As part of my series about the “Five Things You Need To Be A Highly Effective Leader During Turbulent Times,” I had the pleasure of interviewing Alex Rowland.
Alex Rowland is the co-founder and CEO of NewTropic, a premier cannabis manufacturer and supply chain company based out of Santa Rosa, CA. He also serves as the co-founder of Ensemble Brands, an accelerator for cannabinoid-infused product companies, and as co-founder of ANP Holdings, a financial services company focused on the cannabis and hemp markets.
Prior to entering the cannabis and hemp markets, Alex founded several advertising technology companies, including Emerge Digital Group, which in 2013 was ranked both the 8th fastest growing business in the U.S. and the fastest growing company in California.
Before his career in media, Alex founded USPowerSolutions, an enterprise SaaS company focused on the deregulated energy market, which ultimately sold to Green Mountain Energy in 2002. He currently serves on several advisory boards across a variety of industries and works to help upcoming entrepreneurs realize their vision in complex markets.
Alex and his wife live in Northern California with their three children.
Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
I started my first software/consulting company in 1995 to build websites for small enterprises. By 1996, I had moved into building intranets to help companies manage their internal information archives and workflow. Because I had retained ownership of the code and merely licensed it to clients, I was able to use it to build a communications platform for automated retail energy billing in 1998. I later learned that our system processed the very first deregulated energy transaction in the country. We built a business around it.
Selling that business left me restless, so I moved from Massachusetts to California in 2002. There I met with failure around consumer-focused web platforms, and spent six somewhat uncertain years. In 2008, I launched a software platform for video syndication that I merged with another company to create Emerge Digital Group (EDG) and refound my footing. EDG ultimately became the eighth fastest growing company in Inc. Magazine’s 2013 top 5000 rank. I remained in the media business until 2015, when the time felt right to move into a new business.
I’ve always had an interest in cannabis both personally and as a civil rights issue and wanted to find a way to incorporate it into my career. When Colorado legalized recreational consumption and California embraced adult-use in 2016 and passed subsequent legislation in 2017 to codify that, I realized that I could make the dream possible.
I spent a year driving up and down California talking to regulators and dispensaries and came to understand that more products were going to be processed for the consumer than just flower and pre-rolls. As I saw regulations ramping up, I did a lot of research and saw the opportunity in manufacturing and processing. This is a pain point in the cannabis industry because a manufacturing facility is extremely time-consuming and expensive to establish. But once you’re up, it allows you to sign long-term contracts and to plot out a solid revenue stream.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
With the first business I ever started, I was 23 and my perception of how companies were valued and how much ideas were worth was not in line with reality. I was going out to pitch early investors and telling them that my idea was worth $10 million but all I actually had was myself and a 10-point slide show. Looking back on that now, I’m afraid that I would simply laugh at someone like me in that situation. It was a classic example of overestimating your worth and underestimating the trials and tribulations of execution.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
Robert Butler has been one of our primary investors here at NewTropic. He comes from a construction and engineering background and his group has invested $20 million in the business. Moreover, he’s helped to fill in a lot of the gaps in my knowledge around building construction and how to keep it on budget, which has been a big part of NewTropic’s growth. He’s been a great sounding board on how to look at this business as a whole and how to best build a sustainable and profitable opportunity. He’s an older gentleman and talented entrepreneur with a wealth of business experience. Having his insights on how to control costs and ensure timely delivery has been invaluable.
Extensive research suggests that “purpose driven businesses” are more successful in many areas. When your company started, what was its vision, what was its purpose?
When we first started, the purpose was to build a manufacturing facility that would allow cannabis brands to have the same type of execution that a large CPG or pharmaceutical brand would offer. Our goal is to be able to execute on that level. Over time, the goal has evolved to include the normalization of cannabis consumption. Cannabis has a beneficial impact for people who use it, and I would like to normalize it just as you would any legal CPG or pharmaceutical product.
