The startup's offices in Denver, over on Delaware Street off Speer Boulevard, are open and airy. With exposed brick and plate glass walls, a Ping-Pong table, and a kitchen with jars of treats on the island counter, the 7,000-square-foot loft space looks like any other hip young company's headquarters.
But this startup's product isn't cloud software or social networking. It's accessories for marijuana users. O.penVape, which was founded in Denver in 2012 when two pot dispensary owners joined forces, is one of the largest consumer brands in the legal cannabis industry. Already selling in seven states, O.penVape has been steadily expanding its reach and in April 2015 has hit the largest sales numbers in its history.
"We had a record month. Even though this week, during 4/20, is always a seasonal high point, we had [an unusually] huge sales increase," says CFO Steve Berg, a former Wall Street banker. O.penVape typically sells about 200,000 units per month of its cannabis oil vape pen cartridges, at a price of $35 to $75. But this April, with 4/20 business adding to the numbers, O.penVape sold almost half a million units. To help spread brand awareness over the 4/20 weekend, O.penVape deployed employees to ride around Denver in buses handing out vaporizer batteries so people could then just go to a dispensary, buy a cartridge, and enjoy some THC concentrate.
In an industry where brands are just starting to gel and emerge, O.penVape has a product that's recognized by legions of pot enthusiasts--a sleek black pen-shaped vaporizer battery, which has a smartphone stylus on one end, and on the other a clear plastic cartridge filled with honey-brown THC oil and a black mouthpiece. Cannabis oil concentrates have become popular due to their potency and efficient delivery of medical effects, or a high. Concentrates, which come in the form of waxes, liquids, and what the industry calls shatter or butter, can be vaporized or dabbed.
"If you're working with cannabis flowers, you can get variations from batch to batch and even within the same plant," Berg says. "But the cannabis oil's cannabinoid content is uniform and with uniformity you get a consistent format that can be branded."
The formation of a brand
Ralph Morgan and his wife Heidi had opened a medical dispensary in Denver, named Evergreen Apothecary, in 2009. When they discovered there was a market for concentrates and that vaping could aid medical patients without the smoke, they started THC extraction and manufacturer company Organa Labs to start making their own THC oil. In 2012 they joined forces with Jeremy Hiedl and his wife Amanda, who had moved to Denver from Georgia two years earlier to start two dispensaries under the LaContes name. O.penVape now uses Organa Lab's extraction facility to make cannabis oil.
In 2013, the founders joined the ArcView Group, an angel investor network for the cannabis industry. They weren't looking for funding, but wanted to meet other players in the business. During one of the network events that year, they met Steve Berg, one of ArcView's co-founders.
"The ArcView Group started to attract a who's who of the cannabis industry. But Ralph and Jeremy stood out to me," says Berg, who started as a financial consultant for O.penVape, but soon joined the team as CFO. "They built a highly successful startup, but they realized it required professionals from outside of the industry."
Vape to the future
Once the founders assembled a team of professionals from other fields who had a passion for making cannabis delivery easier and more convenient, O.penVape started driving around to dispensaries and setting up small booths to promote their products. Now, the company's products are sold at about two-thirds of the Colorado's 450 dispensaries.
Meanwhile, O.penVape also has started to increase its reach. It now has licensing agreements in nine states where marijuana is legal, more, Berg says, than any other consumer brand. The next big prize is the Las Vegas and greater Nevada market, where medical marijuana companies will be open for business in a few months.
"Las Vegas has 40 million visitors annually. It also allows patient reciprocity, which means if you're a medical card holder from another state you'll be able to use your card," Berg says. In 2016, Nevada also will put legalization of recreational pot on the ballot. "If the medical goes well, the recreational laws will probably be passed and Nevada becomes a legal cannabis state with one of the largest numbers of tourists a year," he says.
O.penVape has no intention of stopping there, though. Given its resources and track record, it's setting its sights on every emerging cannabis market.
"There is a lot of power in branding," Berg says. "The branding of the cannabis industry has been a sort of hodgepodge, but our success has been the twin qualities of a great consistent product and a great branding and marketing system."