PP 78 | Commercial Cannabis

 

There are a number of growers in the industry who started their careers in the closet. This is all too familiar with Matt Gillard, whose journey started from illegally smuggling to legally growing his own commercial cannabis with Jamaco LLC. Picking up right where we left off, Tony Frischknecht continues his interview with Matt, where he now shares the tough decision he has to make in business: looking to bring on an investor and choosing what direction to go to. He takes us across some of the challenges he has to overcome and his plans for the coming 2021. Join in to see how it all pans out in the end and why you, too, can achieve the dream you’ve been working hard on.

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From The Closet To The Greenhouse Part 2 Of 2 With Matt Gillard

How Matt Gillard Built His Commercial Cannabis Grow With Nothing

We are going to be continuing a conversation with Matt Gillard. If you guys didn’t read his last episode, it’s episode 77. Matt was taking us through where he was years ago and some of the exciting stories that he had. If you haven’t read that episode, I urge you to check it out. It will get you in there. There’s still some good information here. We are going to be starting at the point where he has a tough decision to make. He is looking to bring on an investor and he doesn’t know who he’s going to choose and which direction to go. Without further ado, here’s the rest of our conversation.

It was hard to say no. My deciding factor of saying no to him, I told him that I wish that was his first offer. I said, “Six months ago, if that was your offer, we’d be in business. Right now, this is you grabbing straws, and I’m suddenly worth $200,000 where two months ago you wouldn’t have thought about giving me that money.”

That’s impressive. I don’t know where you come up with patience. Most people would walk away from that.

I have to say, I don’t know where my wife comes up with patience. This whole time, she’s extremely supportive and that’s been the biggest challenge. She’s looked at me every day and believes me and this has been years of journey at least, if not a lifetime. You’re getting all that stuff.

Let’s talk about something here. I want to talk about where did you see a break between breaking off from the illegal market into the legal market. How did you come across it? Where did you decide, “This is the last time I’m going to do this?” What pushed you to the point because that’s a tough decision you have to make too. It’s like, “I’m going all in.”

It’s giving up that paycheck no matter how big or how small it is. To give up that circle or those phone calls are definitely different. When I got my Community Host Agreement, it set in a little bit for me. I didn’t pass my backyard. They’ve grown big and beautiful. It’s September and October so they’re strong and nice. I’m courting and trying to get my community hosting from the mayor. He gave me a call and says, “We’re going to sign the Community Host Agreement at the end of the week, Friday,” and it was Monday so I’m saying, “This is great. I’ll talk to my lawyer.” He said, “The plants in your backyard have to come down. If he signs this agreement with you and you get caught next week with these plants, you’re going to be screwed.”

The dream is over.

I started taking the plants down 1 or 1.5 days later in our neighborhood, and this was extremely rare and in Massachusetts, it’s rare. There was a bear with two cubs that wandered into my neighborhood and climbed up the tree to my neighbor’s house. I was at work doing masonry and building the chimney up on the roof, my buddy drove by the end of my street and said, “I don’t know what’s going on.” He knew what I’m doing up there and he went, “Your street is blocked off. There are helicopters flying over your house and there are cops everywhere.”

I went, “This can’t be.” I hopped in my truck. I started racing back to my house.” I got a couple of other phone calls that there was a huge crowd in my house. It turned out that they were all crowded around my house because they were looking at the bear that was up in the trees. It had nothing to do with me or my house. I was standing there and I went through all the police lines up. I went to my house, told the cops, “That’s my driveway.” I can’t go to my house. I was standing in front of my house and the whole Hillside stank. I was talking to this officer and we’re looking at this bear in the tree. He was like, “That bear is going to attack you. Watch out. Back up.” I went, “Yes. I’m afraid.”

Your heart is going to be beating a million miles an hour.

I thought I was losing everything. I knew that in two days that I was signing this agreement with the mayor too. In Massachusetts, at the time, when they went legal, it was in 2016. This was still then, you were allowed twelve plants. I was in a gray zone. They weren’t fenced in, weren’t any cameras, and a couple of things but were the plants legal or not, was questionable.

