Gary Cohen, CEO of Cova Software
Gary leads Cova’s charge into the legal cannabis space by guiding the vision, strategic development, ‘go to market’ plans and culture.
Before joining Cova, Gary was a principal in over a dozen tech start-ups in the mobile communications industry ranging from small VC funded companies to Fortune 100 firms, including Onavo, which was later acquired by Facebook. In those companies he led sales, marketing, business analytics and market expansions. He has also held a multitude of leadership roles with Verizon and AT&T.
Gary holds a Degree in Finance with a Masters in Marketing from the University of Colorado. In his spare time Gary enjoys skiing, mountain biking, outdoor sports, travel and comfort food.
EPISODE TRANSCRIPT
[00:00:01] You're listening to Thinking Outside the Bud where we speak with entrepreneurs investors thought leaders researchers advocates and policymakers who are finding new and exciting ways for cannabis to positively impact business society and culture. And now here is your host Business Coach Bruce Eckfeldt.
[00:00:31] Welcome everyone this is Thinking Outside The Bud. I'm Bruce Eckfeldtl. I'm your host and our guest today is Gary Cohen and Gary is the CEO of Cova Software. We're going to learn a little bit more about what Cova does and we're gonna learn a little bit more about Gary. Gary welcome to the program.
[00:00:45] Thanks for inviting me.
[00:00:46] Yeah it's a pleasure to have you.
[00:00:47] So I love I love these kind of you know situations where people are intersecting other domains of technology and things like that and to this cannabis space I'm Paris to here the story of the software system. But let's start with you. Tell us a little bit about your background. Professionally personally. What were you doing before you got into this space.
[00:01:05] Well you know it's it's a curious thing that I'm doing what most people dream of doing for the second time which is I went into the cellular industry on day one. So a funny thing is I'm sitting here in my office in Denver Colorado caddy corner across the street was my first office for the telephone company for UFW cellular. And you know I sold the first cell phone in 86 and then wrote that industry for about 30 years now until two and a half years ago almost three years ago. And I want you know I was the geeky guy who wanted to know why we're doing what we're doing and how it's working. And just never stop studying the growth of that industry. And I've got a background in finance and marketing. So it all was fascinating to be even before introduction in the conception of a new industry. And then you know here I am all these years later in another brand new industry that will become part of the fabric of how we live and work in the in the world. So that's my background I was a tech guy for 30 years I went from the phone companies for 14 years for rides and in AT&T then I worked for research companies like Nielsen for another 16 years either doing startups in the wireless research analytics area which ultimately led me to a partner I had in Canada called IQ metrics that's a giant retail software company for the cellular phone industry specifically point of sale systems for cellular. Got it. And can I know I'm just kind of tie in these these apps together but you know as the years were going on they wanted to diversify into other segments and we had a really good working relationship for years and years and one day they said you know we've got to figure out how you can come work for us. And then by the way what do you know about the cannabis industry.
[00:03:10] And as an aside what about it.
[00:03:12] I'm a Colorado guy.
[00:03:13] So a lot of kids I grew up with actually went into the industry and then I was living in California for 19 years and a lot of neighbors and friends and acquaintances both in tech and in the pure cannabis industry were you know I was still Mr. Curious. Tell me about this new industry you guys are doing on the medical side and going back 15 16 years ago. So when they asked What do you know I said well I know a little bit more than the average guy but I can't I can't say I'm an expert of any sort. And what I did was I called my friends in Colorado and California and said Tell me about the industry and specifically tell me about the technology that's used in the cannabis space you know specifically software. And then going into retail in from every angle everybody said they all suck.
[00:04:04] Exactly.
[00:04:04] And this was a few you know three years ago.
[00:04:07] And in a lot of it was that it was homegrown. It was you know three guys in a garage saying we could do this and not that they made bad products or bad software had bad concepts but it was so organic and new and young and immature that in a high growth industry like this they weren't creating ahead of what was needed. They were just trying to catch. Yeah. And I think that was the pain that everyone experienced and I called back IQ metrics and I said I'm in. I'm doing Wall Street down and living in New York right by you. And then I quit my job and came back to Denver and started we started going.
[00:04:48] Terry When was that that was 16.
