Published in Economic Development
Hilary Dulany, CEO of Accuvape. Hilary Dulany, CEO of Accuvape. Courtesy Photo

Cannabis entrepreneur to marijuana start-ups: ‘Acquire or be acquired’

BY Sunday, November 13, 2016 01:41pm

For the past two and half years, Hilary Dulany has been traveling between Oregon and Michigan to grow her small businesses amid the transformational change happening with the legal marijuana industry.

Both states are on the front lines of changing attitudes and laws around commercially growing and selling pot. Oregon voters approved legal recreational use in 2014 and, since then, state officials have worked to develop a commercial marketplace. Earlier this year, Michigan Gov. Rick Snyder signed bills that will institute similar regulations, although they are limited to medical marijuana. Dulany and other advocates say it’s not a matter of if, but when, Michigan voters will back legalizing recreational use as well.

Dulany, 40, recently spoke with MiBiz about getting into the cannabis industry, which began for her in 2008 shortly after Michigan voters approved the state’s medical marijuana law. The Monroe County native has had her ups and downs since then, working in multiple states that in some cases left her feeling burned by former business partners.

She is the CEO of Lansing-based Accuvape, a vaporizer company whose products are sold internationally, as well as two Oregon-based companies that grow cannabis and make extracts.

Dulany discussed the challenges of launching startups in a relatively uncertain legal environment, the evolving gender roles in the industry and how pot entrepreneurs should be ready to “acquire or be acquired.”

How did you get involved in the cannabis industry?

In 2008 when Michigan’s (medical marijuana) law was voted in, it was right around the time the economic crash was happening. I was a lot younger then and I didn’t really know how to recession-proof my business. At the time, I was a niche-market specialist and had always done work in small-business development, expansion and infrastructure development. I knew this law was coming and had been voted in so I basically did for myself what I did for other people. I put some business models together, went over them with attorneys and prioritized what we should do. It was just a natural progression for me to enter into this. 

Back then, no one called it an industry — it was really different than it is now. I helped organize the first marijuana expo in Detroit. After that, I had some contacts and people willing to advertise so we formed a publication called the Midwest Cultivator. I learned a lot about the industry in that way.

What other opportunities did you see in those early years?

Knowing what I knew about holes in the industry at that time, I knew the primary investor of (California medical marijuana-focused vaporizer company) O.Pen. It was becoming big and the cartridges used for them were really hard to get. I realized people could make this all over the country. Knowing the initial people who got everything going, I said, ‘Why don’t you let me develop a segment of the company for just the electronics?’ From a legal standpoint, being an electronics company allowed us to operate in all 50 states and gave us multiple market crossover. 

At that point, the options for getting in the (medical marijuana) market were very limited. In Michigan, pretty much any time, something bad could happen to you. As soon as I started making enough money on this, (O.Pen’s) lawyers sent me a cease and desist letter. I sent them a letter back and said, ‘Thank you, I’m starting my own company anyway.’

You also started doing business in Oregon. How did that get started and what are you involved in there?

About two and a half years ago, I went to Oregon and would travel back to Michigan every five or six weeks. I started developing accounts (selling vaporizers) there when one day my friend (who) runs a clinic said I should get a greenhouse and get in the (growing) industry. In Oregon, they opened up residency requirements to (allow) outsiders. My boyfriend and I bought a 13,000-square-foot greenhouse. From there, we opened a lab and started Aardvark Extracts.

How does your vaporizer market to the marijuana industry?

We do private labels on our products for other companies, such as dispensaries or smoke shops, and we also direct (customers) to our other services. The vaporizers themselves are medium-specific and we have them for oils, solid extracts and flower pens. All three products have legal uses and when marketing them, I just have to prove that there are legal uses for it and products for it, such as herbal supplements. We just have to use different terminology.

How do you feel about the new regulations on growing and selling medical marijuana in Michigan?

It’s super interesting to me. I left Michigan because I knew the things I’m good at and the connections I had in the industry at the time I couldn’t just throw away. But I also couldn’t do what I wanted to do in Michigan because (lawmakers) had their heads up their butts and couldn’t finish the law. Coming out to Oregon was my ability to develop a proof of concept in a safe environment. 

I have two solid feelings about the changes in Michigan: First, it will allow me to come back to where my friends and family are. Second: The people I used to work with in this industry in Michigan are very different than in other states. They are very activist-driven, very emotional and don’t have a lot of business experience. It’s a very raw community. I set myself back quite a bit in (Michigan’s) community because I just wanted to help people but realized I needed revenue to help people.

What’s the industry’s reaction to the Michigan laws? 

I hear a lot of people who are just furious about this law, that it will put them out of business. I learned that the things people are complaining about are things I’m happy about. If we’re truly setting up a business, those (regulations) are fundamentally necessary. I believe it’s going to weed some people out, but I also believe it will make the industry stronger.

How does doing business in Michigan compare to states on the West Coast?

When you’re (in Oregon), you take (regulations) for granted a bit. But I’m glad I went through the ringer here learning about the regulations. People in Michigan have no clue what’s about to hit them. 

On one hand, when I first got out to Oregon, it was so much easier to sell weed in Michigan (due to the lack of regulation). Out here, you’re on a website with the state because you’re licensed. In Michigan, if you had an office or a lab, phone number and website where people could find you, you could be raided. There are pluses and minuses to both systems. But for me, the excitement died years ago in all of this.

You’ve been quoted in Bloomberg about gender roles that prevail in the cannabis industry. How have you seen the gender gap play out in terms of entrepreneurial opportunities for men and women?

This is one industry where in the beginning, mostly in Michigan, I was treated as the little lady, especially among old-school, old-man growers and store owners. When they knew I knew how to grow, that’s when they welcomed me into the fold. 

(Accuvape) is one of the early sponsors of Women Grow, which was founded two years ago in Denver that provides opportunities for women in the industry. There are fewer barriers to entry for women in this industry over the past two years — it wasn’t that way so much in the beginning. I really did fight tooth and nail to be treated as an equal in Michigan, but when I got to Oregon, it was different and seems to be on a national level. I see a lot more women-owned businesses across the states, a lot more than there were three or four years ago. Why? Every other industry in existence up until now has a history and protocols and standards in place. This industry has literally just started. Because of that, there are no big players to elbow us out of the way, so if a woman lays the foundation, then she does it. And I think that’s why we’re gaining more acceptance. 

What is the next frontier for the cannabis industry? Do you see a transition to larger corporations and a shift away from the small business model?

In business, the first question you ask yourself is: What is my exit plan? Either you have to be in a position to acquire or be acquired, one or the other. That will determine what will happen in the industry. We’re starting to see Miracle-Gro and Microsoft dipping their toes in the cannabis pool through ancillary means. With Accuvape, I went from a very small business to a national brand in a matter of three years. Still, I’m setting myself up to be acquired.

I honestly think that people aren’t prepared for industry to move in on this, but I’m seeing it in Oregon right now. If people aren’t prepared, they need to wise up quickly. 

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