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3 Deep Questions with Merida 08 : Jessica Billingsley of MJ Freeway

3 Deep Questions with Merida 08 : Jessica Billingsley of MJ Freeway

my first guest of the day is Jessica
Billingsley of MJ freeway – thank you for having me – one of the pioneers of the
industry and thank you so much for spending time I know that this is a
unusual format usually people want sound bytes but the whole goal of this is to
really get the MJ freeway story and have people really understand what goes on
behind the scenes and so that they understand what happens with the public
you know the public face of MJ freeway and then they get a chance to understand
from the CEOs perspective what happens behind the scenes so my first question
to lead off the conversation is you obviously were a pioneer in the space you’ve
been up and running for how many years? – nine years – the SMAW nine years
well congratulations thanks you think I’ve actually entered this space ten
years ago amazing amazing so you start in Denver
Colorado and at a time when electronic resources were somewhat limited you
somehow took this step to create a company called MJ freeway one question
why the name and then second give us a sense of like what it was like in the
early Denver days to to create an electronic tool when a lot of people
there was a lot of historical pioneering knowledge and people were doing things
in their garage and etc etc and electronic tools may have been a
difficult thing to get adoption in a big way so kind of give me you know to walk
me through those those those thoughts that in the beginning of MJ Freeway
sure well so I mentioned that I’m going on a decade in cannabis amazing so I
actually entered the industry as an investor in an operator that’s how I
first got started so I invested in one of the very first legally licensed
operators in Colorado okay and as the investor owner who owned an IT services
business at the time they asked me to choose what software to use to run in
their business okay so so we were looking for software – so that was a common question you might get from an operator in general because your background? – what am I even going to use? yes how am I going to track any of this product and then
how am I going to sell it and what was clear to me just with experience in
other regulated industries was that there were going to be some coming
compliance needs then that you were way ahead of the curve on that one -people were going to want to know what they were getting and they were gonna want to know where
it came from and and and generally what we think of today in fact we invented Seed
to Sale tracking if you go to it still redirects to
to my chagrin we were not successful in trademarking it and I
didn’t fight harder but but never the less trademarking seed-to-sale you mean
trademarking the the phrase ‘seed-to-sale’ I tried – so we dont want to get into the idea expression dichotomy of trademarking so I’m just gonna let you roll with that we’ll move on, so I invested in this operator and they had
asked me to choose a software and I had identified this and look no technology
geek ever sets out to build from scratch if you can possibly repurpose something
so it was born out of a true need for innovation need for something new – were you building on was there something you saw because you didn’t have a lot of guidelines back then you
know I I often tell people that in 2014 when my first operation that I was
involved with went live you know we had nothing we were in the wilderness
with machetes so what what was that the is that how you view obviously that’s my
analogy but I’m sure you have your own what would be your analogy for what the
early days were like for discovering those IT solutions- ‘wilderness with
machetes’ I’m not sure I can top that one, Mitch, but I’ve had a lot of time to develop my analogies – ok no great analogy -ok fine- but I certainly looked at what type of software
technology was available in different other regulated industries and there are
great things about some the alcohol tracking technology that exists out
there about the pharma about general agriculture I mean in general when you
go to the grocery store you have a pretty good idea that there have been
some type of rigor standards or compliance before you buy your food
right and the challenge with cannabis is that you couldn’t take any one of those
and adapt it for cannabis you really needed a hybrid model and that was
something that had to be created from scratch and do you think let me just
jump in there so do you think regulators in just we’re gonna jump around a little
bit cuz you just naturally brought a thought to my mind of do you think
regulators in other states should’ve maybe when thinking about the
required solutions have looked at what’s available just to understand obviously
cannabis has its own idiosyncratic risk and mold and safety testing and all
those things and that’s an element of what you bring but don’t you think that
regulators maybe early on were moving fast and weren’t necessarily looking at
what the world for quality control looked like and how this idiosyncratic
plant might provide challenges for someone like yourself obviously didn’t
set out to do this but so what do you think about that maybe but regulators in
general are often looking for technologists like myself to advise them
on what what we can do they don’t necessarily I wouldn’t say
that it was their job necessarily to say hey here is exactly the technology you
should use to track they go and they ask experts to advise them on what they