At that time, you take stock of what things mean to you and how are you moving forward? Are you cutting down all the plants that night? What are you doing?

They’re coming down in the middle of the night as fast as can be the exact way and I’m terrified.

You’re doing this all by yourself, right?

Yes. You can’t tell anybody. We can’t show anybody.

You can’t call your buddy and say, “I need a solid. Will you come up?” because nobody is supposed to be knowing anything about this.

What I’m trying to accomplish too is to keep your nose as clean as you can be.

Keep your nose as clean as you can be. Click To Tweet

That was your wake-up call.

That was a little bit of a wake-up call. I still played a little bit but I would say when I signed on my business partners, and these people looked at me and agreed to give me $1.5 million-plus, that’s what I said, “I have an opportunity here. I can’t get hemmed up and if I get arrested over making $200, it’s not going to be worth it.” I cut all ties to all that. I like to call it the traditional market and then I put some stipends for a couple of years now.

For those that are out there contemplating, what would you tell them? Why is it worth it?

The safety and the proudness that I can walk around and talk to people about what I’m doing. I can honestly tell them that if I’m trying to cultivate cannabis. I can talk to them about weed and it’s not necessarily that I’m a drug dealer that I’m not paying taxes. Nobody can throw any stones at you when you jump in through all the legal hooks. The most conservative people that don’t like it end up respecting that you’re paying taxes and you’re doing it right. That’s a huge incentive there.

Another biggest incentive is being able to do this early on in the market and the industry. We might be able to make a mark on this industry that’s known for the next 100 years. I like to tell people that Seagram’s 7 is somebody’s last name. Bush is somebody’s last name. All companies that we recognize by brands in 1930 were some of these last names. It’s like me trying to make it at that time. Could we make Jamaco, the highest quality cannabis that you can get in the States? I want it to look like Belvedere and Crystal. We have the opportunity and knowledge. We built a good team behind us. What we’ve been building is this Nexus Greenhouse.

You’re not creating any profit at this point, correct?

Nothing at all. I have a building that cost me a little bit over $3 million to build. It’s completely outfitted. I can turn on my computer now and turn all my lights on. I have 301,000-watt lights in here, a greenhouse mixed light, and all this stuff but we’re waiting for state approval right now, the last final step. We’ve got our occupancy permit, which was a final hurdle. Going through the Planning Board, Zoning Board of Appeals and the special planning process was quite tiresome that took almost a year in itself.

What did you expect to take, in your mind, when you started this journey?

Four to six months and it was fourteen months counting.

How have you been staying alive this whole time?

I’ve taken a stipend off the company of $5,000 a month. I can tell you that since COVID hit, my wife had to leave her job to take care of the kids. Our life expense is probably $4,800 a month.

You guys are right on the edge.

We’ve got nothing now. This is probably the most broke I’ve ever been in my life but it’s also the happiest that I’ve ever been in my life.

That’s good.

It’s damn cool to see that in 2020, we put our silt fence down. The Planning Board said yes in December 2019 to us. In January of 2020, we put our silt fence up around the property. We have 3 acres, we had to deforest an acre of that.

How much did that cost? I don’t even know what it takes to do that. What does that mean?

PP 78 | Commercial Cannabis

Commercial Cannabis: The nice thing with the Nexus Greenhouse is that we’re growing with the sun’s energy, so our operating costs are going to be a third of what our competition is.

 

We had an acre of hardwood. We called a local guy up that makes firewood and sells board wood. He comes to the property, cuts down every tree, takes all the wood that he wants, and leaves everything that he doesn’t want. We pay him $6,000 to $8,000 or something like that. He gets it to keep all this wood. The cost wasn’t that bad but it comes to the de-stumping of the property after that is huge.

Do you have to pay for de-stumping too?

