Dave Nola of Vice Legal talks about the future of the Cannabis Industry
Interviewer: So, today we’re here with Dave “D Money” Nola, and we’re gonna be interviewing him, asking him a few questions about his role as an attorney in the cannabis industry, and I will sort of give a little background on Dave.
He’s been in this space for the past five years, and his background was in alcohol distribution. I’ll let him sort of give a good introduction on the type of work that he does with cannabis clients. And, go ahead, Dave. Take it from here.
Dave: Sure. Until recently, it’s became very broad. In the beginning, it was a lot of just new licensing, which is how the industry started. Now, it’s gotten to a point where it’s a lot more compliance, specifically the regulations that continue to come out. Largely, in the manufacturing role that I’ve noticed, recently, because of the aspects of human ingestability with the products, and so the health department has really beefed up what they want to see, as far as SOPs and what not, and kind of creating those and working with the clients to make sure that their procedures are in tune and whether they can comply with all those.
So it’s been interesting. Some times, it’s, you want to pull your hair out, because you don’t really know how to solve some of these problems. You have to use your imagination, in a lot of ways, because it hasn’t been done before, so it’s been cool. But, you know, also COVID, although a terrible thing, has allowed for a lot of cities to kind of open their doors for more cannabis licensing, in an effort to develop more tax revenue, so that’s been cool. So there’ll be a lot of that on the horizon, with new jurisdictions opening up, specifically in the retail zones, so hopefully, looking forward to that.
Interviewer: Okay, so starting all the way back in the beginning, tell us a little bit about yourself, who is Dave Nola, and what did you do before cannabis industry was the thing?
Dave: It all started one rainy evening, July 1st, 1982. My mom went to the hospital. So, before cannabis, I did mostly alcohol work. You know, I was co-owner of a bar for a long time, which I operated. That kind of led me to go into the legal world.
Interviewer: Which bar was that?
Dave: Kitsch Bar, yeah, 819 Baker Street, 810. As kind of a way to keep in the industry, the nightlife industry, but not have to work until 4:00 in the morning. Helping those restaurants, bars, clubs, etc., be compliant with all the laws and regulations in that industry. Worked for an attorney who specializes in that area, named Michael Cho. That was interesting. He was the one who actually helped us get the license at Kitsch Bar. After cannabis was legalized, in the recreational field, at least, there was a transition that started coming our way, as the industry was growing, which was kind of nice, because they were similarly regulated in the beginning, although a lot of changes have occurred over the years. So that’s where it all kind of started. And then, met Danny Weis in law school, and the two of us kind of picked up and started a little boutique law firm to focusing highly regulated markets, specifically around cannabis and alcohol.
Interviewer: Awesome, awesome. So, once you partnered up, was that a difficult decision to decide to focus your legal practice solely on cannabis and alcohol?
Dave: That’s a good question. You know, at the time, it didn’t seem like it, but like any new industry, it’s hard to foresee all the struggles of an emerging market. Alcohol, although very stable, kind of became something that wasn’t so looked upon as an aggressive move for a lot of the people that I knew in the industries. They all kind of put their efforts towards cannabis, and that was great. Just nobody could really foresee how difficult it may be to penetrate into the market. And so, in one sense, it’s kind of cool. It’s very eye-opening. In the other sense, it’s caused…you know, there’s struggles that come with it.
Interviewer: Yeah. Absolutely. And as far as your client base, how many clients within the cannabis and hemp and alcohol spaces do you currently serve?
Dave: Total clients that we probably have has got to be about 180 or so, total, in those spaces alone. Active, you know, it’s probably…it all depends. Some of them, we do continued compliance with, I’d say, there’s a good 20 or 30 of those, where they’re constantly have us look into whether it’s a new contract for some partnership, joint venture, etc. Some of them are literally just small mom and pops, and we help them with their licensing, and kind of keep them, you know, I guess, at bay, until and if they need us. Some of them don’t actually ever go… They might just actually sell their business off after it gets a license, and that just is their MO. So that’s where kind of the, I guess, relationship ends.
Interviewer: So, as far as the various types of businesses within the cannabis space, what types of businesses have you licensed and assisted with? Can you kind of describe the types of clients that you work with?
