Cannabis Industry Veteran Nick Tennant of Precision Extraction Discusses Marijuana Research & Industry Growth
Nick Tennant of Precision Extraction Solutions

Cannabis Industry Veteran Nick Tennant of Precision Extraction Discusses Marijuana Research & Industry Growth

By Rekt | Rekt Report | 1 Sep 2021


 

Today's Twitter Spaces Interview is with Nick Tennant of Precision Extraction, who runs of one of the largest cannabis extraction consulting firms.

There's a lot of parallel growth between blockchain and cannabis industrial scaling. 

Rob: Nick has a huge operation going, in terms of its influence, that helps companies that are trying to get into the extraction space so they can create marijuana products with a consistent amount of dosing and is really doing a lot in the space for marijuana, making it more easy for companies that want to jump in to do so with a certain level of expertise and experience.

Nick: Thanks for having me. It's a pleasure to be here.

Rob: I think one of the most interesting areas that people outside of blockchain had been requesting an interview on or some sort of a primer on has been marijuana. I was telling you before the show that there's a lot of overlap, like VC funds that are in blockchain are also heavily. A lot of times. Medical marijuana here in Southern California, like getting either distribution or processing or manufacturing. How did you come into first blockchain and then marijuana in terms of as a career.

Nick: Sure. So I've been in blockchain since 2016, and I guess you would kind of characterize me always as a technology enthusiast, right? Like any sort of disruptive technology I've always gravitate towards. And I just try to understand. As much as I can about why it's disruptive, why the technology is going to change the future state of the world and kind of run through scenarios in my head about, if this, then this and how will this progress and proceed. And what's the, the likely paths and the likely outcomes. And I think when you run through. That thought process, it leads you to understand the future state of the world. And blockchain was one of those things that obviously, with Bitcoin back then with the financial system set up the way that it is, and we can go into all that long-winded conversation of course, there, but just really saw the future state of the world being integrated with blockchain and being integrated with decentralized technologies and, and Independent currency, right? Like this parallel monetary system that's being built next to this old system that has many flaws of course, and live through the, the 2017 boom, watch the Ethereum go from seven bucks all the way up to, 1400 or thereabouts and all the way back down and made some good trades and bad trades. And the whole time I was still running.our company in the cannabis space. And so trying to. Follow both paths. We went, obviously went into the crypto winter there 2018, 2019, but I was still building everything in the cannabis space. And I'm not full time in crypto I'm full-time in cannabis, but still follow the technology, invest in and really have my ear to the ground and what's happening.

Rob: You're so right. Like there's a lot of carryover in both spaces where you've seen a huge shift. I worked in private equity for about a year. And the guy that actually led my tech department went to go work for canopy and he kind of helped usher. Some huge investments into marijuana right. About the same time that a lot of blockchain projects were scaling. And I wonder from your point of view, it seems like during the early stages of blockchain, you had, people that were coming in as a hobbyist or the seriousness, wasn't quite there, sands a few projects here and there. And then the perception, at least in Southern California, that like with marijuana, That the seriousness wasn't quite there, like real scientists wouldn't get into it. And then as the legalization came and bigger and bigger scientists and influencers and celebrities got in like the series. Started to make a real shift. Did you see that shift in your own life, like interacting with other kinds of marijuana companies and scaling things? 

Nick: Yea, definitely. I mean, I think that there's a parallel path here because what you have to understand is that they both came from a taboo sort of social interpretation, right? Like blockchain or Bitcoin being used on silk road, cannabis being an illicit drug. Right. They both have. The social interpretations of being taboo or negative or, or whatever it was. And so naturally the paths were somewhat similar, at least from like a socioeconomic economic perspective and the way that people interpreted them. So really, in the early days of cannabis, You were worried how far you could stick your arm out because it might get chopped off. And I think that a lot of the same held true in the early days of blockchain, right? I mean like the Mt. Gox hack and all these crazy things that happen. But as the infrastructure started developing.

