Being first is not always best. If you’re first, you’re making all the mistakes and dealing with all the issues. When legalization happened in California, we quickly applied to acquire licenses. What we’ve learned is that we essentially had to teach the cities, which passed laws to allow cannabis activity, but at the same time did not understand it. Two years later, we finally received a license, but we spent a ton of money. Now is the perfect time to enter the market because a lot of the mistakes were already made.
As part of my series about “5 Things I Wish Someone Told Me Before I Started Leading a Cannabis Business” I had the pleasure of interviewing Daniel Abrahami.
Daniel Abrahami is the cofounder of Headquarters (HQ), a strategic advisory collective focused on helping cannabis entrepreneurs unlock accelerated growth in California’s multibillion-dollar market. Daniel is also Managing Partner of AGM Ventures and has been advising companies and investing in cannabis operations since 2014. With a passion for the intersection of cannabis and commerce, his mission is to unlock innovation in the industry.
Daniel led business development for ABC Gems, an international emerald mining, cutting and distribution company. He also co-founded Pravo, the first decentralized high-end jewelry manufacturing operation in Los Angeles, and helped launch numerous direct-to-consumer fashion and apparel companies.
Thank you so much for doing this with us! Can you share with us the story about what brought you to this specific career path?
My career has been defined by the convergence of two paths. I come from a family of entrepreneurs, so I’ve always had the entrepreneurial bug. In high school, I started my first online business selling paintball gear and server space for gaming in the early years of Esports. Growing up in Los Angeles, I was also surrounded by cannabis at an early age. I began to look at the plant from a business perspective while in college, and learned how to help operations stay as compliant as possible and market their products.
My family was always very involved in Israeli business, so I witnessed the strides Israel was making in the worlds of technology and medical cannabis, which has been legal since the early 1990s. Doctors in the country have been studying the different compounds of the plant for many years, creating brand new technologies from their discoveries and treating patients with a variety of ailments.
It opened up my eyes to the lack of innovation happening in the U.S., where the market was still heavily focused around flower. Although flower is the base of the industry, there’s so much more you can do with the plant. This inspired me to launch Headquarters, a strategic advisory collective focused on helping cannabis entrepreneurs unlock accelerated growth in California’s multibillion-dollar market. We bridge the gap between old-school tactics and cutting-edge innovation by working with clients to launch and build businesses and brands in a smarter and more efficient way.
Can you share the most interesting story that happened to you since you began leading your company? Can you tell us what lesson you learned from that?
My first interaction in the quasi-legal space was when I was assisting my friends with one of their first licenses in LA. We quickly got raided while I was there helping them do inventory, which was actually one of the most terrifying things I’ve ever experienced. It’s something a lot of people have gone through in the industry.
This prompted me to step away from cannabis and I thought about getting back into my family’s business. I could have easily become discouraged, but I decided to go back six months later. I couldn’t resist the urge to jump back into this exciting landscape. When I walk through those farms and labs today, it never ceases to amaze me that just four years ago, it could have been the end.
For me, it was a lesson of perseverance. The generation before me fought for the right to access this plant and without them, we wouldn’t have this multi-billion-dollar industry that employs hundreds of thousands of people. I think that’s one of the most important lessons in cannabis.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
I make mistakes almost every day, but one funny story stands out. While helping a friend with a raise, we pitched a group of investors who really tore into us. After the pitch, I texted my friend, “Man, they were a-holes.” Turns out, I accidentally texted our group chat with the investors. That was not a pleasant feeling. One thing I notice about myself is that I’m always rushing. It happens quite often, where I’ll text the wrong person or email the wrong group. The lesson here for me is to make sure to catch myself, slow down, check my work, double-check my work and maybe even throw in a triple-check before sending things off.
And no, they never ended up investing. That bridge was burned.
Are you working on any exciting projects now? How do you think that will help people?
Our most important initiative at Headquarters right now is the California Launchpad, a proprietary six-month growth program which culminates in a 30- to 60-day in-store pilot, to take businesses and emerging brands from idea to products-on-the-shelf in six months. In California, our legal landscape hasn’t created a playing field that easily allows innovation. It’s created extremely high barriers to entry, which strains the market and prevents growth. On average, you have companies spending more than $1.5 million over two years to enter the market. That means you have to be very well-capitalized to get in.
Our Launchpad is built around solving that problem. We give these businesses the support they need to execute on their vision by partnering with a vetted supply chain. This is crucial in the wellness space, as you need products that are compliant. Our purpose is to be the foundation for companies to unlock growth, because unless we can do this, the cannabis industry will continue to be stigmatized while innovation is stalled.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
I would definitely have to say my parents. As immigrants who didn’t go to college, they didn’t have many options and were forced to build something for themselves, as their parents did before them. I essentially grew up in their office and watched their business grow from a 500 square-foot room to an international organization. I think my success is a direct result of their support and guidance.
When I was 10 years old, my parents lent my cousins and I $20 to start a lemonade stand. We made $25 that day, which we were thrilled about. My dad then asked for the $20 back, explaining to me the basics of borrowing money. I received my first entrepreneurial lesson while we divided up the remaining $5 among the group of cousins. There were countless lessons in the following years, as my parents made sure I was exposed to a variety of experiences, all of which have impacted the way I live my life today.