Dave: Sure. Most of them are in the cannabis manufacturing, cultivation, distribution worlds for the cannabis. In the alcohol, it’s mostly the bar and restaurant. We do have some retail, and I’ve done a lot of work there. And there’s also the testing lab. I would say the testing lab is the least of them, largely because of the difficulty of an attorney understanding the science behind how those SOPs are created. You really need to have somebody with a chemistry or pharmaceutical background and kind of help you develop that. It’s just not an area of expertise that anyone outside of a scientific background would understand. The retail is like many traditional retail stores, except there are some caveats with security, air filtration, etc. The manufacturing was slightly difficult, but easy to…or attainable, I guess, by an attorney, as far as the procedures go. It is scientific in many ways, however, it wasn’t to such a complex level to where it required some specialized or advanced degree.
Interviewer: Awesome. So you’ve been in this space for five years. Tell me, like, why do you love working in the cannabis space?
Interviewer: Why are you still doing it?
Dave: Well, I’ve always had a passion for cannabis itself, and that kind of came from my parents. They actually were pretty active users, and even, I don’t want to say innovators, but liaisons of the plant being good for medicinal purposes. In fact, had my grandmother, back in the mid ’90s, during her cancer run, using the product in many ways, through teas, etc., and always were believers in it. That led into, of course, an industry that was opening up, and it was exciting to kind of see where it could go next. It’s not too often in people’s lifetimes where you see a market like this emerge. I mean, the last time something like this probably really happened was prohibition. You might be able to say the dot com boom was there, too, but that wasn’t something I had a passion about. So it’s been great to kind of see it evolve. It’s had its struggles like any, but at the same time, we’re gonna look back in 20, 30 years from now, and remember what it was like in the beginning.
Interviewer: Yeah, building an industry from nothing.
Interviewer: And you’ve already seen a lot of crazy things.
Interviewer: The regulations are constantly changing. Okay, so you have all of your baseline of clients. You love working in the industry. Which clients are your favorite?
Dave: The ones that pay their bills.
Interviewer: Okay, perfect answer.
Dave: All right, no. The ones that truly have a passion for it, from prior, just outside of a monetary aspect of it, that truly care about the plant and have a passion for it as a culture, not just a business, you know. And that’s exciting to see, because you see their heart glow. You also see their effort be a lot more when they care about it at that level. If it’s just a monetary thing and things aren’t working out money wise, you know, you see a lot of people just bog down or leave, walk away, cut the cord, whatever it might be. And so, it’s cool to see all sides of the coins. It’s cool to see them come together, customers that work well together. But as far as the ones I love the most are the ones that it’s rooted in their culture, and rooted in their heart, so…
Interviewer: Awesome. As far as…all right, if you were on the other side of this, if you were a new person to the game of legal cannabis, and you are trying to start a business, what would you look for in terms of hiring an attorney, such as yourself?
Dave: Sure. Definitely knowledge in the procedures to be expected. You know, so I’d say on average, a new cannabis business, 12 to 18 months before you open your doors. It could be longer, depending on the jurisdiction. Some are conditional use permits, some are business licenses, and it’s difficult to put your thumb on exactly how every single city is going to handle it. So, having that realistic expectation. You know, putting that upon them to, “Hey, this is what the city looks like it’s going to be,” or, “Here’s what you can expect.” Setting those expectations is important, because people naturally want to accomplish things fast. And so if they go into it with that expectation in an industry like this, where it’s extremely difficult, you’re going to see them become very ornery. And so, that’s not really what you want to deal with. You want to set that expectation to be real, going into it, it’s going to be difficult. It’s going to be a long time. It’s going to be expensive, but it’s worth it in the end.
Interviewer: Right. So, if I’m walking into a room with an attorney that I’ve never met, who’s going to help me with my cannabis company, I mean, whether I’m a newbie to the cannabis industry or whether I am new to the licensed, regulated side of the market, how am I able to vet out whether that attorney can actually help me?
Dave: Sure. A lot of it is just looking at your goals, and helping shape that, I think. If your passion is cultivation, that’s great. You know, what I can do is help you shape that part of what your passion is into a compliant way. But at the same time, opening up your mind, understanding that, yes, it’s cannabis, but it’s also a business, and with business comes a lot of other areas that you need to focus on, you know, from human resources department type aspects, to payroll compliance laws, all that other kind of stuff that comes with it, which a lot of people tend to overlook. And getting them to see the big picture, I think, is how you can really help them out. And not just saying, “Oh, it’s going to be so easy. Let’s do this.” Understanding that there’s all of these areas in which I can help you, and kind of giving them a couple of points on each, so that they see everything going into it.