should track and right you know at the we have a seat at the table with most regulatory agencies how for a long time now remember we’re kind of still talking early years so certainly
in the early years and you weren’t in the conversation – so we absolutely were
on all of the first advisory boards right right but so when you think what
I’m actually asking is slightly different I’m asking more about
regulators didn’t they might say what is capable but the rules don’t always come
comport with what is possible early on what is easily possible it actually
leads into one of my my core questions for you which is I’m sure like anyone
else who has a solution that is used by several thousand people congratulations
on that again by the way -thank you- yopu’re hearing complaints all the time and and those complaints could be from the ‘it doesn’t do this’ one small thing that one person
wants customized all the way to broad system-wide complaints that you might
get in any state and you know that’s that’s not a knock on you it’s the
reality is in an industry that’s developing from the ground floor and you
being one of the pioneers you’re gonna run into some of that we’re discovering
you’re discovering things just like everyone else so how do you what is your
internal process or your external process for taking in those complaints
prioritizing them which one’s get conserves resources are not unlimited
time is not unlimited I know you’re very passionate about the tech side but the
reality is it’s a fast-moving industry and and you are in some ways a
bottleneck the systems are a bottleneck so how do you handle that responsibility
when people are complaining because I’m sure you hear it all the time people
probably that’s the first thing they bring up to you an operator so
it’s a lot of pressure – sure so we handle it in a couple different ways and certainly
at MJ Freeway we’re very metrics driven okay so we track tickets by total number
of customers right we track how many of our customers vote on or report certain
issues or certain problems – you’re using it as votes but I know you mean you say how
many instances of a certain thing are brought to your attention exactly
exactly and then we have a product governance board and we identify based
on that based on our resources how and what we’re gonna prioritize okay and
we’re always looking for creative solutions as well we’re very focused on
our core values and MJ freeway one of our values is be part of the solution
right so it means to be part of the solution for for our clients our operators internal/external sure- because at the end of the day you know that’s why you know -right- that’s why
we’re in business -right- I would like to but prioritization I just to go back -sure- so but the prioritization of these I’m if 50 problems or 50 concerns issues whatever
you might call them come up you know there are some that are probably mission critical
critical path -absolutely- so what is the process for you internalized internally
prioritizing resources like how many people are building the core product
constantly revising it updating it and how many people are on like the strike
team or I don’t know if you call it internally I do come from a tech
background as well just like you -okay- but I’m not as deep in this so I think it’s
great for people to get a sense of what it’s like at MJ Freeway it’s frenetic
I’m sure every day you probably feel you sleep very well at the end of the night
to the extent you can sleep because we’re all working frenetically so what does
that strike team look like or what does the core team look like when it comes to
your actual core solution so I think you’re asking about the sort of the
product development side of the solution you know we’ve got roughly 50 people that are
focused in that area the company ok about 10 on what we think of is the product
side the side that decides what we’re gonna do how we’re gonna do it but whose
job it is to poll stakeholders okay so they poll not only our internal
stakeholders which would include something like prioritization of tickets
support how many tickets have you collected on X – company called market
access you know we’re QA/QC and you know it was for bond trading electronic it
was a revolutionising the electronic bond trading so it’s probably very
similar where you get a call from like goldman sachs and they say by the way
this audit ticket has an error spotting the treasury someone’s got a jump on that
that’s gotta get fixed immediately yeah there’s more like core development
that’s I more talked about the runway on how you fix or amend because you’re at this
critical juncture of people in the regulator which is the core of our industry,
our industry doesn’t grow without these solutions you are fundamental to the
bottom of the pyramid as it’s getting built we certainly do you think of
ourselves as the backbone the backbone upon which the comply we enable
compliance we enable regulation we enabled taxation and so we are we our
core we are critical -I agree- this is going to date me the more that we talk about dial
tone in a way we’re dial tone and nobody thinks about dial tone but to be fair
you asked me about MJ freeway earlier -yeah the name- unfortunately that dates me also okay so
so MJ is short for Mary Jane right or marijuana MJ we call it Cannabis nowadays
but sure we do so it and see how it says The Cannabis Capital Conference not
the marijuana cap we certainly call it cannabis and yet there
is a an important piece to claiming a name sure and for us especially in those
very early days the idea and it doesn’t seem revolutionary now but the idea that
we would claim anything related to marijuana or cannabis in our name and
