Exclusive Interview with Canndescent Founder and CEO Adrian Sedlin
Canndescent is doubling its revenue month over month and eyeing more growth – geographically and in its product portfolio – in the coming months. Founder and CEO Adrian Sedlin spoke with New Cannabis Ventures about the company’s founding, branding, and position in the California market.
Lifelong entrepreneur Sedlin started and ran his first company while he was still an undergraduate at Georgetown University. The company went public in 1996, just as he was finishing his MBA at Harvard Business School. Ever since, he has focused on early-stage growth companies. Right before starting Canndescent, Sedlin was in a retirement period, but a phone call from his brother-in-law sparked his interest in the cannabis space. Two years ago, the company started in his home office. Now, it has 115 employees, a number Sedlin expects to grow to 200 by the end of the year and then double again in 2019.
The Six Problems Canndescent Set Out to Solve
Sedlin identified six different problems faced by consumers and founded Canndescent to solve those problems.
- Product quality. Sedlin wanted to create a better class of products than existed in the industry, which was just emerging from prohibition.
- Confusion and intimidation. Thousands of different strain names create a difficult shopping experience for consumers, and a big part of the Canndescent brand is simplifying that experience.
- Lack of consistency. Different growers and processes make it difficult for consumers to replicate an experience, so each of Canndescent’s products is designed to deliver a specific effect consistently.
- Image. Sedlin sees cannabis as an aspirational product that needs an image overhaul, and Canndescent aims to do that through marketing its luxury lifestyle brand.
- Toxicity. At the time of Canndescent’s founding, much of the product in California was testing positive for pesticides, according to Sedlin. Creating and testing better products eliminates this problem.
- Opacity. Lack of transparency in the industry meant consumers did not know there their cannabis was coming from, and Sedlin saw an opportunity to shed light on the process from seed to sale.
“The Prestige is in the Flower”
The company has five different effects: Calm, Cruise, Create, Connect, and Charge. The company’s effects based architecture tells consumers how each one of those effects will make the mind and body feel, as well as what kind of activities they might want to do while using the product. Consumers can choose their products based on this intuitive platform, but a good deal of terpene and cannabinoid research goes into creating each product on that platform. Each time the company develops a new genetic, the company profiles it, performs focus group testing, and determines which effect that genetic belongs under.
Premium cannabis flower serves as the bedrock of the Canndescent portfolio, and it will serve as the launch pad for new product categories. Right now, the company offers gift boxes and prerolls. In the fourth quarter of this year, its oil line will launch, and in the Q1 of 2019, its first ingestible will be available. “The prestige is in the flower,” according to Sedlin. He believes that winning in flower opens the doors to every other product category.
Canndescent does not have any brick-and-mortar retail stores, and it is going to stay that way. The company is vertically integrated – it cultivates, productizes, and sells. It has a distribution company and sales team that bring the company’s products to other retailers with a physical presence. An account rep will educate dispensaries on the brand and focus on building an audience for the brand at each dispensary. Typically within six to eight weeks the Canndescent brand will be the number one selling product in a dispensary, according to Sedlin. The company is avoiding brick-and-mortar and betting on ecommerce and direct-to-consumer sales.
Canndescent Raises $22.5 Million in 2018 to Date
Canndescent has raised a total of $22.5 million thus far this year through a $10 million Series B closed at the beginning of this year and a $12.5 million Series C convertible note closed at the end of June. Sedlin has been raising money since he was 21 years old, and he generally gives himself four to six months to close out a round of funding. The Series C closed in 90 days. Sedlin points out that the company’s rapid growth means it is always seeking capital resources and qualified investors.
California’s Regulatory Pain is Canndescent’s Gain
The wave of regulatory changes happening in California is rocking the boat for a lot of companies in the market, but Canndescent is riding it as an opportunity. When Sedlin founded the company, he focused on implementing all of the best practices already in place in more highly regulated states, like Colorado. The company has been doing child-resistant and tamper-proof packaging, seed-to-sale tracking, and microbial and pesticides testing since its inception – regulatory demands that are forcing some companies to scramble. The company invested significant resources to get ahead of the regulatory curve, and the investment is paying off. Revenue is doubling month over month. Sedlin expects the company to end 2018 at a $25 million run rate and reach a $50 million run rate a quarter or two after that.
Expansion on the Horizon
When thinking about expansion, Canndescent aims to grow through new product offerings, new brands and price points, and new markets. California remains the company’s prime focus because of the sheer size of the market, but it is slated to expand into two or three new markets next year.
Looking ahead, Sedlin intends to maintain the company’s discipline and dedication to providing exceptional products designed to elevate the consumer experience.
Listen to the entire interview. Canndescent is a client of New Cannabis Ventures.