Marijuana Business Magazine November December 2018

It proved to be a costly error at a time when KushCo wanted to get into the Colorado market, but instead, it spent the capital needed in Washington. “We had no funds left over for Colo- rado. In 2014, it started to take off, and people were ordering product from us, but we were shipping from California. We thought we would be at a big disad- vantage trying to ship from California.” The solution, company executives reckoned, was to partner with one of KushCo’s Colorado customers, Dank Dispensary, which had a warehouse next to its Denver store. Dank created a new LLC, Dank Bottles, and KushCo granted the company an exclusive distri- bution agreement for Colorado. “That was a creative way to get into the state physically while preserving our capital,” Kovacevich said. But the down- side was that a lot less of Colorado’s lucrative packaging niche was going to KushCo, so the company decided about a year later to spend nearly $375,000 in cash and 3.5 million shares of stock to buy Dank Bottles. “They provided value and got us to the market quicker.They did a lot of things well, but the reality of the situation is we would have saved a few million dollars had we had our own capital and opened up ourselves in Colorado,” Kovacevich said. “What we learned from the Dank experience was there’s definitely value for a distributor, and if it’s an exclusive distributor in what we would consider a key market, we’re going to end up buying them. So, we don’t want to create that situation again.” And if KushCo was going to expand nationally without re-creating a situation where it gives local partners exclusive distribution agreements, then it would need to go public. Executives started prepping for a public offering in 2014, and the company started trading on the over-the-counter market in 2016. KushCo Holdings opened a 13,000-square-foot facility in Las Vegas this summer. Photo courtesy of KushCo RECIPE FOR SUCCESS KushCo Holdings was able to grow from its home base in California across the United States and into places such as Canada and China thanks to: • An IPO that gave the company the capital it needed to expand into new markets – and, equally important, new product categories. • Diversification and expanding into different but complementary ancillary product lines, making it easier to break into and make sales in new markets. • Emphasizing the importance of personal relationships and having people on the ground in key markets to establish those relationships and expand into other markets. 62 • Marijuana Business Magazine • November/December 2018