This week’s show guest is Drake Sutton-Shearer, CEO and cofounder of PRØHBTD Media. PRØHBTD Media is a Los Angeles-based cannabis culture, lifestyle, and creative agency. PRØHBTD Media owns and operates the first original content studio and largest multi-platform video network in the cannabis space reaching millions of people each month. They provide a suite of premium video production, brand development, and digital marketing solutions to help cannabis brands build their businesses and connect with customer.

Now you might be wondering why I’m featuring a cannabis company on my show. Cannabis has traditionally been dismissed as an illegal or high-risk sector, but from an investor’s standpoint, it’s an undeniable trend that needs to be looked at. Let’s get on to the show.

Jay: Hey, Drake. How’s it going, man? Thanks for coming on the show.

Drake: Thanks, Jay. Thanks for having me.

Jay: I’m super excited to talk to you today because you’re in a very unique space and, especially from an investing standpoint, it’s a very trending space for us. So why don’t you give us a little bit of introduction and who you are and what you do for a living.

Drake: Sure. My name is Drake Sutton-Sheerer. I’m the CEO and founder of PRØHBTD Media. I’ve been in the cannabis industry now for four and a half years full-time. PRØHBTD is a platform that creates, builds, and markets cannabis brands to local audiences. And we do that by helping cannabis companies build their businesses with video production and packaging and design and marketing. In addition, we own the leading content studio and the largest multi-platform video network in the cannabis industry. So you can find our content on popular platforms like Roku or Apple TV or Amazon and, of course, on PRØHBTD.com.

Jay: Wow. That’s pretty fascinating. You’re in a very unique niche within the cannabis space, which why I’m particularly intrigued. You’re an entrepreneur. You’ve done some ventures in the past. Maybe you could give us a little bit of a background of what you did before you actually came into the cannabis space.

Drake: Sure. We can go back a long way. I’m from New Zealand initially. I grew up as a kid on a farm in the middle of nowhere. So agriculture is in my veins. I was selling wool and livestock when I was a kid. I’ve been self-employed since I was 15, and I built multiple businesses and sold them. I was in the music business for many, many years, and I’ve been in the states for 22, 23 years now, and I came here when I was 20, 21, I believe. We had a tele management company. We had a number of Grammy Award-winning producers and platinum-plus-selling artists that we managed as a company. We also built websites and lifestyle-brand marketing programs for large entertainment companies like Universal, Sony, and people like that. I sold that and then went into the virtual goods business. I had the first GIFing app on Facebook.

Many of you may remember back in the day, on Facebook, they used to have these really annoying gifs that you send to your friends, and they would animate and stuff. I was the guy that did that with some partners. And we sold that.

We had really great partners. We did stuff like Transformers and the Walking Dead. This was way back when. We would make these entertainment virtual GIFs. So I got very involved in the virtual goods business and have a bunch of patents around that. So we sold that.

Then I got into the music publishing business, and we built a music publishing company, and we acquired a number of copyrights and placed them in very popular movies. Then we sold that.

Cannabis has been part of my life since I was very young. I used to grow it when I was younger, and I’m very familiar with it, so it’s very personal to me. When I felt like there was two things — an opportunity to make a difference and change the conversation for the better through marketing, media, branding, etc., and an opportunity to do something that was very near and dear to me, and to help people, I jumped headlong into the space.

Jay: That’s pretty exciting. You clearly have both an entrepreneurial background and a background in media, which makes perfect sense. I guess you’re spotting this trend, which now it’s very apparent what’s happening in this space. But four or five years ago, it wasn’t as apparent. So I guess it was a bit of a risk.

Drake: We’ve taken f**king arrows in the front and arrows in the back. They’re scratch marks. But look. That’s the thing. If you’re going to try to pioneer something or be involved with that, you’ve got risks. If you’ve got experience in overcoming risk, you have a higher chance to succeed. So we’ve been very fortunate, but we’re done this before. So we’re willing to take those risks. But yeah, when we went out to the market four years ago just with a deck and an idea to help change the conversation in the way that we wanted to, a lot of people were interested, but a lot of people weren’t writing checks. Today it’s very different. Everybody wants to write a check, and it’s really about who do we want at our camp table. So it’s a different time.

