Entrepreneur transforms existing company into cannabis business serving growers
by Omar Sacirbey
Reinvention doesn’t always require radical change. In fact, it can be extraordinarily simple.
Just ask Steven, who transformed his North Carolina odor removal company into Cannabis Clean, which helps marijuana growers prevent mold, mildew and other bacterial contaminants from ruining their plants and, in some cases, losing millions of dollars.
“I decided to take what I was doing with an existing business in a different market and start applying it to the cannabis industry,” said McMorrow, who started Cannabis Clean in the summer of 2014.
To ensure a successful transition, McMorrow realized he needed to hire outside help, tweak his business model and, most importantly, move his new company from a state that hasn’t legalized any form of cannabis to one of the leading marijuana markets in the country, Colorado.
Same Service, New Market
McMorrow started his initial business – 123 Fresh Again – in Raleigh, North Carolina, with his mother. The company focused on removing odors using chlorine dioxide and quickly built up a client base consisting of used car companies, apartment complexes and other businesses.
When McMorrow started using cannabis a few years ago to quell his epilepsy, he saw both a mission and a market opportunity. He had always been concerned about his previous medications being properly manufactured, and he felt no different about medical marijuana.
McMorrow already had developed a product effective in eliminating the types of bacteria that can also harm cannabis plants. He also had the technical know-how to apply the compound in various environments, so transitioning the company into the cannabis space was inexpensive and required little additional expertise.
“The big advantage is that the protocols and procedures are already in place,” McMorrow said.
The main difference is that while his old company reacted to odor emergencies, his new company is about “preventative maintenance.”
Cannabis Clean treats grow room surfaces with chlorine dioxide, which smells like bleach and chlorine but is far less toxic. The company’s product attracts and then kills harmful microbes on contact. McMorrow said this is important to growers because it provides them with a cost-effective way to have an indoor grow space that will be free of mold, mildew or other microbes that may ruin a crop. By eliminating such contaminants in an indoor grow space, cultivators don’t need to use pesticides, McMorrow said.
Transforming into a new company doesn’t necessarily mean coming up with a new product, which can require expensive and complex research and development. Rather, McMorrow found a new – and lucrative – purpose for the same product, making the transformation easy and inexpensive. Not every product or service lends itself to such an easy jump, but many can, McMorrow said.
North Carolina isn’t exactly a hub for the cannabis business. Quite the opposite: The state hasn’t legalized medical or recreational marijuana, so any cannabis-related activity there is underground and illegal.
McMorrow never intended to target North Carolina’s black market. Rather, he wanted to spend some time on market research before deciding where to plant long-term roots. He learned it is better to have a business model that emphasizes his company’s application services rather than product sales. The service jobs bring in significantly more revenue than simply selling bottles of cleaner to cultivation operations, McMorrow discovered.
And if a customer buys the cleaner but applies it incorrectly, the product might be less effective and might not work as intended, leaving customers dissatisfied. That realization spurred his decision to move the company’s headquarters to Colorado.
“As we moved away from offering product, we had to move to a place where we could offer application,” McMorrow said.
Despite nailing down the cornerstones of his transformation strategy – focus on service rather than product, and move to a state that has legalized cannabis – McMorrow felt that to guarantee a successful business relocation, he would need an industry expert to help him through the challenges of moving and tapping a new market.
When it came to finding an expert, McMorrow turned to a former work colleague, Josh Alper, who had started a Michigan-based cannabis consultancy called Green Science. Alper helped Cannabis Clean craft its business plan and navigate the bureaucracy of starting a new business in a different state. Most importantly, Alper introduced McMorrow to Plano, Texas-based Blue Diamond Ventures, which acquires and finances new cannabis industry companies.
Blue Diamond decided to finance Cannabis Clean with $250,000, which it is disbursing in installments. The venture firm also connected McMorrow with the owner of Green Labs, an incubator in Denver that provided him with office space. In November, Cannabis Clean moved to a new office in Denver that has abutting warehouse space for its products and equipment.
“We couldn’t have done it if we hadn’t been acquired by a public company to help with the funding,” McMorrow said of Blue Diamond, which gave Cannabis Clean its first installment last May. “And in the end it was worth it to be where things are happening.”
The Need for Clean
The company’s move west has been validated in recent months by increasing government and public scrutiny over illegal pesticide use by growers in Colorado.
Denver started a pesticide crackdown on growers about nine months ago, confiscating millions of dollars of plants, while the Denver Post tested plants last year and found that at least one major grower had been using unapproved pesticides.
McMorrow said the natural evolution of regulations will lead to strict requirements tied to bacteria in a grow room, which will help boost the need for Cannabis Clean’s services.
“We want to help growers meet the standards that are going to be passed down; it’s inevitable,” McMorrow said. “They’re already throwing product and medicine away if it tests positive for having been in contact with certain pesticides. Pretty soon, it’s going to be the same when product comes in contact with contaminants and bacteria.”
That’s not to say it will be a slam dunk for companies like Cannabis Clean.
Despite the pesticide crackdown, some growers are still reluctant to change their practices, McMorrow said.
“They’re like, ‘Why should I change?’ I’ve been growing good pot.”
Still, McMorrow sees immense opportunity, and the company hopes to work with Colorado’s Marijuana Enforcement Division to help it remedy issues in the industry.
“If they walk into a grow and find that it’s not clean, send them our way, we have solutions,” he said.
McMorrow is also networking “like crazy,” going to industry conferences and various events. The payoff has come in the form of jobs, including a 15,000-square-foot facility the company treated in September. McMorrow also knows that his four-person company can’t cover all of Colorado, let alone branch out to other states with legal markets. That’s why, long-term, he hopes to create a franchise model where people can get in at between $5,000 and $10,000.
And North Carolina – where support for medical cannabis is growing rapidly – could materialize as a market for Cannabis Clean at some point down the road if the state legalizes.
“We didn’t really come up against too much” resistance when we started in North Carolina, McMorrow said, noting that the name of his company didn’t cause any problems when he registered his business with the state or opened an account at Wells Fargo.
When people saw employees wearing Cannabis Clean t-shirts, the reactions were of curiosity, not disdain.
“I’ll go back to North Carolina in three to five years when it happens. We just had to go where there was a hotbed of activity,” McMorrow said.