Jmîchaele Keller knows how to put a face on cannabis contaminants—his own.

The charismatic entrepreneur recently startled a room full of congressional staff by telling them about how he cut his ear in half.

Keller’s audience, gathered to learn about pesticides and other product safety concerns, cringed as he projected a photo of his grisly wound onto the U.S. Capitol Complex wall.

Although he is CEO of one of the nation’s largest cannabis testing companies—Steep Hill, with labs or affiliates in seven states—Keller lives in the Netherlands, where sales are unregulated.

When he consumed what he believed to be cannabidiol (CBD) from a tincture, he passed out almost instantaneously, waking up to find he had fallen and badly sliced his ear.

“My story is not unique. I’m sure you can find it in the U.S.,” warned Keller, who entered the industry two years ago as he embraced CBD as a treatment for a digestive condition.

It turns out there was no CBD in the tincture he used, and that isopropanol was used in the extraction process; and while isopropanol is sometimes used in home extraction (not usually in commercial extraction due to risk of residuals), residual levels remained in high enough concentrations to pose grave health risks, Keller said. The experience, Keller continued, made him see a need for federal regulation—and testing requirements for pesticides and contaminants—in the United States.

“I’m on a mission,” he said. “FDA, please help us!”

The States: Labs in the Laboratories of Democracy

With federal oversight still a distant prospect, however, states have been working to refine their own rules for pesticides.

There are still no federally approved pesticides for cannabis use, leaving states to sort through substances that cannabis cultivators are allowed to use and to define acceptable limits for those compounds.

Colorado has a list of fewer than 200 allowed pesticides and doesn’t yet require private lab testing; Washington allows 330 and requires lab testing for 13 pesticides; Oregon allows 362 and requires testing for 59.

Alaska’s Division of Environmental Health/Pesticide Control Program has a “Partial List of Pesticides that Meet Criteria to be Used on Marijuana Crops” with 145 allowed substances, and the spreadsheet noting whether each substance is a good treatment for fungus, mites, insects, slugs, worms, or for use as an insect growth regulator (IGR). Pesticide testing hasn’t yet been rolled out there.

Nevada, meanwhile, maintains a list of nearly 100 substances that can legally be used. And in California, draft rules for medical marijuana were released by the California Bureau of Marijuana Control in May, suggesting mandatory testing for 66 pesticides. Draft rules for recreational marijuana are expected later this year, and some anticipate the proposed pesticide regulations will be adopted for adult-use cannabis as well, once the medical and recreational programs are integrated under SB-94, the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).

Some medical marijuana states, such as Arizona, don’t require cannabis testing, much less specific pesticide screening. And across the country, laws are changing as regulations are debated in legislatures and among health and agriculture officials.

In states that rolled out restrictions, many labs say cultivators are increasingly falling into line.

Oregon, for example, has seen a trend toward compliance, suggests Dr. Anthony Smith, chief science officer at Signal Bay, a lab based in Oregon with a small satellite location in northern California.

“In 2015 and most of 2016 we saw failures for pesticides in flowers on the order of 15 percent of the batches we tested,” he says. “Beginning in 2017, we are slightly under 5 percent.”

In four years, Smith says the lab has only ever seen results indicating the presence of about 15 chemicals of the 59, and he feels in time he could imagine data-driven revisions to the list.

However, a white paper prepared by the Cannabis Safety Institute (CSI) in 2015 found that use of unapproved pesticides is a widespread problem, with certain substances much more common than others.

The CSI study, whose authors were based in Oregon, found 10 percent of samples contained myclobutanil—a fungicide that can create hydrogen cyanide gas when burned (relevant, obviously, to smokable forms of cannabis) and that is typically banned for cannabis use—and mite-fighting bifenazate. Imidacloprid, an insecticide, was among the most commonly detected. Smith says the top pesticides in that study retain their primacy in his lab’s results.

Dr. Donald Land, a University of California-Davis chemistry professor who leads Steep Hill’s pesticide-testing efforts, says pesticide use and testing protocols vary among regions. In Hawaii, for example, authorities don’t require testing for pesticides not available on the islands, he says.

States like Wisconsin, Land adds, may see less myclobutanil use, as that substance is used heavily by wine-making regions and may not be locally available.

“That’s the thing with cannabis: [Growers] use what they can get. Things that are widely available in that market,” Land says, noting that insecticidal pyrethrins derived from chrysanthemums are among the most widely detected pesticides.

Though first to roll out recreational sales, Colorado has been slow to force pesticide testing.

Luke Mason, co-owner of Colorado’s Aurum Labs, says the company bought used equipment for about $240,000 last year to test pesticides, as he was receiving inquiries about such testing. In the past year, he says, he has run fewer than 50 pesticide tests.

“I do not expect to see my money back on that until at least a year or two after testing for pesticides is required,” he says.