Jay: That’s right. So it must feel pretty vindicating, if you will, or just comforting that the tables his turned. The power has changed hands now.

Drake: It feels good. If only the power would shift to the people, which would shift to the federal government, then we’d be in an even greater position. But it will come soon.

Jay: That’s a good segue. I wanted to ask you… For the audience that perhaps has not been paying as close attention… It only popped up on my radar, personally, in the last year, I’d say, because I started seeing investment opportunities in it. But I’m not really in that space. Can you give the audience just a brief overview? What’s the landscape right now? Why has it sort of exploded in popularity, in interest in the last four years. What is the legal landscape as well?

Drake: In the US, you’ve got legal states. You’ve got 30 medical. That means that medically, they’ve passed laws that enable people to consume if it’s for some kind of an ailment. You’ve got 16 with CBD, which is the non-psychoactive part of the plant but has a lot of medicinal properties. You’ve got nine recreational states. You’ve got nine states that have some adult use law, along with medicinal that allow people to consume and use cannabis for many different means. California alone is going to be close to $7 billion in revenue in 2018 from cannabis. That’s astounding.

The US recorded music industry is around the same, I believe. There’s a lot of smart people in the record business. The cannabis business has a lot of smart people in the business and more coming into it, but it’s still a very, very early time.

The thing that’s really fascinating to me is that, not since the industrial revolution or the tech boom has there been something like this. Cryptocurrency is surely an opportunity as well. But with cannabis, first of all, the industrial revolution and the tech boom, those were market creators and makers. Those were things that were created and happened and grew. The cannabis industry, the market exists, and many people think it’s a half a trillion dollar play. The US alone is easily a hundred billion dollars in the future. When you compare that… I think coffee is a $30 billion industry. We are the same as tobacco at 100 billion, and I’m pretty sure, over the next five to seven years, we’re going to be siphoning off a lot of that capital into the cannabis industry because are going to move to cannabis.

Jay: That’s pretty fascinating. I like the analogy that you used of being…that the market is already there. So, arguably, it would be easier for cannabis to go mainstream.

So from a legal standpoint, personally, Drake, how do you feel about… Federally, do you actually think that there’s a chance that it will be legal at some point in the future? Is there risk? Obviously, there’s always risk, especially given our current administration now. But what are the risks for people that are looking to invest in this space?

Drake: 64% of the US population thinks it should be legalized. It’s pretty hard to get anybody to agree on anything these days, let alone 64%. So that’s a great, great thing in itself. I think that whenever there is significant capital and money involved, people make decisions — good or bad. Knowing it is potentially a 100 or 150 billion-dollar market, the government is absolutely going to say yes, the question just is when.

I have what I think is a very deep network in the cannabis space, and I’ve talked to people that are close to Washington, and I’ve talked to people that are not. The general consensus is it could be two years, it could be seven years, before the federal government legalizes it.

Here’s the way I look at it. You’ve got states and you’ve got constituents in those states that have voted for cannabis legalization, and so you’ve got this states’ rights issue versus the federal government. The thing is, is that the feds, they can’t really… They don’t have the time or resources to walk into the states and say, “We’re going to regulate, and we’re going to put these companies out of business.” And the states are vehemently against any of that too. They’ve got their own issues to figure out. In the meantime, the business keeps on growing. Even alcohol was a $200 billion category. They’re certainly upset because money is moving from their category to cannabis, so they’re like, we need to be in that business, which is why you’re seeing nearly a half a billion dollars of transactions happening in these super early stages.

You’ve got constellation brands that invested a couple of hundred billion into cannabis growth out of Canada, and now they’re going to be making beverages. It’s just a matter of time, and I think that for investors, if you’re looking for great returns, you move in early on great opportunities. If you’re looking for mild returns, then you’ll wait. I think that if you’re looking for safer returns and safer bets, you’ll look at companies that aren’t necessarily touching the plant directly. And that’s one of the reasons we got into the business too, is because we don’t have the same risks as somebody who was in the agriculture side of the business.