[00:04:52] Three years ago and then in the middle of 2016 we started working on the software and in learning about the industry probably more importantly trying to understand what should we build. Yeah why. And then adapting a lot of what IQ metrics add over to the cannabis industry which I could go super deep into. But it turned out we couldn't really reuse much of the cellular stuff.
[00:05:16] And I thought you know naively I thought we could just change smartphone to strain manufacturer to grower and let's go rock and roll and lock this industry and it turned out twin weights and measures compliance with three perishable. Good.
[00:05:36] You think about things like purchase limits and looping and the next thing you know it took almost two years to just get the minimally viable product that we could go to market with.
[00:05:46] Yeah. Having having a software guy for a long time it's easy to deceive yourself on just how similar things are how not different things are.
[00:05:55] Until you actually go to start programming and putting real pencil to paper on those things.
[00:06:00] Well you know I'll go back to the cellular canvas so when I sit on this lucky guy I'm on the ground floor twice and to high growth industries. The similarities are amazing.
[00:06:13] Yeah. Yeah. Tell me more about that. I'm curious like you know having having been at the early stages of cellulite. I guess what do you see a similar. And maybe what do you see is different.
[00:06:21] Where are we. The only thing different is the regulatory side of it. OK. Because it wasn't a controlled substance it didn't have all the hair around it. Take that out of the equation and what you have is almost the exact same entrepreneurial risk taking profile of who went into the industry and as a result. You know when I go back to when we sold our first cell phone we didn't run credit on people.
[00:06:47] We were just dying to get a. But you know and half of them didn't pay a lot of it was very poorly thought through like like the education side. Yeah that is a great similarity. The early cellular education was you have to be very judicious about using this because it's 60 cents a minute.
[00:07:09] I think if you want to just talk back and forth on your commute you know it's going to be a thousand dollar bill. Yeah and then the negative publicity. Well you know fall out and churn and all that and I look at you know for example you look at Oklahoma right now which is just a new Wild West experience and we're working down there we're selling tons of stores if their education level is so unbelievably low that selling the software and the solution and how we can help them versus the fundamentals of retailing and can ask controls and how to do it the right way exactly like cellulite how do we you know how do we provide an hour why on something that we've never even thought of before. And people in Oklahoma have no read. Most of them have no retail or cannabis experience at all.
[00:08:02] Do you find that you're spending just as much time kind of training and consulting now about how to run their business. As much as just providing a software solution because how do you deal with that situation say it sounds like you've got a software solution that is reasonably sophisticated that you're applying it to an entrepreneur aka a business owner who is not so sophisticated right now.
[00:08:21] That's exactly right. You know what wound up happening was we only sell cover in markets where we fully meet all the regulatory requirements. So I've got leads from every corner of North America. And we're only in Colorado Washington California and Oklahoma as well as all of the legal provinces or private retail provinces in Canada. So what happened was we got a ton of leads starting in about October in Oklahoma and it wasn't on our radar and wasn't a worry about or think about it. And really because it's a medical market it's the first red state. So we we made a bad assumption that this is going to be super highly regulated and difficult in difficult means. We've got to do a lot of development work to do everything they need. So these leaders are pouring in and I went online I tried to learn about the laws and regulations and there were next to none. So then we got our attorney and I said look I I'm missing something so I'm paying this guy hundreds of dollars an hour and he goes through it all I they don't have any laws.
[00:09:35] We have been handing out licenses without laws. Wow.
[00:09:39] So in Oklahoma right now there's over 800 retail licenses that have been distributed to put that in perspective color or Washington only has 400 dispensaries in Washington three times bigger than Oklahoma.
[00:09:54] So you're these things out like what we need is twenty five hundred dollars an Oklahoma driver's license some piece of real estate to say this is where it's going to be. It's a thousand feet from a school in a clean criminal record. And you're going to go do you want to grow process or retail. So anyhow to make a long story short I asked my sales people go. Can you set up some meetings down there. I'm just going to fly down and down about what's going on.
