Toronto vape company Greentank poised to cash in on cannabis legalization – Globe & Mail
SOURCE: Globe & Mail
Dustin and Corey Koffler, brothers and co-founders of Greentank Corp., have been growing their business at breakneck speed over the past year – and the pace is unlikely to slow down as cannabis legalization approaches.
One year ago, Greentank, a Toronto-based startup that designs vaporizers for cannabis-oil producers, had its first product ready, but no employees and no sales. Today, the company serves 60 clients in four countries and has hired 16 employees, most of whom work out of a converted industrial space in the city’s west end.
And while Greentank has no clients in Canada, where licensed oil producers are still prohibited from selling vaporizers, the company has signed numerous supplier agreements here in anticipation of “rec” – the momentous dawning, later this year, of a recreational-cannabis market across the country.
Entrepreneurship runs in the Koffler family. The brothers’ grandfather was Murray Koffler, who, in the 1940s, founded the pharmacy chain that came to be known as Shoppers Drug Mart.
Murray Koffler passed away in November, and the brothers still find it hard to talk about their famous grandfather. Asked to describe his influence, Dustin fumbles through an earnest response. “I think, indirectly, we’re following in his footsteps,” he says. “We’re in the drug space.”
“But it’s a different drug space,” Corey jokes, lightening the mood as they both laugh.
The idea for Greentank came to Dustin, 36, in the summer of 2016. He had been working in the e-cigarette industry and was attending his best friend’s wedding in Colorado, about three years after the state had legalized recreational marijuana.
As the wedding wound down, he surveyed the dance floor and was struck by just how openly guests were vaping cannabis. He was also struck by something else – the devices themselves were not designed for cannabis oil.
These vapes, rather, were intended for liquid e-cigarette “juice.” It was like watching someone put diesel fuel in gasoline engines, resulting in smoking, burning and ultimately, breakdown. “I knew where these things were coming from, and I certainly knew they weren’t made for this type of oil,” he says. “So I woke up in the morning and I thought, okay, there’s something here.”
Soon, he was on the phone with his e-cigarette manufacturer in China, asking whether they could re-engineer their product for the cannabis-oil market. He also enlisted his brother Corey, 31, who was already working in the tech sector and had experience in startup financing. The result was a vaporizer aimed at premium cannabis-oil producers, who were looking for a device that would maintain the purity of their flavour profiles.
Greentank was founded, and the timing couldn’t have been any better. By the end of 2016, the number of U.S. states that had legalized recreational marijuana had doubled, from four to eight. And, in March, 2017, the Canadian government announced its plan to do the same.
That momentum has led to a surge in sales for vape companies. According to estimates from cannabis data providers Eaze and BDS Analytics, sales of prefilled cannabis vaporizers in North America skyrocketed to US$3.3-billion by end of 2017 (representing 34 per cent of the cannabis products market ) from around US$240-million by the end of 2015 (representing 4 per cent) . That’s an increase of more than 1,200 per cent in two years, as consumers make the shift from smoking dry bud to vaping oil.
Separate from Greentank, the Kofflers have also launched a web-based networking platform called WeCannect, which aims to be the cannabis industry’s version of LinkedIn. The service is free, with over 500 users, but eventually, they hope to monetize the market data they collect.
By the end of 2017, Greentank, which won’t divulge its revenue figures, had closed a US$4.3-million seed-financing round from strategic investors as well as a couple of big-name venture-capital funds: Toronto-based Green Acre Capital and Los Angeles-based Casa Verde Capital, which is owned in part by rapper Calvin Broadus (also known as Snoop Dogg). Even their Chinese manufacturing partner got in on the action.
Despite phenomenal growth, Greentank is still small and has yet to make a dent in the industry, which is led by San Francisco-based PAX Labs. To put things in context, PAX closed a US$46.7-million Series C round of funding in 2015. Since then, well over 50 manufacturers have entered the market for cannabis vaporizers, according to Matt Karnes at New York-based GreenWave Advisors.
Still, Mr. Karnes believes that the caliber of investor standing behind Greentank is a positive sign. “The Casa Verde guys are some of the smartest VCs out there,” he says, “so if they’re putting their money in, I think it’s a pretty good signal that this company is going to have a compelling value proposition.”
What sets Greentank apart, according to the Koffler brothers, is customization. Unlike PAX, which brands its devices, Greentank works with oil producers to create vapes that are customized and branded for them.
The company starts by guiding oil producers to pick the device that’s most likely to suit their extract. Engineers in China then tweak the device as needed. Then, finally, designers at Greentank work with their client to incorporate various materials, styles and a “wrap” that uses the client’s brand.
The final product is then shipped – for around US$3 apiece, for orders up to 100,000 – to clients, who fill it with their oil and sell to dispensaries. “When they’re ordering these units, they’re coming fully customized and branded to our partners’ look and feel,” Dustin says. Once they’re filled with oil, at the retail level, the units may sell for upward of US$50.
Canadian users will have to wait to purchase Greentank vapes, but the Kofflers say that the federal government has provided assurances that the technology will be available within a year of the Canadian recreational-market launch. “It hasn’t yet been built into the legislation,” Dustin says, “but we’re working with some of the largest licensed producers in Canada.”
SOURCE: Globe & Mail