Yes. Once we have the property cleared. We have to bring up the elevation to meet our elevational pad. Our building pad is 130×260 and we have it half-built. We have phase two that will put some more greenhouses but that in the low spot had to be brought up 2 feet and the deep spot had to bring up 6 feet. Before we could bring up that 6 feet of fill, we had to first scrape off a foot of topsoil in all the dirt, the rocks, and all the stumps. We had an excavator for a week to get out all the stumps. Paying him to get rid of the stumps was probably the most expensive part because they rot or breakdown easily.

For one tree in a neighborhood, I’m trying to think of what a cost is to have somebody do that. It’s over $1,000 to do one stump that they charge you.

When we start getting the heavy equipment here and the bulk stuff here, it gets a little bit nicer. Our guy that did all our land clearing for us and all our site work for us was the farmer that lives across the street from me that I originally had the lease on his barn. That was the tough conversation that I had to go to him one day and say, “You know that I can’t leave the barn and I can’t legally grow here but the good news is that neighbor across the street that you hate, I bought his house. I’m going to tear it down and put it right there.” When we got the property, we had a little one family decrepit house on it that had to be torn down. It was pretty much condensable. That guy was supposed to move out in March when I took control of the property. He refused to leave in March and he ended up leaving in June.

Was he a renter?

He sold me the house without having another place to go. He wanted to back out of the house sale and said, “I’m going to back out of the house sale unless you give me another 90 days in the house.” I said, “I’ll give you another 90 days in the house but I’m going to hold $25,000 in escrow to make sure you get out and that was a battle. We’re in the middle of summer and I was battling. That whole time, I’m trying to get him out. I was going through the Planning Board process so I’m not trying to let this guy. The guy that was living here that I bought the house off came to him that a marijuana monopoly was buying his property. At one point, he wanted another couple of hundred thousand because he heard it was marijuana involved.

It’s still going on. That’s probably one of the most frustrating parts of being involved in the industry. Once everybody hears that it’s marijuana, they want to double the price.

Nobody knows what they’re talking about either so these professionals that you’re paying for. If you’re in a new market and you’re paying a mechanical engineer to design your grill that’s never designed one before, he has no idea what he’s doing. He’s charging you more because it’s marijuana and he’s going to design you something that doesn’t work for way too much money.

It sounds like you’ve had some experience with that already.

One of our mechanical engineers came back with a bill that was $400,000. I told him that I paid $800,000 for the whole building. Why would I put $400,000 mechanicals into it? Granted that mechanicals did end up costing us $200,000, but every quote that we got originally was easily 50% more than it should have been or double what it should have been.

You’ve shopped quite a bit.

I got lucky. In September of 2018, I quit masonry. In January 2019, I got into Jamaco’s payroll and got my stipend every month. I then became the Construction Supervisor in my colonial brickwork company, pulled the permit, and did all the construction supervision. I was able to watch all the numbers there pretty close and get multiplied. At the same time, we tore the house down in March 2020. I stuck my son and they asked me to see him with me. We grabbed this big 30-ton excavator and smashed the house up together. It was great.

I bet that was fun.

He loved it. I must have enjoyed it more than him, to think that we broke ground. We have a turnkey facility now going through COVID. It has been terrifying. Something’s got delayed or sped up.

You’ve been through quite a journey.

Thank you. The whole time, I’m learning a ton. My brother is an excellent grower. He gives excellent advice on materials in the systems that we have to use but he’s never scaled up big. A lot of opportunities for me to learn all these systems too, and how to bring them to scale. It’s great that you can hand water and hand-feed 36 plants but when you have 3,000 plants per room, you have to go for an automated system. You can’t necessarily grow in ways that you want to grow in ways that you can.

Nobody can throw any stones at you when you jump in through all the legal hooks. Click To Tweet

How has your relationship evolved with your brother over the past years?

It’s good and bad. We’ve gotten extremely close, which I like. He’s getting frustrated with me on one side of things. When we’re talking about standard operating procedures, he says, “You do it like this.” I say, “I can’t do it like this. We have to write this down. It’s so basic that when we give this to the next head grower and once you’re not growing here anymore, they can take your formula and do the exact same thing. I know that you do a little tad of this and a little tad of that, but we have now put numeral numbers to everything. It goes to how you package it. How do you trim it? How do you take a cutting? What angle do you hold the disposable razor blade up or the disposable scalpel?”