Jay: I think it’s a very smart that you’ve entered the market. Let’s talk about PRØHBTD. Let’s drill down a little bit deeper because I think that what you’re trying to do is trying to help with some of the negative stigmas that are attached to the space. First of all, right now, I think that it’s obviously becoming more mainstream. How do you see the perception?

Drake: I think we have a philosophy at the company where, like other industries that are emerging, you have a choice. You can either talk to yourselves and complain and have an echo chamber, and the echo chamber can grow to be very large and significant, but you’re really only influencing the people and the pieces of that echo chamber. And so I tend to look at the market and say, if we’re going to mainstream the market, then we need to bring the mainstream to cannabis and vice versa.

And so we’re very focused on partnerships. We have a partnership with Advertising Week, who are the leader in what’s next. They do massive, massive events around the world. And we’re the exclusive cannabis partner with them to help introduce cannabis to Madison Avenue and into the very large packaged goods companies. And that’s one way we do that on the business side.

We have some huge partnerships we’ll be announcing soon. I can’t say what they are today, but they are with best=in-class publishers and magazine owners that will really help give entrepreneurs in the cannabis space a much higher profile in the global marketplace beyond cannabis.

We have partnerships with people that manage some of the biggest stars in the world of film and TV, and we’re currently working on scripted and reality shows with them to figure out ways to move cannabis into the mainstream.

What’s happened in the past is it’s been kind of like legacy media, the High Times magazines of the world. Like Cheech & Chong, it’s incredible. They’ve had a great run. That’s not cannabis. The thing is, what we’re noticing is that there’s a huge opportunity where 9% of the market are endemic, meaning they wake and bake. They’ll wake up and get stoned. That’s a very specific cannabis culture thing.

But 91% of the overall market, that is the mainstream. They’re curious. They’re interested. They want to know. Cannabis doesn’t definite their lifestyle. They just include cannabis as part of their lifestyle in certain ways. And those are the people, that is the audience that is going to take the message of cannabis and permeate the mainstream and create more permanence. So we’re very focused on reaching that audience and talking to them.

Jay: I find it pretty fascinating that, like you said, there’s a lot of Cheech & Chong. They’ve had a good run. But then they’ve also helped with this sort of negative stigma that is attached to the industry. When you kind of drill down and do the research and realize that there are a lot of health benefits from certain parts of the plant or when you extract it, I think it changes the entire situation, because people are very into health nowadays. And so that’s a very positive tailwind for the entire industry.

Drake: The health industry — health and wellness — is a phenomenal trend as well. You’ve got so many issues just in the overall food chain. We could talk about that for hours. But I think that people today, they’re just generally more informed. The internet has certainly helped that. People today think they know a lot more than they do because they read about it online. Is it true? I don’t know. But have they experienced it? Probably not. I tend to err on the side of if someone hasn’t really experienced something, then how much expertise do they really have?

Cheech & Chong is from an era that…they entertained a lot of people. They also went to jail. Tommy Chong went to jail for possessing cannabis, which was insane. It was just the wrong time, and he served time. And they’re great people, and they did good things. And it just happened that at that time, cannabis was absolutely outlawed. He now has a pretty thriving business in a very different kind of category of cannabis.

Jay: So, Drake, let’s talk about PRØHBTD Media. Specifically, you mentioned earlier that your business involves a couple of different areas. I’m looking at your website right now. It’s beautifully designed. Original content is one of your strong points that you guys sell on the site, and I think it’s very necessary for that sort of thing to proliferate the message. And you also help connect cannabis brands to each other and to other larger corporations. Is that right?

Drake: Yeah. I think the overall thing here is that our main mission is to help our brand partners build their businesses. We don’t have clients in our business. To us, clients are for bankers and dentists and lawyers. We are hyper focused on partnering with people and building value. The advertising industry as a whole has been very focused on the client mentality, which is “Get the money in the door. It doesn’t matter what happens next.” And we’re very focused on value creation and value building.

