Farhaj Mayan of Kanna

Shutting down a startup, investing in vice industries, and the future of Cannabis.

Farhaj Mayan is the co-founder and CEO of Kanna, a marketplace to find gigs in the cannabis industry. You can follow Farhaj on Twitter @farhajmayan.

Prior to founding Kanna, you started Fade, a mobile app connecting barbers and clients. What were some key takeaways from that experience?

The booking platform ecosystem was very crowded.

Last time we checked, around 36 different calendar + booking + payments solutions were in the market. We thought we differentiated ourselves by focusing on the barbering and men’s grooming niche and we were right.

However, we realized that Fade was a vitamin and not a painkiller and it never made that transition. We charged a $25 monthly subscription fee to barbers who wanted a sophisticated and customizable calendaring tool but we were building product for our end users.

Although by personalizing barber recommendations, we reduced barber discovery and first booking time to ~3 mins vs the industry average of 46-52 mins, we couldn’t build out and incentivize barbers, the supply side of our marketplace from disintermediating.

Our cohort retention numbers were terrible.

By the time we realized it was time to pivot and refocus efforts on the calendaring software but it was too late. Our direct competitors Squire and theCut raised fresh rounds and our CAC 32x’d over night. We decided to fold the company.

Key takeaways:

  1. Build high-touch relationships with your customers - the importance of obsessively interviewing customers early on and discovering the “hair on fire” problem is so underrated, especially during the $0-100k ARR stage. Just watched the SUS video where Brian share the tipping point for Airbnb - PG told them to get out of Mountainview and spend time with real customers.

  2. If you have an idea for a marketplace. Build a low-code/no-code MVP till you hit $2.5k-10k MRR. This proves people are willing to pay to solve said problem and helps you iterate on product with little to no technical debt or carving out a chunk from your cap table.

  3. Keep team very lean. For software startups till your ready for a seed round, I’d recommend keeping your founding team lean (3 tops). All you need is a hacker (builds product), hipster (designs product and brand) and hustler (sells it).

  4. Don’t get lost in the next feature fallacy and overdevelop your product. First time founders find themselves in this position frequently because they want to launch a “perfect” product. Hot take: only thing it’s going to do is increase your credit card and technical debt with no real impact on customer experience or traction.

One of the hardest problems that marketplace businesses face in the early days is solving the chicken-and-egg problem. Which side (supply/demand) is your priority right now and why?

There are three major “hair on fire problems” in Cannabis - Compliance, Banking and Hiring. There are a lot of great startups/scaleups working on compliance and recently banking but hiring solutions are still in the nascent stage. 

We’ve noticed due to the exponential growth of the cannabis industry building our demand side (farms and dispensaries who need to hire) is relatively easy.

In fact just through word of mouth, we’ve received inbound interest from 68 farms in Oklahoma and some massive operations from across the states.

The real challenge which we’ve acknowledged is going to be building out the supply side of our marketplace - finding that scalable process to onboard and vet gig workers in a market where a farm is looking to hire talent.

Facebook puts most cannabis businesses in jail when it comes to advertising so both FB/IG and even Google ads are a no go. We’ve found ourselves experimenting with traditional marketing methods recently and creating viral loops within our platform to generate impressions for the top of our marketing funnel.

Marketplaces generally thrive in highly fragmented markets (when there are alot of buyers + sellers). What does the existing cannabis market look like? 

34 states have legalized cannabis (11 legalized recreational). There are over 39,000 licensed cannabis businesses across the US in legal markets.

As of Jan ‘19, 296,000 people have gotten jobs in Cannabis and around 40% of those jobs were gigs like trimming, budtending, packaging, retail and security jobs that help cannabis business owners take their produce from seed to sale.

With an industry CAGR of 28% it’s safe to assume that by 2024 at least half a million people will be gig workers in Cannabis.

Cannawages also pay 11-15% higher than the median salary across the US.

However, due to the lack of banking access most farms and dispensaries have to transact purely in cash which is very cumbersome and honestly terrifying. The SAFE banking act just passed through the House, Senate is voting on it soon - fingers crossed.