Dr. Claire Ohman, lab director of CMT Labs and a member of Colorado’s pesticide working group, says the group recently completed a pesticide detection-limit study, and that the Colorado Department of Public Health and Environment will establish baselines “above which all of the labs should be able to detect pesticides” and that a lab-certification program for pesticides will follow in the near future.

Good Lab or Bad Lab?

Labs in different states must meet different third-party or governmental certification requirements. But should the assurances of certification give peace of mind?

Maybe not, considering controversy in Washington state, where state-accredited labs are mired in controversy about alleged cheating to attract customers, as detailed in a Leafly report this spring. In April, the Washington Cannabis Laboratory Association—a group of cannabis labs—filed a complaint with the Washington State Liquor and Cannabis Board (WSLCB), alleging one of the state’s top-six labs routinely inflates THC results, with average results significantly higher than its five top competitors. In February, the Cannabis Farmers Council informed the WSLCB that a member had sent a sample to eight labs, with results from one standing well above the rest.]

In his speech at the Capitol, Keller warned of “bad scientists” and “disreputable labs.”

“There are plenty of them in every state in the country,” he said.

Land says the high cost of testing machinery may mean some labs lack the capacity to be effective. He says it takes research into the lab’s history to gather confidence, and that it’s possible for suspicious growers to send samples to different labs to verify for themselves.

Reputable labs incur additional cost to ensure their results are accurate, Smith says, noting his lab performs quality-control testing for each pesticide for every testing batch to make sure testing equipment can accurately measure a control sample.

The quality-control testing involves using an expensive, pure reference chemical of the pesticide and making sure the testing machine gives an accurate readout, he says. He encourages growers to ask labs if they’re doing it.

“Labs should be adding value to your products through good testing, not just giving you some paper that lets you enter the commercial space,” Smith says. “If you make a mistake measuring THC, people are probably not getting sick. But when you’re looking for something like a pesticide, it’s not in all samples, and if it is, it’s in very trace amounts. … You have to be able to say if the compound was there, we could have detected it.”

Organic Cultivation and Pesticides

Some growers strive to grow organically, which means using natural strategies such as beneficial insects or natural oils or sprays. Trying to be organic and actually being pesticide-free, however, can be two different things.

Keller said he knew of people who “thought they were organically growing,” but testing revealed otherwise.

Land says that this might in some cases be caused by systemic pesticides in clones. (Editor’s note: See the “Systemic Pesticides” story in the May 2017 issue of Cannabis Business Times for more on this.) He says the research remains to be done, but that “the lore” among growers is that it can take five clone generations for a systemic pesticide to be totally undetectable.

Smith recalls that in Oregon, some samples tested positive for metalaxyl, initially a puzzling result as the chemical is not generally associated with cannabis. He later realized that growers with that chemical present during testing were in proximity to nearby orchards, where it is used to prevent fruit rot.

“It could be your neighbors, basically,” Smith says. “You should think about testing your soil if it’s old agricultural land or if it’s imported from somewhere.”

Taking on California

California’s large and long-unregulated market is about to meet state bureaucrats famous for big-government regulations. And it might not be pretty.

“My guess is probably 70 percent of growers use pesticides” currently in California, says cultivator and retailer Eli Bilton, specifically referring to substances that might soon be declared off-limits. The second-generation grower, who moved from the Emerald Triangle of northern California to Oregon in 2015, says, “Maybe it’s even higher.”

Land says he believes that 70 percent is a decent guess for the number of California growers currently using pesticides that the state may ban. He says Steep Hill has seen an upsurge in clients as growers prepare for mandatory testing, likely to come next year.

California is notable for the reluctance of some of its cannabis business owners to talk to reporters. A leader at one small, but well-regarded California lab declined to talk at all about pesticides for this article, saying news articles had covered the topic, and they had nothing to add.

Land says California’s transition to required testing will be messy, but that “it’s a mess everywhere.”

“The thing that’s unique to California is scale. There’s significantly more cannabis being produced,” he says. “What you have in California are microclimates up and down the state, [and] with all those different microclimates, you have different pests that are present.”

Still, for all the complexity and kinks that need to be worked out—including concentrate sampling, acceptable testing levels and batch sizes—predictions aren’t all bleak.

Land anticipates that cultivators will use far fewer unapproved pesticides once testing is required.

“Having test results will allow people to minimize the problems,” he says. “Once that happens, the good actors will come out on top.”

Steven nelson covers legal affairs and drug policy for U.S. News & World Report. He lives in Washington, D.C., where a green thumb would be useful.

The growth of the North American cannabis industry ripples through communities across borders, but often overlooked are the tribal bands and their unique position within North America. With sovereign control and special relationships with federal government, tribal communities can offer companies and investors opportunities that are difficult to find elsewhere.

First Nation tribes, largely those situated throughout Canada, are beginning to show interest in entering the burgeoning marketplace.

