Ebbu Wants to Power the Next Generation of Cannabis

ebbu

Have you ever heard of ebbu before? Until a week ago, I hadn’t either, and I make it my business to keep my ear pretty low to the ground on such things. But ebbu has quickly and quietly garnered an enormous amount of interest from investors and cannabis industry insiders.

I make a living analyzing the actual prospects for a company. For ebbu, we can’t go on the typical metrics like revenues or profit margins. We can only analyze the business model itself, and the addressable markets involved. Neither task is easy.

In a startup industry like broad scale cannabis, investors are not just looking at new products and services to pique their interest. They are also looking for big ideas, and the right collection of talent and leadership to transform those ideas into realities.

Colorado-based ebbu doesn’t seem to be short on any of those necessary intangibles for long-term success. Last week I spoke with Dooma Wendschuh, CEO of ebbu, to get a better feel for the company and its bold ambitions. He is unabashed about the future of the cannabis industry and the place ebbu can take in it.

 

What is ebbu?

Ebbu wants to be a consumer products company, a pharmaceutical company and an intellectual property company. And most ambitiously, ebbu thinks it can put a consistent “high” in a bottle. With formulations like “Chill,””Energy” and “Giggle,” ebbu wants to dissect exactly which combinations of the myriad chemical compounds in the cannabis plant lead to the desired effects, and then bottle it up—literally and consistently—so that customers know what they can expect each time they consume the product.

As Mr.Wendschuh put it, “We stand at an epic moment in history as we shift from a world with three legal recreational psychoactives to a NEW world where there is now a fourth … a fourth which is generally regarded as healthier and safer than the others.”

“But for cannabis to realize its potential it needs to change. The kind of restaurant you like to go to won’t serve you a joint or bring a dabbing rig and a blowtorch to your table. For cannabis to achieve mainstream acceptance we need products which are reliable and predictable. We need a brand we can trust.”

Wendschuh likens the processes his company is working on with the cannabis plant to a distillery for alcohol. When potatoes get turned into vodka or apples turned into cider, what is essentially an inconsistent starting product becomes a standardized alcoholic product, one that will produce a specific effect each time out. Marijuana flowers can and will change batch to batch, even with “identical” genetics. It is to be expected, just like with apples or potatoes.

Wendschuh continued, “Say you go to the grocery store and buy some apples. Imagine they’re all from the same ‘strain’—so they’re all Granny Smith. These apples will invariably be inconsistent. One might be sour, another might be mealy. Another crisp. And when it’s just something you eat, you won’t let it ruin your day. You might make a mental note that one isn’t very good. With psychoactives, this natural variability can be much more pronounced. But what if we took those apples and turned them into hard apple cider? Every bottle would have the exact same taste, texture, smell, and—most importantly psychoactive effect. That’s the magic of distillation.”

But Wendschuh is betting that if a product with a consistent psychoactive effect, like my morning cup of coffee or a bottle of wine over dinner, can be put in front of U.S. and global consumers, those consumers will naturally start to reach for cannabis products. Maybe even reach for an “ebbu energy” drink over that cup of Starbucks or an “ebbu chill” over that six pack of Budweiser.

 

Full-Court Science Press

In order for ebbu to take that mantle, it will have to pursue the necessary research & development (and the resulting intellectual property) with a ravenous level of focus. So far, ebbu seems to be doing just that. After raising $2 million in seed funding earlier this year, ebbu is preparing for a $9 million Series A financing round in early 2015. The resulting $11 million will go towards a massive R&D effort to create these formulations, then rigorously test and refine them with consumer focus groups.

Wendschuh explained, “We have as strong an R&D team as anyone in the cannabis space. We have added several key positions in the past few months. We now have three expert chromatographers, all of whom have done pioneering work in their respective fields at major pharmaceutical companies or research institutions. We’re currently building out our R&D psychopharmacology department with a Ph.D. cellular pharmacologist, and we’ll soon bring on a clinical psychopharmacologist. There’s no one in the industry approaching trying to solve the problems we’re trying to solve – so we need more brain power than even the most sophisticated cannabis companies. I’m happy to say we’ve found it!”

 

Testing—Safety and Efficacy First

Wendschuh acknowledged that the testing and product iteration will be long and expensive, but in his mind, safety and efficacy have to come first. He noted that “a lot of people in this industry are here to make a quick buck.” Wendschuh understands how quickly a brand can fall by the wayside if it doesn’t do what it represents, and if it doesn’t do so safely.

To combat this, ebbu expects to spend $50 million in total R&D spending over the next two years to “achieve reasonable acceptable versions of our distilled cannabis products.” If its Series A round gets fully funded, that $9 million plus the original $2 million seed will have raised $11 million from accredited investors.

