016 Urban Gro - Future Proofing and Integrated Design with Mitch Galton

:: 01:04

Hello and welcome to another episode of cultivation elevated. I'm your host, michael Williamson. Nope, that's not it. Hello and welcome to another episode of cultivation elevated sponsored by Pipportaculture. I'm here in Austin, texas, with Mitch Galton, director of business development for urban grow.

:: 02:01

Hey, thanks for having me.

:: 02:02

Hey, buddy, thanks for seeing you again. Yeah, nice to see you in Austin.

:: 02:04

Yeah.

:: 02:05

It's been a while. We've, uh we we've had some fun, uh fun road adventures over the years, yeah.

:: 02:10

No, it's been an been an exciting, uh, exciting journey.

:: 02:13

So for our listeners um who aren't familiar with urban grow, can you kind of give a just general um oversight of urban grow and solutions and stuff that you guys offer?

:: 02:23

Yeah, definitely, and it's changed a lot over the last couple of years. You know, two years ago we uplisted an Aztec, did a pretty big capital raise and as part of that we've made quite a few acquisitions and really started kind of embracing a turnkey model where we can take customers start to finish, you know, from all the way through architecture, uh, mep, all the engineering services, equipment procurement and then most recently, uh, construction management and GC in a lot of cases. So really kind of soup to nuts. Um, you know, the idea is that we can help customers, you know, one stop shop, do everything and get to market really quick.

:: 02:56

Yeah, uh, that might be one of the biggest restrictors that we see with people. They tend to get delayed for a million different reasons or excuses, um, and there's a huge financial ramification for not getting to market fast enough especially in these new States.

:: 03:10

You know a lot of these groups pay such a premium to get restricted licenses. Um, you know the idea that prices are going to be really high for the first couple of groups to come online and so every you know couple of months that you're kind of delayed in permitting, or because there was an issue with architecture or MEP, whatever it was. That can cost you huge amounts on on what you paid for that license.

:: 03:32

What are some of the biggest delays that you've seen um like in in on projects typically like what are the? What are the common trends that we've seen over the last I don't know 10 years?

:: 03:41

It's a good question and you know, part of what makes this industry so challenging is that there are a million delays coming coming from all directions. You know, construction is a big one, um, permitting is a big one. Sometimes you just run into cities that don't want cannabis cultivation, uh, in in their district or in their city and and they make it really challenging on everything from fire inspection to, you know, safety planning. Everything can kind of get in the way, um, you know, in a lot of the time and the things that we try to mitigate its collaboration between architects, engineering, you know, just a week gets delayed because there's not communication or communication slow. But having all that in house allows us to kind of speed up that process and allow for better communication between groups that are building these projects.

:: 04:23

Nice. I want to dig more into urban growth. There's a lot of interesting stuff there. But before I do I want to dig a little bit into your backstory because you have a really, in my mind, fascinating um entry into the cannabis space. Can you elaborate a little bit about kind of where you were and what time period that was, and kind of what transpired?

:: 04:43

Yeah, yeah, and I'll keep it brief. We can always edit it, edit it down if it gets too long. But, um, you know, so I, I was in college and I had worked for a general LED company. Um, you know, we did like restaurant lighting and all that, and one of the projects I had assigned to me while I was there was looking into the viability of LEDs for horticulture.

:: 05:00

And where were you at school at this time?

:: 05:02

UC Santa Barbara, um, so I was in my my second year during that um, about to enter my third year and um, after doing that research, you know my my kind of conclusion from it was that LEDs aren't really there yet for horticulture. This was back in 2015, 16. Um, but it was pretty close. Uh, hps were still really predominant. Double ended, had come to the scene pretty recently and they were really efficient. They were growing, you know, they were really good for plant growth. But LEDs were advancing really quickly and it was clear to me that eventually they would kind of surpass HPS and there would be a big shift in the horticulture space. Um, what?

:: 05:36

what, sorry. What year was this as well?

:: 05:38

20, like kind of the end of 2015, beginning of 2016. Yeah, um, and so I. You know, I was just kind of keeping an eye on the handful of LED horticulture lighting companies out there, and a one that was really interesting to me was BML, um, but their price point was a little bit high and the product, you know, wasn't quite there to beat HPS at the time, Um, but I think in fall of 2016, they rebranded the fluence and came out with a product that was, you know, night and day better than, than, I would say, all the LEDs available at the time. But also, you know, I thought it was the first product that was really going to be able to compete with HPS, um, and in surpass it, um, and so I, actually I just reached out to the company, I sent him an email and Jerry, who you know pretty well, one of their owners, reached out to me and we talked for, I think, two hours in my uh, I was in my third year of college, um, and at one point he said he's like look, you know, we'll probably have a job for you when you graduate, but if you, if you're interested and you want to take a break from school, I'll teach you more in the next year than you'll ever learn in college.

Wow, yeah, and to his credit, he really did. It was, you know it was a pretty crazy experience but it, you know it was a tough decision, but I ended up leaving. After my third year I took a leave of absence and um moved out to Texas. I there are only 15 people in the company at the time how, how did mom and dad feel about that? You know they they were a little bit surprised, um, probably not thrilled, but I think they appreciated that I was. You know that I could always go back to college and that you know the timing was pretty unique. The horticulture, the indoor vertical farming space, was blown up and then also cannabis was was getting really big in a lot of states.

:: 07:10

I mean, how many billionaires left? Uh? You know Harvard and Yale to go get busy with what their ideas were.

:: 07:15

Yeah, yeah. And again, I could always go back. You know, I think that was part of what uh made me feel comfortable. As you know, I could. If it didn't work out, I could just go back and it would be a good experience. But, um no, it ended up being incredible. We grew tremendously, both in staff and then also revenue, over the next three, four, five years. Um.

:: 07:33

What number employee or how many people are on the team at this point.