As it became socially and societally normalized whether it's the use of blockchain technologies and cryptocurrencies, or it's the use of cannabis, right? It's becoming more wide stream, more adopted. And, and obviously any person that really studies the space, they come to a logical conclusion that it's only going to grow bigger, stronger, wider, faster. And as that happens, I think that. Original players in the space or the people in the space, whether you're an investor, whether you own a business. You know, it's, it's all positive, right? You've got this to 70 mile an hour tailwind, so to speak the whole way through in either industry. And I think that a lot of people from cannabis were gravitated towards cryptocurrency and blockchain technologies. And a lot of people from blockchain are gravitated towards cannabis and. A thing to understand too, is in cannabis, the banking sector has been extremely precarious, right? So you have this entire industry that's been sort of stifled by lack of funding, lack of free regulated banking having bank accounts shut down left, and right. So, enter this parallel decentralized Financial system. I think that you almost have a pre-ordained group of people in industry that are ready to adapt and integrate these types of technologies. And I think that a lot of people in the cannabis. Are very well-educated in the blockchain space.  

Rob: Also, do you see a lot of the cannabis CEOs say like, cut, have a similar cloth. Are there people that have just grown an appreciation for it in their own use? And they're like, well, this is being inefficiently done in my experience and are trying to bring something to the space?  

Nick: I think that we're still very early, right? Like it's just so early. I mean, yes, there are. Definitely business leaders there's companies in our space that accept cryptocurrency as payment. We're obviously one of them there's innovative and forward-thinking business leaders, but man, I got to tell you it's just like everything else. While we may have a greater percentage of that pie. So to speak in terms of people that have actually adopted some form of commercial cryptocurrency, most of the business leaders in the space are. I mean, they've heard of blockchain, they've heard of Bitcoin. But they don't really fully understand it. They don't really get it. They don't understand, you know, why decentralized technologies are going to eat the future of everything. And I think that the more that it becomes adopted, the more you're going to see this change. One of the huge things I saw a lot of the CEOs in the space questioning themselves and. Trying to understand why they shouldn't be taking cryptocurrency or Bitcoin is payments after, the whole Elon Musk thing after he did all the tweets. And they're like, okay, well, this CEO of this multi-billion dollar, one of arguably the largest and most notable companies in the world is accepting Bitcoin as payment. Why shouldn't we? And I think that. Most of people, whether it's through their own choice or through just circumstance, don't really have the time or the aptitude to independently research these types of things. And, and it requires a lot of foresight. It requires a lot of just time and critical thinking. So it's very hard to understand an alternative space when you're running a business full time. Right? Like our business consumes a lot of brain power a lot of time, and it's very hard to understand every single nuance of what's going on and everything, for example, I'm seeing this NFT thing going on and I really wish I was better educated on it because people are just making insane money, but I have. Take that one on the chin and say, Hey I missed it. I'm learning as much as I can, but there's just not enough time in the day. And when you're running a business, I think it's hard for these CEOs to really become ultra forward-thinking and be able to adopt the technologies in front of everyone.   Rob: I remember back when I first got into crypto in 2014 that same year, they had a launch of a few coins, potcoin and cannabis client, dope coin, and a hemp coin. I remember. And it was the first movers were thinking that using those coins would be the way of the future. But I know that some providers are using like BitPay and it seems. Some are using on-boarding kind of solutions. Is there a consensus in the way that marijuana users would use? Is it like a specific type of coin or what's the thinking in terms of how to kind of get Fiat?  

Nick: Yeah, I mean, it's going to depend on what sector of the cannabis market you're in because retail dispensary's have large volumes. Low, monetary transaction. Somebody like our business has less value, but our sale may be half a million dollars to a million dollars, . Something that we use, like Coinbase commerce is pretty easy because we're only sending out,, a handful of invoices a week. But it's hard to man, it's so early. And then how do you get that intermediary settlement layer? Because I don't think that most of these companies, the issue. Is that if you're running a dispensary or a large grow operation, you've got cost of goods sold. You've got payroll, you've got all sorts of things that you have to pay for and your vendors or your subsidiaries that you're paying. They're not going to take crypto. So where does that intermediary come in and then how do you bridge between. Already something that's looked upon unfavorably, right? Which is cannabis. Okay. Then you have cannabis in the normal banking sector. That's hard enough. Then you have cannabis in the normal banking sector. That's taking crypto payments, converting those crypto payments to a centralized exchange and a centralized exchange, dumping them into a traditional Fiat bank account. It's going to give the regulators a heart attack. Right. So. That has to be figured out. And I think when that gets figured out, or there's a parallel financial system, or there's wide enough adoption of cryptocurrency by the vendors and service providers within the industry, then, we could have a complete parallel path to the traditional banking system that cannabis can operate on. And that's obviously the goal with the whole world. Right. But it's going to be a battle it's going to, I mean, you know what the central bankers and the regulators are doing, it's going to be a very big battle and it's going to be a precarious one. We'll see how it comes out.  