“You’ve got a land base. You’d have a partner who has tax advantages,” says Shawn O’Connor, general manager of Homalco Wildlife Tours, who is currently developing branding for Homalco First Nation’s medical cannabis operation in Blue Inlet, British Columbia. “You would have a partner who also has some form of political capital in Canada,” O’Connor says.

Ontario-based Pontiac Group, led by managing partners Jacob Taylor and Jonathan Araujo, helps facilitate partnerships between native bands and established brands in the cannabis space, helping native groups find their niche in the rapidly developing industry.

“Companies are looking to become unique in this space,” Araujo says. “And that’s what will make us unique in the world, is having this plant tied to First Nation culture and First Nation spirituality.”

Pontiac Group helped coordinate the partnership between the Wahgoshig tribal community and DelShen Therapeutics Corp., a medical marijuana licensed producer in Canada. According to the Pontiac Group, 13 communities are now involved in medical cannabis, and it anticipates more than 40 First Nations bands joining together for mutual benefit. Taylor noted that the cannabis industry offers a chance for individual tribes to work together to take advantage of a promising industry.

“It’s very rare that First Nations get on board with new things as they come into Canada,” Taylor says. “And it’s even rarer that they come on board as a collective.”

On the corporate side, companies partnering with tribal bands would not only be able to benefit from tax advantages, branding opportunities and lower energy costs, but also directly impact the communities. Martin Shefsky, executive director at DelShen, convinced the company’s board to take an active role in corporate social responsibility, citing it as the key in working with First Nations.

“We wanted to give back, we wanted them to participate, we wanted them to share in the economic benefits,” Shefsky says. “It’s a material differentiator.”

That difference is something Pontiac Group and O’Connor see as the driving force in tribes participating in cannabis: the opportunity to build up tribal communities with jobs, infrastructure and better health resources. The potential source of revenue has caught the eye of tribes across borders.

In Santa Ysabel, Calif. (San Diego County), the Iipay Nation, over the past few years, has permitted medical cannabis, converted its defunct casino’s 35,000-square-foot gambling hall into a cannabis grow facility and developed a cannabis regulatory agency in an effort to create a solid framework for cannabis enterprises. Despite the generally conservative demographic, the general membership of the tribe supports the decision to develop medical cannabis to better the community.

“The money will be going to things like road improvements, building improvements, government infrastructure improvements, job training,” says Dave Vialpando, executive director of the Santa Ysabel Cannabis Regulatory Agency. “The tribe is looking to invest those revenues in providing for the tribe’s self-sufficiency and self-determination, which goes along with the tribal nation’s sovereign responsibility as a right.”

Job creation is another motivator for tribes that often deal with high unemployment. O’Connor sees 30 to 40 more jobs being created for Homalco First Nation once he and Chief Mary Ann Enevoldsen set up the production license for their cannabis operation.

“The youth like the idea of working in the cannabis industry,” O’Connor says. “Whether it’s in sales or growing, or related skill trades that would be involved, like electricians or plumbers or botanists.”

Perhaps the most important benefit for tribal communities is cannabis use as a harm-reduction strategy. Bands have notoriously struggled with abuse of tobacco, alcohol and opiates. Pro-cannabis supporters involved with these tribes hope to continue changing the historic perception of cannabis from negative to positive as a big step toward more tribal involvement. Canada’s Thunderbird Partnership Foundation, which works with the First Nation and Inuit communities to help address substance abuse and addiction, views consumption of cannabis as a way to curb the detrimental use of these other substances.

“This is a plant that was given to us by planet Earth, and we’ve known of its health applications,” Araujo says. “We don’t know the science behind it per se, but now the Western world is really getting on to the science behind it, and we’re excited to be a part of this movement.”

Canadian Context

As for what the rules and regulations for recreational cannabis will be in Canada, that remains a mystery, and the anticipation is creating confusion.

“The problem is a lot of the rules and regulations are moving targets. So no one knows what they are going to be,” Shefsky says. So instead of waiting on government to set the terms, Shefsky is prompting industry leaders to offer training programs that will acclimate potential producers to Canadian cannabis.

According to Shefsky, education is paramount because a cannabis boom, which professionals expect after legalization, will open the door to major vulnerabilities.

“If another 50 facilities are built and operated, you’re going to have the potential for a high failure rate,” Shefsky says, noting that a lack of human capital could be the demise of would-be cannabis businesses.

Cannabis outside medicinal is still illegal, but the currently proposed Cannabis Act could make recreational cannabis legal by July 2018. This would make Canada the first industrialized nation in the world to legalize recreational cannabis.

Business for recreational cannabis could prove successful based on data provided by the Canadian Justice Department. According to the Government of Canada, licensed producers of medicinal marijuana have been growing steadily year-to-year. There are currently 50 licensed producers in Canada, according to government data.