:: 07:35

Well, when I joined in 2016, I think it was about 15 people, um, you know we had a lot of uh manufacturing also, so it's, you know, people in different roles, but about 15 total, I think. Um, and by the time I left in 2020, we were around 200. Yeah, and then we had a lot of paper growth through those years and you know a lot of a. It was interesting to watch that journey, both from the, you know, customer standpoint working with a lot of groups that really expanded and then also, you know, just the internal. You know, going from a really small startup to a much bigger still startup was. It was an interesting journey, but a lot of fun and tremendous learning experience. Do you feel like now?

:: 08:10

that you've gotten the startup bug, or like you got to experience the startup, because a lot of people don't. They live their whole lives, they work for very stable companies, they have a very clear um sense of what their role and responsibility is and kind of day to day stuff, um. And then there's people that have been a part of a startup and it's if you're lucky, it's controlled chaos. Um, you know um and so, but it's not for everybody. You know people that thrive on structure sometimes really struggle, um to have light feet during startup mode. Um, and you know, year one, so exciting, yeah, and it was like crazy and still good, but like it's starting. But like year three is like one of the hardest years I find in a typical startup. It's when, like, you're either doing it or you're not.

:: 08:53

Totally and we were really lucky. I mean it was. It was such a unique startup in the sense that, uh, the ownership team never took on outside investment, so it was really all kind of held internally and we had a lot of freedom over product design. You know our approach to the market and I think that helped a lot, but it was definitely it was an interesting experience being in such a small startup and having to scale quickly. And then, you know, we were acquired in 2018 by Osram, which is a $4 billion company, and so I kind of got to see both sides of the.

You know hyper small startup to the and hyper growth startup to the you know institutional, then around a hundred year company, and, and you know there are pros and cons to both. Um, it's definitely a more exciting environment when, um, when you're in a startup scene, but it's a, it's also a lot more stressful. You know it really comes down. There's no backstop. You know it's a. You know the decisions you make can can affect whether you're around for the, you know, in the next year or the next month, even. Um, whereas you know having that backstop of a $4 billion company, who can, you know, kind of bill you out or look longer term and make make investments. You know that has some benefits also.

:: 09:56

Can we talk a little bit about this concept of like getting to market early. You know, while you were at Fluence, your territories were mostly North America, or Canada specifically.

:: 10:08

Yeah, mostly North America. I did a lot in Canada just because there was so much growth up there at the time and all those guys were really chasing speed to market in a huge way.

:: 10:16

Yeah, that's about, I think, the time that you and I connected and we started hitting the road together and I was, you know, looking at trying to see our what are people doing in Canada? Is anybody going multi tiered or vertical? What I learned is people are building some monstrous greenhouses, yeah, and so it was. I have my you know, theories on where Canada kind of hurt themselves, but, like you know, from your perspective and what we experienced, that I mean I don't even know if that's hyper growth. It was like it's like megalodon growth. I mean it was just I've never seen anything like it. I've never seen so much capital deployed. I've never seen. That was my first time seeing a million plus square feet of cannabis greenhouse. Yeah, and it'd be next to like three million square feet of peppers. And you know, I mean it's just like the whole thing was just like. I was like, wow, I've really been doing this at a very craft level in comparison to this.

:: 11:09

Well, and what was interesting about Canada is it did start out pretty small and so a lot of these guys went from, you know, 2000 square feet to 2 million square feet overnight and I think you know that that alone presents a lot of challenges, even if you can do something super well at 2000 square feet. Just finding the staff in a lot of the places where these guys were building to manage a million square feet of cannabis was really challenging. Yeah, canada's been an interesting market for sure.

:: 11:32

I mean ultimately Canada's, you know shot in the foot was not having canopy restrictions, you know. And then that tied into basing evaluations based on what you could produce but not what you could sell, and that is such a terrifying, I don't know situation to be in it. I look at it and I'm like and then you restricted retail outlets as well. Yeah, so you choke the businesses but you allow them to overproduce. I mean it's crazy that that was like somehow okay and like nobody was like this is gonna implode early on, you know yeah, and it goes to show that you know this.

:: 12:09

the way that states or jurisdictions roll out cultivation licenses, you know we see it very hugely based on, you know, based on where groups are, but it does make a difference in how viable these, these companies, are long term. Right, like you know, restricted licensing is great because it gives you a license to print money if you get one of the first ones, but the question is what happens after that? You know, if you have unlimited square feet, like we saw in Canada. You know that really valuable license is great because you can build unlimited, but it also means that your competitors can build unlimited also, and so the value of that license is always going to go down as people expand and the state continues or the jurisdiction continues to issue new licenses, which is another issue.

Canada had they, you know, they issued the first batch of standard licenses and then just kept issuing them. I think there are, you know, a couple hundred up there now, especially once you once you factor in the craft licenses for a while it was only 20 or 30 licenses and it allows those guys to raise, like you were saying, tremendous amounts of money and just dump it into in a more square footage.

:: 13:09

Mm. Hmm, you were also on the horticulture side, or the non cannabis side as well. Were you selling it at that market at the time?

:: 13:16

Yeah, we were doing a little bit of it. You know cannabis was always bigger but we were definitely doing a lot of the indoor vertical farming and then a lot of the a lot of the greenhouse groups also and in a lot of the cases we connected with those guys because they were converting a portion of their tomato greenhouse or their cucumber greenhouse to cannabis and then they started looking at lighting for or supplemental lighting for their other crops. Obviously much lower amounts that the ROI is much lower from increased yield. But you know, it kind of got their foot in the door and got the commercial ad guys a little bit more used to higher tech equipment.

:: 13:50

What are you excited for over at Urban Grow, like what's what? What are some of the like the projects or maybe new solutions or developments that you guys have in the pipeline that you would like? You know this is an exciting opportunity for for cannabis.