It’s good to hear that you’re on that. That was probably one of the biggest mistakes that most of the people that I was around started at these companies. They never tracked any of this stuff, and creating these SOPs is huge. It happens in every other industry so why wouldn’t it happen in this one? Eventually, you’ll probably want to sell at some point, and being able to have those in place makes your company so much more valuable. I know many guys that get an offer or they get to negotiate. They show up, start walking people through what they need to do and they’re like, “I have no recipes.” It’s like what you said, “You brought it up. How fuck am I supposed to do this?” You basically lose value in your company because you can’t hand it over.

I realized in July 2020 or something or even the first year we started that everything’s started to come together. We knew that we needed it. I call her the chief of staff. She calls herself the Office Bitch. Knowing that I can build well and my brother can grow well but we’re not good at paperwork. We’re not good at figuring out all that stuff so we hired our chief of staff. She’s absolutely amazing. She did come from the defense industry. In the defense industry, they had a lot of federal contracts that we got screwed and overlooked a lot, so the SOPs in that industry are bombproof. They’re used to getting audited. She’s bringing a level of professionalism and sophistically to this operation. We couldn’t do without her. We’re paying a significant professional wage to her, but it’s worth every dime in the world.

It sounds like you’re paying for quality and quality doesn’t come cheap sometimes. It doesn’t.

We’re fortunate that our investors are self-made also. They’re all entrepreneurs. We all have multiple little companies doing other things. I now have no other company. I’m focusing on this. Tim is a commercial fisherman. He knows what it’s like to go to work every day and put his head down. Me and him, hand in hand, built this facility. Whenever something had to be cleaned, moved or somebody wasn’t doing their job, we’d have no problem picking up the screwdriver and screwing the screw in and leading by example, in trying to set the pace for everybody else.

As soon as you get your approval, are you ready to start growing?

Yes. I’m sitting in a completely empty building by myself that is ready to start work.

That must give you some anxiety.

It is. Going through the state process, they don’t tell you that much. They can’t give you any advice, or they think that they’re consulting you. Ask them the next step is going to happen. They say, “We can tell you how the process is going to happen but we can’t tell you when you’re going to be in that process.” The first instruction we got was over the phone like this, a Zoom meeting. They asked to see a bunch of things and talk about them. The second inspection was also a Zoom meeting where we plugged our laptop in and gave them a tour of the facility through the laptop. They asked me what the SOPs are and we were constantly printing out and showing them things.

He then wrote his report and we were told it was 2 to 4 weeks before we get on the state agenda and when we’re on the state agenda, generally 99.9% of the time they vote yes on everybody. We’re assuming and hoping that on January 14th, 2020, we get on their agenda and we hope that they vote for yes for us. At that time, we’re able to start operations. One month into operations, the state comes back in and does a physical inspection, does a walkthrough, and tries to find any deficiencies. If they can’t find any deficiencies, they give you your Certificate of Compliance. At that time, we can then start selling products.

In the best-case scenario, you’re looking at three months being able to start full production.

We’re thinking of mid-January 2021 when we get to start production. By the end of February 2021, everything should be full. Hopefully, by June or July 2021, we’re in the market. One of the most frustrating things in the last few years is many people have looked at me and said, “It must be nice to be rich in six months.”

Unfortunately, the media isn’t helpful to the startup entrepreneur in cannabis.

Maybe in six months, I’ll be able to buy a hotdog or something like that.

Are you guys starting your own retail shops as well? Are you doing strictly wholesale?

PP 78 | Commercial Cannabis

Commercial Cannabis: Bringing other people on board your ship and building momentum as soon as you can, can go a long way.