For First Nations to reap some benefit from this growing industry, government representation will be key.

Pontiac Group is adamant about keeping First Nation representation in government as the tides roll toward total legalization, especially for the safety of First Nations. That means incentivizing both parties to meet.

“There needs to be input from First Nation peoples in this land,” Araujo says. “If they don’t do that, we’re going to have the same issue as we do with tobacco, where community members are just going to set up shop anyways, and they’re going to do it the illegal way because they were never consulted with.”

Bridging the Culture Gap

Drawing a bridge between tribal culture and the modern, westernized business world is the major service Pontiac Group provides. Both Araujo and Taylor explained that there are many differences in perception in how deal-making works between these two, often-clashing worlds.

“It is in our culture that we take our time to really come up with much thought about an answer,” Araujo says. “And when you’re in a corporate meeting or business meeting with people and they’re asking a question to a native party or a native audience, and they don’t get that two-second response, they often start to freak out, and Jacob and I have seen this in many business meetings where they become uncomfortable.”

While Western business people can struggle with the slower pace of First Nations, tribal people grow frustrated with Canada making decisions on land that tribal people consider to be their territory, the Pontiac Group members say. Both Araujo and Taylor realized they needed to better educate indigenous people about non-tribal business customs.

“A lack of understanding [from Tribes] has been apparent,” Taylor says. “And we’ve really been on an educational process ourselves over the past few years in working with communities on this subject.”

Sean O’Connor says that it is important to understand that native bands are governments unto themselves. But there is overlap between both sides when it comes to stigmas surrounding cannabis.

“The brainwashing of the past against cannabis looms large and [over] the older segment of the population,” O’Connor says. “It takes time to sort through and consult and discuss like any governing body would to make sure you are representing the interest of the people.”

Large sums of money are essential for tribal communities to build the infrastructure necessary to build a business, one that can help update roads, provide jobs and offer medicinal cannabis. But for companies interested in partnering with tribal people, Shefsky suggests learning about tribal needs, desires and problems before going in.

Often, the deeper need from the tribes when considering business ties with the corporate world is respect.

“What we look for is what we call a VCR, they have to have a vision, the capacity and the respect for the First Nation,” O’Connor says.

U.S. Relations— Playing It Safe

Laws exist to respect sovereign, tribal lands, many of which are on both sides of the border. For example, the American Indian Religious Freedom Act allows for peyote, listed alongside cannabis as a Schedule I drug, and other products to be transported across the border for ceremonial purposes.

“We have contacts in Washington state as well, and trade between First Nations is a growing sector of economic activity both in Canada and the U.S.,” O’Connor says.

But taking cannabis across the Canadian border still poses the threat of serious jail time. Even if the current Cannabis Act were to be passed, the penalty for crossing the border could mean up to 14 years in prison for Canadians.

When it comes to considering doing business across the border, Shefsky says the United States is in the back of DelShen’s mind, but the group will wait until the regulatory framework is more favorable.

Despite a 2014 Justice Department ruling stopping attorneys from prosecuting tribes that cultivate cannabis on tribal land, a 2015 project for a cannabis resort in South Dakota was stopped after federal authorities threatened raids. The consultant working on the project at the time, Eric Hagen, was arrested and charged with conspiracy to possess, possession and attempted possession of more than 10 pounds of cannabis. He was cleared of all charges in late May 2017, according to the Sioux Falls Argus Leader.

Another native band, this one in California, also had its cultivation operation raided in 2015. The Pinoleville Pomo Nation had 400 plants and an extraction lab raided and eradicated in September 2015, according to the Ukiah Daily Journal.

Despite short-term prospects for exports looking dim as the U.S. federal government could roll back some of the cannabis industry’s protections (most notably the Rohrabacher-Farr Amendment), Canada could still play a major, global role. Both Pontiac Group and Delshen believe that Canada will be looked at from around the world as a leader in expanding cannabis into a nationwide industry—an industry that can uplift tribal communities.

Sam Fiske (top) and Sean Froelich (bottom) are freelance reporters and producers in Chicago. Along with their colleague John Rosin, they team a production crew and create videos covering politics, tech, business and culture. They currently produce web shows and podcasts for Technori, a startup showcase, and are published on WGN radio. The team also creates dozens of videos for their original news network, Toughington Post.

“I’m founder and CEO of Cloud CO Farms. We will cultivate over 80 acres of CBD-rich, non-psychoactive cannabis per year.”

Luke slightly falters after the opening line to his pitch on season 1 of “The Marijuana Show.” The then-24-year-old is visibly nervous in front of the investors: He is fidgeting, his voice is monotone and he is hesitating. He makes the mistake of saying he has partnered with more experienced cultivators and that they will take 50 percent of the crop at the next harvest, which the panel of these “Shark Tank”-like investors interprets as him only being a 50-percent owner of the company.