:: 14:06

Yeah, it's a good question. You know, now that we're we have kind of a full suite of services and we're able to do turnkey we're really trying to kind of integrate everyone a lot more.

And it's been fantastic because, you know, one thing we were talking about earlier is if you have individual groups, it can be really challenging for the architects to communicate with the MEP and for that information to go quickly. And now that you know everyone's kind of familiar with each other, we're integrating really well. You know everyone knows who to reach out to about certain things. Projects just run much more smoothly and so you know we've been doing a lot of retrofits and our equipment team is is really talking a lot with our, our MEP division and that's been huge.

You know a lot of guys are retrofitting lighting. They're adding a second tier and that really changes the humidity that you have to manage in the space, the temperature, the sensible load that you have to manage in the space, and being able to just call up you know one of our engineers and talk to him about the HVAC, how that affects the current HVAC system, what equipment they can kind of add in to mitigate the changes or the impact. It's been really fantastic and one of the things we always struggled with at Fluence was helping customers understand when they change lights what else changes in their system and just being able to call someone else on our team that really knows that stuff inside and out has been huge.

:: 15:18

So you guys do, in addition to mechanical, electrical and plumbing or MEP engineering, you do structural and civil. Yeah, structural structural, civil.

:: 15:28

You know environmental hasn't come up as much, but we can, yeah, we can, we can manage all that. Yeah, it's usually like a poor site selection. Site selection is a huge piece of what we're doing on the architecture side. You know a lot of groups are deciding between going into an existing space and kind of fitting it out, gutting it, or building ground up, and there's a lot more, you know. Again, coming from the lighting side, I didn't realize how much went into the site selection and how much, you know, a couple of things being overlooked can really impact you down the road, like utilities available.

:: 15:55

Yeah, that's that seems to be an Achilles heel for a lot of people. They are like I got this great property. Oh yeah, we had got a bunch of power. Oh, look at all these power. You know it's like no, no, no, you don't have the right kind of power, your real powers. Three miles down the road it's a place like California. I mean, one time when we were at Harperside farms in Salinas, I think we waited over two years for a power upgrade.

Yeah, I mean, you know that does a financial perform? It's, it's, it's, it's brutal and you look at the loss revenue opportunity and it is. It is very difficult. It's brutal.

:: 16:26

And once you're already in that far, if you've selected the wrong site and you've done, you know, structural changes to it, started the retrofit, you know it's too late to turn back in a lot of cases, maybe it's only approved space in the local municipality, I mean totally, or your licenses tied to that space and you can't move all sorts of stuff.

So you know that that is a big piece of what we've been doing with a lot of the you know, the East Coast states where they are starting to kind of launch programs and issue licenses. A lot of what we're doing with new applicants or, or you know, new licensees, is just helping them kind of understand what they're in for when they when they're looking at a site and, like you said, we've had people that are convinced they found the right site and then we kind of help them understand all the things that they weren't looking at, you know, understand the full picture and start looking at things that they weren't considering. What are some of those things? You know, like you said, access to power is a huge one.

Utility rate utility rate, you know, sometimes you know just structural, when they start looking at what they, the rooms they actually need to put in there, that kind of thing it's. You know you need to start breaking down walls to make a fishing canopy layouts and then you know this was a supporting wall. So you know there's all sorts of stuff, hazard, hazardous materials in a lot of cases. You know what the water on the site looks like. That kind of thing.

:: 17:38

So, for people who aren't familiar with retrofits, you said you're seeing a big increase in retrofits, which to me makes total sense. It's it's, I assume, part of surviving consolidated markets and leaning up from an energy footprint and carbon footprint standpoint to some extent.

:: 17:52

Yeah, and when I say retrofit I should clarify there's kind of two types. One is, if you're building a new kind of ground up project, you can take an existing, just empty warehouse and grocery store warehouse totally and just you know, retrofit it from a building standpoint.

But what we're seeing a lot more of is groups that are already managing canopy. You know they have a facility that they either built you know, maybe even only three, four, five years ago that's kind of outdated or they made an acquisition, probably paid too much in a lot of cases, and now they're trying to kind of go back and make it profitable. And, yeah, we're seeing a lot of traction on both of those. It's a lot harder than it sounds. I think that's one of my big takeaways after doing a lot of these projects. There's always little things that you're not considering. And again, that's where having an installation team that we work with, having the MEP guys that we can contact and kind of understand minor changes or changes that seem minor, how that impacts everything else, that's been really valuable, because switching lights is great, upgrading lighting or upgrading benching is great, but if your HVAC can't handle it or your DEHU can't handle it, it's environment's almost always going to be more important than anything else.

:: 19:00

It's interesting in the vertical farming space, people will say like, oh, vertical farming doesn't work, or they want to blame something or someone, or both in some cases. But they'll be like, oh yeah, and I always think like, well, it's not the racking's fault, it's not the lighting's fault. This is almost 90% of the time it's poor mechanical design and it's operator error, and so it's easy to look at some new technology that's being developed, it's being refined. I mean, look at the amount of innovation that we've had in cannabis specific cultivation. I mean there's been leaps and bounds, huge. But yeah, it's interesting when people want to place blame on the equipment that they're poorly using in their poorly designed space with just the wrong mechanical system Totally, and that's another coming from a company that was so equipment focused on just one piece of equipment.

:: 19:55

It's really made me broaden my horizons in terms of understanding as important as lighting is. There's so much more out there and I think every vendor in the space can take that lesson. The HVAC guys can need to focus a little bit more outside of HVAC. Understanding how your system fits in with the rest of the equipment is really what matters, because you can have the best light, you can have the best rack, but if the grower doesn't have the system or the understanding of how that affects the rest of their system to really utilize it, they're always going to blame the equipment and they're not going to get the results, which is, at the end of the day, what you know as equipment vendors, what we should always be looking at.