say that that’s what we were doing that we were actually going to provide
software to marijuana or take cannabis operators right that was a really really
big deal and in it it actually inspired a lot of confidence and loyalty in us
early on that we were willing to do that willing to claim that well it’s funny
you say that because Merida has no relation to cannabis it’s the location
in Spain of an aqueduct system -is that where it came from?- aqueduct of the miracles I waned something -okay-
first of all I have children and when I started Merida it was still that you
know societal the questions were unanswered with how adoptable this was
gonna be obviously in the three years since it’s been things have changed a
lot and I’m sure you see the acceleration where early on was like
pushing a rock up a hill now it’s a much smaller rock and a much less steep hill
but not steep hill labs which we’re also investors in but I think for me I wanted
a name that I could say and not have my kids immediately associated with
cannabis not because I was embarrassed or anything but because the medical side
was just being developed and the truth is we all have our own reasons but I
want to convey agriculture and innovation but simple technologies
because that’s kind of what we invest in and that’s one of the reason why I
wanted this chance is because I think of MJ freeway as again a core principle and
a core part of what people need to perform but at the same time you’re in a
very challenging place where that bottleneck leads to in a space with
smoothing you know warp speed people often think you have to be the so
the solution instead of a solution and sometimes they probably put demands on
you guys I’m sure that are not necessarily your in your core bailiwick
it might not be your solutions problem might be their operating problem but you
can’t really say that to them well we can -okay- right so so – wow how’s
that for customer relations well I I thought the customer’s always right – the
customer is always right however they’re going to because if customers will come
and tell you how to solve something they’ll say you need to put X field here
in this thing and it’s our it’s our job it’s the job of any good software
developer software provider to collect all of that and just say what is the
actual problem here that we’re trying to solve not just what they’re saying do
this thing here in this piece or just make this one thing work this way it’s
it’s not our job to take that and to prioritize this long list of do it this
way it’s our job to take it and to look at it and say is there a larger problem
here and then what would be the solution to that problem how would we go about
that and that’s how you work on inefficiencies that’s how you continue to
innovate and and look forward and it’s why that’s why we still exist it’s
why we’re still relevant nine years later because we’re we’re doing that
we’re looking at the the whole set and thinking about how do we solve the
actual problem right so that actually leads to a natural question so one of the things
when we met I don’t know maybe a year ago at one of the Merida connectivity
dinners it probably was close to a year ago at this point and you know I thought
I really appreciate your candor on everyone kind of knows MJ freeway
there’s been a few things that we could have done better so we at Merida do
a like a sort of personality test for the investments we make a corporate
personality and one of the things we really look for is companies who you
can’t really fix whether it’s corporate or other issues if you don’t acknowledge
and you you were very forthright about hey we’re getting better all the time
we’re learning so what is one thing that you can say hey I really wish we would
have done this as a corporation they’re not individualistic things but whether
it’s really to date or any of the things that I think they’re pretty well
documented at this point for you guys and you’ve been very candid and you guys had
a public filing so obviously that that’s its own disclosure so what’s one thing
that you Jessica Billingsley said you know what as a company here’s one thing I
learned and here’s how we’re fixing it with just one thing you know in your
history that you can just sort of dig up and it’s not an easy
one to answer but so this changes over so this changes over time right and there was a point in time where I would have said the the one thing was that we as an ancillary
business thought that we would it be immune to some of the industry
challenges and that we would have no problem with our banking services we
would have no problem with credit card processing we would know how to have no
problem with some of these things right and so we I think put ourselves in good
alignment with the industry since then I serve on the board of the National
cannabis Industry Association and we we really work to make sure that our
interests are always in alignment with our clients interests so is that one
thing you think that you could have done better earlier I mean in terms of just
directly answering the question – is there anything you can think of though
that you said you know this was a learning moment for me and I learned and
our company’s gotten stronger because of it and I’m just curious if there’s one
thing you can think of or a few we’re just general concepts someone’s sneezing
in the background if there’s general concepts that you you might think of
like here it’s a corporate personality thing I don’t mean an individual event like
something you learned on your path that you go I’m glad I learn that that was
