Steve DeAngelo — the Founder of Harborside, Founder of The Last Prisoner Project, author of ‘The Cannabis Manifesto,’ and a long-time cannabis advocate, entrepreneur, and investor — released an op-ed this week across multiple cannabis publications calling for the industry to reject the pyramid-shaped business model prioritized by large cannabis corporations and multistate operators.
Titled Save the Cannabis Industry: Topple The Pyramids!, the article describes the blissful pre-legalization era of the California medical market — a time when the industry “worked in its basic purpose of providing high quality cannabis at affordable prices, and providing all of its participants with an adequate income and dignified lifestyle.”
But “everything changed,” DeAngelo writes, after California voted to legalize adult-use cannabis. He describes the collapse of California’s legacy market as most medical growers were locked out of licenses, the advent of corporate finances, and the emphasis these newcomers placed on the ability to scale. The article also describes the costly and slow industry roll-out in Canada, where big players started big moves to capture large sections of the federally legal industry. “In Canada, only 20% of cannabis produced… since 2018 has actually been sold,” he writes. “80% was of such low quality that it had to be destroyed or is still warehoused — resulting in the loss of $11 billion Canadian dollars of investors’ money.”
Rather than continuing down this path of wasting millions upon millions of dollars trying to gobble up a market share that will ultimately still be dwarfed by the unfettered, unregulated marketplace, DeAngelo dreams of the industry’s return to small businesses. “Thousands of legacy, artisan producers could get into the industry without the need for crazy amounts of capital,” he writes. And instead of a handful of multi-state operators jostling for brand awareness, he imagines cute tourist trap villages full of cannabis artisans, or even just a digital marketplace for cannabis cultivators to connect directly with consumers — something like “an Etsy for weed,” he writes.
That same sentiment was reflected recently in a federal proposal by U.S. Reps. Jared Huffman (D-CA) and Earl Blumenauer (D-OR) which seeks to let small-scale cannabis cultivators operate on a direct-to-consumer model once the plant is finally legalized nationwide.
And were that plan realized, big cannabis companies “would be freed from the thankless and impossible task of producing high quality cannabis in massive facilities,” DeAngelo writes. “They could stop disappointing their investors and focus instead on an achievable goal: providing the financing, infrastructure, and marketing capacity that small producers will need to succeed.”
In an interview with Ganjapreneur, DeAngelo said that while the industry’s failures had become a “source of extreme heartbreak” for him in recent years, he reached his tipping point after someone asked him whether it was even ethical to be encouraging legacy operators to be coming into such a broken system. The question surprised and stuck with him:
“Part of what I recognized when I did my analysis is just from a numerical point of view, the deck is stacked against the legacy community. Even if every cannabis license in the country that exists today went to a legacy operator, most legacy operators still wouldn’t be licensed because there are so few licenses. So if we really want to create significant meaningful room in the legal market for the legacy players, we need to start replicating the same structures that we had in the legacy marketplace.” — Steve DeAngelo, in an interview
When asked about getting cannabis investors and venture capitalists on board with changing the status quo, he recommended they “learn from what’s already happened.”
“Over the course of the last five years, the scaled-up model … has lost 11 billion dollars of investors’ money,” he said. “So if you feel like losing more money, go ahead and keep buying into that model which has proven not to work.”
Instead of buying up more licenses or pursuing regulations that lock up the supply chain and create even more artificial bottlenecks for high-quality product, DeAngelo recommends investors look instead to other sections of the cannabis economy such as the federally legal hemp or cannabis tourism industries.
But until the cannabis industry has seen that “mutually beneficial reset,” the boom-and-bust cycle will continue, he said.
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