Interviewer: Right. So you’re the cultivator, walking into a room, and you’re trying to vet me out as the attorney. How do you know that I’m not full of shit?
Dave: Sure. A lot of that is just understanding the actual process itself, right? So, if you don’t understand how to cultivate, how can you understand how to regulate it? So if I’m a person that’s talking to an attorney, I’d want to see if they understand cultivation, for example. Same with manufacturing, or whatever it might be. Understanding it to its core. You can’t understand how to regulate it, unless you understand what you’re regulating.
So, it kind of took me back to a class in law school that I loved, it’s energy law. It started with that. The first half of the semester was all understanding energy production, just the science behind it, simply. Not about any laws at all. Then, how do we regulate it? So I look at it from that same kind of perspective.
Interviewer: So, you’ve worked with a lot of cannabis clients. What are the top three reasons that cannabis operators or cannabis businesses fail from your experience?
Dave: Number one, definitely, undercapitalization. They oftentimes come with the perspective that it’s going to cost…or perhaps they paid in the traditional markets or the black markets to get an operation going. Or, temporal, you know, they think, “We’re gonna get this done in six months.” There’s too many bureaucratic hurdles in the way to lay such a short expectation on that. So between those two, it’s difficult. A lot of times they find themselves in a situation where they’re nine months in, at this point, and they’ve got to go scramble to try and get some more money. And it’s difficult, because you’re rushing at that point.
The other aspects of it, I mentioned it before, is understanding that it is a business, just like any other. Although it has its regulations rooted in cannabis, you can’t not focus on all of the other areas that are necessary to run a business, you know, all that behind the scenes administrative work. It’s terrible to do. Nobody likes to do bookkeeping. Nobody likes to do that stuff, marketing, whatever it be, but that’s still part of business. So understanding going into it that that’s something that you have to be a part of, too.
Interviewer: So, number one, you’re saying money. Number two, quickness, speed to get to market, and those expectations, and three is just business acumen.
Dave: Overall business acumen.
Interviewer: Day to day operations. Yeah. That makes sense.
Dave: Yeah, I mean, it’s fine, you can delegate, but then you need to go into it with that, “Okay, I run the cultivation and my team is going to do that as far as the plant growth.” Let’s just use cultivation as an example. But if you don’t have the time or you might find yourself stretching yourself too thin, for every other aspect of running a business, then you need to delegate that out, going into it. It needs to be a part of the plan.
So, a business plan, an operating plan, is forward thinking. It’s what you think you might do. A standard operating procedure is what you do in that moment. And so, in the plan, you create that forward thinking, and once you get there, you create the procedure for why you’re there after it’s become real. And so, it’s something that people need to understand when they’re working, as their businesses move through these transitions.
Interviewer: Yeah. It sounds like it’s important to have a good team together to run that business.
Dave: Sure is, yeah.
Interviewer: Well, have you had any experience with clients that are operating in the black or the gray market? I mean, how have you seen that transition over into the regulated space?
Dave: Sure. Well, every one of them that came from the traditional market, it’s hard to get that last foot of theirs over the fence, into the regulated market. They’ve got that…what’s the word I’m looking for, rebellious kind of…you know, they like that dark side. They like the dark side of the moon, too, you know. So they like to be in the light, they like to be in the dark. And so, getting them to pull that last foot over the fence has always been a little bit difficult. Because they’re used to, every week, walking away with a wad of cash. In this industry, in the green markets, the value is not in how much cash you put in your pocket every day, it’s in how much equity and value you can increase through your business. Of course, you would like cash coming in every day, but when you don’t have something tangible, like stock value, it’s hard to see why you’re working so hard. So, getting them to understand that, in that transition, is difficult, so…
Interviewer: Yeah, yeah. As far as the last five years, and doing what you do, what were some of the biggest hurdles that you had to overcome, just for your business, and in operating and servicing these clients in the cannabis space?