Wendschuh hopes to cover the additional $39 million through revenues generated from the company’s initially marketed products, the first of which will be whole plant extracts (WPEs), which he “hopes will be on shelves in the first quarter of 2015.”

 

ebbu’s Attack Plan

I asked Mr. Wendschuh how he saw the other players in the space that might be considered competitors—companies like Dixie Elixirs. His answer gives great insight into the future power the ebbu brand could deliver, provided that the company can create the truly unique, proprietary formulas they’re developing:

“Dixie is the clear market leader and Tripp [the company’s CEO] is truly a pioneer in the field. He’s single-handedly changed the public perception of the industry and opened the door for companies like ours to operate as legitimate businesses in this space. Why would we want to compete with someone like that? That’s never been in our business model. Product manufacturers like Dixie and O.penVAPE are potential customers, not competition.

 

“The truth is that edibles manufacturers are forced to rely on flavoring when marketing their products. Those who make vapor pens are competing based on form factor (how the product feels in the hand). But the cannabis consumer, whether recreational or medical, doesn’t make purchasing decisions based on form factor or flavoring. They make purchasing decisions on expected psychoactive effect—how the product will make them feel. Right now, it’s very difficult for most product companies to provide their consumers with a predictable, reliable psychoactive response. That’s where ebbu comes in. We sell product companies our API—our Active Pharmaceutical Ingredient—our distilled cannabis to use when manufacturing their products. By doing this, we allow them to brand their products on not just flavor and form factor, but to brand their products based on what consumers really care about—how it will make them feel.

 

“All we ask in return is that they put a little sticker on the package which says ‘ebbu inside,’ not too dissimilar from when you buy a laptop and it says ‘Intel inside.’ We’ll never make a better soda than Dixie Elixirs—we wouldn’t want to. What we want to do is help a company like Dixie make a better soda!”

In the later stages of product development, ebbu plans on servicing end markets with delivery mechanisms like vape pen refill cartridges, capsules, and sprays—all with the ebbu brand promising a consistent response.

 

Market Size Estimates

We didn’t need Wendschuh to convince us how big the potential end markets are for cannabis products, provided that broad legalization and liberalization trends continue. MJINews’s research has led us to an array of estimates for how much money is currently being spent on cannabis, with estimates being the keyword. Nobody really knows how big the market is, as so much of that money is currently passing through the black and gray markets, or off the grid of traditional banking institutions. $100 billion annually is a boilerplate that I’ve used in the past, which give or take 10 or 20 billion might be close.

My personal estimates are a bit elevated from most reported sources, but closer to the numbers whispered by those most in the know. Regardless of whether you take the highest or lowest estimates out there as gospel, most folks can agree that if cannabis is legalized federally, the number of people who will use cannabis will grow—if not exponentially, then at least briskly.

Wendschuh has even bolder numbers in mind:

“How big is this opportunity? I could show you financial forecasts and pro formas, but instead I’ll say something very bold: This opportunity is bigger than the internet. Bigger than the tech boom of the early 2000s. How many people use the internet every day? About two billion. How many of the 7 billion people on this earth frequently use some form of psychoactive? Almost all of them. Ours is a culture that benefits immensely from recreational psychoactives. Responsible use of alcohol brings people closer in relationships—champagne is used to celebrate. Businesses around the world benefit from increased productivity from the traditional morning cup of coffee … .”

 

An Eye to the Future

If ebbu can make even marginal inroads to industries like coffee and alcohol, it could drastically expand the total end market potential for recreational cannabis – well beyond even the “whisper numbers” annually.

Because if they can convince people to incorporate cannabis-based concoctions into their daily lives recreationally (as the alcohol industry has done in the U.S. to the tune of $180 billion annually), entire new demographics could be in play. Also, we have barely scratched the surface of the compelling data on the health efficacy of cannabis for potentially millions of Americans.

At the end of the day, ebbu is in a science race, even if one were to concede that it is the only one running in its direction right now. Because as federal, legal, and financial barriers to entry continue to erode, ebbu is going to have some major players breathing down their necks from the Big Pharma, Big Alcohol and Big Tobacco arenas. Players with billions of dollars at their immediate disposal for R&D.

Wendschuh gets this, as he added, “We plan to do exhaustive and rigorous consumer testing, as we continue to iterate better versions of our products … we feel that our head start in this area will give us intellectual property advantages over companies that may someday enter the space from larger industries like pharmaceuticals and alcohol.”

One thing is for certain: ebbu is blazing trails. Where those trails lead, only time and science will tell.

Ryan has spent nearly 20 years analyzing financial markets and investment opportunities for institutional and high-net worth investors. He specializes in determining the size and scope of new markets, changing industry trends and the market potential of new companies, products and services. Ryan has also published hundreds of articles on investment topics, market commentary and macroeconomic analysis.

Related posts

Top