[00:10:25] And I met with five potential reach five licensed he's now in Oklahoma City and then three in Tulsa came back to Colorado and called her. Called a meeting and said they don't know any better. It's unbelievable. They don't know. When I talked about compliance it was an unknown thought of what you're probably going to need to do at some point about retailing and how do you set up a store and what should you be thinking about for a cannabis dispensary. You know like from a security standpoint and a loss prevention you know and just basic core concepts. And to answer your question what did we do. I said and we've never done this. I said Why don't we do some seminars. Yeah. Promise not to make them sales pitches whatsoever. They're purely educational and will invite people for you know it will be free. And I go look if we get 10 or 15 people it's a success. And we'll do one in Oklahoma City and one in Tulsa. So the first week of November I'm sorry the first week in December we had 30 people in Oklahoma City thirty five in Tulsa. And it was you know we had to keep expanding the room because more people kept RSVP. And we're doing it again next week. And we've got those same numbers already. I mean they're just starving for education knowledge. So that's how we're doing it. Dan the whole Koval process there's they're getting an enormous amount of training. So it's it's the software but it's also best retail practices and setting them up for the compliance and how they do their reports to the Oklahoma marijuana authority.
[00:12:10] Well I've read that I think that you know it's an interesting situation where you're actually having to kind of educate train your customer up up to a level where they can take advantage of the software that you provide. Give us an overview of the software I'm getting at in terms of what areas are or from a solution point of view. What are you focusing on. What part of the supply chain are you kind of entering or providing solutions I guess. Give us a sense of what our focus is.
[00:12:35] Well that parent company of ours has 84 percent of all the retail cellular stores in North America. So in 20 years they wound up building it in a way that it's easy to learn easy to use and that's the front end and the back end. So in our industry we took those best development UI UX processes applied that to cover it but tenders kid within like five or 10 minutes.
[00:13:04] It's really simple straightforward. That's the front of the House the back of the house is in this is the other similarity in why we win here. The cellular industry is the single most complex retail software environment in all of retailing. Yeah. So when you think about going into a cell phone store. The rise in or Sprint or T-Mobile or any of them you're there running your credit they're looking up rate plans. They're figuring out hardware which changes in its cost and commissions and all that. Then you've got warranty insurance et cetera. And then every carrier does it differently. So it's super fragmented. There's a reason these guys have so much share compared to Oracle or NCR someone else coming into the cellular world because it's a pain when you look at the cannabis industry you have almost the exact same complexity. So when you ask that question what do you do in the software. I get asked all the time why can't I just go buy some 7-Eleven software. But in the legal states whether it's medical or rec you have seed to sale tracking which ultimately means as a retailer you're that last point in the supply chain.
[00:14:14] So everything you order and bring into the store needs to adhere to that tracking of all of the cannabis products using batch tracking which is messy. You have states like Colorado where they still sell bulk flour or or loose cannabis. So you might have a deli style where people put it on a scale and you know I want ten dollars or I want cherry. Yeah you've got to weigh it out and by the complex part of that is if I bring a pound in the back of the store I'm going to divide that into eight quarters haves roll joints out of it. Each one of those products you're making onsite needs to have all that batch tracking go with each one of those and labeling and barcodes. So the software needs to be able to create new products in the store. Yeah. OK. Then you've got this element of when you open a pound pot and you start dividing it out you weigh everything at the end.
[00:15:13] It doesn't weigh up there's a shrink in there. Yeah.
[00:15:16] Now you know here you have a product that dries out incredibly fast. So as it loses its moisture it loses its weight. Well the government doesn't care about that. They you had a pound come in the D'oh what happens going out the front door. So you need to adjust for it and you need capabilities to make a report that goes to the state in this case. Colorado huh. It says of that pound you know three or four grams blew away you know somebody opened the door while we're away and it blew off out on the floor for the air conditioning came on our table and you need to account for that. I think that the marijuana specific capabilities blow people away because they don't think about it until you're an operator. Yeah. What you know we have this thing in this industry called looping and looping means someone goes in a store buys the maximum they could buy goes out to their car waits 15 minutes comes back in. Now how do you prevent that. Well if you count on your bud tender or let's say they just change shifts. Yeah. No one's in the store that was there in minutes and an hour ago. How do you stop that. How do you catch people with bad ideas. How do you keep people from buying over their limit. So that's another really hard problem to solve because I walk into a store and I want two of those drinks with 100 milligrams each.
