MJBizMag August 2021 - 10

FiveQuestions | with Ross Haley
Exiting a Marijuana Startup
Serial entrepreneur shares strategy and challenges when selling ancillary businesses
By John Schroyer
W
hen Ross Haley entered the
cannabis industry 20 years
ago, it was to sell the proverbial
" picks and shovels " with Ag Natural,
an ancillary company he founded
to focus on gardening supplies for
Northern California marijuana farmers.
Only four years after launching Ag
Natural, Haley learned that a competitor
wanted to acquire the business, which
he wound up selling in 2005.
After the sale, Haley immediately
began another ancillary marijuana business,
Vermicrop Organics, which offered
a line of fertilizers and soils designed
specifically for cannabis growers. He
later merged Vermicrop with a sister
company, General Hydroponics, and ran
both until they were acquired by agricultural
giant Scott's Miracle-Gro in 2015.
Haley also found time in 2010 to start
The GrowBiz, another retail hydroponics
company, which expanded to 12 retail
locations before being purchased in
2020 by GrowGeneration Corp.
In 2016, Haley also founded Truth
Enterprises, which became the parent
company of his current business, LBS,
a state-licensed marijuana cultivator,
manufacturer and distributor based in
West Sacramento.
MJBizMagazine sat down with Haley to
get his advice for other cannabis entrepreneurs
about how best to plan and
execute an exit from a startup business.
What was the key to your success
with startups and exits?
The theme of the California Gold Rush
was picks and axes. It's pretty commonly
known that there were a lot of successful
companies that came out of that industry
that weren't actually mining for gold.
They were servicing supplies.
10 MJBizMagazine | August 2021
From a business aspect, that model
works in a lot of different industries,
and it worked really well for me in this
industry.
Part of it was that cannabis growing
and selling weren't completely legal.
So, the tools that were needed to
care for the plants, increase yields and
mitigate pests, I found ways to supply
those products to growers. Those
businesses-the hydroponic (cultivation)
stores specifically-became training
grounds for knowledge.
People could come in and buy
supplies and talk about genetics,
methodology, things that were
successful or weren't successful.
That really became a breeding
ground for my knowledge. The common
thread was knowledge and technical
expertise in an industry that really
couldn't share it publicly.
What were some of the obstacles
when building and exiting each
of those companies?
Creating processes and finding
passionate people that care about
the business and the product are big
obstacles for us. Just learning how
to do business in the trenches, not
Ross Haley
being formally trained. I think those are
probably three of the largest obstacles:
people, process and learning through
trial and error.
Persistence was a huge (asset). I
think the biggest reason businesses fail
is because people quit.
You see a lot of businesses where
they start out as a cardboard manufacturer
and end up being a print company.
If failure's not an option, sometimes you
have to make a left turn, sometimes you
have to make a right turn, but you just
keep moving until you figure stuff out.
What was the trickiest part
about exiting for you?
The legal side is probably one of the
most difficult things-and it's mostly
underestimated by people who haven't
experienced exiting. The cost and
the resources you need to do that
successfully is definitely one of the
largest hurdles in exiting.
I underestimated the amount of contractual
diligence that would be required
to sell. It's also really easy to not have
the right contract and end up costing
yourself a tremendous amount of
money, even after close, because there
are invocations and all these things that
can be pulled back if the diligence isn't
done correctly.
How long does exiting take?
My first major deal (with Scott's
Miracle-Gro in 2015) was a year and
a half from the start of " the dance "
to closing that deal. That was my first
major exit.
Fast forward to the GrowBiz deal, I
had offers from GrowGeneration over
four years and always turned them
down. It wasn't until this last interaction
MJBizMag August 2021

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