This industry is young dynamic and creative. Do you use any clever and innovative marketing strategies that you think large legacy companies should consider adopting?
First, I think legacy companies should make sure to focus on collecting and leveraging their data. As a new company in a young industry, Headquarters takes the “move fast and break things” approach, and we use data to make guided assumptions. If you don’t move as fast as possible, you’re not going to learn in an industry where regulations are constantly changing.
The second thing for legacy companies would be to establish quality, localized partnerships. Without those, you’re not going to get the desired reach. Every brand has three customers: super fans, casual fans and non-fans. The super fans you’ll always get, but capturing casual fans through partnerships is how you scale.
Next, make sure not to sleep on Gen Z. Many companies don’t know how to talk to this up-and-coming generation slated to be the largest consumer segment. Gen Z consumes differently — they’re the first purely digital generation, so creating a strategy around that is going to be table stakes.
Can you share 3 things that most excite you about the Cannabis industry? Can you share 3 things that most concern you?
What excites me about the cannabis industry:
- Opportunity. The cannabis industry is young — many like to say that it’s only in the second inning. The top companies of today won’t necessarily be the top companies of tomorrow. California itself is the largest cannabis market in the world and there is still massive opportunity that hasn’t been capitalized on.
- Innovation. Cannabis is not just flower, joints and vape pens. It is a medicine and there are so many things to be discovered. Hundreds of companies are working on the next generation of products and we’re just scratching the surface. That’s one of the most exciting parts for me. I think the medical side will be the ultimate catalyst for full legalization.
- Change. We’ve lived for decades under a narrative that says cannabis is bad — a period when many injustices took place. More and more countries are making an effort to change their laws and not punish somebody for just having a joint on them. There’s been progress, but much more needs to be done.
What concerns me about the cannabis industry:
- Taxes. Unfortunately, as an industry that is still federally illegal, we have a tax issue called 280E, which has been an extreme burden for many companies. Also, numerous states look at cannabis as a last resort to fixing their budgetary problems and impose high taxes on state and local levels. When alcohol prohibition ended, there was a zero percent tax to allow the industry to thrive and to grow. That’s been quite the opposite for cannabis in California and other states. For us at Headquarters, we help to set up businesses in a way that prevents them from having direct exposure to the plant to alleviate the 280E pain.
- Regulations. I do understand that regulators try to protect consumers and be cautious with a brand-new industry, but a lot of the regulations have killed small mom and pop businesses from entering or succeeding in the market. They’ve caused companies to go out of business just from the lawyer fees needed to be compliant. When you have these high barriers to entry, all you’re doing is enhancing larger companies that have the capital and bandwidth to handle that. That’s why at Headquarters we help companies navigate the complicated terrain. We want them to focus on innovation — end of story.
- Consumer trust. We’re seeing this in both the CBD and THC markets, with brands making false claims. If we lose the consumer’s trust, we’re going to lose the industry. My hope is that a handful of these bad actors trying to make a quick dollar won’t ruin it for all of us.
Can you share your “5 Things I Wish Someone Told Me Before I Started Leading a Cannabis Business”? Please share a story or example for each.
- Being first is not always best. If you’re first, you’re making all the mistakes and dealing with all the issues. When legalization happened in California, we quickly applied to acquire licenses. What we’ve learned is that we essentially had to teach the cities, which passed laws to allow cannabis activity, but at the same time did not understand it. Two years later, we finally received a license, but we spent a ton of money. Now is the perfect time to enter the market because a lot of the mistakes were already made.
- The stigma of cannabis is still here. When I first got into the space, I reached out for feedback from other professionals that I’ve worked with, and many seemed to look down on me. This was an eye-opener for me because I grew up believing it was widely accepted. When you go outside of California, it’s a totally different story. This is why it’s so important to lead with education.
- Every day will be a challenge in an industry that is still federally illegal. When the COVID-19 pandemic hit, I think this point was highlighted. Every industry got a bailout while cannabis got nothing, although cannabis was the only industry still paying taxes. We were putting money in the government coffers to pay all of these other sectors. As an industry, we’re on our own, and it’s something to keep in mind moving through the space.
- Trustworthiness is key. Success is dependent on understanding who you can trust and on being trustworthy yourself. This is exaggerated in cannabis — as a very small industry, word gets around fast.
- It’s all about your team. You definitely can’t do this alone. It’s necessary to surround yourself with the right people and utilize different perspectives. Those perspectives are what will save you from making the big mistakes.
What advice would you give to other CEOs or founders to help their employees to thrive?
It all comes down to trust. As long as you put together the right team and put trust into them, they’re going to be able to execute much better. Micromanaging is not the answer. Without trust, employees are not going to take the risks necessary for an early-stage company. One of the first things I did after deciding to found Headquarters was to rally a team and put trust in them. I look to them for advice, and believe that’s what every CEO or founder should do.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I would choose to reform our education system, especially as a father to a four-year-old daughter. It’s a pivotal point for the United States and the rest of the world. A lack of education about history and other cultures has led to a lot of the issues we’re experiencing today. This definitely applies to cannabis, where mis-education has led to so many injustices.
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This was very inspiring. Thank you so much for joining us!