[00:16:43] I want four cookies. I want some concentrate for my vape pen and I want a half ounce of that kosher Kush. And are you do you really think a bud tender can do all those conversions in their head. That's it. We know all that stuff is less than 28 grams. So would you really want is is there entering it into a sale. Is it calculating and stopping and saying well can't any more in the basket or another way to think about it. And this is a great business solution is what if someone fills their basket with 20 grams of or equivalent of product. The software notify that the person at the counter say hey you can still get eight more gram. Yeah. Exactly. Sell you this or that or you can get two more drinks. That's where the complexity kicks in and I think that would people underestimate is the nuances of California versus Oregon Oregon versus Washington Washington versus Colorado the laws and regulations as this industry tries to become legitimized. Now you know every state is taking the input from the market and saying we'll go ahead and adapt. And so they're going to change the laws or regulations and they have for every three to six months something tweaks or changes. And if you're a good software provider to that retailer it's adaptable. So in real time I'll give you a great example like here in Denver the city of Denver would only let you sell cannabis till 8:00 o'clock but then you have a suburb right across the street.
[00:18:19] They're open till 11:00. So you've got all these owners in Denver saying you know this isn't fair. You know this business and how some people just might not ever come back to my store they're just going to go to that store right across the street. So the petition Denver for a change in the hours in Denver did it. Well one of the things we built into the software was if you're not allowed to sell past 8 o'clock but you have to report every sale with a timestamp and what you sold and when you know when you sold it. If I've got someone who locked the door at a quarter to seven or quarter to eight but didn't ring that transaction up to 8 0 5 and now I submitted to the state in real time I just reported my own violation. And if I do it all the time they're going to come shut me down. So Kovac can your software closed down the cash registers at 8:00. And then when they changed it to 11:00 can be modified to let it. You bet. So you find these nuances in every jurisdiction that keep changing all for the purpose of this you know legitimize this industry and make it clean and transparent and that's what we do.
[00:19:30] Yeah. And I'm curious how much I see the kind of necessity around compliance and reporting you know to kind of stay within the bounds of the laws and legislation.
[00:19:40] I see the kind of operational management you know making sure that things are efficient are tracked properly you know are are properly processes are enforced in the right way from operations standpoint.
[00:19:51] I'm really crazy about this retailing type and I think that's for me. This is the one area that is. I started out as an architect into software and so very focused on customer experience and user experience and I still feel that the you know the dispensary experience is fairly rough.
[00:20:09] And I'm curious what you're doing in terms of the software side to help the customer experience.
[00:20:14] I mean you you mentioned it a little bit with the idea of the upscale like hey you still have eight grams left.
[00:20:18] What else do you see that that you're doing or opportunities to really help the dispensary create a positive supportive customer experience or the buyer for the user when they're when they go through the retailing process.
[00:20:31] Well I think that's one of our biggest value ads is this was built on an open API platform which made it very easy to integrate with partners. And so that's part one we can pull a partner could be a media company that pulls cannabis specific or or media specific information into the store.
[00:20:52] I think more importantly we build Cove in a way that it's built for an omni channel experience so we can use our software as the hub to feed menu boards with real time updates of what's available what the cost is program it so that as you get down to your last five pull it off the menu board. Oh and also pull it off of the inventory that we display on our Web site. So for that online search and discovery everything is real time and updated. There is another technology we developed that's very unique. We're the only ones with it called Express Checkout. Meaning in a high volume store. Can you bypass the lines go to a tablet and self shop self select. Place the order send it to the back. Have someone pick pack and put it in a bag for you. And you're in and you're out. So there's another aspect that we didn't talk about which is the way that we architected cover. Is that any point during the customer experience you can get more information about the products you're looking at. Carson who covers tablet based in and just kind of like an Apple Store you can get out from behind the counter and walk around and either fill a basket with the customer or you have a catalog in your hand. And if the guy says well what's the difference between this bubble Kersh and this gorilla glue we can open it up we can look at the profile and what is that. What is that product or what are the characteristics of it. If there's labs if there's lab results with the THC CBD.
