Vertosa's CEO Discusses the Cannabis Industry and the Resilience of Startups
Published: Apr 21, 2020
Ben Larson is the CEO and co-founder of Vertosa, an Oakland-based cannabis infusion technology startup. A self-described "serial entrepreneur", Ben has also served as the Director of Global Operations for the Founder Institute, the world's largest pre-seed startup accelerator.
Vault recently spoke with Ben about the impact of the COVID-19 pandemic on the cannabis industry and the unique challenges and opportunities startups face in the midst of a crisis. [Editor's Note: This interview has been edited slightly for length.]
Vault: Tell us how your background as a "serial entrepreneur" led you to the cannabis industry.
BL: I’ve long been passionate about helping fellow entrepreneurs realize their goals. After founding a few startups of my own, I was the Director of Global Operations for the Founder Institute, where I helped launch over 100 startups locally in the Bay Area. We expanded into more than 100 cities and onboarded, trained, and guided local leadership to spur economic growth outside Silicon Valley. I’m still a Director and Mentor at the Founder Institute.
By 2015, I was drawn into the burgeoning legal cannabis industry, where I sought to assist the advocacy movement through the only way I knew how: building a startup ecosystem that cultivated innovation, knowledge sharing, and a "rising tide" mentality. I co-founded Gateway, a full immersion business accelerator and seed investment program that connected aspiring cannabis entrepreneurs to knowledge, capital, and mainstream opportunities. We teamed notable advisers like Phil Libin of Evernote and Patrick Lee of Rotten Tomatoes with cannabis advocacy and business leaders like Debby Goldsberry of Magnolia Wellness and Ed Rosenthal to mentor companies in the program and bridge the gap between cannabis and the mainstream.
Along the way, I met Dr. Harold Han, the senior emulsion scientist at Bio-Rad Laboratories. I discussed with him his perfect alignment to solve a major problem in the space: water-solubility and cannabinoids, primarily for infused beverages. Before long, I made the decision to put all my effort and resources behind a single concept that I truly believed in and joined Harold in creating Vertosa.
At Vertosa, we create custom cannabinoid solutions that solve emulsion issues within the infused marketplace and work with brands to create stable and scalable infused products that can consistently deliver on their promise to the consumer. Since Vertosa’s inception, we’ve partnered with over 50 companies and launched beverages and topicals with leading brands including VitaCoco, CC Wellness, Caliva, Spacestation, and more.
Vault: How have you responded to the COVID-19 pandemic within your own company? What advice do you have for other leaders during this crisis?
BL: Vertosa’s headquarters are in Oakland, so as soon as the Bay Area Shelter in Place rule took effect, we immediately transitioned our staff to working remotely. It has been challenging, but we’re getting through it, continuing to secure new brand partnerships and develop new infused products to put to market.
Unfortunately, many business leaders have had to make deep cuts to survive and preserve as much capital as possible to invest in rebuilding when the market begins to recover. When making these uncomfortable cuts, focus on the essential, but be human. Let people know they are valued. In the end, be decisive but not cold.
We continue to invest in our employees, perhaps more than ever. We have supported our team in setting-up their home offices, are sponsoring health and education programs for the team, and have planned a team self-care day with mandated “unplugging.”
Vault: What role does corporate culture play in navigating a crisis? How can a company’s dynamic empower that company to withstand this kind of strain?
BL: From day one, culture has been Vertosa's central motivator. We ensure that every employee believes in our vision and mission, is dedicated to our core values internally and externally, and knows they are contributing to an effort greater than any one company. This dedication has paid off in spades during this crisis. Amidst cost-cutting and a reduction in force, our team members are more motivated than ever. We all know the measures we’re taking today will enable us to capture the opportunities that lay ahead.
Vault: How do you inspire connectedness when people are isolated from the colleagues they used to see every day?
BL: Checking in virtually, especially through video conferencing, is extremely helpful. Be a source of inspiration in a very worrisome time. Celebrate wins, no matter how small. Express gratitude, even if it's just for showing up. You never know what someone is going through personally in times like these.
I find myself reaching out more often to individual team members just to see how they’re doing and if there’s anything they need from management. The beautiful thing about a well-run organization is that work can act as a consistent and positive distraction from all the bad news in the world. It’s centering. Creating that distraction while holding space for everyone to navigate what’s happening in their personal lives is a delicate balance that I strive for every day.
Vault: Do you think startups were positioned to better adapt to the pandemic than larger or older corporations were? What unique challenges and opportunities do startups have when navigating a crisis?
BL: Startups have the ability to be nimble, react quickly to shifting landscapes, and target smaller markets in comparison to larger companies. Their ability to pivot and creatively solve new challenges for emerging markets or new consumer trends is historically what has made startups special. Many of the greatest companies were forged by the fire of crisis, and that’s because a crisis will force or accelerate market shifts missed by larger companies.
However, the challenge many startups often face during crises is capital constraints. Where a big company may choose the path to weather the storm, a startup must react quickly, conserve cash, and bring their company as close to sustainability as possible. Not a bad exercise for a young leader, and often one that sets the company up for success in the future.
Vault: How has the cannabis industry has been affected by COVID-19?
BL: The pandemic has impacted every sector of the industry, and the situation continues to evolve. Even massive, multi-state operators are scaling back by laying off workers and closing facilities to cut costs. Adult-use sales have been unpredictable, spiking and declining.
While many states, including California, have declared cannabis businesses essential, the federal government has prohibited state-legal cannabis businesses and most ancillary cannabis companies from receiving grants or low-interest loans through the new economic stimulus package—let alone federally supported banking. These factors make an already rocky legal cannabis industry even more uncertain.
At the end of the day, going from illegal to essential in such a short period of time is a huge emotional win for the advocacy movement and is something we should all take a moment to recognize and celebrate. We’ve come a long way.
Vault: What will the repercussions of this crisis be for the industry?
BL: It really depends where in the supply chain you’re looking. Overall, I find the signaling to be largely positive. Operators in the industry have long hypothesized that cannabis is recession-proof. With recent surges in sales at the beginning of the shelter-in-place orders, delivery orders doubling on many platforms, and the “essential” designation by state governments, it seems the hypothesis may be true.
I often describe the entire cannabis industry as a startup. As such, operators in the industry are familiar with being agile and rolling with the punches. This will certainly affect retail trends and shifts to omnichannel, accelerate the growth of infused products over smoking and vaping, and has dramatically forced a shift to sustainable business practices due to retracting venture capital.
While cannabis has many applications, a key application is stress management. A healthier and more effective alternative to alcohol, which is also spiking right now, is more readily available to the mainstream consumer than ever before. When all is said and done, I believe this will be a positive shift for the cannabis industry and movement.
Vault: Since states have varying definitions of what constitutes an “essential” business, have any of Vertosa’s partners been impacted by these mandates?
BL: It certainly challenges operations and collaboration efforts for us and our partners, but it’s nothing insurmountable. We hear about some supply chain constraints, whether it’s packaging or inactive ingredients, or certain distributors and retailers that are facing challenges, but nothing too out of the ordinary. Being a California-based company right now definitely helps.
Vault: What lessons do you hope business leaders will take away from this crisis?
BL: This is the ultimate trial by fire. Successfully emerge from this, and you’ll have more experience under your belt than any education can provide. It will force a stoicism that makes everyday trials and tribulations that much easier to navigate with a level head. What I hope accompanies this experience is a clear understanding of how to manage with humanity, empathy, and a clear understanding of how to be good corporate citizens with the greater public good in mind.