One by one, the investors announce they won’t join Luke’s venture—although the two dispensary owners on the panel say they will sell his product in their stores if and when he is operational.

“The Marijuana Show” creators and producers, Wendy Robbins and Karen Paull, felt that Luke deserved a better result. So they gave him a second chance.

“A lot of times, we’ll go off of somebody’s passion and somebody’s reason why they’re doing something,” Robbins says. “His family had already put all their retirement money into this farm with the belief system that he would succeed.”

“There was something in us that just knew that he would do whatever it took. And sure enough, he really has,” Paull adds.

On his second try pitching to an investor, Luke (who preferred that his last name not be published) was able to secure a quarter-million dollars for a 25-percent equity stake in his company—a million-dollar evaluation for a cultivation company that didn’t have any plants growing yet, led by an owner that has very little cultivation experience.

With that money, Luke has finished building, and now oversees, 11,500 square feet of greenhouse space dedicated to growing hemp for extraction purposes. And with the recent addition of a $300,000 extraction lab, paid with a loan from the company’s main investor, Cloud CO Farms now is making plans to change the makeup of Colorado’s San Luis Valley.

From Wall Street to High Life

Atypically in this industry, Luke did not have any cultivation experience prior to moving to Colorado. A native of Warwick in upstate New York, he earned his college degree from Loyola University—a private Jesuit school in Baltimore, Md.—in business management with a focus on finance. He got his first job out of college in July 2013 at a stockbroker’s house, where he spent his days cold-calling potential clients.

He says that side of the finance industry was not the right fit for him, as he wanted to help people rather than sell to them. He then moved to Northwestern Mutual in a financial advisory role, helping people make better financial decisions.

Throughout his ventures on Wall Street, Luke was keeping an eye on a burgeoning industry on the other side of the country: cannabis. A trip to Colorado to visit his brother in February 2014 solidified the notion that this was something he could do. He took a growing class at an establishment that, he says, “wasn’t too legitimate,” but still offered him good experience.

His return to New York City was a short one: He sold most of his belongings to his roommates and friends in the city, packed a couple of bags and left in July 2014 to start working on his cannabis dream.

“The only reason I ditched all that and came out here is because I saw an opportunity that was better than the one that I was currently looking at [on Wall Street] that would satisfy the two things I was trying to do, which are: provide financial independence for myself and my family, and find a way to help people in doing so,” he explains.

Learning the Ropes

Luke’s first stop on his new journey was Pueblo, Colo. Along with other hopeful cultivators, he met with a real estate developer with 300 acres of land, who wanted to divide them into 5-acre lots and build greenhouses for cultivators to lease.

The next six months were spent in planning meetings, designing the greenhouses, planning security, listening to equipment-supplier pitches. Ultimately, however, the owner of the property lost his funding, and the project fell dead.

Despite the setback, Luke says he learned a lot about every aspect of the cannabis industry, especially about the risks associated with a start-up industry. He says everyone involved in the project failed to do their due diligence about the property owner’s finances.

“We trusted this guy, ’cause we had spent so much time together, and he gave us the assurance that it was moving forward, repeatedly. But eventually, I guess, when it comes time, you figure out real quick who’s actually gonna be able to pull it off and who’s not,” he says.

Luckily, he was able to get his money back: roughly $150,000—his mother’s entire retirement savings. He says knowing where his money is coming from motivates him “to work 100 hours a week, every week,” and pay himself a $5/hour salary. “I can’t imagine losing that. … I could never let that happen,” he says.

At the time, Luke was living in an apartment in Pueblo with his mother. He took the retirement savings and rented a greenhouse operation to get some experience growing and some cash flow. He also bought a limousine to help him sell his recreational cannabis product to dispensaries.

“In Colorado, you can legally smoke in a vehicle while driving if the driver is in a separate area of the vehicle where he’s not exposed,” Luke explains. The plan was simple: Drive to dispensaries, invite the purchasing manager for a test drive where they could sample the product in the back of the limo.

“Now that we’re doing hemp, it’s turned into a family collector’s item,” he says with a laugh.

While working the greenhouse operation, Luke also was searching for properties across the state. An online search yielding a thousand potential properties was narrowed down to 30 that he wanted to visit in person, which, in turn, became a handful of viable options.

Luke says the first thing you need to look for when shopping for properties suitable for cannabis cultivation is water. The second? Also water. It took him another six months to find a suitable property, but in July 2015 he finally found the right place to build out his dream: Alamosa, Colo., in the San Luis Valley.

“It was 127 acres for less than $1,000 an acre; it had three agricultural wells with water rights,” he says, “so we would be able to do what we needed to do in terms of irrigation.”

The other attractive point about the property was the owner being open to finance the purchase, so Luke only needed a 20-percent down payment.