:: 20:31

Yeah, and at Urban Grow, you know, you know that you're buying stuff that's already. The integration is there, it's already. You know you're not selling something that's like, oh yeah, we're not exactly sure how this marries with this. It's like, no, no, this is like a best practice. These are industry leading companies that we, you know, we sell products for.

:: 20:48

Totally. And we do, you know, on that note, we do a ton of vendor vetting. That's another piece that I've really, you know, tried to stress over the over the couple years that I've been with the company is that there's a lot of noise out there from equipment vendors in the space and, especially as more equipment categories get kind of commoditized, there's tons of new players from overseas coming in with, you know, really low cost products and making sure they're doing what they say they're going to do. It helps customers understand what they're actually buying, what they should actually be paying. But it also, you know, if a lighting company is saying that their fixture is running at 600 watts but it's actually running at 640, 650, that has a big impact on the HVAC.

And so, you know, by doing this vendor vetting, we're not just saying, hey, here are the vendors you shouldn't go with. We're saying, look, you know, if you want to go with this vendor, that's totally fine, and understand what it's really doing in your system and how it impacts the rest. You know we try to be really equipment agnostic and not, you know, give recommendations, we just try to give data and that's something that you know. Again, a lot of the vendors are not super transparent about. So you know, doing that third party vendor vetting is really valuable for us.

:: 21:51

It's everything you know and I find that typically from my experience on projects, a lot of times the new owners, they just they don't speak the language, they don't speak MEP, they just it's a lot. If you're not coming from that background, it's almost like a foreign language and then, equipment selection and integration.

I think a really challenging thing for people as owners who aren't in the space yet or just getting there, is like looking at apples to apples. When you're looking at equipment, you know comps, I mean they just look at the price, Like, oh, this one's the cheapest and it's like no, no, no, that one is definitely not the cheapest. In the end, Totally, totally.

:: 22:27

No, it's, it's a tough one. I mean, I'm, you know, I consider myself pretty, pretty well versed in a lot of this equipment and sometimes I'll be looking at two, two lighting quotes, two benching quotes, and even as someone who's really familiar with what what I'm looking at, it can be hard to do an apples to apples comparison and really drill down into. You know what each vendor's proposing, you know what they're actually providing, that kind of thing. So, no, it's a it's, it's a really good point. And you know, another piece is, even if you have two vendors that are offering exactly the same thing, making sure that you're buying from a vendor who's going to be around to honor the warranty for the full lifespan of the product is is massive. You know, over the last couple of years we've seen a lot of vendors, especially smaller kind of fly by night vendors, go out of business and even if they had great products, if you're not able to get a warranty when it, when it fails or when there's an issue, that's a major, major downside.

:: 23:14

Yeah, it's, it's interesting. I don't think it's the correct way to say it, but it's like that one nectar choke or you know, like that one phone call to make is probably the edit, that part.

:: 23:24

No, we, we actually you know what I'm saying Like yeah.

:: 23:27

It's an issue and it's associated with your equipment, like I'm calling whomever it is at Urban Grow. Versus one of the challenges I had when I was in operations in the earlier days and I spent real money on HVAC. I remember we did like a big Stoltz install for for kind love, and when we were commissioning and doing all that stuff. Like you know, there's a lot of finger pointing between like MEP HVAC company and then sort of like HVAC installer and they would kind of like do this thing and I was like I don't have time for this, like can I make people fly in, everybody get in the room and like we're just going to sit in this room until we work this out.

:: 23:59

Yeah, no, though we actually use the term one throat to choke all the time, because it is, I think, a huge piece on the equipment selection side of our of our value add is that you know if a vendor goes out of business.

All of the vendors that we work with, you know we have kind of contingency plans to make sure that we can honor the warranty even if the even if the company doesn't, you know, adhere to it as well as we'd like or as well as the customer has expectations. So you know, we're making sure that. You know again, it's not only speed to market, but it's once your operational speed to continue staying in market and in production is huge. If your HVAC goes out and you have a room sitting there for two weeks, it doesn't matter if it's the installer's fault, it doesn't matter if it's the manufacturer's fault. You just need to get HVAC up and running and being able to just make one phone call and, you know, be able to for the grower, move on with your day to day and just be sure that it's getting addressed, is huge.

:: 24:45

Yeah, absolutely, just saves time.

:: 24:47

Yeah.

:: 24:50

So the retrofits that you're seeing from you're seeing a good amount, from HPS to LED.

:: 24:55

Yeah, a lot, from HPS to LED. And it kind of goes back to what you were saying on how quickly technologies advance in the industry. You know growths that were built four, five years ago. You know, in most industries four or five years isn't that long. But I think the way a high-tech facility is being designed today versus five years ago, just from the increase in technology increasing, you know how many new technologies have really been kind of validated and people have figured out how to really make them profitable and make them viable. It's totally different than how you'd built a grown 2016, 17, 18.

:: 25:24

Yeah, I'd be interested to see what it looks like five years from now. Yeah, hopefully they're still human employees involved, not just AI. Yeah, of those retrofits from HPS to LED, I'm going to ask this question because I think I know the answer, but I'm just curious Are you seeing anybody converting from LED back to HPS?

:: 25:45

No, you know HPS, even on new construction HPS is really rare these days and I think that's just because LEDs have gotten. You know it's like an iPhone. You know I have an iPhone 14 or whatever. You know my first iPhone. It seemed great when I had it, but if I went back to it it would be. You know night and day difference and I think people you know that technology curve has kind of happened with LEDs also to the point where they're cheap enough and the performance is high enough that it just doesn't really make sense to go HPS. You know plants don't really care where they're getting the photons from, whether it's an HPS, the sun LEDs as long as the spectrum's broad enough and you're getting the right amount of photons. That's almost always going to be much more important than the type of light that you're using. And so as long as the performance is there and the price is low enough which we've seen LED prices come down tremendously over the last couple of years it just makes it really hard to choose HPS.

