In just five years, Verde has grown from nothing more than a business plan sketched out at the founders’ kitchen table to a fully vertical, multi-state cannabis operation ready to challenge the biggest names in the game and to become the premier business consolidator of single-asset operators in the cannabis sector that will take not only Verde’s business to the next level, but also help other entrepreneurs take their businesses to the next level as well.
Today, Verde owns two retail stores, an extraction facility and a 16-acre cultivation property in Oregon, as well as two medical dispensaries, an extraction facility and an indoor grow in Oklahoma. The company is also preparing to open shop in Colorado and is in preliminary discussions to acquire a cultivation facility in Maine.
“Our core objective has always been to perfect our model and deploy it in new states as they come online,” says CEO William D. Merritt, who founded the company with his wife, Amy. “We’ve already figured out the model and have already learned what everyone in the new state is trying to learn.”
The Verde team has built its success on not only being early movers, focusing on high quality standards and impeccable compliance, but also drawing on years of experience from the Merritts’ previous lives as lawyers and the owners of a vertically integrated real estate operation, while capitalizing on smart, strategic partnerships to maximize their profit and compete against the biggest companies in the space.
And now with a scalable and proven model, Verde is ready to begin a new phase of business — to acquire and roll-up small, successful cannabis businesses. In order to do this, the Merritts are preparing to take their company public on the Canadian Stock Exchange and use their knowledge, along with the collective experience of the team they have assembled, including Tim Townhill, Verde’s chief financial officer, to allow them to use equity in Verde as a currency to acquire the assets and access capital markets to facilitate accelerated growth ahead of what they believe is the impending federal legalization of cannabis in the United States.
“We have created great products and we have created a great business model, and now we are bringing other people in the industry together with us, which in the end will make us all stronger,” Merritt says.
‘Go do it yourself’
Verde was formed in 2016 at the Merritts’ kitchen table in Fort Worth, Texas, less than two years after William Merritt got his first glimpse of the industry during a vacation in newly legal Colorado.
Although he was 39 years old, Merritt had never tried marijuana before, but since he wasn’t going to be breaking any laws where he was, he went to the nearest dispensary to see what exactly he’d been missing out on with his friends for all those years.
And while he says the pre-roll he purchased finally gave him the firsthand understanding of what his friends had been telling him since he was a teenager, what he saw at the shop left an even bigger impression.
“There were just lines of people with fistfuls of cash and, you know, chaos everywhere!” he says. “And I guess as an entrepreneur or as a business owner, I thought to myself, I want some of this chaos!”
Convinced the cannabis industry would “change the world,” Merritt called his broker and told him, “‘Find me the company that will become the Starbucks of cannabis. I want to get in on the ground floor.’”
Merritt was hoping to invest in a company that not only had an iconic brand, but like the coffee giant, also had a vertically integrated model. It was a model he used to grow his real estate business, allowing him to offer a better product at lower prices to the consumer while maintaining higher margins, because he had cut the middlemen out.
But after six weeks of looking, his broker determined that at that time a company like what he wanted simply did not exist in the cannabis landscape.
“He kind of chuckled and said, ‘Well, you’re a securities lawyer, you’re a businessman, go do it yourself: form it, build it, take it public,’” Merritt remembers. “Fast forward to 2021 and here we are.”
In addition to having fully operational businesses in Oregon and Oklahoma, Verde has entered into a financial services agreement with a leading Canadian firm to assist the company’s efforts to go public and be listed on the Canadian Stock Exchange. Going public will open Verde to additional capital for further expansion, giving it the ability to act essentially as a venture capital firm for small operators looking to grow but lacking the financing.
“What we are now doing is finding these smaller, successful, single-asset companies and offering them the opportunity to team up with us,” Merritt says.
It seems that Verde’s “secret weapon” that gives it an advantage over its competition is the Merritts’ prior professional experience, particularly the couple’s legal background, for compliance issues, and the real estate knowledge to find the right assets at the right time and to employ a vertical approach to their venture. It is a formula that has proven to be successful in two states so far.