[00:22:26] When was it grown when was it harvested. We can look at all that information if it helps the customer on their journey. I think that from a retailing standpoint one of the great things is we're an enterprise software company. It's bringing an enterprise solution to the industry that has never had that app in what's inherent in that is you come into my store right here across the street and we're out of that thing you want that I can see on my tablet the availability across all our stores. So instead of sending you down the street or calling up you still have this or that I can show you exactly what we have where to go get it or if it's out of order. Here's what's on order which usually takes a day or two days. So from an experience standpoint we built all these capabilities not only on the product side but you know there's a loyalty aspect in this industry as well. So if I can keep track of your recent purchases when you come back in I can say you know how did that Nikon vape pen work for you. I really liked it or I didn't like it. What didn't you like. Well the batteries were out really fast. Now let's get this other thing. So on the medical side you have to do things like that. I need to know what's what your medication. I'm working on the retail side. When you employ a CRM aspect of understanding who your customers are what their habits are not only in outreach marketing but when they come in the store.
[00:23:55] Can we create a better experience by helping guide them around their their habits and preferences. Yeah yeah I think I think this question pulls me in what you said is I always give the example of you know the early dispensaries were like early video stores you know and it was a mom and pop and it was 400 square feet. The only difference is there's not a curtain with porn behind it. But you know that's where it starts that's with a little store. It's absolutely shocking the caliber and quality that's developed especially in the four and five year old markets now where they've gone from you know warehouse districts and bad neighborhood. We're the only places a landlord would let a cannabis store operate to class A we we're in a brand new retail center or you're freestanding giant monuments sign a million dollars of finish out out there everywhere. So it's evolving. And this is different than cellular. It's evolving at a much faster rate. So I think the savvy retailers like native here in Colorado we have native roots there like the biggest retailer in in the US and Canada and they run both the operations on the back in their grow processing and manufacturing all the way through to their retail. The consistency in quality in the in the products in the looking feel of the retail experience. It's unbelievable. And there's a reason they've grown off themselves to such a degree because all those best principles are being applied in this cannabis industry.
[00:25:41] So let's talk about the future a little bit.
[00:25:43] I mean where do you think it's coming down the pike in terms of kind of the next changes either to you know regulation or in terms of the development of the market or you know user base and how however you kind of strategically plan for some of these things like what do you what do you have in your backlog or what do you have in your strategic plans that correspond to some of these things. What's here. A tear gas that's going to be the big changes over the next 12 24 months.
[00:26:08] Well I think there's a couple of things. First one let's talk about governmental I'm a true believer that in the next 12 months they'll change the banking laws. I don't think they're going to re categorize cannabis during this administration. So I don't see that. But what I do see is the catalyst for the banking laws is not only the Democrats in Congress but it's a real bipartisan issue when I see an issue. There's a bipartisan agreement that the way that this industry is being managed on the financial side is bad for everyone. It's bad for the government it's bad for the owners the business people and ultimately it's it's a bad criminal aspect. So it's going to force everyone to use cash and transact in cash. The catalyst I see as California is this year progresses California is going to kick in their enforcement more and more. Last year they were unbelievably lax which didn't drive the. Gray and black market out but this year it will in what it will do is force more and more cash through the cannabis system in the eighth largest economy in the world. Whereas all the cash in the U.S. it's getting flushed into the cannabis industry at the same time you have all these other states. And I know people talk about how we now have banking that the banking is so limited and onerous.
[00:27:32] It's not widely available to everybody. So I have a feeling the Democrats are pushing the legislation. I think the Republicans will say it's a good safe thing to do is you've probably talked to a million cannabis industry people and they've talked about section 280. And everybody I mean just in a nutshell the fact that no one can deduct their business expense in the operation of a cannabis business makes the owners feel like double taxation. And everyone thinks these guys are making ungodly amounts of money and they're not. And the cards are kind of stacked against them. So my first point is the government and that banking so they'll add banking they'll loosen it up so that you can take these incredible Visa and MasterCard and now and honestly that will be a huge relief for this industry. The second thing I see happening in Colorado is already the leader in it. And that's consolidation. So what you'll see California has hundreds and hundreds of millions of dollars parked waiting for the dust to settle. Jurisdiction by jurisdiction or whether county or city across California. They're still figuring out we're going to allow cannabis in our city or not. And until they figure that out and then the state starts issuing the licenses which is a big bottleneck right now once everyone knows this is a legal dispensary and legal license dispensary then the big money is going to start gobbling up the real real players.
