A ‘Real’ Conversation About Medical Cannabis in Missouri
Derek Mays, founder and CEO, the Real Cannabis Co.
Courtesy of Derek Mays

A ‘Real’ Conversation About Medical Cannabis in Missouri

How a St. Louis cannabis company is progressing with its plan to become a vertically integrated operator in Missouri’s newly approved medical program.

December 17, 2019

Each year, new states join the legalization movement—ranging from limited medical roll-outs to full adult-use. In 2020, Missouri will join the growing list of states permitting the cultivation and sale of medical cannabis. Missouri voters passed an amendment in November 2018 to legalize medical marijuana. On Dec. 5, the state announced it would begin issuing licenses for all types of medical cannabis facilities on Wednesday, beginning with testing facilities.

Other key dates from the state’s Department of Health and Senior Services include the approval of transportation facilities on Dec. 23, cultivation facilities on Dec. 26, infused products manufacturing facilities on Jan. 10, dispensaries on Jan. 24 and seed-to-sale tracking software on Jan. 31.

Cannabis Business Times recently spoke with Derek Mays, the founder and CEO of one of the applicants, the Real Cannabis Co. in St. Louis, to gain insight into how the process works and what the company expects moving forward. Mays also works as a patent and compliance attorney, currently serving as deputy general counsel at Maritz Holdings Inc., a market research and business solutions company based in Fenton, Mo.

What drew you to this industry?

A friend of mine living in Illinois informed me of the [cannabis] industry forming in Illinois in 2015 and asked if I would have interest in beginning a venture with him in Illinois. We quickly realized we didn’t have the resources and connections or knowledge of the industry to be prepared to enter that market. But it did pique my interest and took that curiosity and brought it back to Missouri. Medical cannabis is a compliance business, so I felt with my compliance background … and my ability to find people who would be interested in investing in this space locally, we would be able to assemble a very strong team to enter this market and be successful.

Where do things stand with your company right now?

We have 10 management members. Some are full time, and some haven’t even moved here. We have myself and a couple of others still working for their [current] employers until we have a little more clarity with regards to licensing boards. But our business has put a lot of pieces in place. We’re pursuing seven licenses: one cultivation license, one processing license, five dispensary licenses—so we have a number of facilities under control, some leased and one purchased. We also are still working with consultants, and we are using their expertise to position ourselves to have rapid entry into the market when licenses are awarded.

We are working with an architectural firm and general contractor firms in order to be prepared to start building out rapidly. We’re not as concerned about being the first mover necessarily but are more about entering the market prepared and feeling that we’ve addressed any issues that we could face going in. We’re also doing a lot of marketing work and working on a new website that will be launching soon. We participate in events hosted by the Missouri Cannabis Trade Association, including a job fair. We received, I think, upwards of 75 resumes.

Can you talk a little bit about the licensing process, and are you confident you’ll receive one?

There are 60 cultivation licenses that will be issued, 86 manufacturing and processing licenses that will be issued and 192 dispensaries, which is divided up 24 each in our eight congressional districts across the state. So, my short answer to your question is that, yes, we are confident, but we’re as confident as any team can be in light of the massive number of applications that were received relative to each of those categories. In other words, there were, I believe, 550ish applications that were received for those 60 licenses, which means there’s about a one-in-10 chance of winning one of those licenses. We believe we are in the top 10% of the teams that have applied for licensure in the state, and we certainly believe we will win one of those 60, but we’re also clear-eyed and practical as well that it’s a very competitive process, so we have to be ready for any contingency.

And what makes you confident that you’ll be in that top 10%?

Why I’m confident is mostly because of the team we’ve built over last three-and-a-half years. We’ve been working on this since 2016. We just know that we a level of talent that most teams have not brought to bear. Beyond the amazing team that we have, the investor core that we’ve been able to maintain, the involvement that we’ve had in building out this program in the states, we believe our facilities are top notch. We’ve actually taken time to look at many of our competitors’ facilities, and we don’t believe their facilities compare with ours. And the support we’ve been able generate from the local community—I’m politically active, I’m an elected official in my community and serve on a number of nonprofit boards—the support that we’ve been able to get from our community and political leaders, I believe, is going to position us well in addition to that.

So, you must have a facility secured before you can even apply, correct?

That is correct, although you can do it either through a letter of intent or through lease or a purchase agreement. So we’ve been paying rent for the last several months without having any use for the space at all, which is not always fun to do, but that’s just part of the overall process—that you have to have control of these places so once you’re informed of whether or not you’ve won the license, then you can move in. One of the requirements is that you have to be up and operational within a year of the award. 

Do you have a contingency plan in place if, for some reason, you don’t win a license?

Once you’re awarded the license, you have five days to accept the license and reply to them and say, yes, we accept the license. If, for any reason, one of the teams elects not to accept the license, the next highest-ranked team would then be offered the license award. So we feel pretty good about being in the top 60 but if not and if other teams do not accept, we’re already going to be considering purchase options—approaching teams to purchase a license from teams who may have changed their mind or may not feel as strongly as they did before about the opportunities in Missouri. We will likely approach a team or more to purchase one of their licenses to enter the market. And then we’ll see where everything takes us.

Can you expand on how you were able to secure funding?

We are a minority-led business. And we will position ourselves as a minority business enterprise. However, it’s difficult to raise capital, particularly in this space, from only minority investors or primarily minority investors, so most of the funding we’ve gotten to date are from either family or friends who we’ve been able to touch base with or they’ve heard about us from any media attention we’ve received or just word of mouth. We’ve been fortunate enough where some of our current investors have reached out to other people in their family or their friends, and that’s really how we’ve built up our cohort to date.

We are seeking additional investors for our large raise. We’re still in the midst of trying to pin down the bigger dollars we’re going to need to quickly build out our facility, so we have not gotten that in its entirety at this point, so we’re still looking for investors who would be interested in our vision, and believe we have a strong team who will be able to operationally execute and rapidly scale this business to be competitive on a national level. We’re still looking for additional investors who would be interested in perhaps having conversations with us, but our current investors are very strong high net-worth individuals who are largely in this region who know who we are and believe in what we’re trying to accomplish.

Can you explain what goes into that process—in terms of making a pitch to potential investors?

We spend a lot of time building out our pitch deck, and we’ve spent a lot of time working with outside counsel. What we normally do is have a conversation, introduce who we are and why we’ve entered this space, what we’re trying to accomplish, the team, which is really our true selling point and then what we view as our advantages in attacking the market.

So, is your eventual goal to have a national presence?

Absolutely. We want to scale this business. Now, we’re very strategic in our outlook in terms of markets that we believe would be more attractive to us and how we can go about entering those markets, and honestly our goal is to provide investor value and to make sure that we operate this business in a way that’s responsible while also aggressively positioning ourselves for future success. It’s very difficult to be profitable from the outset [so we need to] at least be responsible in terms of operating this business in a way that our investors would feel comfortable in continuing to support us and our approach. I guess that’s a long-winded way of saying we’re going to take our time and make sure we take all steps possible to be profitable as early as possible and remain profitable while also keeping our eye on any and all opportunities that mesh with our strategic outlook.