How to Create a Weed Startup With the Founder of Potbox
Smoke weed? Ever think the day would come when your weed would be delivered to your doorstep, legally? Well, that day is finally here.
The recently launched Potbox had the launch every startup dreams about, getting covered by every conceivable media outlet you could imagine — from Mashable to Rolling Stone. In a single week, the whole world was abuzz with the news about their brand and their business.
Monthly subscriptions aren’t novel, unless it’s a subscription service for premo marijuana, delivered right to your door every single month. Of course it’s not legal to have the USPS deliver weed to your door, but Potbox delivers the weed through their own delivery men.
We got an exclusive interview with the founder, Austin Heap, a seasoned veteran in Silicon Valley about his new startup, which is the 3rd one he’s fundraised for. But he says Potbox is the most interesting one he’s worked on so far.
The marijuana startup space is very interesting and also very challenging. It’s also super lucrative, but there are many inherent problems with owning a marijuana-based business.
Here’s what you’ll learn in our interview:
- A rundown of the challenges involved with running a weed startup (including legal issues)
- Austin’s tips to networking & fundraising in Silicon Valley
- How Potbox got so much press (hint, it wasn’t a difficult process)
From Idea to Execution
Before founding Potbox, Austin Heap was an employee at Recurly, a platform for subscription billing. One day, he was sitting with his now co-founder Ian and discussing startup ideas.
“My co-founder Ian thought about the idea of a subscription service for marijuana. But at the time we just chuckled about it because we didn’t have the expertise to make it work.”
Shortly after their discussion, Austin and Ian both met another man named Everett, a 20-year veteran of the medical cannabis industry. They discussed the Potbox idea and everything clicked. Now, they had all the components needed to start a weed business.
Even though subscription delivery services already existed for weed, Potbox is serving a much more sophisticated market. Potbox manages the weed from it’s seed form until it’s delivered to your door.
“We provide patients with the highest quality medical grade cannabis available and the most ethically grown. For example, one of the things we do is we make sure our cannabis is grown without pesticides and fertilizers. We aim to give a choice to our patients when it comes to cannabis.”
But even before their launch, Potbox ran into issues very quickly. They had to figure out how to solve the legal issues with owning an online weed startup.
“[The legal side of weed] is a very frustrating and complex part of the industry. Every state has its own laws and rules. Navigating the legal side has not been a light undertaking. Potbox is only available in California right now and we follow Prop 215, which allows medical marijuana to be legal. According to the law, though, we are not a cannabis company. We’re a branding & supply chain company. We contract with our partner’s dispensary to do the delivery because that’s what California tells us we have to do.”
Despite operating in an industry where there are strict operating laws, the authorities have never contacted them to check out the legality of their business. Austin assured me that even if they did, they would find nothing because their lawyers are extremely thorough.
But legal issues weren’t the end of their problems.
“The #2 challenge is that there’s a whole lack of clarity or definition on the cash side of the business. At the federal level, cannabis is still not legal. So every state has their own laws about the banking side of things. Right now, the only institutions that accept cannabis money are mostly credit unions that are ahead of the curve. Most large banks are very nervous about taking cannabis money. We had to talk to many different banks to figure out what bank would take our money.”
And forget about using Paypal or Stripe if you want to collect weed payments online. You have to figure out another system to use. For Potbox their partner dispensary handles payments. Part of maintaining compliance with Prop 215 means that any exchange of money must occur within the ‘closed loop’ of dispensary to patient. If this is confusing to you, it basically means the consumer doesn’t pay Potbox directly. The consumer pays the dispensary and the dispensary hires Potbox to do the delivery.
Fundraising & Networking in Silicon Valley
One of the aspects of his business that wasn’t a challenge was the fundraising part. Potbox is Austin’s 3rd startup that he’s fundraised for.
“There were tons of inbound investment offers. Once people in the valley found out what I was working on I got a lot of unsolicited offers. Email, phone, Twitter, everywhere. It was nuts.”
The idea of Potbox was so marketable and so lucrative that investors just knew it was going to be a hit. Austin also mentioned that the offers were rolling in even before they had their massive launch day where everyone on planet Earth under the age of 50 was pretty much made aware of Potbox.