Rob: We definitely will. It seems like. There's institutions that are antithetical to both, getting the banking accounts going when the federal charters are still what categorizing it as a schedule, one illicit drug and shutting down accounts. And with blockchain, you know, people are still shutting down accounts for buying crypto on Coinbase. And it's a whole problem. I know that in my next. I've gone several years to LA blockchain week. And on the exhibition room floor, they'll have like one or two marijuana people that are trying to figure out kind of interplay to get something done on blockchain. And they always tell me that the hardest thing is getting a consistent dose so that when you see. Like a hundred milligrams on a particular product that, it's a spectrum. It's not an exact, science it seems like what you guys are doing is more of an exact science. Can you talk a little bit about the extraction and kind of how you work with business?  

Nick: Absolutely a hundred percent. So what we do as a business, obviously we're an end to end integrator. So we'll start there, right? You can come to us with a pile of soil and say, Hey, I want to start an extra X company. I want to make candy bars and vape pens. I want to do 20,000 units of each one a week and, and give me everything that I need to build it so we can actually design your space, build your building, help you with permits integrate all the equipment, stand up your production line. And ultimately train your staff, integrate SLPs, make sure that you're GMP compliant so that you're making these products in the quantity and quality and the fashion that you want. But in terms of how we're creating these products, well, you have to think about is we have this magical plant and this plant grows. These molecules, right? They grow cannabinoids, whether it's THC CBD, you've got somebody to other minor can have a night's CBN, CBC CBG, right? There's about 120 of them that are identified to this day. Then you also have your turpines. Your terpenes are what give you your flavors smells aromas and things like that. So what we're trying to really do when we extract, as we're trying to capture these essential molecules, these desirable molecules and the purest fashion that we can. So whether that's actually doing a wide spectrum extract where we're getting the native ratio of all those molecules, or are we trying to isolate a single molecule like THC or CBD? So when we isolate singular molecules, we can take it to a 99.9999. Percent purity. And then that can obviously be weighed that can be dosed into whether it's edibles or whatever it is. Topicals lotions, tinctures that can be dosed to an exact dosing. Right. And this is how we create for these large brands. We create a replicatable scalable product. That's consistent. It tastes the same every time it has the same effect every time. And it has exactly. The traceability and the safety aspects that one would want when consuming a mind altering substance.  

Rob: Do you find that People will come in with oh, I want us to sativa to a certain degree, or I want to cross strain. And I, I want it this as an end result. And then essentially they're designing, marketing around that. Or do people just come to you visually and say, I want to get involved in this space. I have such an influencer here and here. They want to promote. You know, I'm thinking of a, I think George Clooney with his alcohol companies, you know, he sold it for nine figures, 10 figures, whatever it is. And you're seeing like a lot of celebrities getting into the weed space, obviously Seth Rogan. And they're seeing that as an alternative to alcohol to get into. . Do you see people coming with a business plan or just people just kind of throw up their hands and come to you and say like, how can I with this land, get something as an end product.  