And frankly, we are taking positions in some of these companies, and so we need to have a long-term view on it, because there’s a ton of enterprise value to create around ownership in some of these brands that we’re helping to build and market.

But it all starts with content. These days, very few people make a purchase decision without watching a video or reading an article. And so you build trust with consumers when you can deliver great content experiences where they can learn and be entertained and discover things. And once you’ve done that, you can build an audience. And then once you’ve built the audience, the audience is telling you what they like, because you’re learning about what they like through their behavior. And then you can offer them products that they’re looking to purchase.

And so in that way, you get to build this product and media company hybrid, whereas if Diageo, the largest beverage company in the world could own Viacom or Vice Media, that’s the vision that we’re building. And we’re very excited about it, and it’s working.

Jay: It’s such a clever way too. And you see all these older-school Fortune 500 companies now backpedaling, and they’re like “Okay, we need to get into media. We need to reinvent our online presence” and this sort of thing. So I think you’re attacking it from a very effective angle.

So you have the original content that you create that helps with building PRØHBTD, the brand itself. And then, I guess, on the revenue side of your actual business is, you mentioned two things. One is connecting the brands, and I guess there’s a fee involved with that. And then the other you mentioned briefly is you actually invest in some of these companies. Is that right?

Drake: Yes. There’s three legs to the stool of the business. The first is the creative agency side of the business where we help a cannabis brand design their packaging, create their packaging, connect them with supply chain partners, use strategy, help them with marketing. And we get paid fees for those. Sometimes we’ll take less of a fee in exchange for ownership and equity or perpetual revenue share. We currently have positions in four different companies and expect to be in 20 or 30 over the next few years.

The other upside to that is we get to see nearly every company in the space that matters come through our doors. So we learn a lot about the industry, a lot about the landscape, the nuances of the landscape — which, that kind of stuff you can’t buy. It’s hyper intelligent, and it’s very important to us as we move into the market more.

The second leg of the stool is the content creation, and we have our own studio where a brand will pay us to produce content for them, but we actually own the content. So they may say “Here’s $15,000 or $20,000 to produce an episode of, say, a three-minute episode of some digital video,” but we actually own that content. They don’t. They have a right to use it for promotion, but we own it.

What that does is it helps to underwrite us building a library of intellectual property. So we now have the largest cannabis video library in the world — more than 45 hours that we are currently repackaging to license that for fees to companies like Shutterstock and Getty Images and people like that.

It’s kind of like the cannabis companies, they pay for it once; we make a margin when we produce it; and then we own 100% of the margin thereafter because we own the content, and we get to actually license it for fees forever and ever, amen.

And then the third leg of the stool is that once you’ve built the brands and you’ve marketed the brands through content, then you can help sell those brands and those products direct to consumer through ecommerce. And we’re currently working on ecommerce initiatives right now. And we’re incredibly excited about, and it’s feeling very, very good.

Jay: That’s fantastic. Thanks for the breakdown. It’s crystal clear now what you guys do there, and I think it’s so smart. I particularly like the fact that you guys are taking some investments into these companies. It’s almost like your company is running like a mini VC as well in the cannabis space, which is awesome.

Drake: Imagine you’re an investor, and you wonder, how does my investment scale. Well, frankly, would you want to invest in a company that how one brand, or would you want to invest in a company that has 20-plus brands and a content library and an ecommerce… It’s very diversified on the revenue side. There may be something in the future where, because we have a lot of people involved in that business that have a lot of influence in the entertainment business, that we have one or two hit shows. That could be a fortune changer.

One out of 20 brands could be a quarter-of-billion-dollar brand. This is the future we’re building. You don’t really know because we’re building that airplane in the sky kind of thing right now. But we feel very confident that we are building some of these future hits.

Jay: I’m curious to hear your thoughts, Drake. You’ve been in the business for four plus years. What does cannabis, the industry, look like five years out from here? And what does PRØHBTD  look like?

Drake: Five years out, we’re going to be doing $100 million topline. And I think that given our position in the industry, as a leader, and having defended that and built and widened and deepened our mode, I think we could have a billion-dollar valuation.