that was very helpful to the the trajectory of MJ freeway -well I think
it’s- and it can be brief by the way cuz I want to move on to our final question oh
goodness okay all right well yeah so so to answer that I think I think you’re
alluding to and and and certainly as you look at our company you think about well
what was the hardest moment we we were the victim of a cyber attack a couple
years ago and that’s there is no silver lining right right something like that I
just want to say that first and there it’s fairly complicated from a
technology point of view in terms of what could be done better -the headlines are simple, reality is more complicated- you know what what exactly happened what could we have done better I think the the biggest learning moment in that all of that for me is
what it means to be a leader right what it means for a team because it’s easy we
are in cannabis cannabis is growing quickly
everyone’s growing and making more money year over year and you know we always
-at least perceptively- well certain so certainly I maybe I should say we’re grossing more
revenue year -that’s a fair point- over year you’ve been in this for nine years and
even so in the traditional world that just show you how hard adoption is I
mean I don’t remember what your public filings that on your revenue but just to
show how hard it can be to get adoption on an electronic even in a space where
you were one of the pioneers it’s hard to get over 15-20 million dollars of
revenue annually to this point not just you I’m saying everyone so that leads to
my last question which is I try to leave the last question where I asked a
question more about the economics of the macro space some people can walk away
because that’s what Merida does right you know we collect data information
voraciously everyone knows that about us so my final question to you is what is
the largest market cap and revenue of anc- of an ancillary company and it can
be any ancillary so anyone that does not touch the plant core it could be Kush
bottles which you know we’re investors in to anyone what is the largest
ancillary market cap on December 31st 2020 assuming that that December is not
like this December where everything just tanks and and what is their revenue what
is like an ancillary company’s revenue like what just think out loud so
people get a sense of someone as an insider what do you think that number is
those two numbers so largest market cap of any ancillary company in space what’s
the biggest market cap I think right now it’s roughly eight hundred million
dollars or something of that nature whatever that could be in two years so I
so first I think the largest is going to be one of the supply companies and I
think the market cap is like equipment so I’m thinking where they might be that
you really would you know an accessory okay fine consumption accessories in
consumption accessory and what is their market cap and it’s in the billions -Narrow it down to 2 or 3 billion- so so they’re revenue two billion three billion well it’s
tricky right are they gonna get the same market cap percentage you know -I’m asking you you’re an
expert you’ve been doing this for a long time and this is this is education for
people who may just want be watch this for someone have no idea what you what
you’ve done and how you’ve gotten here so I want you to bring your perspective
so it’s your quick it’s the question for you okay well give me just a moment I’ve
got a couple things that I think you’re important than I want to say here so I
do I think the largest will be consumption accessories and a part of
that is that they’re able to sell and we know that medical delivery devices
anything we’re talking about pipes we’re talking about okay you know something
that you might see in a traditional head shop okay and so a consumption company
like that that is inflated the cannabis industry that does sell their products
and dispensaries but also sells their products and many other outlet point
that is a company that will likely have the most revenue so maybe hundreds of
millions and then have a correspondent in ten or fifteen exactly okay but what
I think is important and and really important that I would love you know for
the anyone paying attention to this market the sector to understand about
the technology space is that there is a mostly untapped market opportunity you
talked about us and how you know we’re at eleven million round right now and what
you know how hard it is to get to break through that 20 million barrier what
that means although I think we’re miss let me just jump in there for a second
I’d be remiss if I didn’t point out that you collaborated with New Frontier on
what I think is a groundbreaking consumer study so obviously there what
you’re saying is completely true about the untapped really is when we think of
2019 is the year of the consumer it’s when consumer segmentation and that
doesn’t happen without your data it doesn’t happen without your service
without your company and whether or not the true Silver Bullet of MJ free
waiting five years from now is data and aggregation and predictive analytics or
the core seed to sale who knows but I’m gonna I’m gonna leave it on that which
is thank you first of all thank you so much for spending your time I know it’s
a busy day for you there’s tons of investors here the Benzinga
conference is amazing so I want to thank you a ton it’s been
great to get to know you over the last year and congratulations on your current success and good luck on the future – thanks for having me – thanks jessica alright, take care

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