Nick: It's both. The quality of the preparedness of the individual or the business pretty wide spectrum. I would just equate that to, that's kinda just how people operate in life. So, but our client base, we have new entrance. We have almost every single one of the multi-state operators, whether you know, the big boys, they have a publicly traded symbol. I won't name any names. But almost all of them are our clients. About 95% of them are our clients. So those guys, they have a product plan. They know exactly what they're selling. Exactly what they're manufacturing exactly at what ratios and what volumes in which state it's going to go into in which individual jurisdiction has better sales volumes of a certain product than others. And then you have people that are completely just starting out, like people that need guidance, people that we need to mentor. A large part of what we do. It's a very much a consultative sale. It's very much a sale that we work extremely closely with our clients, whether they're a new entrant or they're a large multi-state operator or just a seasoned operator either way it's very much a dialogue kind of like we're talking right now, What are the sales look like? How do we think the sales of a certain product are going to trend in a given region? Do we think it's wise to add extra production for a certain product, like vape pens, because we see the trend going there. Is there another means or method of production, like live resin, vape pens, or you know, like the THCA crystals of sauces. That are really popular. And how is that going trend? So we're constantly with our ear to the ground. We're constantly advising our clients and we're always trying to make sure that our clients have successful businesses and profitable ones.   Rob: In Colorado, in California here, we see companies that go public first on pink and then upgrade. But they're getting pretty nice valuations. Do you see the some of these companies hitting the public markets and getting some capital from that, or from VCs willing to jump in after a few, ones who've already put their toes in and have gotten some sizable returns. Is it like concentrated in the east coast Southeast? The west, or is it now like more across the country? Do you deal with B2B clients?  

Nick: Yeah. Our, operation is actually global, so we, we do a majority of our business in north America, nice chunk and Canada. But EU is coming online, but in terms of the investment space in the market space wow. I think maybe crypto is probably one of the only places that you can probably get a better ROI than cannabis. And that may not always be true. Because crypto has these crazy boom bust cycles. When you think about cannabis, you've got a industry that's growing at a 40% Kager year over year. And the best businesses within that industry are drastically outpacing that kegger. So you can look at somebody like Trulia or Verano and look at how they've grown revenue and profitability. And it's just, it's really insane, these companies are doing some of them over a billion dollars in revenue now at this point, and we're only about. 20, 25% tapped into north America. These companies have obviously plans to go global and look at what that's going to do over the next decade in terms of the investability of the cannabis space. And that's why you're seeing these narratives and these expectations of growth in the cannabis space. And you see some these companies just getting crazy valuations. I know we've had a, quite a bit of a pullback things got quite overheated, but I mean, some of these stocks, if you were in early 2020, you were doing a 10 banger easily. And it doesn't mean that it's right, like I think that the market generally. Right now is a little bit frantic and overheated, but these companies, the underlying fundamentals of the industry and the underlying fundamentals of their balance sheet and profitability. It's very nice. They look very good, and the opportunity for growth is not going to stop. People are only going to consume more cannabis. There's only going to be more jurisdictions that come online. So it's one of the spaces, obviously with me being really deeply entrenched, but it's one of the other spaces where. I have quite a bit of capital to work, you know, I love crypto, but you know, diversity is key. And I think that there's absolutely a tremendous opportunity and which also makes a tremendous opportunity to build a business in the space. So the same way that, you can launch a crypto technology or decentralized technology and go to an idea. I think that building a business in the cannabis space is just as good, perhaps a little bit more stable, a little bit more well received. Obviously you can get into the public markets fairly easily, so tremendous, tremendous opportunity, extremely bullish for the next decade. If not longer.  

Rob: I'm a huge fan of value investing. And I love Peter Lynch. A suggestion to invest in what you know. And I remember doing the interview. Yeah. I was like 2017 for canopy. And the guy sitting across from me interviewing me was like U Chicago. And he was saying that a bunch of the guys over there are like MBAs and just talking to them. I thought I knew a lot about marijuana coming in and this guy was smarter than me and better informed than me. And I think at that point I had that epiphany like, whoa, some seriously high level people are entering the space. Do you have an idea? Like if you looked at a marijuana business and said, this is a really well run business, or this is really clicking off, is there common themes between well-run marijuana, businesses that you see in ones that essentially have some difficulty kind of getting there?  

Nick: Yeah. I mean, I think that you can look at the business fundamentals the same way you would look at any other business, right? So yeah, I'm doing a masters, maybe consulting McKinsey type of analysis of the business, looking at the profitability, looking at the free cash flows, the P and L their opportunity for growth, looking at the corporate presentation looking at their foothold in terms of technology or products or customer loyalty. Like these are just all the same fundamental. Looking at the management team, what's the management team's track record, what's their history how are they operating their business? Can they clearly articulate their vision? It's just like investing in any other space. And if you get it right, the risk reward ratio is pretty awesome. It's a very, very large asymmetric bet. Because you have, again, that's 70 mile an hour tail. In the cannabis industry, the same way you do, like in a crypto bull market, except cannabis is couldn't be a decade long bull market, if not longer.  

