High stakes: How this marijuana company gained buzz in a budding market
This post is in partnership with Entrepreneur. The article below was originally published at Entrepreneur.com.
By Joe Robinson, Entrepreneur.com
The bed was a mattress on the floor, the night tables two cardboard boxes. It wasn’t exactly what Ata Gonzalez and his wife had envisioned. Just a couple of years earlier, they had made millions in the Florida real-estate market, only to lose it all in a music venture that completely drained their savings.
They traveled to California to stake a claim in an even more adventurous business: the burgeoning medical marijuana trade. “I was a step away from being homeless,” recalls Gonzalez, who lived on cheese sandwiches as he waited for his first cannabis harvest at the farm he was renting. “The pressure was intense. My wife gave birth a month before harvest. I don’t know how I didn’t have a heart attack. You hear all these stories that people would come and steal your crops.”
It seemed preposterous. Gonzalez had never grown anything, let alone handled large-scale farming. Yet he had done his homework. For the better part of a year, he made trips to California to learn how to grow cannabis and sell it to dispensaries. He joined a collective and learned how to cultivate, cure and trim the crop.
Despite the challenges, the first harvest of their fledgling company, G FarmaLabs, was a success and found buyers. So Gonzalez decided to expand output by planting at another farm, then another. Then, and only then, did he upgrade his bedroom furniture, preferring to put all earnings back into the company.
Five years after that first grow, Anaheim, Calif.-based G FarmaLabs is one of the leading companies in the cannabis space, with 40 employees including in-house scientists, and has an expanding array of some 50 products, ranging from vape pens to 20 flavors of infused chocolate edibles. Gonzalez has his sights set on a cannabis empire. His Liquid Gold Delights Mint Meltaways were named “Best Edible” at the 2014 Southern California Medical Cannabis Cup, and his Liquid Gold Chocolate Bars won the Kush Cup at the Kush medical marijuana expo in Anaheim. The chocolates are decorated and packaged in sophisticated designs that would rival those of any deluxe confectioner.
“We see a lot of hippie products in the market,” says Gonzalez. “We want to step it up, lead the pack. We see ourselves as a national brand, a world brand. We’re trying to create a Coca-Cola, not just a product available in California.”
But growing a cannabis business comes with hurdles not faced by the average venture. Medical marijuana is legal only in 23 states and the District of Columbia, and recreational weed is legal in Colorado, Washington and, as of November, Alaska, Oregon and the District of Columbia. Each state has its own rules, making a central manufacturing system difficult. And then there’s the banking problem. Since marijuana is still on the federal books as a Schedule 1 narcotic (categorized as dangerous as heroin), banks are wary of working with businesses that touch the plant.
“Not being able to bank, how does somebody lend you money?” Gonzalez asks. “You’re forced to pay a lot of things in cash.” Since launching the business, he has had to employ armed guards.
Indeed, the vagaries of cannabis laws and politics have made for risky business. Gonzalez spent $100,000 to open a dispensary in the Eagle Rock neighborhood of Los Angeles, but it was closed by local authorities in a backlash to dispensary proliferation. A second shop lasted only three months before Gonzalez decided retailing wasn’t for him. He lost $200,000 on his dispensary ventures.
“Every month in the dispensary business was like a year,” he says. “You never knew if you were going to have a store the next morning.”
But laws have solidified since then, Gonzalez says, and he has ambitious plans, including new edible products and a crowdfunding website that will help other cannabis entrepreneurs get off the ground. How far G FarmaLabs goes depends on the Department of Justice changing its classification of marijuana and the end of prohibition nationwide, for which Gonzalez is a public advocate.
“When that happens, there are literally billions of dollars drooling over being in this business,” he says. Until then, the watchwords are patience, persistence and cardboard furniture.
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