Most importantly, when it comes to hiring, employers really struggle because there’s no standard vetting process, it’s hard to verify black market experience and translate it to legal market qualifications.

On the other hand, almost 720 people have gone missing in Humboldt County California having been kidnapped, murdered or disappearing entirely after being recruited to trim and harvest at black market farms.

What are some common misbeliefs that people (say investors) hold about the cannabis industry, and how do you address them?

Often times we have to disqualify investors from the get-go since some have vice clauses in place that trickle down from their LP’s or are a part of their investment thesis. That’s totally fine and I respect that!

I also think the industry still hasn’t been destigmatized for a lot of people.

Honestly, it took me going to visit a farm, sitting in on a trim session and meeting the faces behind the company, owners, workers and stakeholders to realize they’re just like anyone else but severely underserved.

People still think of it as a recreational drug and don’t see the medicinal impact that it’s had. Oklahoma for example has seen a 30% drop in opioid prescriptions within less than a year of medical cannabis being legalized.

People also don’t recognize how much disenfranchisement happened during the prohibition on Marijuana. When you look at the diversity of business owners and investors profiting off of the cannabis industry it’s clear that most are white. Don’t get me wrong I think everybody should be able to benefit from this incredible industry.

However, for the people who were incarcerated and had their lives ruined through the war on drugs with most of them being black and brown they deserve some sort of reparations whether in the form of startup grants, education or employment opportunities to make their living through this industry.

We’re consciously building this into our business processes and company culture, even when it comes to the diversity and distribution of gig workers and our core team.

We firmly believe that as this industry continues to see exponential growth education will be critical to ensure that it has the right impact.

Why is right now the perfect time for Kanna to exist in the world? (What trends are you seeing? What exist now that didn't previously exist?)

We understand the market for cannabis workers and services is fragmented because of polarizing local laws and market needs which translates to a huge opportunity for being first movers into smaller, less sought after markets and setting the standard.

Also, the regulatory nature of the industry will edge it towards a place where having compliant hiring processes in place will become more important than ever as incumbent companies become more competitive leading to regulatory entities seeking more transparency.

This is no simple task for a small to midsize operation to achieve themselves.

Our goal is to become the first-mover in creating a platform that handles the full vertical of finding, vetting, licensing, training, and insuring workers in cannabis, much like how Wonderschool or Honor have done for their respective industries.

The key to winning however will be a combination of the speed and quality of service.

What we've realized, as with most similar gig-focused marketplace, focusing on building the supply-side of workers and demand-side of employers at speed is replicable, thus mirrored by the fierce competition in many of these industries.

What truly differentiates a marketplace from its competitors now is owning the full vertical to produce a better end product than your competitor.

Back then, a moat could be built with scale and speed at your back, but now, a moat of product experience and platform trust in the marketplace is equally, if not more defensible.

This is where we're focused on doing better than any of our competitors.

We put together the right team. Brad, Vu and I have a deep understanding of marketplaces through our previous ventures.

We know how to build platforms that can combat disintermediation, incentivize the supply and demand side and have the technical background to launch and iterate quickly with almost no technical debt.

Our co-founder Ziljian is the owner of vertically integrated cannabis operation in Oklahoma (MedInc grow farms and Kanna Kures dispensaries). Mick, a 2x cannabis cup winning grower is also advising us. We have a very tight feedback loop for the initial product due to Ziljian and Mick's deep industry insight. Their industry connections have also helped us achieve early traction in a very short period of time.

There are more job openings in cannabis every day than people who are qualified to fulfill them.

With the exponential growth the industry will see over the next 5 years we believe Kanna’s managed marketplace model is strategically positioned to provide real value to both employers and job seekers.

Our biggest challenge will be figuring out a scalable onboarding process to fill the top of our marketing funnel with qualified gig workers. Once we’re able to calculate how much it truly costs to open the marketplace within that zip code we believe we can hit the ground running and start expanding into other legal states (if it isn’t federally legal by then) relatively quickly.

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