:: 26:40

It's interesting to hear like oh, the prices have come down so much over the last few years while, like in other areas, the prices have skyrocketed so much. But of those retrofits to LED, how many of those are single-tier still versus multi-tier, if you had to kind of put a rough percentage on it?

:: 26:59

You know that's another really good question. I would say 50% plus are deciding to go multi-tier. When they make that switch, you know, it depends how capex-constraint they are.

A lot of these groups are switching to LEDs because they're just trying to stay viable and financially stable and in a lot of cases they're really good rebates for LEDs that allow them to do it pretty ineffectively or pretty inexpensively. And so you know those guys don't really have as much. You know they don't have as much cash to go multi-tier, double up the lights, that kind of thing. But for a lot of these guys, as they're doing the retrofit, they're looking at how to kind of optimize, how to improve. You know both yield and just efficiency.

And you know, back to what we were talking about on how certain systems affect others in the space when you make a change from HPS to LED, it has a pretty good balance of pretty big impact on HVAC and the exact impact really depends on how their system sized, what type of HVAC system they're using, that kind of thing. But in most cases your wattage is going to drop pretty significantly. Even if you increase intensity. You're still probably going to see a pretty big drop in wattage when you change over from HPS to LED. But the humidity stays the same and it might even go up. And so a lot of the time what we're seeing is groups going multi-tier, going with kind of the same intensity that they had, but just doing it on two levels with LED, and so they're able to, in a lot of cases, get away with the same or this it's a more.

:: 28:25

If you go from 1,000 watts to like 600 something watt, you play in that 1,200, 1,300 watts?

:: 28:32

Yeah, exactly, and so you can. Again, depending on how the HVAC is set up. Sometimes it's almost easier to make those HVAC changes when you just add two tiers and then if you just kind of change the wattage in there, you're able to kind of adhere the original wattage a little bit more, which makes the HVAC a little easier to manage. So we're seeing a lot of groups do it, and also if you're in a cultivation room it's such a hassle to take it down and retrofit that you might as well do it all at once, go multi-tier, add a ton more canopy and take it away from there. So 50% plus, and it just comes down to where we're seeing groups doing it and how much capital they have. I think more groups would be doing it if they had the capital.

:: 29:10

But I mean still 50% significant. Also the reason I asked this comment. With people that are kind of savvy in the lighting space or are working on lots of various projects around the country or globe, not seeing very many. I've got one that went from LED back to HBS.

:: 29:28

Really Interesting. Yeah, what was the reason in there?

:: 29:31

I believe it was. There were certain cultivars that they said were just. They liked the trade expression more, it was more desirable, whatever that meant to them. And I want to say there was something to do with living organic soil or something, it was just yeah. It was going to be a single tier. That's maybe what it was A single tier because they had living organic soil beds and they had certain cultivars that performed better under HBS in their eyes.

:: 29:57

Yeah, it's interesting HBS. A lot of these genetics were bred under HBS and so part of me wonders is the temperature under HBS that they're more used to? But yeah, I think a big part of it might be temperature. Is it like photon penetration? Most of the time a green light is really what causes canopy penetration and so if you're getting a good green content, which most of the kind of broad spectrum LEDs have, and you're getting the right intensity, you should get the same canopy penetration.

But one of the challenges when you switch over to LEDs and again, depending on how it impacts your system, your HVAC, knowing those changes and the changes you need to make from an operational standpoint is really valuable.

A lot of times groups will put in 30% more light, 20% reduction in wattage. Their HVAC changes totally how it's being run and then also their planes are getting way more light than they're used to. And so we really work with customers to make sure that when they switch to LED, and especially when they switch to higher intensity with any light source, that they're kind of ready for the changes that it's going to make, usually a little bit higher watering rate. But the big one is that you want to photoacclimate, you want to make sure that when you put your plants in from VED you start at lower intensity and kind of ramp it up slowly. Because if they were getting 700 pfd with their HPS when they first flipped into flower and then you start moving them from VED into 900, 1,000, 1,200 pfd, you can get some pretty big issues that you're not used to seeing under HPS just because of the lower light intensity.

:: 31:22

We talk a lot at Catalyst and PIP about compounding stress and compounding stress events and, for whatever reason, there's something around the time where people like to transplant or move. So you're physically moving the plant from one environment to another. They're not always conditioned ideally, like you might have a lot of humidity in your bedroom, totally, or an optimal amount of humidity in your bedroom, and then you go into a larger space where you don't have as much biomass and it's drier. They'll prune the bottom of their plants, they'll top their plants, they might do an IPM foliar spray. The lighting might be different, the nutrient changes and it's like there's a lot of change at one time to put on a plant.

And then I hear comments from growers like oh yeah, it bounces back, or and I'm like you just lost a week, it sets you back so much, you just lost a week Totally. And people don't realize in horticulture farming, cannabis seconds matter, days matter, weeks matter, they add up to seconds matter and labor days matter and production in turns Totally, weeks I mean weeks is big bucks when you're losing a week.

:: 32:28

It's huge. You know plants do bounce back. It's a weed that's always going to grow, but I think the impact of that stress long term definitely shows up in the final product. And, like you said, how long it takes to actually finish and having a plant in a flower room for an extra week. All the stuff you said about fewer cycles, a year, less revenue, but the risk of having that plant just sitting there. It could get diseases, anything could happen in that last week, and so keeping plants in alive as short as possible to the point where you need to get to harvest is huge. And again, I think that is one of the big benefits of LED is that you can acclimate and mitigate that transplant shock that I think a lot of HPS growers are just used to dealing with.