I think that the cannabis industry itself in five years from now, I believe, will be federally legal. I believe that California will be, without question, the greatest market opportunity, globally, for cannabis. It’s just absolutely massive because you’ve got all the right factors, and you’ve got people here who really, really understand the lifestyle. And you’ve got wellness, which is such a California trend too. It’s really a confluence of things that are happening to really prop up that market opportunity.

But I think that globally it’s going to be online too. I think you’ll see much more movement in Europe. I was just down with Advertising Week in Mexico City five weeks ago, talking to people there, figuring our strategies on the importation and export side, because Mexico now has allowed the importation of infused products. So you’ve got an entry point now into LATAM, into their market, so you can also have content, and you can have beverages or topical lotions or edibles — whatever it may be — into Mexico.

I believe that one of the biggest white spaces in the cannabis industry is the Hispanic market. There’s not one company devoted to building brands for Hispanics, which is insane. So we have partnered with the largest talent management firm in the Latin community to work with them to build brands and produce content.

Jay: So you’ve obviously, four or five years ago, I guess, before you jumped in, you did your research, and you’ve been investigating what the different parts of the business are. As an investor, could you talk a little bit about… I know there’s a bunch of different verticals that you go in, like you said. You could invest in, say, a grower that touches the actual plant, which obviously has higher risk. I know there’s extraction facilities. There are things like edibles, companies that you can invest in. And then there are the “picks and shovels” plays, such as PRØHBTD  or maybe some of the accessory makers. What’s your view overall? What’s the best place to invest?

Drake: Personally — I’m biased. I just think it’s picks and shovels, and it’s not plant touching today. If you’re touching the plant, one thing could happen tomorrow, and you could be out of business. PRØHBTD is not going out of business because the market is only growing, and people still want a place to voice their opinion and watch content. They still want a place to learn about things, so that’s only going to grow.

I think that Software as a Service products are great. I think that there’s a huge opportunity in distribution of cannabis. I think that delivery service is a big opportunity, if it’s the right company. There’s still a lot of issues around delivery, however, direct-to-consumer is the way. Amazon has proven that. I think ultimately Amazon will be selling and delivering weed at some point, once we get past the opioids.

But I think if you’re invested in the space, you invest in two things. One thing, because you understand it or at least people that you trust understand it enough so that you feel confident in investing your money.

I also think, though, when the time comes for people to look for exits, liquidity events are everything that people look for, and as a company and as a CEO, I’m also always focused on trying to build and create shareholder value. There’s going to be a lot of M&A in the media and the brand and marketing side of the business because that’s what it is. It’s an absolute war of brands that is coming in the cannabis space. There’s no question about it. Today there’s no brands, in my opinion, in the cannabis space. Great brands take years. Pepsi is a 123-year-old brand. I think that to have a great brand, you need loyalty from consumers, and you need credibility, which means you need utility. You need a reason for people to continue to buy into that brand. And I think that cannabis companies are just starting to understand those fundamentals, and they’re starting to understand the consumer.

So right now, you’ve got a lot of packaging and a lot of experiences and a lot of marketing, but all of these things are fundamental to brand building but, in terms of has the future of cannabis brands arrived yet? I’m not so sure.

Jay: It’s going to be interesting to see how this plays out, but it’s certainly a sector that we’re all going to keep our eyes on. As an investor — I think a lot of the audience are investors — and I know for the a fact, just like the crypto thing you mentioned earlier, I’ve just been seeing so much about it in the last year or 18 months about investing — whether it’s pitch decks or just people talking about it in mainstream media. So I think it’s an exciting time to be in the space. I particularly like what you guys are doing there at PRØHBTD, Drake.

I just wanted to ask a last few questions. I appreciate your time. What are some of the goals that you have in the near terms for 2018? Anything that you want to direct our audience’s attention to in the near term?

Drake: In the near term, we’re going to finish our series A, which is feeling like it’s going to cls in the next month or so pretty easily. We’re going to get to work and continue to build out the team, and we’re going to continue building series. We’ve got some incredible partnerships that I mentioned earlier — we can’t talk about today, but they’re with some of the best companies in the world at what they do.