Rob: Oh, there's such a demand. And then the evening, the different states that are kind of taking the lead of Colorado and California, and the positioning by a lot of politicians relative to alcohol has been effective. Also the hippie generation getting older. I know people that were such counter-culture and they would tell me that it's an eventuality that when the hippies got more political power, that it was going to flip. So it seems like a cool time to be involved in this industry. Are you seeing people doing things in hemp and CBD as well? Or do you think that the big push or that a lot of what you do is more in the THC.  

Nick: Well, so in 2018, you know, we passed the, the the farm bill, the federal farm bill, which made hemp, federally illegal. And really what that did, man, is it set off like a powder keg in the hemp industry? I mean, it was just a boom. And it was to the point where like 60% of our business was from hemp processors. But that was when CBD was like eight to $9,000 a kilo. The price is less than 500 bucks a kilo. So the people cut the scale very fast and then eroded out all the margins. The demand was met and it went away. So today as we stand, yeah. But 95% of our business is cannabis-related and only about 5% is hemp. So I think that CBD has become commoditized. And I think that from a technology standpoint, when we step back, like precision is really a technology company, we make technologies and innovative technologies at that too. Extract these high value molecules from this plant and these high value molecules, we keep identifying more and more. Whether like, again, I alluded to before, whether it's THC or CBD or CBG or CBN or CBC, and then you've got all these other isomers and derivatives of these individual molecules. There's hundreds of them. And these molecules are going to continue to pop up and as they up. People are going to find new and innovative uses for the ability for them to treat or, alleviate disease like conditions or ailments of disease. And as these become more medically prevalent and better studied, there's going to be new businesses that pop up surrounding the isolation of these individual molecules. So I think CBD was probably just one of the first. And I think that, for example, like CBN right now, you're seeing sleep products coming out left and right with CBN you're seeing CBG at about $30,000 a kilo because it's a highly sought after molecule. So in the future state, you're going to have all these different cannabinoids. All these different cannabinoids are going to be like different commodities. And each commodity is going to be extracted in a slightly different manner, isolated in slightly different manner. And they're all going to be recombined in different products, whether that's a medicine or whether that's a recreational product. And each one of these molecules, each one of these cannabinoids, they bind to your endocannabinoid system differently and they produce a different. effect is why they have the different use cases. But with that all being said, the technology, the very early stages of this industry, that's where we're at right now. It's going to continue to develop. So you've got this technology curve that's coming, you've got this wide adoption curve that's coming. You have more people consuming cannabis than ever. You've got more and more people passing cannabis legislation. And it's just this snowball effect that keeps rolling downhill and it's going to continue to get bigger, stronger, and faster.  

Rob: From what I've seen. That's spot on. I remember in 2008, I was working with a bunch of Spaniards that were over here to do research and LA Jolla San Diego area. And, Casual conversation with them like, oh, what are you here to do? And they're all fellows. And they were all doing marijuana research to find out, how the cannabinoids interact with the brain. And they're working with blue chip pharmaceutical companies. And remember these European guys were saying like, you don't understand. This is such a big market, and then they're gobbling up so much. PhDs are like the best and the brightest for marijuana that you don't understand. And I remember at the dinner party, everyone's like, oh, did you get it? You know, take samples to work and study at home or whatever. It's still kind of laughed off, but they're like the smartest biomedical PhDs are jumping into this space. So it seems. For the full market to be tapped, there's still a lot of research that needs to be done. Is there a lot of research being done that you're seeing.  

Nick: A ton. So, so we serve a lot of universities. A lot of prestigious universities provide them equipment. So there's, there's on the academic level a lot going on, but moreover, oh boy, last I checked out. I don't know if I can get this number, right. Cause it's probably skewed now, but the last I checked, there was 189 clinical studies going on for cannabinoids and alternative cannabinoids in the pharmaceutical space. So these are traditional pharmaceutical studies, like The same way they would validate any other drug and whether that's a good thing or a bad thing. I think that that's a whole other discussion, but they definitely are putting forth a substantial amount of research, a substantial amount of resources, because there is a tremendous amount of promise on how, again, these cannabinoids can treat, cure, alleviate human disease and other debilitating conditions.  