:: 33:08

I was just remembering, as you were talking, I was like that's right, mitch, is like my go-to quick LED Over the years. I'm like, hey, mitch, what do you think of this? Or what's this? Or tell me, break this down for me. And you're like you do your photon genius stuff. And what would you say is the diminishing returns on penetration into the canopy from LED and like a multi-tiered setting, like how much of a bush or hedge are you actually really aiming for? Because it's interesting to see people's strategies around how tall of a plant they grow, how much are they skirting? Like the big yielders in HPS, they're growing six, seven foot plus plants. You're not doing that in a multi-tier.

:: 33:47

And I think part of that change is it's what people are growing for. Back when you were getting 3,000, 4,000 a pound and your class B bud was getting 2,000 a pound, you might as well just keep that stuff on there. But as price is compressed it's become a lot harder not only to sell your product at the price you want, but actually just move your product at all. People are saying why get the lower buds or the class B, class C, when I could really just focus it on the top? I might not get as much total yield but it's easier to package because I'm packaging the same kind of consistent product. The stores are going to keep buying from me because they know it's the same product coming out.

:: 34:27

And A's and B pluses are however you want to grade that.

:: 34:29

And the spread in a lot of states, especially in mature markets, between A and BC has plummeted. A lot of guys aren't even able to move B and C and I've had guys that are throwing away trim just because it's not with all the processing effort and the labeling packaging. It's just not worth it. So I think that's part of what's driven that and I think that's really what determines how much you want to leave. How much space do you need for that cultivar to produce just top A or just kind of class A cultivar or class A flower, yeah? And so I think two feet, three feet is what I normally see.

And then I think also it comes down to airflow. If you're really worried about airflow under your plants, you're going to skirt a little bit more. But there's also the labor piece to look at, because any time I look at a balance sheet on a grow, labor's always higher than I expected. It's kind of mind blowing in some of these grows how much they're spending on just plant pruning. And it's a bummer because you're spending money to grow that biomass and then you're spending money to pay someone to walk in there and chop out that biomass and bag it up, go run it through destruction. So it's kind of a fine balance and it all comes down to the local market how much your buyers prioritize and pay premium for class A versus B versus C and how quick your labor can do stuff like skirting in a pretty big way.

:: 35:46

What you just said, just like I'll have him cut it and play it again so people have to hear it twice. But what you were describing of taking the time and energy to essentially over-vege a plant just to then have to remove leaves and skirt more of it, it's like if you know you're targeting a let's call it that 24 to 36 inch hedge. It doesn't need to be up here, it can be down here and allowing proper airflow below and above for your systems to be effective. I look at that as from a lean hat, like value adding touches versus devaluing touches, and that is a devaluing touch for the reasons that you highlighted the labor component.

:: 36:28

Huge Well and then, like I was saying, with the risk of just having a plant be alive, anything can happen to it. Your HVAC can shut off, someone can knock it over, pathogens are out there, pests, veg. I think that's even more crucial is limiting the amount of time in veg and so, like you said, rather than growing a plant four weeks in veg and then skirting the bottom half that you just spent all that time growing. I like seeing people do. Shorter veggies Mitigates risk. You get a lot more turns. You can have one square foot of veg fill up a lot more in the flower room. If you're doing a shorter veg cycle and if you're only trying to grow two or three feet, why have it be up here and grow a five foot plant when you could just start it out that way?

and move it in earlier.

:: 37:10

It's interesting. On the multi-tier stuff. It's like the veg timing of those cultivars due to stretch. It's so critical, like knowing what you have. Totally. We've been working on solutions and kind of tips and tricks that we're gonna put out in an upcoming webinar, but helping those first time growers in new facilities with new genetics, with new equipment, with new team, like the amount of newness, it's like the all everything all at once kind of entourage and even for a seasoned veteran cultivator that's been doing it for a while, it's a lot. It's really overwhelming. There's so much integration and just bugs to work out why you're supposed to be growing your healthiest, best crop. That is what you're launching your brand with simultaneous. You know what I mean. Totally. The pressure is really high on harvest. I mean it feels like every harvest, but specifically that first harvest in a new facility, it's huge.

:: 37:59

And we were talking about Canada some of the challenges they ran into. I would actually say that, on top of all the over licensing over square footage per minute that they allowed, one of the biggest issues that the Canadian market faced was the lack of bringing in new cultivars. The first couple licenses were able to bring in whatever they wanted, but they didn't really take advantage of that in a lot of cases.

:: 38:19

But I believe it didn't have to come from phytosanitary certificates, so it had to come out of either. What Spain, holland, right? Yes, you had.

:: 38:27

Dutch genetics early on. You had, and it had something to do. I'm probably gonna butcher it, but they had something to do with the federal aspect. They couldn't bring stuff in from the US because it wasn't federally registered or whatever, and so I think that that was a big part of it, and the first guys did have just kind of a carte blanche to bring in whatever they wanted. But after the first, I think, seven licenses they really cracked down on it and a lot of the American genetics that were really popular they couldn't make it up there and so we walked through some beautiful facilities that were actually really well set up and, I think, really well run, and then you saw some Shishkeberry. And you saw some Shishkeberry that was in.

:: 39:03

Was that the name of it?

:: 39:04

Yeah, they were like. I think we went on a tour of Canada once and saw 10 Groes running the same Shishkeberry and some of these cultivators were just beating their heads against a wall with a perfect system, a perfect SOP, and they just couldn't get the cultivars that they had, the three or four cultivars that they'd paid 10, 20, 30 grand for in a lot of cases.

:: 39:22

Yeah, they paid big money for it.

:: 39:23

Yeah, just to get a clone, that you know.

:: 39:25

That all their competition has.

