Jason Vegotsky, CEO of Petalfast– Interview Series

 “Everybody is trying to do everything, and too fast. Vertical integration is one of the biggest reasons businesses struggle in the cannabis industry.”

Jason Vegotsky

Many would not like to hear or even believe the infamous startup static: almost 90% of startups fail within the first year. While there are no hard and fast statistics on the startup failure rate in the cannabis industry, Mac Mahon the CEO of Accelerator, places the figure at a staggering 97%, citing that the nascent industry has “longer odds.” In as much as the validity of this claim is not backed by research evidence, a recent survey that was conducted by National Cannabis Industry Association showed that about 37% of cannabis businesses are struggling to break even. So much for the much-hyped green rush, right?

Jason Vegotsky, an industry expert admits that “some of the best and brightest minds have failed in the cannabis industry.” Several plausible reasons can explain this. For example, after bagging a cannabis license some get too excited and become complacent, underestimating the competition. Others start off too ambitious and over-invest in structures and an over-paid c-suite. And the list goes on.

In an actual sense, breaking even and achieving profitability is very much a possibility in the cannabis industry. And contrary to common belief, several cannabis businesses make it past the first year. That said, given the challenges that are inherent in the strictly regulated and fast-growing industry, it's prudent to seek professional mentorship. Having a fool-proof go-to-market strategy can save many entrepreneurs from the heartache of a failed business. Is it possible to achieve this?

Let's get that answer from Jason Vegotsky, the CEO of Petalfast.

Petalfast is a leading go-to-market platform that helps new cannabis businesses to launch out and existing ones scale their distribution.

Meet Jason

The cannabis industry is one that many would rather not associate with. How did your career path lead you here?

Some of the best and brightest minds have failed in the cannabis industry, and the challenge of winning in this very difficult and fast-growing space is what attracted me to join. Early in my career, I worked in wine and spirits distribution and built my own natural food brand. It was a natural progression to entering the cannabis space, and I've learned from my past experiences and failures while leveraging my industry knowledge to get to where I am today.

Introduce Petalfast and what the company does, briefly.

Petalfast is the leading go-to-market platform for brands looking to enter or grow within the cannabis market. We've been hyper-focused on California, but we are now expanding across the country. Our sales, brand management, and field and trade teams work to incorporate our brands into retailers to build connections with consumers, leading to increased revenue and customer loyalty.

What gap is Petalfast filling in the California cannabis market?

We are filling the distribution gap. To build brands, you need a good go-to-market strategy, and at Petalfast, we employ a different spin on distribution. Our brands are distributed to all California dispensaries and delivery services through our wholesale partner, Nabis. They handle the logistical operations, including inventory management and product delivery. This is so we can focus on the front-of-the-house activity, which includes customer service, maintaining retail relationships, merchandising, budtender training, and more. It's tough to do it all on your own, and partners and distributors in the cannabis industry have been challenged to build a robust selling organization, so Petalfast fills that gap.

A recent survey by the National Cannabis Industry Association (NCIA) revealed that only about 42% of cannabis businesses are turning in a profit. Why is it difficult for most cannabis businesses to make a profit?

Everybody is trying to do everything, and too fast. Vertical integration is one of the biggest reasons businesses struggle in the cannabis industry. It's hard to enter this space, so focus is critical. The more verticals you're in, the more challenging it is to be profitable, which is why Petalfast is solely focused on selling in and selling through at retail. We are looking to be the best at what we do, and I believe that the brands that stay focused on their core competencies will see long-term profitability.

Due to the strict regulations, marketing cannabis is anything but straightforward. What can be done to make things easier on this end?

Federal decriminalization and removing cannabis as a Schedule I drug on the controlled substances list would undoubtedly make things a lot easier. In today's world, the number one way for brands to connect with potential customers is through social media, but cannabis companies face many challenges and roadblocks in promoting their brands through these channels. When you combine that with the restrictions on TV advertising, it becomes challenging to build brand awareness.

Since the industry doesn't have access to the traditional marketing playbook, retail is where brands should be focusing their efforts. Engaging with consumers in-store allows brands to grab their attention and drive faster sales until other avenues open up. At Petalfast, we decided to invest in field and trade marketing to bring brands to life at the retail level. We do this better than anybody else, and we do it at scale.

Vertical integration versus horizontal integration or specialization, which trend best suits the cannabis industry?

I believe specialization is best. Vertical integration stretches a company too much. While there are some unicorn companies that have been able to do it and do it well, many companies struggle with vertical integration because they need too much money or lack focus.

Specialization will win the day. Companies that commit to spending the money, time, and energy to become the best in their category will be better suited for long-term success.

You have worked with big brands such as Coyote, Emerald Sky, Bloom Brands, and Yada Yada. Which has been your most fulfilling project?

They were all fulfilling, but I'm extremely proud of Yada Yada. According to recent Headset data, they are one of the fastest growing brands in California. In seven months, we took them from an idea to the second largest flower brand in the state. Bringing Yada Yada to market and seeing them rise to a top 10 brand within that category in such a short amount of time validated all the work we are doing at Petalfast.

One piece of advice that you can give to an entrepreneur looking to venture into the California cannabis market?

Dive in fast. Your goal for the first 6-9 months should be to gain experience and learn as much as possible about the cannabis industry. Without a base level of industry knowledge, you won't be able to hit your full potential. After that, you can pivot into the right career trajectory for you.

What's next for Petalfast?

Petalfast is expanding into Michigan and Massachusetts over the next six months. We are looking for competitive marketplaces where vertical integration is breaking down to build the top sales and field and marketing teams, followed by a leading portfolio of brands within those states.

It was a great pleasure to have this one-on-one with Jason, CEO of Petalfast. Readers who wish to keep up with the company are more than welcome to visit their website.