cannabis industry around, you know, like senior folks who are, who have, you know, arthritis or like pain or you know, seizures and uh, anxiety. And so like, that's where CBD products come in and help out a lot. And, um, and there's almost like, not just the sort of chemical component, but there's also the delivery mechanism and the sort of look and feel of the product that matters too. But you're not going to have like your grandma's smoking a joint. It's going to be something like your gummy or something that's a bit more, um, you know, it's just more form fitting, you know, to that consumer
Speaker 3 43:50 or a lemon drop in the bottom of the purse or something.
Speaker 4 43:53 Exactly. Exactly. Very, uh, very style. And so there's whole new markets being created for this and, and it's not just driving, basically what I'm trying to say is it's not just driving the demand for consumers of the existing industry, but it's also creating new demand from demographics that used to, you know, think this thing was, you know, the devil's lettuce and it was now, now it's actually beneficial and medicinal and you know, provides health and wellness benefits. So um, yeah, it's pretty, it's pretty true.
Speaker 3 44:20 So part of the line of questioning there is, is more along the lines of, you know, obviously sell through is going to create a lot more distribution opportunities. And so I'm curious how much of a role you play in the product placement in helping them build their brands and like in store advertising, that kind of, is that, is that part of what what you guys are doing or is that outside the scope of what you're currently doing?
Speaker 4 44:46 Yeah, it is, but in a more subdued way. So, you know, when a brand comes to us for help on distribution, um, you know, what we have that we can leverage that actually differentiates us and that no one else has is a lot of the data. Um, you know, we have probably, you know, two years of data that no one else really has around the best products being distributed across the state. And so, um, ultimately it's, it's a, it's not a service that we provide, but because we've built a lot of like relationships with, uh, you know, the brands and vendors, suppliers, um, just in normal natural conversation, we tell them, Hey, like your products could probably do a bit better here and here's the data to support this. And so it's, um, you know, it's a win win too. You know, we don't have to necessarily make all that much money off of our data. Um, and it's, it's not, it's, I don't think analytics is that big of a market in this industry. Um, just cause there's only so many people to sell data to. Um, but uh, you know, largely be the benefit is them having a better sales strategy and a targeted marketing strategy to be able to, um, ship more volume through us. So it always ties back to that one like North star metric as you said.
Speaker 3 45:53 Yeah. And it actually reminds me of, um, of Eventbrite actually where, you know, the whole business model at Eventbrite is about, um, you know, T taking a piece out of every ticket sale. And so while they're not necessarily an events marketing kind of business, it's within their interest to have great SEO on the pages for events, for example, and to have a, you know, great Facebook hooks so that you can sell more tickets through Facebook and, and using the data to feed those things. So that's where it kind of for it. It seems like on one side, as you said, the data helps you differentiate from other distributors and, and, and add value. But at the same time you do have the incentive that if, if they sell a lot more through you, then you make a lot more money in the process, I assume.
Speaker 4 46:42 Yeah, exactly. It's, it's kind of like a value added service that makes us more than just like a, uh, a trucking logistics company. You know, it's, it's actually like a whole platform, uh, that you come to to help drive your brand. Um, and so that's, that's honestly what we're trying to do now is like how do we expand into an experiment with like new opportunities, um, whether it's, um, you know, like the data side of things or, um, you know, one of the things we're doing actually is, uh, um, we're building out our own credit system too because we've handled so many payments at this point now. And there's such a lack of visibility about like around you know, which dispensary's are willing to pay or which ones are even good at paying. And so, um, you know, building more of those tools out for people is something where we just want to make our platform that much more attractive.
Speaker 4 47:29 That, you know, if you work with any other distributor, you're just going to lack so much of this, uh, of, uh, of the sort of training wheels and like guard rails to drive your business, um, that you're going to want to come to us for, you know, our shipping and ultimately we can, you know, that gives us pricing power too just because that sort of stuff is, it's almost becomes like a elastically demanded service that's, you know, or I guess like a elastically demanded part of our business that, you know, is included in our service.
Speaker 3 47:57 Very cool. Well, I could ask a ton more questions, but we're obviously, uh, coming up against some time here. I just, to me, I think the, the, the whole idea of a, of a massive industry, it's obviously been a big industry for a really long time. It's, it's, it's, it's coming out of the darkness into legality now. And so it's just really interesting to see how, how, you know, formalized distribution and, and, and, and the importance of compliance and kind of all of all of these pieces fitting together and building <inaudible> I would say it's so different than any other space where usually an emerging industry is like demand is kind of emerging slowly as awareness of the industry. It's like the demand has been there and now it's just very quickly kind of a <inaudible>.
Speaker 3 48:47 I don't even know the right words to necessarily explain it, but it's, it's a, it's, it's, it's almost like a big bang launch of a, of an industry there. And so I, I think it's cool that you acknowledge that a lot of your growth is just being in, in the right place at the right time in terms of the rising tide rises all ships. But then at the same time, you've clearly moved into the position where you're, where you're moving more product than anyone else and that you're, you're getting that, that advantage of, of a lot of volume and, and the network effects that happen to be when you're plugged into a lot of different retailers and you're bringing a lot of brands to the table. And so that you're, you're, you're clearly not just rising up with the tide, but you're, you're, um, consolidating a lot of, uh, a lot of the opportunity in, in your business. And it's exciting to see.
Speaker 4 49:35 Yeah, absolutely. Um, yeah, I mean I think, you know, the next challenge is really we have this sort of, uh, I guess like revenue retention, sort of treadmill model that we keep, um, spinning up and up on this virtuous cycle. And next is how do we, you know, scale past California? Cause I think we have a pretty great playbook for this and you know, how do we fit national, how do we go global? And I think that's where a lot of the excitement is going to be. And, um, I think, I think a lot of it is just like morale too. You know, like part of the growth of the company is just having that constant drum beat that things are progressing and we're part of this amazing revolution. Um, and so, you know, internally people have to feel that they're part of something big too in order to like really push the boundaries and like grow beyond what we have currently today. Um, and so yeah, no, it's, it's a pretty exciting time for the industry and, um, I think, uh, you know, we've done a fairly good job, but there's a long, long way to go to get to where we want to be. Yeah, absolutely. Well, congrats on all the success and thanks so much for, for opening up what you're doing and giving us all a chance to learn from you. Awesome. Thanks so much. It was a, it was really fun being on the show and uh, we'll talk to you soon.
Speaker 1 50:44 <inaudible>
Speaker 2 50:49 thanks for listening to the breakout growth podcast. Please take a moment to leave us a review on your favorite podcast platform, and while you're at it, subscribe. So you never miss a show until next week.
Speaker 1 51:01 <inaudible>.