 

We are not. We’re strictly wholesale and we’re only doing flowers. The state that we’re in has a little bit of wetlands on it so we’re restrained on the size of the building that we can build. We got a building permitted that’s 22,000 square feet, so we’re devoting that whole thing to cannabis cultivation. We have little amenities in here we have two small offices. We don’t physically have the room to do any processing. We have looked at some other ventures in Massachusetts. There have been a lot of people that have gotten close to where we have. They’re starting to fail and they’re not coming to tuition. We’ve had 2 or 3 retail locations that come to us and ask us for financing, backing and buy them. We’re in a situation where we spent twice the amount of money that we thought we were and we’ve got no more cash. We’re done.

Are you familiar with the social equity programs that are happening in Mass?

Yes.

I’ve got somebody I want to introduce you to that that might be a good partnership. How are you guys planning to get rid of your product?

Ideally, we don’t want to package it here. Initially, in the first year of production, we’re going to white label things and get the product out to the shop. We’re not necessarily going to focus on branding and getting our name out there as much until we refine it. We’re operating in that Nexus Greenhouse. We’ve never grown in a mixed light greenhouse so we know that’s going to be a learning curve. The first 4 or 5 crops we put off might not be something we want to stick our name on 100%. When we start going to market, we’re going to sell pounds to wherever we’re buying pretty much. We have a couple of handshake agreements. We won’t sign anything with anybody outside of a letter of intent because we don’t want to count chickens before the eggs are hatched. Every two weeks, I get a phone call from a dispensary now saying, “When will you guys be online? Can we carry your products?”

Are these only one dispensary or multiple?

Every two weeks a different one calls me. It seems like our option to sell everybody wants it. In the Massachusetts market, we were told that if you can get it to pass, you can sell. It’s not even about the quality. It’s about passing testing. Testing is rigorous here that if you can get it to pass, it’s 4,000 pounds right now. That’s in the pound bag that’s not broken out. We’ve been seeing that hold for a while now. It’s interesting because in Maine, the wholesale price has gone up to $1,000 in 2020. It’s gone from $1,800 to now it’s $2,800, which is better than what Maine has seen in years.

It’s supply and demand.

All our numbers are based on $15 to $100 a pound.

You guys went low. That’s awesome.

The nice thing with the Nexus Greenhouse is that we’re growing with the sun’s energy so our operating costs are going to be a third of what our competition is. We suspect that we’re going to be able to bring a pound to market for under $250 per pound, whereas traditional indoor is going for more than $750 per pound. If the guy is good, they get a little bit lower than that.

How many guys are that good?

Exactly. Most guys are inefficient and they don’t realize they’re at $900 a pound to produce it. When the market hits $1,500, the guys that are $900,000 are going to have a real hard time struggling at that. We get a facility that’s down the street from us that’s 120,000 square feet. They have 80,000 square feet rented and they are going to do a three-tiered LED garden. They’re going all in. They’re spending $60,000 to $70,000 a month in rent. The fortunate thing about us is we bought our property for $260,000 which is pretty much nothing. Now, we own the property outright. We weren’t able to get financing on any of this so we own all of our equipment and all of our building outright. We’re setting the position where we’re not paying anybody else for our stock.

You don’t have massive interest rates. You have debt, but it’s internal.

The bank is our partner so it works that way.

That’s rare too. Nobody is getting bank loans still. These are great stories. For those of you out there that think this is a get rich quick, it isn’t. You can see from what Matt has talked about. He started this journey back in 2001 and now it’s 2020, and he’s becoming legal.

A lot of people have told me a couple of years ago, when I was talking about my brother that we want to get into this and do that, they would say, “You’re crazy. Weed is never going to be legal. You’re never going to have this opportunity.” They didn’t believe me and now that we’ve got this dream achieved when people start to hate on it, one thing I like to do is tell them my next dream too that’s even crazier than this dream. They can look at that one and say, “No. That’s ridiculous.” For them, the thing that they told me was ridiculous the first time was suddenly a reality.