[00:29:07] And right now there's too much uncertainty location by location. So it's not happening yet. Colorado is so far ahead of the game we've probably got 15 10 plus store operators in places like Washington they have a limit you can only have five retail. OK so you're going to see consolidation go at a faster and faster rate and all of those principles of economics will kick in. You know the strong will by the week or the week will get pushed out in Oklahoma. Right now it's such a land grab that and there's no laws yet. Yes I was gonna go down there and try to buy up you know five or 10 prime locations. I don't know what the laws are going to be. AB I could wind up buying an empty bag of dust because you can't have a store you know in Bartlesville. You know so Bartlesville is out now or some funky law that says stores can't be 1000 feet from each other. Yeah. So the other guy got the license first. I'm out. But once the dust settles you're going to see consolidation in every one of our markets.
[00:30:14] Yeah I think that the dynamics of scale and it's interesting time I mean and I think that's one of the reasons that space is so fascinating from a business hot Aereo point of view is there you know that that's kind of craziness and dynamics you know as painful on one hand it's also you know as opportunity. So someone who is willing to play some bets you know develop a good strategy around it so that they can take advantage of it. You can do some good business.
[00:30:39] Yeah. And I don't want to paint the picture that you can't be a small operator in succeed because being a brand new industry if you have a good strong retail background or a great finance and operational background and you open one store as a savvy operator you'll do great. Yeah. And I think that as we keep expanding. Yes. I guess my third point which I never told it's going to have three is you know you look at Michigan so they're going to start in 2020. New York and New Jersey are both looking across the river at each other.
[00:31:14] Nobody wants to lose the tax money. Way.
[00:31:18] I had someone tell me that that if you look at all the states surrounding New Jersey including New Jersey you have something like 22 million people. So if New Jersey goes first all the states around are going to have everyone just jump in their car drive over it get what they need and help with all that money in New Jersey. And that's the impetus for Cuomo to kind of kick it into gear and say let's get going.
[00:31:43] Exactly. They don't want to mess up that's about.
[00:31:45] Yeah yeah. So someone like me as I watch that on a daily basis I want to know what's going on who's going to blink in then you know you can't start this industry with the flick of a switch. Oklahoma's just hysterical because they really said Go on September 1st.
[00:32:05] But if you plant the first seed on September 1st it's an agricultural product.
[00:32:13] It doesn't appear out of nowhere unless it's illegal.
[00:32:16] Yeah exactly and that's and that's the that's the irony of this whole thing is that the illegality prints these situations. Gary this has been great. We're going to have time here. If people want to find out more about you about cover what's the best best source of information. Best way to get it.
[00:32:30] Yeah I would say go to www.covasoftware.com and it's got the one thing that we're kind of known for and we've done. I'll pat myself on the back. We've done a great job. Is educational information about the industry about retailing. So we published about 100 blogs about 20 papers to e-books. Right. Like how to start a dispensary. Stuff like that. So if you go there you can also if you're you know if you're a retailer want to be a retailer and want to see Kroger. It'll point you where you need to go.
[00:33:05] Yeah. Awesome I'll make sure that link is on the show note so people can click through. Gary thank you so much for taking the time. Great conversation. I love, you know being a tech person myself I love people you know kind of in the tax base that are looking at how do we really create systems that are going to solve these problems so it was enjoyable conversation. I appreciate the time. Thank you.
[00:33:24] You've been listening to thinking outside the board with business coach Bruce x out to find a full list of podcast episodes. Download the tools and worksheets and access other great contact. Visit the Web site at thinking outside the Buy.com. And don't forget to sign up for the free newsletter at thinking outside the box. Dot com forward slash newsletter.
[00:29:25] You've been listening to Thinking Outside the Bud with Business Coach Bruce Eckfeldt to find a full list of podcast episodes. Download the tools and worksheets and access other great content. Visit the Web site at thinkingoutsidethebud.com. And don't forget to sign up for the free newsletter at thinkingoutsidethebud.com/newsletter.