Dave: Sure. I would say, something that was unforeseen was going to be the inconsistency of cannabis growth, so to speak. And what I mean by that is, because the cities have the power, when this first was legalized, there definitely were a few large jurisdictions that came out of the gates running, and there was a lot of work. And then there’s stalls, long periods of time, in which no new cities are opening up for any new licensing, which is really where you see the threshold take it to the next level, as far as an attorney’s work goes. Continued compliance is always there, but from the time after you get the first stage approvals in cannabis work, it may be another 15 months before the client is open, and that compliance work comes down the door. So you really are hoping for new jurisdictions to open up, because that’s where the majority of the work lies, and also, it’s the most interesting part, because every jurisdiction is different. It’s like a new puzzle that you got to complete.
Interviewer: Yeah. It sounds like most of your work has been in California. What other jurisdictions have you been serving, and have you seen a big difference between working in those other states versus California?
Dave: Definitely some. Recently, we did a lot of work in Illinois from the retail round, and then also from the craft grower, and infuser rounds. Those are similar in some regards, but also extremely more robust. What they required was an incredible amount of forward thinking plans. I think there was a total of 17 total different plans, they were forward thinking, and it’s kind of difficult to take this fictitious business, and make a model of it in your head and make it all compliant. So, other states, it’s literally, you just walk in and submit a piece of paper, and you get a license, and so it’s interesting to see that difference. We have that same kind of thing here, even in just a microeconomic perspective, in Southern California. If you go out to some of the desert cities, you know, you literally walk in with a piece of paper, turn it in, pay a check, or pay a fee, and you’re off to the races, where some of the jurisdictions, it’s six months before you even get your first stage approval. You know, so it’s interesting to see those differences.
Interviewer: Yeah. It sounds like it’s kind of all over the place, state to state.
Dave: Definitely. Yeah.
Interviewer: So, tell me a little bit about your firm and your plans for 2021 and beyond. What are you looking forward to this year?
Dave: Well, like I said, earlier with COVID, again, it’s a terrible plague on our world and to society to have to go through this, but at the same time, there’s always opportunity in negative aspects of life. And in this case, I really think that a lot of the cities are going to start looking to alternative industries to fill that void, to help increase that tax revenue, get jobs back, you know, to a reasonable amount, etc. And so, hopefully, we’re already seeing that some cities are opening up or getting ready to open up, and that’s great, because without the local jurisdictions being open to the cannabis industry, we’re never going to grow. Because it’s them who really controls. So we’re looking forward to that. A lot of new cities, even some of the ones that where our office is, in Costa Mesa, some other local cities, like Corona, etc. And so, being right here in our backyard is exciting to work with them.
Interviewer: Absolutely. And how do you see the future of the cannabis industry, you know, nationally, globally, any thoughts there?
Dave: You know, sure. When I first got into this, years ago, I knew it was going to be a long struggle. But you know, the turtle wins the race. It wasn’t going to be something that was going to be easy. You know, obviously we had the federal challenges from the get go, but I knew one day it was going to be overturned, just like it was in the states. And slowly, but surely, it’s inched that way. More and more states, over the past years have come forward, legalization, new laws coming on the books, whether it’s medical or rec, and it’s exciting to see that. It’s to the point now where it’s so overwhelming that the federal government just can’t look away. So, that’s the next step, and once that’s there, then it’s the international look. Like I said, the turtle wins the race, but so far, it’s been a good race, and we’re winning.
Interviewer: Awesome. And for any other potential clients out there that might be listening, do you…I mean, are they late to the game? I mean, you’ve been in it for five years, and someone coming new to this space, I mean, what would you tell them?
Dave: You’re definitely not late. There is so much opportunity still. Yes, there is going to be competition going into it, but one of the aspects of this industry that’s phenomenal as compared to others, like the alcohol, is the ability to vertically integrate. So if competition is something that you understand may be difficult, then you need to come out of the gates trying to be integrated as quickly as possible, so you can control some of these outlets to the consumer. That way, you know, you have a little bit more of a…I don’t want to say a guarantee, but a pad, so to speak, and you can build your brand that way, and then go out there and compete, once you’re already in the market.
Interviewer: Yeah, well, I want to thank you for your time, David, Nola, and for your very deep insight into your role within all of this stuff that’s happening within the cannabis space. So, have a great Valentine’s Day.
Dave: I will, thank you. Appreciate it, guys.
Interviewer: Take care.