“For us, the property was affordable, it had a lot of space and room to grow,” he says. “The local county officials were open to working with us in terms of giving us our certificate of occupancy, and allowing us to do the hemp cultivation and also the hemp processing.”

Unstructured and Out of Money

What the property did not have, however, were any structures; it was just “a big piece of vacant land,” as Luke describes.

So the young entrepreneur shifted his focus from real estate to greenhouses. At first, Luke says he was considering all options from “the state-of-the-art … greenhouses … all the way down to little cold-frame hoop houses.”

“I’m always just looking for the best value I can find—something that works, that’s gonna get the job done,” Luke says. Ultimately, he settled on a 30-foot by 96-foot greenhouse frame from Oregon Valley Greenhouse, purchasing four of them, and sourced the rest of the parts from different suppliers.

One of those sourced parts is a solar cover made of woven fabric that Luke says is “significantly stronger than your typical poly cover.” Those covers have been on the greenhouses for 18 months, and he hopes to get another five to six years out of them before they need to be replaced, barring any serious tearing from winds.

“Also, one of the biggest points on this one was that it has a 100-percent diffusion rate,” he continues. “If you picture a ray of light coming in at a straight line, it’ll hit that cover, and that cover will basically blast it into thousands and thousands of particles going everywhere.”

There are several advantages to having proper diffusion rates: You improve your light coverage, reduce heat by dispersing the energy throughout the structure, and reduce the risk of burn spots, which can damage crops, he says.

While Cloud CO Farms’ team reduced costs by building the greenhouses themselves—Luke’s brother worked as a construction manager in Manhattan, notably for the Bank of America building—the company ran out of cash during the building process. In addition to his mother’s retirement savings, Luke was able to amass another roughly $100,000 in loans from family and friends. When that was spent, he turned to “The Marijuana Show.”

Showing Off

Looking back at his appearance on “The Marijuana Show,” Luke realizes the odds of him leaving with an investment were pretty slim, especially given the size of the project he was pitching and his lack of experience.

“I’m coming in there with probably the biggest idea out of anybody on the [show’s first] season,” Luke recalls. “What I was trying to do was large-scale, ... pushing boundaries. And to investors, that’s pretty scary, especially for somebody who hasn’t done it before.”

To Robbins and Paull, Luke made a few critical mistakes in his pitch, not the least of which was giving the impression that he did not fully own the company.

“And then he offered them too [little equity] based on the expertise that they would have brought to the table and would have needed to bring to the table,” Robbins says.

Paull believes this is a common problem in the cannabis industry: people believing their company is worth more than it is because it’s cannabis, or are making sales projections based on today’s figures without considering the drop in prices that is currently being seen across the industry.

“You don’t want to overshoot in your evaluation [and say], ‘I’m worth $20 million,’ [when] you haven’t put anything in the ground. This won’t make sense” to the investors, Paull explains.

After Luke failed to secure financing on his first round, the show’s creators coached him on ways to improve his pitch. Notably, they told him that he would have to be open to giving a bigger equity stake in his company and that the investor is going to want control of the company should he get off track. When all is said and done, it’s about the money for the investor.

“That makes sense because that is what an investor is going to do,” Robbins says. “And that’s part of it, too, if you’re a young entrepreneur or a young cultivator, … you want to interview [the investors] as much as they interview you” to ensure your visions for the company are the same.

“Your investor also wants to know that you’re coachable,” she continues. “So … we would tell anybody, including Luke, … to make sure that you’re really ready for the investment, that you’re available to be coached, that you’re available to hear the needs, that you’re going to do what needs to be done to be profitable.”

His appearance on the show also allowed him to make connections with people he otherwise would not have met, some of which have turned into business opportunities. In addition to the two dispensary-owners/investors who said they were interested in carrying Luke’s products in their stores, Luke says he also has created a partnership with another contestant from the show “who does dog treats and dog bones.” He has been selling his extracted CBD oil to them for use in their medicated dog treats.

Building those relationships has been crucial to the company’s growth, and Luke never completely shuts the door on anyone, even people who have turned him down in the past.

“You can never do that, as much as you want to,” he says. “I’m just trying to build my network as much as possible, and not burn any bridges, ’cause you never know what might come up down the road.”

Hemp vs. Marijuana

What made Luke stand out from the rest of the entrepreneurs on the show’s first season, apart from pitching a cultivation business, was that he was not pitching a marijuana business, but rather a hemp business. While he thought the marijuana industry was reaching a saturation point, Luke saw the CBD market as filled with opportunity.

“This was mid-2016 ...,” Luke says. “The price for CBD was very high, at that point, because there wasn’t any supply, really.”

There were other advantages to growing hemp instead of marijuana: The cultivation license for hemp is only $500 versus $25,000 for a marijuana cultivation license; there is no plant count limit for hemp; and you can grow it outdoors anywhere in the state, whereas marijuana can only be grown outdoors in Pueblo, he says.