“We’re able to come in with discipline and knowledge that our competitors don’t have, tapping into 20 years of real estate development under a vertical model, and building those businesses and knowing where to look for distressed assets and how to acquire them,” Merritt says. “I believe that has allowed us a tremendous advantage.”
Verde made its first investment in a distressed asset when Merritt found a shuttered medical dispensary in Eugene, Oregon, for sale on Craigslist. The owner had decided to focus on his grow operation, leaving, essentially, a turnkey operation that just needed to be restocked, all at an “extremely attractive price.”
Merritt scooped it up and opened the doors of Verde’s first retail store on April 20, 2016. He used Oregon’s early sales period, which allowed medical dispensaries to begin adult-use sales prior to the licensing of recreational shops, to get a head start on his competition. Next, he located an old check-cashing business near the center of the city, secured the space and built a new flagship Verde store. The success of the two retail stores led to the acquisition of cultivation and processing licenses, further stabilizing the Oregon business.
With clean, attractive stores that intentionally eschew the potentially intimidating feel of modern, high-tech “Apple store” style dispensaries, Verde’s success is built on providing an environment and selection that meets the needs of every consumer.
“That’s something that we’ve tried very consciously to do as we built the Verde brand,” Merritt says. “We want anybody to be able to come into our store and feel comfortable.”
In August 2018, Merritt turned his attention to Oklahoma, where he connected with an attorney who helped lead the push to legalize medical marijuana. Within a few days, he secured the real estate for four dispensaries, a 10,000-square-foot indoor grow and a processing facility.
Verde submitted its license application as early as possible and received some of the first licenses issued in the state.
The company applied everything it had learned in Oregon, bringing the more mature state’s standards to the Oklahoma business, even though the new state had far fewer regulatory requirements.
“If there’s no rule in Oklahoma, then I do what Oregon requires, and that really works well,” says Amy B. Merritt, who focuses on compliance and has created internal manuals with step-by-step processes for opening new Verde stores and operating them all in a consistent manner. “We’ve yet to find ourselves not meeting a standard that gets passed at a later date.”
The company has even been contacted by state regulators for use in their training programs as an example of what good, compliant operations look like.
“We found that sometimes we are a source of information for the regulators on best practices and all those things,” William Merritt says. “It’s afforded us a really good relationship with the regulators. They know us as a solid, clean operator.”
The next phase in Verde’s growth, according to Merritt, is to complete his goal of going public, and then use the company’s business roll-up plan and access to capital markets to help fund other small cannabis businesses, offering them cash and Verde stock for a piece of the smaller business with the promise of helping them find capital.
Merritt says there are a lot of smaller cannabis companies that have reached their limit in terms of raising capital from friends and family.
“They’re just tapped out, there’s no banks that will lend to them,” he says. “They’ve hit a wall and they just can’t get through it. Well, I’ve spent the last three years working on getting through that wall and accessing private equity and public markets.”
Verde’s plan is to buy the company’s assets, but not get in the way of an operator who is already successful.
“I’m not trying to come in and tell you how to run your business. You don’t need my input on your operational business plan because clearly it’s working and you are successful or I wouldn’t be talking to you,” Merritt says. “They continue to run their operation as they always have, and they place trust in us to go to the capital markets to get them the capital they need to expand their footprint at the grow or to buy three more dispensaries or whatever their growth objective is.”
The idea is to not only compete with the larger MSOs by building up essentially a coalition of smaller businesses, but potentially be an attractive group of geographically diverse assets for a larger company to eventually acquire.
“We’re linking ourselves together and not only are we getting the capital benefits, not only are we going to get the accretive value benefits, but we also get the knowledge and the shared resources of a group of seasoned cannabis operators,” he says. “They’re too little for the big guys to care anything about, but if you take a whole bunch of little things and put them together, you end up with a big thing.”
There is already a letter of intent with the first business involved and a “pipeline” of others to come.
It’s the next step in creating the vertically integrated, nationally branded business that Merritt initially hoped to invest in before forming it himself.
“I don’t want to reinvent Starbucks’ wheel,” Merritt says, “I just want to take what worked for them in the coffee industry and deploy it in the cannabis industry.”
To learn more about Verde, visit the company’s website, verde420.com.