:: 39:27

That all their competition has and it just wasn't gonna work super well in their system. And so you know, I think genetic selection, especially when you're looking at kind of more unique canopy layouts like multi-tier cultivar selection, is huge. You know, it's, at the end of the day, it's what the consumer tastes and it's what they're buying and it's what your day-to-day operations team is actually working with.

:: 39:50

And I think genetics. It's so interesting. So all these big players are like I'm the biggest right and it was like this bead on the chest and look at all this canopy and it's like, yeah, but it's boof, it's garbage, it's hey, Nothing, yeah, Like yeah nobody wants to smoke it.

:: 40:03

Yeah, and a lot of them didn't. You know a lot of. We still see it where a lot of new licensees are so focused on getting the perfect system, the perfect location, the perfect license and the perfect state and then they don't think about how to get the genetics in there that are gonna really fit well with that, and so that is another drum. That I've really been trying to beat is make sure that not only have you you have experience with the genetics, you're gonna run, but you know what they're gonna do. You know if they're gonna stretch two feet when they go into that multi-tier rack and flower or they're gonna stretch one foot. You know how much foliage are you gonna have, how much are you gonna de-foliate that kind of thing. And then also, are people gonna buy? Do people want that cultivar? That's a, you know. Sometimes you find the one that grows perfectly, it's disease resistant and nobody wants it.

:: 40:45

Totally. It's usually how it goes and usually the one that everybody wants is so finicky and you gotta really baby it. But what's interesting is so we went from that like being a bead on our chest, like we're, how big we are, to, oh shoot, quality matters, like once someone has herb that's even 20% better than your herb. It's hard to go back to and be like wow, I didn't realize what. If you're new to cannabis, you're like I didn't realize what I was smoking as garbage.

:: 41:08

Totally and I think we're gonna see that that kind of continue. You know I'm, you know I was just talking about how I really am pushing for the idea of shorter cycle times and veggie and flower. But if you find a cultivar that takes 10 weeks, 11 weeks, but it's really special, you know, I think you should have the flexibility and the open-mindedness to sell it if it's financially viable, you know, if your customers are willing to pay a huge premium, or if it grows really well in your garden, nobody else has it. You know, don't be afraid of chasing kind of more finicky cultivars if that's what the customer wants.

:: 41:39

Yeah, I definitely like the retail like dictated production versus grower. I've seen that knock it well historically. It's how you end up with hundreds of thousands of pounds of chocolate OG on the mass market or something. I mean you know, just like it checked a lot of boxes but consumer demand wasn't as high as you'd get to kind of force it into the market.

:: 41:59

Totally one of them. On the flip side of that, sometimes you have marketing teams that are looking at what's selling today and they're saying, hey, we need 200 pounds of this. And then 12 months later, by the time it's all ready to sell, nobody wants it anymore. And the marketing team is saying, hey, you know why do we have this? We asked for it 12 months ago. We need cooking, you know some other type now. So it's a. You know there's a moving target there and trying to kind of predict trends while also working with what goes well in your garden.

:: 42:24

You got to get those cuts early, as soon as you're like I think that's going to be a hypey one, you know it's like oh it's got a Z in it and it's like a household random object now, and I mean, the naming of cultivars has gotten so challenging. I feel bad for breeders these days. Totally Every name I've ever thought of has taken. It's getting really creative out there, though. You know, now I see stuff and I'm like that's pretty funny.

:: 42:43

Yeah, no, there are definitely some good names. Well, and you know people, I think, also sometimes when they're when they realize something isn't selling they realize their shish kebari isn't selling they just rename it. You know, and that's another thing to kind of watch out for is really knowing what you're going to get. And it goes back to you know, the way we started this topic was you mentioned. You know, when you're starting up a facility you have to kind of decide what you're putting in there.

The most successful groups that I've seen kind of long-term, that have been able to build a really good brand, they go through in a lot of cases the seed selection phase, which is an absolute nightmare and I wouldn't necessarily recommend it. But if you really are looking at you know, long-term brand viability, long-term differentiation, maybe it's worth popping. You know, 10,000 seeds, realizing that you're not going to have very successful harvest for the first six months a year but then after that you're going to have some really special differentiated stuff that you don't need to be. You know, chasing what's hot, chasing what the guys down the street are doing, you have something that's yours and that you can kind of brand on your own.

:: 43:39

Yeah, relationships in the space are important. Huge I like to bring in. I call them like proven cultivars yeah, I used to call them proven winners. But then got a cease and desist letter from proven winners the horticultural company. I was like, okay, that's not, you're a huge company. I'm sorry, but proven cultivars that yeah, they perform well in multi-tier.

We already know what to expect from them. We already have rich imagery and COAs and so the sales and marketing team can actually plan. You know, when you're popping from seed or you just got a bunch of clones from the homey and you think you've got something, the marketing team has no idea what they're getting and so you're trying to, you know, be excited about this first time to market, but you're literally taking pictures of the winners like as they're ripening on the bud versus already having that stuff already. You know, pushing out that, that messaging. The interesting thing is, you know, as I said, we saw those growers go so big in Canada and in the States as well. The last few years there's been a lot more dialogue around quality and around genetics and I always thought it was so crazy because I'm like, whether it was a smaller project maybe five million or 10 million, or 20, or 30, 50, you know we were on 650 million dollar projects together and they spent like no money on genetics.

:: 44:54

None, and they balked at spending 10, 20 grand on it.

:: 44:56

I know, and then it was like, hey, that's really expensive. And it's like, are you insane? You know, like you have like the Taj Mahal here and you are growing disease, undesirable, weak genetics.

:: 45:09

You know that's. I guess another benefit of doing it from seed to start out is just, even if you have something that you know exactly how it grows, you know what it is, if you don't know exactly where it's coming from, it can cause a lot of issues in your facility If it has. You know. Viruses are becoming a huge topic of conversation, really hard to test for, especially down in the States. If you don't know what's coming into your facility, even if it's the perfect cultivar, or you don't know where it's coming from or what it's coming in with, you can have major issues that impact your whole grow for ever.