Count the little wins, the freedom that comes with it, and highlight that. Click To Tweet

It sounds like you like the animosity of it. What would you tell the people out there that friends are telling them they’re crazy, their mom is saying, “There’s no way, this weed thing is dumb. You’re going to waste all your money?” Your friend down the street is like, “I’m not going to be friends anymore with you. You’re too nuts.” What do you tell them?

Count the little wins, the freedom that comes with it, and highlight that. It’s tough. You have to be willing to give up all your money. You have to make sure you have a strong family network. I’m surprised I didn’t end up in divorce over this. My wife is tolerable. I’m going to meetings, granted we got no money to take care of this so I didn’t send a lawyer to the meetings. I went to a meeting. Planning board meetings start at 6:30 PM until 9:30 PM. That means that I come home from work, eat dinner quickly and I say, “I love you.” I’d kiss the kids and I’m out the door again.

Unfortunately, I haven’t done much parenting in 2020. Having a good support system, if you get a little of that behind you, you can do it. Bringing other people on board your ship and building momentum as soon as you can go a long way. I brought my lawyer and my brother early on. It gave me other people that believed in me and wanted me to win also so I could turn to them at those times. My public speaking for the last few years has gotten a lot better, but it’s still not anywhere near where it should be.

With that said, building your foundation is a huge part of your success. For those of you reading, this is just the start for Matt. Matt is at the starting line and I know it’s hard to believe that especially with your story. Has that sunk in yet?

It hasn’t yet. My chief of staff has said it to me a couple of times. She’s sitting on the shoulder and said, “You own a marijuana company? What the fuck? I was in defense a year ago building missiles to blow people and now this is what we’re doing. Pinch yourself and realize it.” It’s tough when I am realizing it from the joys and the accomplishments that we’re getting in, not necessarily the numerable value. I’m not getting, “No. I’m getting $100,000 this week and $100,000 that week. I’m not rolling in money or anything like that.” It’s not a financial joy that I’m feeling. It’s more of, “Everybody told me I couldn’t do this.” I put my head down with literally nothing but an idea when we started this thing.

To close it out, this is how you live your dream. You’re living your dream.

It is. A lot of people say, “Go home. I can’t believe you’re still working. You work 12 to 13 hours a day.” If you love what you do, you’ll never work another day in your life. I came here and it’s my happy place. I enjoy tinkering with the stuff around here, hanging lights and looking for the opportunity that we have.

I’m excited about what’s going to happen for you guys over the next few years. You’re still going to hit a lot of obstacles. However, this is when things start cooking for you and you understand what it is like to be legal. I want to thank you for being on the show and sharing your story with me and the rest of the community out here, those who are either wanting to start or are in a tough time now. You had many tough times and you’ve come out on the other side. You’ve got ownership, partners, a foundation, and a family that’s there for you. I want to congratulate you on building that to this point.

Thank you, Tony. I appreciate that and what you’re bringing to the industry or the culture. I enjoy your show and I’ve gained a lot of knowledge from you. I appreciate that.

Matt, that means so much to me because that’s why I’m doing this. I see the wind that you have in front of you and I can taste it almost before you taste it because of the excitement that you have right now of living your dream and feeling alive. Even though you’re broke, you’re excited and it’s a rarity. It’s something that I don’t know too many people know how to explain until you go through it. It’s challenging. I have a tough time when I talk to people, explain where I see it, and now that I see where you’re at, you’re close. You’re right there where you’re touching the tip of it.

I’ve got the license right here.

You’ve got your number there and your badge. That’s always a good feeling. I want to bring you back on. We’ll try to do this annually.

I’ll talk to you in 2021.

We’ll see what challenges you went through, what you’ve gained, and stuff like that. Guys, thank you for reading. Go to PlantProblem.com and you can tie in if you want to get in touch with Matt. You can connect from there. I look forward to sharing another story with you. Thank you so much.

Enjoy your day. Thank you.

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About Matt Gillard

PP 78 | Commercial CannabisMixed-light craft cultivator of cannabis in the Massachusetts recreational cannabis market. Matt has been in the cannabis industry for two decades and now he is going commercial.

 

 

 

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