But how did investors find out about his company before launch day?
“It’s about the fact that I’m someone who people do know in Silicon Valley. This is my 3rd startup I’ve fundraised for. I have a reputation so I’m a little bit more reliable than someone who just moved to the Valley.”
And what was the key to getting connected in Silicon Valley?
“I remember when I first moved here and I wanted to get a meeting with any investor, I would have to beg for any meeting at all.
I think the most successful entrepreneurs are the ones that are the most fascinating people. When an investor identifies you as a “cut above the rest” is when you will get plucked up and pulled up from where you were. I had mentors who really helped me in that regard.
So my biggest advice is just try to talk to as many people as you can. Just by asking someone to get coffee is the first step. By showing initiative puts you above 90% of the people out there. Even if you get a lot of nos you’re bound to get some yeses. If someone says they’ll buy me coffee, more often than not I’ll grab coffee with them.
Get mentors. Get people smarter than you to help you. Make sure you’re the dumbest person in the room.“
But is the Valley the best place to start a startup?
“Yes. If this is what you’re really passionate about. There’s nowhere else for you to be.
The Valley is FLUSH with capital. I used to be on the East Coast but they’re still playing catch up over there. The West Coast is much different. Investors here expect to lose millions of dollars and they’re fine with that. East Coast investors value much more sane deals. Essentially the West Coast is much more high risk high reward, rather than the East Coast which goes for safer bets.”
One of the things that really impressed me was the amazing launch that Potbox had. If only my startups could get that much press, I’d be rich (hah).
So I had to ask Austin if he had any secret sauce, but for them it was almost too straightforward.
How did they approach their launch PR strategy?
“I want to say that I went to bed absolutely terrified before our first article was published on Mashable. Honestly I didn’t know how well we would do at all.
One reason I think we went pretty viral was because we had a great MVP. One problem I know that other startups face is that they get too pre-occupied with “releasing a MVP” but they don’t focus on the V which is “viable.” And if you release something that’s low quality its going to be very difficult to get that viral launch.
The first step was we identified 10-15 outlets we’d like to cover our product. Then we pitched them and tried to send them a press embargo. In our case, we sent them a Potbox. In most cases, you’re going to get a few people who will say yes. And of course we got many nos as well, and that’s absolutely normal for any startup. But we realized that our launch was going really well when outlets that we didn’t even reach out to decided to run a story about our site. We never approached Rolling Stone or Playboy and they both decided to write a story based on the other articles there were about us. When the PR cycle takes off on its own and in an organic fashion, then you know you’re doing well.
Did they do anything crazy or try to “hustle” press in any way?
“Honestly we just emailed people. We identified the press outlets, sent them a sample, told them our launch date, and that was pretty much it. It was viable enough to get press coverage just on the merits of the product we were selling.
A tip I must give is that you have to ask. That’s all we did was we asked. I’ve gotten $10k of free stuff just by asking my network.”
And there you have it. Potbox obviously had a couple of advantages that other startups don’t have. Being that they sell a physical good, one that is highly desired by many people, it wasn’t difficult to get coverage.
- Have a good product. Potbox has a big advantage with media outlets because it’s a physical product that everyone loves (weed).
- Send an email to 10-15 related media outlets, and send them a press embargo. A press embargo pretty much gives them the relevant info on your launch, but the outlet promises not to publish any information until a certain date. This is important because the media pitching happens way before your launch. It would have been pointless if Mashable wrote about their product before they had even launched because they wouldn’t have been able to leverage those views into customers. Furthermore this also gives media outlets the impression that they’re breaking an exclusive story.
- Send samples. In my personal experience running a media startup, we LOVE samples. If you’re going to send me some weed (or something else awesome) who am I to deny you a simple blog post?
- If no one wants to talk to you, then you obviously need to rethink your product. Everyone thinks their product is the best thing ever, but if you can’t get anyone to cover your product then you may want to rethink what you’re doing.
But even with 1 million unique views on launch day, Potbox still isn’t satisfied.
“After an amazing launch, we’re now in hustle mode just like any other startup. We have to figure out new customer acquisition channels and learn how to grow our business.”
Get your own Potbox here.