More opportunities also exist for partnerships with groups outside of the marijuana industry. Luke is in talks with Adams State University in Alamosa, which is starting to research the industrial uses of hemp. While Cloud CO Farms is not focused on industrial hemp (its focus remains on CBD production), Luke is “trying to get some interns for biology in the greenhouses, and some interns for chemistry in the lab doing processing.”

Cloud CO Farms’ extraction lab has become the crux of Luke’s plans. When he was planning the harvest of his first crop, he realized that he would have to spend $200,000 to get it processed because “processing options were so limited.”

“We decided we could either spend $200,000 to get this [crop] processed, or we could spend $300,000 and build our own processing facility and do it ourselves,” he explains.

With those extraction tools, Luke and his employee Dennis can process raw CBD flower into anything from oils to 99-percent pure CBD crystals, Luke says. But more important than that are the business opportunities this opens up: processing for other cultivators.

Luke already has his business plan in place: $2 per gram buybacks on distillates and $4 per gram buybacks on 99-percent pure crystalline isolate. Additionally, cultivators low on cash can kick back a portion of the distilled product to Cloud CO Farms.

Now, the 25-year-old has begun looking toward nearby farms as potential revenue streams. With one of the greenhouses on the property reserved for nursery production, Luke can sell hemp seeds and clones to those local farmers he can convince to start growing hemp as part of their regular crops.

“The strategy of our business is to be able to provide clones or seeds to farmers, so that they can plant their fields. And then, be able to provide them with processing services so that when they’re at their harvest, they can take their hemp and actually turn it into a more viable product,” he explains. He’s also working on adding distribution to the company’s list of services to become a “one-stop shop” for farmers unfamiliar with the cannabis industry.

“Our goal as a business is to take all those concerns off of the farmer’s plate, and just have them do what they do best, which is farm,” he says.

The biggest challenge for Cloud CO Farms and the entire CBD industry, Luke says, is getting consumers educated about CBD to increase demand. But with $150,000 in revenue in his first three months selling his product, it seems that Luke is on the right track to pay back all his creditors.

Especially his mom.

Canopy shape has a significant impact on your company’s bottom line, and that’s seen in the many different canopy shapes cultivators are trying out. No clear consensus has emerged on which approach is best, and that is not surprising for a young industry. These shapes are being created by growers using the familiar techniques of pruning, pinching, trellising and super cropping. Add light, nutrients, hormones and plant spacing to your shaping toolkit, and you can deliver the lowest-cost canopy management program for any growing situation. Here, we review a handful of canopy-shaping techniques and how they can impact your cannabis harvest’s bottom line.

Abstinence

It’s always easiest to do nothing. Many strains grow into bush-like forms with no effort on the grower’s part. So if a grower selects only such strains, they can duck a significant amount of labor. Sativa-dominant strains, on the other hand, often have tall and skinny phenotypes. Even they can be transformed into bushier shapes with the right handling, but the grower must decide if it is cheaper to coerce those plants into a higher-yielding shape or just plant more of them. The answer to that and other shaping questions comes from assessing the cost of producing a given plant size and shape against the additional yield attributable to the shaping.

Short, Tall, Skinny, Fat and Flexible

After doing nothing, the next easiest/cheapest shaping tool is nutrient and light manipulation with which growers can speed up or slow down plant growth at will. While shaping actions determine the basic plant structure, nutrients and light determine size. Combine the two to get the shape you want.

The home-grown plant in the picture on pg. 91 was grown on half the nitrogen most veg formulas contain. The extremely short internodes demonstrate how much growth rates can be controlled this way. This 3-foot plant produced ¾ of a pound of finished product with flowering nutrients, so it is clear that by raising your elbow a little more or less as you pour nutrients into the tank, you can get the plant to do what you want.

Nutrients can also help the extreme shapers out there who use trellising or super cropping. Using more ammoniacal nitrogen (NH₄) over nitrate nitrogen (NO₃) produces supple branches that can be more easily manipulated. This is a little harder than it sounds since most cannabis nutrients contain only small amounts of NH₄ and offer no way to alter that. Nutrient salt users can easily add ammonium sulfate or ammonium nitrate to get the desired suppleness.

Hormones

Pinching off growing points manipulates hormone levels, a process to which all plants are remarkably responsive. Growing points produce auxins, whose presence at certain levels suppresses side branch growth. Reduce or eliminate the auxin levels with a pinch, and that suppression signal is lost resulting in increased side branch growth.

Caged vs. Free Range

Shaping decisions have historically been based on understanding how much more yield is gained from a proposed action. That additional yield will be dependent solely on how efficiently a plant shape intercepts light. (For more, see our column “The Key to Maximum Yield,” in CBT’s January 2017 issue: bit.ly/maximizing-yield.) Growers need to look long and hard at the light-gathering character of any trellis scheme before committing to it.