I think, for us, we’ve got some shows on the content side that we’re going to go out and pitch and likely sell to the Netflixes of the world which will help to extend cannabis into the mainstream. We’re really building out our product development business because the ability for us to IDA, create a brand, put it into the marketplace within six months is a really, really interesting opportunity that, frankly, could be just a huge moneymaker. Because, as a company in the cannabis space that can actually spin up a brand and market it all at a same time with an audience is very, very unique. And so for us to be able to really invest in that, into more of the science of that, and treat it on that R&D side, I think, is important for us as a company and to become more efficient. Because as we begin to scale, we’ll need to be efficient for cost’s sake. So we’re looking to do that.

We’re looking to grow our audience. We did 1.4 million unique visitors to our website last month. I’d like to be at 2.5 or 3 million by the end of the year. We did 18 million video views last month. I’d like to be at 35 to 40 million video views a month by the end of the year. So we have goals here at the company, and everyone is tasked with hitting them.

I think the thing I’m most excited about is on the revenue side. We’re up 520% on revenue from the same quarter last year that we are this year. In 2016, I’m not sure how big the audience is here, Jay, who is listening, but average order size in the cannabis industry, for what we do, two years ago, were 7,000, and this year, they’re 80,000 so far. So the appetite for brand building and being one of those brands to win in the future is very, very big, and we’re well positioned to capture it.

Jay: That’s very exciting. Last couple of questions for you, Drake, before we let you go. I always like to ask my founders that come on, serial entrepreneurs that are more experienced like yourself, any one piece of advice for young startup founders or entrepreneurs that might want to get into the cannabis space or maybe they just want to start a company. What advice would you give them?

Drake: I would say follow your instincts versus a book. If you’re incredibly passionate about something, you’ll find a way to monetize it. I think that, as well, don’t be afraid to hold out. One my biggest mistakes was that I sold a company too early, and I could have made an extra 30 million bucks if I’d stayed in it. But look, I bought bitcoin at 20; I sold at 90. I should have hung on to that thing. You never know.

I think that it’s just important to really listen to yourself and not the noise around you. It’s funny how good our radar can be if we really listen to it. So I think just following your passions, and your instincts can treat you well. Just don’t be stupid about it.

But I think one of the most important skills from an entrepreneurial standpoint, I think, is just really having the balls to say “yes” more often, even if you’re prepared with the resources to execute. So many people things days overanalyze something. They’re like “If I do it, I don’t have the resources. Then if I get it wrong, I’ll go out of business.” And say f**k all that. When somebody says to you “I’m willing to pay for this” and you can find product-market fit with a customer, you figure out a way to execute that because that is how you’re going to grow your business. Because if somebody wants what you offer, you have the opportunity to start and grow a business. I used to see a lot of people overanalyzing a lot of the time. And that doesn’t really get you anywhere. It may get you a great job at McKenzie or…and they’re great places. I’m just saying…

But on the entrepreneurial side, you’ve got to jump in. You’ve got to take risks, and you’ve got to believe in yourself that you can execute for the right reasons.

Jay: That’s awesome. Thanks for that advice, Drake. Last question is where can people find you, follow you, connect with you? Obviously your company website, PRØHBTD.com, which we’ll have linked up in the show notes. Personally, are you on social at all? Or is there any way that people can connect with you?

Drake: Yeah. PRØHBTD is P-R-O-H-B-T-D.com. There are no vowels. That’s Prohbtd.com. You can go to ProhbtdMedia.com, which is more of a B2B site. We are on Instagram. We are on Facebook. At Instagram, it’s @ProhbtdMedia. On Facebook, it’s just @Prohbtd. We’re on Twitter, etc. I’m on LinkedIn. You can find me there. Feel free to say hi.

Jay: Awesome. Thanks so much for your time, Drake. It’s been a very, very interesting and enlightening discussion. Appreciate your time, and best of luck with the business.

Drake: Cool, man. Thanks, Jay. Appreciate it. Bye.

Jay: Alright. Take care.