Rob: I remember that during that also same time period. They had a bunch of university case studies where they would, in this case, you would partake in an edible. And then he wanted to check for response time playing games that were particularly demanding of your mental energy. I think it was CS go and they wanted to kind of see how the brain responded while high and then test that. And I think there were. 10 spots and they had a thousand applications, but the stuff is being really directly put into application in large pharmaceutical companies. I mean, those studies are. Bought up, seems like on a yearly basis, do you see like the next iteration of this space, just like the broadening in terms of the scope or is it pretty fragmented as far as you can see, are you getting like a few businesses that are getting huge orders and they, your on-boarding, or is it like a smaller companies that are trying to kind of dip their toes?  

Nick: So it's actually a great question. And we talk about this a lot. Cannabis. You have to remember, man, that it's like cannabis is an organic plant. Whenever there's an organic plant. It's put here by the universe. People are naturally going to gravitate towards the organic, natural state of that plant. And because of that, you know, there's so many different strains. Each strain has unique attributes, flavors, unique effect, et cetera. So you can think of it like the wine industry, or you can think of it. The micro brew and craft brew industry. There's always going to be the large-scale producers. There's always going to be the big boys that are just pumping out the Budweiser, the Coors, the Kendall Jackson's over the world, but the majority of the industry is going to remain in some sort of scaled craft concentrates. And you can think of these, like the micro brews or individual vineyards. Then you're going to see the same thing with cannabis. But another thing. We can compare it to would even be food and our seasonal food or farm-based food. A lot of people will just eat commercially farming. I'm not one of them, you know, I will go to whole foods and I'll pay more for the local organic, artisanal food. I think you're going to see the same thing with cannabis and probably more to a larger scale on our artisanal side, because people that consume cannabis, there's something magical about the plant. Whether they're using it recreationally or to treat a medical condition people that use the plant, they feel a certain connection to it. A certain connection that it's put here by the universe. And it's put here for a reason and to adulter or the natural state of it is not the way that it's perceived to be intended to be used. That sort of belief structure holds true with the majority of cannabis consumers. And I don't think that you're going to see really a trend in shift in that. And I think that it's going to continue to hold true.  

Rob: I know that at LA blockchain week, I get a bunch of people that are interested in this space and they want a partnership up with someone and in their mind, at least as the way they explained to me over dinner, they're like, This number of followers, I'm making content in this space. I have devotees in this space and I want to be able to curate, what I put my name on and stamp on. Do you work with influencers or do they work with their PR firms or are you kind of B to B or how could how would someone come at you if they wanted to kind of get a business relationship going with, with precision extract?   Nick: We're a B2B, right? So we've, we're an equipment solutions and, and integrator provider of, of services. But you have to understand that, you know, I've been in the space now for 18 years. Most of our staff has been in the space for over a decade. So our tentacles and our roots within the space are extremely deep. Oftentimes. If we're not the right fit for somebody, we can point them in the right direction. We know everybody in the industry you know, I do a ton of speaking engagements. We have a very wide reach on all of our social platforms. So, you know, by all means we always appreciate referrals. And generally when we refer people out, we do it on them. Just a positive sort of vibe and, and it always comes back around to us and positive karma. And it's something that we believe in, in terms of the way we run our business and our morals and something that we believe in our philosophy for life also. So we're happy to help wherever we can, if it's just a couple of minutes of our day. And, if it's if it's a client. And somebody that wants to make extracts and produce actual products, then absolutely. We're the best company in the world to help them envision and create their dream.  

Rob: Amazing, Nick, I got two introductions that I want to make too on LinkedIn. I think you would be a huge resource for them. I'd like to thank everyone listening today to Rekt radio. And if you are not subscribed to go ahead and subscribe on substack at altcoins.substack.com Or a LinkedIn.com/In/DeFI/ and if you have additional for Nick or forthcoming speakers or ones that you want to hear with, go ahead and put it in the comments below Nick. I appreciate you coming on today and really shining a really informative light on this space and bringing some seriousness and professionalism to an area that I think getting their foot.   Nick: Absolutely. Well we've got a raging bull market for everybody. So everybody's welcome. And thank you guys for your time and anything you need, just please reach out.

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