Pubdate: Tue, 04 Jun 2013
Source: New York Observer, The (NY)
Copyright: 2013 The New York Observer
Contact:  http://www.observer.com/
Details: http://www.mapinc.org/media/1720
Author: Kyle Chayka

CLASSING UP THE JOINT: POSH POT STARTUPS CASHING IN ON REEFER MADNESS

WeWork, a co-working space on Little West 12th Street, is a warren of
glassed-in office cubicles populated by aggressively branded startups
with names like Strike Force and Savage. Rodawg is quite like the
other young design and marketing businesses there, except that the
product it centers around is illegal in the state of New York.

Founder Josh Gordon wants Rodawg to be for weed what "Billabong is for
the surfing industry."

Tall and scruffy, Mr. Gordon was dressed to meet The Observer in the
casual-but-expensive mode popular among entrepreneurs: designer jeans,
a plaid collared shirt opened to reveal a hefty gold chain and a
T-shirt screen-printed with a steer skull. One arm draped over the
back of a chaise, he spoke in the laconic, "bud"-peppered tone of
someone who had had a positive high school experience.

"Hopefully these will not be perceived as just the run-of-the-mill
smoking products for stoners, but rather something that investment
bankers, doctors, lawyers and the people getting bottle service at
clubs will relate to," he said, referring to his designs for a
gold-plated joint case, a grinder shaped like a pepper mill and a
cannabis prep kit modeled after an upscale cocktail set.

Rodawg, which consists of Mr. Gordon, an in-house designer based in
Miami and a rotating group of interns, is positioned "for the
discerning socialite rather than the stereotypical hippie," Mr. Gordon
said.

On the company's home page, a photo of blissed-out tokers who look
more at home in a VW microbus than at a Bergdorf's trunk show is
accompanied by this text: Imagine elegance and class where once was a
crass, dirty field of grass. Envision a glass of fine wine or cognac,
sipped slowly at a soiree amongst good friends, the liquor smoothly
trickling down your throat, and you'll understand the subtle beauty of
the fruits of our labor.

"Just looking at the marijuana industry holistically, there's zero
class," Mr. Gordon said, referencing the pot leaf and rainbow
aesthetic of yore.

Mr. Gordon, 26, was raised in Miami and wintered in Colorado, where
marijuana was legalized for medical use in 2000. A formative event for
his budding entrepreneurship was the opening of a dispensary near his
family's Colorado ski house. "I grew up seeing the marijuana
revolution," he said. "There were all these dispensaries popping up
out of nowhere and black-market guys going mainstream. I realized
there's an opportunity here."

A report by See Change, a cannabis-oriented research firm, estimates
that the U.S. medical marijuana market was worth $1.7 billion in 2011
and could reach $8.9 billion by 2016. The sharks are circling: a
former Microsoft executive last week announced plans to create a
Seattle-based Starbucks-like weed purveyor, one of many new
enterprises aimed at the growing market.

New York City is starting to see its share of the action, despite Gov.
Andrew Cuomo's staunch opposition to pot legalization of any kind. The
town is full of investors, after all, and Connecticut and New Jersey
- -- now among the 18 states where medical marijuana is legal -- are
right next door.

Teeming with designers and tastemakers, New York City was the perfect
place for Mr. Gordon to launch his business after his graduation from
Fordham University's School of Business last year, which followed a
stint studying Talmudic law in Israel as well as a wedding. "What
better place to start a lifestyle brand?" Mr. Gordon asked.

Using his own savings and seed money from his father, a legalization
supporter who worked in financial services, Mr. Gordon's first move,
in early 2012, was luxe-ing up the utilitarian packaging used by
marijuana dispensaries. "They use plastic bags and cheap vials," Mr.
Gordon explained. "You go into a liquor store and buy a bottle of
Johnnie Walker, it'll come in a nice glass bottle with good branding,
and you feel the value. That's really not the case in
dispensaries."

Rodawg (the name comes from a nickname for the founder's son) came up
with the idea of private-label pre-rolled joint cases, upon which
dispensaries could overlay their own branding. After racking up
$50,000 in sales at trade shows, the company then turned its attention
to producing its own branded joint cases with the Rodawg name and logo
embossed in black. Inside lies a set of empty, unbleached paper cones
sourced from Amsterdam; the pack runs $5.99 for three cones and $6.99
for five. "We realized our core competencies are design, understanding
what people like and having a decent sense of fashion," said Mr. Gordon.

