Pot Goes Wall Street
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Weedmart: Marijuana Superstores. IPOs. Reality TV.

Meet the cocky entrepreneurs at the vanguard of the pot boom.

Early on the morning of the opening, Mann's brother phoned to say that someone kept calling him from a blocked number, claiming to be waiting outside weGrow. Fearing that it was vengeful drug-world competitors, Mann called the police and sped over in his orange Lamborghini Gallardo. Instead, he found a TV news crew. Just hours after the store opened its doors, Mann's wholesale hydroponics supplier called to say he would no longer sell to weGrow because it had violated the hydroponics code of silence. Mann started quietly buying merchandise from retail hydro stores and sold it at a loss just to keep his shelves stocked.

Mann says he acquired his nose for business from his father, who'd been a farmer in Punjab before coming to Oakland in 1985 and buying a cab. Now he owns 200 of them. But Mann says his dad is less than impressed with his return to the family's agricultural roots. "He's very worried," Mann told me. "All the time."

As Mann was getting weGrow off the ground, Derek Peterson was managing a $100 million investment portfolio at Morgan Stanley in Orange County and dabbling in the pot business on the side—growing weed in his garage and brokering pot sales to dispensaries. He was also working on converting an eight-wheel trailer into a mobile WMD lab of a pot farm known as the Big Bud (motto: "Size DOES Matter"). He approached weGrow's Grow Squad (later renamed Bloom Room after Best Buy claimed the name infringed on its Geek Squad tech-support service) for technical advice and came away impressed.

Mann eventually proposed a deal: Peterson's company, GrowOp Technology, would manufacture hydroponics equipment and sell it to weGrow. Then he and Peterson would take stakes in each other's businesses with the ultimate goal of taking GrowOp public on Wall Street.

While Mann roped in a family friend to broker manufacturing contracts in China, Peterson mined his Rolodex at Morgan Stanley, where he was still employed as a senior vice president in its Irvine office.

Peterson agreed and moved up to Oakland. While Mann roped in a family friend to broker manufacturing contracts in China, Peterson mined his Rolodex at Morgan Stanley, where he was still employed as a senior vice president in its Irvine office. (A Morgan Stanley spokeswoman asked that I not mention Peterson's employment at the firm. Shortly after this conversation, Peterson told me he was headed to Orange County to do damage control. He said he'd already been planning to leave Morgan Stanley at the end of the year.)

Peterson claims that Grow-Op was an easy sell to potential investors, largely because it could offer a seriousness and business savvy that its competition couldn't. If everything works out as Peterson and Mann insist it will, GrowOp's projected $2 million in annual profits will give it a $50 to $60 million market cap when it goes public later this year. Together they will own 70 percent of the shares. That's small change compared with a tech IPO, but if it actually happens, it would add to weGrow's legitimacy in the eyes of investors, regulators, and potheads.

One Saturday a couple of weeks before the weGrow bash, I caught up with Mann and Peterson at the International Cannabis and Hemp Expo just south of San Francisco. It was 4:20 p.m., and they had procured strawberry-banana-marijuana smoothies from two of the many scantily clad young women sauntering through the hall offering all manner of pot-infused goodies. "I consume the least out of everybody," Mann told me. "Most of my staff has never even seen me smoke." Peterson worried about his smoothie's high THC levels: "They always scare me when they say, 'We've been making them stronger and stronger.'"

The afternoon's big event was a debate between pro- and anti-legalization potheads that quickly went sour, as chants of "You suck!" clashed with cheers and applause. "I'm hiding behind you if a fight breaks out," Peterson told me. "I'm too stoned to throw punches." I pointed out that pot smokers are supposed to be peaceful. "I'm telling you, man, when economics gets involved, it changes everything," he replied. A year from now, he predicted, the pot business "is gonna be as ruthless as Wall Street."

He and Mann headed over to a table selling Doob Tubes, pocket-size airtight joint containers. "Everybody knows Doob Tubes," Peterson said before moving in to see if the Doob Tubes guy would cut him a deal on volume. "I only sell it at one price, and it's at wholesale," Ray C., the inventor and owner, informed him firmly. Peterson asked what the price would be if weGrow ordered 200,000 tubes—a shipment 20 times the size of a typical order. Ray C. laughed. "That would be a much different price."

Though Oakland now requires industrial-scale pot farms to be not-for-profit, "My feeling is that eventually they'll turn that into a for-profit entity down the line," Peterson says. "We could, 20 or 30 years from now, be the Budweiser of marijuana."

 

SIZE DOES MATTER. Mann and Peterson know the real money isn't in being the biggest seller of Doob Tubes. Which is why they still have their eye on the mother lode of California's green rush. Oakland is planning to offer four industrial-scale marijuana farming permits, and the weGrow guys hope that their new cannabis cultivation arm, GROPECH (Grass Roots of Oakland Philanthropic and Economic Coalition for Humanity), can snag one. They envision a 60,000-square-foot, solar-powered warehouse that would hold 30,000 cannabis plants yielding $50 million worth of buds per year. Though Oakland would require the farms to be not-for-profit, "My feeling is that eventually they'll turn that into a for-profit entity down the line," Peterson says. "We could, 20 or 30 years from now, be the Budweiser of marijuana."

Late on a Tuesday night, Mann and a couple of weGrow employees sat in his bachelor pad in downtown Oakland, passing a glass pot pipe. On his widescreen TV, the city council was debating how to assign the grow permits. "It's like watching the Super Bowl for me," Mann said between hits. He perked up when a council member suggested that the farms be required to purchase 80 percent of their equipment locally; that could be huge for weGrow.

"There's so much politics involved," he said after changing out of his suit and into a white hoodie. "It's like a game of chess, man. The thing that you have to keep in mind is that you've got a lot of pieces before you get to the king, right? And any one of those can be a game changer."

After an hour, the council decided the permit question was too complicated and tossed it back to city staff for further review (the council is still debating how to offer the permits without breaking federal law). Mann was angry; he hadn't expected the wheels of government to turn so slowly. Around midnight, he got an email on his iPhone with a link to an article about resistance to weGrow's planned expansion to a suburb south of San Francisco. City officials weren't sure if the store would be legal. "Isn't that insane!" Mann exclaimed. He was losing his appetite for thinking about business. The munchies had kicked in. He headed into the kitchen and stuck a leftover enchilada in the microwave.

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