:: 45:38

I call it the Trojan Horse. Yeah, I've done it several times, like when I got to California for the first time and had to grow it and I was just like I remember putting an email out to the team and they were like if anyone's got any like really good, you know cuts that you think will work well at the farm and you want to work out something like you know, nobody said anything but because it was a harborside farm so they had the big retail on all the clones and it crazy clone vendors, like in terms of diversity and volume. I just took it all and I knew that.

I was bringing it all in, and I did bring it all in and we worked through those challenges and the sad thing is is you bring in a hundred different things and, like you, go fast forward a couple of years and you're like man, I'm growing like four, six of the original hundred.

:: 46:21

Well, you know and it's interesting, like where it's all gonna go in terms of cultivar selection, like grapes for wine, there were only like 30 cultivars out there, which seems like a lot compared to you know a lot of other crops, but you know, if there were only 30 cannabis cultivars right now, it would make things a lot easier.

You know they're, like you said, hundreds and you end up growing the same handful based on what you're looking for, how your growth's set up, what pathogens you're dealing with. I know a lot of greenhouse growers that have about three or four, but then they kind of cycle them based on year or time of year. So you know powdery mildew will get really bad with shishkeberry in winter not to pick on shishkeberry. But you know they'll have some issues in certain seasons that you know are totally not an issue in others and they'll just kind of, you know, arrange their cultivar selection and what they're growing based on seasonality. But everyone is kind of dwindling down to a handful because they realize what works and what doesn't. Even if it does grow a really good product that people want, if it doesn't work in your grow, it's just not gonna work.

:: 47:18

Yeah, totally yeah, it's like you know my quotes. Let the genetics see the heavy lifting for you.

:: 47:24

I like that one.

:: 47:24

I just I've watched people just struggle and it's like this isn't the one you know, like they'll try and change everything around the plant and and. And that ties me back to another comment that I have is when you're planning genetics for your facility, you need to think about this actually at like, in my opinion, at the A and E, at the like in the very first mile of design, because you kind of have a choice to make. You're like am I going to design a facility that has the capabilities that I think are considered a best practice, like, optimal, like from an environmental standpoint, I'm going to be able to hold this optimal. How much, how much variability will I actually have? Is basically what you choose to restrict Totally, because you're going to say, hey, we're making these sausages, I'm going to put all these ingredients into the sausage, and these sausages are going to be consistent.

And if the ingredients don't work for the sausage, well, those ingredients don't get to be in the sausage. And so you're basically building machine and it's like, if the plants thrive in here, they'll be selected through a, you know, almost natural selection process. Yeah, if they don't, they're going to be cold. The other path is usually typical with a stronger budget, a more advanced cultivator and sometimes a lot of times like a science like science based team, but they'll choose to have more variability within their cultivation facility for their genetics Meaning. If I need to adopt my environment to something completely outside of typical parameters, I have the capabilities of doing that, but that comes with a premium cost, totally.

:: 48:48

You know Well, and you know it raises a good point about future proofing. Right, we talked about how challenging it is to predict. You know I feel like I've been in this industry for a while, but if you go back three years and ask me what the industry looks like today, you know three years from from when you asked I would have guessed totally wrong. You know, and you know I'm still immersed in the industry. But I promise you that if I was to guess and paint a picture of what the industry is going to look like in three more years, I'm also probably totally wrong, and so I was like you just discredited my.

:: 49:16

my next question, my last question, is a prediction for the future.

:: 49:20

Well, it's tough. You know this industry changes quick and I think one of the challenges as a new operator that's building a facility is deciding how much do you really want to future proof your facility versus building it really purpose built for what you're doing today? And I think you know there's a balance and a lot of it depends on the market how you see more licenses rolling out, how you see patient count or you know whether it goes rec. You know new, new business popping up. It becomes really challenging because anytime you add future proofing you're either sacrificing for today, today's production, or you're paying a premium. You know, and so we try to help customers.

r that works really well with: 1200

You know, they can't run it in their whole facility because it's not worth the cost just to have that option open. Yeah, that's interesting.

:: 50:42

So for people that want to learn more about Urban Grow, where can they find you all over all the Internet of Things and socials of sorts. Yeah, yeah, so you know Urban.

:: 50:52

Grow. You know, our website has a bunch of info on all our different services. Urbangrowcom yeah, urbangrowcom Easy enough.

:: 51:00

Yeah, easy enough to follow. Is it all spelled normal G-R-O? No, no W. There we go.

:: 51:04

But, yeah, pretty similar. So yeah, you know. And then a lot of people are familiar with our kind of you know the divisions that are all internal now but that we acquired over the last couple years. So Emerald Construction, dvo HVAC Group out of Houston that we're really excited about, that we acquired pretty recently, and then 2WR MJ12 is our architecture team. That was one of the first acquisitions we made. So, yeah, all on the Urban Grow site. But you know, folks may be familiar with those kind of brand names also.

:: 51:35

Yeah, urban Grow turnkey solutions. Mitch, I could talk to you forever. I'm grateful to have been a friend and watch you grow personally over the years, and so I've learned a lot from you and had a lot of fun on the road learning this crazy industry and navigating and watching you know kind of like being a part of cannabis history to some extent. So it's been exciting and it's been a pleasure. Oh, likewise, man, I know. I appreciate that. I know this isn't the last conversation, so I look forward to the next one.

:: 52:01

Likewise, I appreciate all that you've done. You've been a tremendous help. I've learned more from you than maybe even Jerry, so it might last year of school. So no, I really really appreciate it and it's been a blast being on.

:: 52:12

Alright, brother, thanks so much. Yeah, I guess he's turning it on the way. That's a wrap.