To expand the business and develop a second-generation case, Rodawg
found a Washington-based investor intrigued by the marijuana market,
who provided an infusion of $500,000.

That investor is a member of The ArcView Group, the first angel
investment group specifically devoted to marijuana businesses. Troy
Dayton, who co-founded the California-based firm in 2010, began
advocating for cannabis legalization after a childhood prank. During
high school, his friends enticed him to smoke for the first time and
then got a security guard to pretend to arrest him. The joke was a
total buzzkill, and it left Mr. Dayton ready to fight for U.S.
citizens' rights to party.

Mr. Dayton heralds marijuana as no less than the "next great American
industry," as he enthused repeatedly to The Observer during a recent
phone conversation. "Everybody and their brother wants to open up a
dispensary or a cultivation, particularly in the Northeast," he said.
"It's like a feeding frenzy."

ArcView is taking on emerging marijuana companies and introducing them
to investors, advisers and partners, becoming the "Y Combinator of
cannabis," as Mr. Dayton explained, referencing the well-known
Mountain View, Calif., incubator. The investment group even mimics Y
Combinator's demo days, asking cannabis companies to stand up and
pitch potential investors at quarterly meetings.

In mid-June, one of those meetings will take place at an undisclosed
location in downtown Manhattan with over 50 of the country's foremost
marijuana investors, ranging from retired Wall Street warriors to
young tech millionaires and the early pioneers of the cannabis market.

The price of admission to ArcView's club is $3,500 in annual fees or
$10,000 for lifetime membership and a willingness to invest at least
$50,000 in the future of the marijuana business, which could turn out
to be a very profitable endeavor. "There are entire areas of ancillary
businesses that haven't been touched," Mr. Dayton gushed. "There's
fresh snow in this industry."

Mr. Gordon is just one of a group of marijuana entrepreneurs who are
as comfortable referring to "core competencies" and "pivoting" as they
are to "nugs," the slang by which Mr. Gordon often refers to the
plant. Jason Levin is the founder of UpToke, a Palo Alto-based
vaporizer company whose slogan is "Silicon Valley meets Humboldt
County," nodding to the California district known for its potent
cannabis cultivation.

Mr. Levin noticed that e-cigarettes were gaining traction in the
tobacco market, but the devices weren't effective for consuming
marijuana's active ingredient, THC. So the University of
Florida-schooled engineer designed a sleek, $300 vaporizer shaped like
a large pen, with features like an attached grinder, quick heating
time and a much longer battery life than competitors. "It's like any
startup: pick a problem you want to solve that you'll enjoy working on
and work on solving the problem," Mr. Levin explained. "We have
engineers who used to work for Apple and NASA," Mr. Levin told The
Observer. "We think of ourselves as a tech startup that happens to
make vaporizers."

After an initial phone call with Mr. Dayton, Mr. Levin brought the
investor a functioning prototype. He passed the device around at a
party in Colorado, and everyone dug its capabilities. "I hit it and I
was really impressed. Everyone wanted to try this new thing," Mr.
Dayton recalled.

ArcView took on UpToke, and the company finalized its first infusion
of funding at a recent meeting of the investment group in Seattle.
"ArcView has been tremendously supportive of the whole process. The
coaching, the exposure -- they're building up an industry that's
cohesive and professional," Mr. Levin said.

As with any nascent industry, cannabusiness has its challenges, and
Mr. Dayton and other experts will be addressing legal, funding and
insurance issues at a June 11 symposium hosted in Soho by Medical
Marijuana Business Daily. "This is a serious business seminar for
investors, executives and entrepreneurs. It is not for patients or
consumers," reads an invitation online.

So maybe leave the three-foot bong at home. "It betters the industry
if you have a business that premises itself on providing a more
classy-type offering," said Mr. Gordon, ensconced in his WeWork
cubicle. "It has to look good to the general public, as opposed to the
stereotypes we've become accustomed to."
- ---
MAP posted-by: Matt