Yield is not the only reason for trellising. Growers in some states now must comply with total canopy area restrictions, and trellises offer a solution. The cost of this compliance solution is the labor of tying plants to the trellis.

For example, think about a plant with just eight main branches that will be tied along trellis wires as they grow. Assuming each branch needs three ties, 24 ties are required. At 20 seconds per tie-down, including all overhead, this amounts to 8 minutes per plant. Two thousand plants require the equivalent to 6.6 40-hour work weeks and 5,000 plants require 16.6 40-hour work weeks. As prices drop in the market, such costs will draw increasing focus, and the pros and cons of trellising will get a second look.

The alternative to binding plants is freeing them. Free-standing plants require little shaping and don’t have trellising costs. That is a big plus, assuming yield is the same. Canopy area can be easily measured, and compliance should be a proactive activity designed to ensure the operation remains legal.

Spaced Out

The Drug Enforcement Agency (DEA) in 1992 released a study, “Cannabis Yields,” showing that plants given twice the space to grow produced as much as three times the yield of more densely planted crops. The DEA did this study to help field agents quickly assess the amount of cannabis in an illegal operation. Twenty-five years on, the study still offers growers valuable insight into plant growth and a tool for their shaping toolkit.

Apply Yourself

Armed with a now-complete set of shaping tools, all that remains is to apply them appropriately. All cannabis strains produce a natural structure of a single main stem with side branches. Pinching the growing point on that central main stem leader stops vertical growth of the main stem and redirects growth to side branches. Pinch the leader after six to 10 branches have formed, and you will get a multi-stemmed plant that reminds you of a flared flower vase holding a big bouquet of flowers. Combine that structural modification with low nutrients to produce a short, stocky plant with a wide canopy that can hold prodigious flower loads. Do this with many plants to get a sea of green canopy that doesn’t require trellis netting. Labor savings, anyone?

Knowing whether your plants are ahead or behind is key to consistent canopy management. You get this information by measuring plant height and canopy girth over several crop cycles. The information allows you to plot out growth curves over time. Compare the current plants against those curves, and you can see where the plants are versus where they should be. If the plants are right at the height and width on the growth curve, the Growth Progress Index (GPI) is 1.0. If smaller, the GPI is less than 1.0, and if larger, the GPI is greater than 1.0.

Knowing where your plants should be, you can make active growing decisions to keep them on target. If veg plants are smaller than they should be at some point, a nutrient boost and increased light will catch them up. If plants are getting too big during transition, keep them small by reducing nutrient concentrations/frequency and lower light levels during transition.

Super-cropping (see “5 More Tips for Increasing Yields”) is a way to get more flower sites exposed to light. This seems to be a technique unique to cannabis cultivation, suggesting that it arose out of an underground grower’s need to be able to deal with overgrown plants rather than a strategic approach; however, it is standard procedure for more than a few cultivators. Overgrowing plants is another common strategy where plants are allowed to get big and then are cut back to get a denser outer canopy with more flower sites.

There is nothing functionally wrong with these techniques, but additional veg time (up to twice as long) can increase costs and veg space requirements dramatically. We suggest the shaping time and energy can be reduced by a growing plan to get plants directly to their final size with no over-growth using the control techniques discussed here. In this world of the incredible shrinking profit margin, we expect labor-intensive practices to eventually disappear from large-scale cannabis production.

Use Caution

Growers do need to be aware that pinching and pruning at the wrong time can reduce yields. Pruning plants in flower can produce conflicting hormonal signals that can slow growth; contain all pruning and pinching to the veg room, and then use only nutrients and light during transition. Growers using ultra-short veg periods will not have time to do much, if any shaping. And on the cost side, that’s a plus.

Being the free spirits that plants are, from time to time they will send out branches that don’t grow the way you want them to. Branches may grow inward or just too close to other branches. These branches should be removed to keep the canopy open to the airflow that is so important to disease prevention.

Extreme shaping using spreaders, weights and other bonsai-like techniques is no longer commonly seen with production plants due to the labor involved, but the practice lives on in mother plants, which are often grown with multiple main stems. The ability to spread those main stems produces a more productive mother plant.

Canopy management is a game of shape and size, and until one shape is shown to be superior to others, growers will continue to experiment with shaping. What you decide to do to your plants will determine whether you spend a little or a lot on your canopy. For cultivators who spend a lot, the business question is, what are you getting in return?

Kerrie and Kurt Badertscher are co-owners of Otoké Horticulture, LLC and authors of “Cannabis for Capitalists.” They have worked with large-scale cannabis producers for more than five years. Kerrie has been involved with plants her entire lifetime and earned certification as a Professional Horticulturist by the 100-year-old American Society for Horticulture Sciences. Kurt brings his 34 years of corporate experience and operations management skills to bear on the business challenges of cannabis cultivation.