Thank you for all that. Let’s now turn to the main focus of our discussion. Can you share with our readers a story from your own experience about how you lead your team during uncertain or difficult times?
When you get a company off the ground, it’s always turbulent. This is emblematic of every company I’ve ever started: You’re trying to realize a vision with an uncertain budget and uncertain expenditures. You have to get your people comfortable sitting in the boat with you in choppy waters. Part of that requires just remaining calm and looking at things dispassionately and helping people understand that it’s just part of the journey and will ultimately be rewarding when you emerge from the storm.
We’ve had to scale the business this year with NewTropic. We finally went from theory to practice and the first half of this year has been all about turning our visions into practical reality. We’ve hired over 150 people this year and have already lost 50 to 60 of them in the process for a variety of reasons, including the pandemic. Many people just don’t feel comfortable working right now, even with the best social distancing standards in place. We completed work on our first facility, acquired a second facility, and entered into contract for two more facilities. The last six months with NewTropic are exhibit A in how to achieve a satisfactory end with a million moving parts. My hope is that the team is all united, and I hail them for how they’ve dealt with massive uncertainty while moving forward.
Did you ever consider giving up? Where did you get the motivation to continue through your challenges? What sustains your drive?
I probably considered giving up on NewTropic in early 2018 simply because I didn’t understand how we could capitalize the project sufficiently to get it off the ground. I could see the funding environment was changing and we were raising a lot of money on what was effectively a concept. There was some consideration that maybe we wouldn’t be able to get across the finish line, but I guess I’m not very good at putting a fork in it, so we got it done.
What would you say is the most critical role of a leader during challenging times?
Remaining calm. What most people look to in the leadership of any company is not just a feeling of purpose, but as you’re going through turbulence, it’s the sense of calm purpose even with bombs dropping all around you, to continue to be unfazed and remain singularly focused on achieving your goal and helping direct people in their efforts to make that goal a reality. When leaders are mercurial or panicked or emotionally volatile people, it becomes very difficult for employees to see it as a business that’s going to succeed or even a place that they want to work.
When the future seems so uncertain, what is the best way to boost morale? What can a leader do to inspire, motivate and engage their team?
Communicate with them. Constant reaffirmation that everything’s going to be OK and that we’re going to execute on the goal. You’ve got to be somewhat irrational to do what we do. I’ve got a lot of competing thoughts in my head. It’s almost an irrational belief in our ability to do something. There’s no direct evidence that we’re going to succeed. It’s constantly affirming other people’s irrational belief in you.
What is the best way to communicate difficult news to one’s team and customers?
Relay the bad info quickly, take ownership, and work in partnership to resolve it. Never bury that information.
How can a leader make plans when the future is so unpredictable?
A leader’s job is to make plans in chaotic environments. That’s what makes them leaders. I liken it to moving from Point A to Point B when Point B is a mountaintop in the far distance. Your job is to envision how to get there when between you are valleys and peaks and rivers and crevasses, but you don’t see that terrain, you just see the mountain and keep people’s heads looking up to that objective. Sometimes you look up and it seems that the terrain can’t be overcome but if you can keep people focused on that objective, they will figure out how to get to those goals.
Is there a “number one principle” that can help guide a company through the ups and downs of turbulent times?
Fealty to a core ethos. For some people, it’s spiritual or moral or ethical. You have to have some core that’s driving you that feels like a force for good and keeping that front and center and not violating that principle when trying to achieve your objectives, especially when the terrain gets very difficult, is key. You want to be proud of yourself when you come out the other side.
Can you share 3 or 4 of the most common mistakes you have seen other businesses make during difficult times? What should one keep in mind to avoid that?
Actually, I can share five!
- Underestimating the cost and complexity of doing something. Most people, especially those who are inexperienced at starting companies, have a radically simplified view of what it takes to get a business off the ground.
- Giving up too fast. It’s a very fine line; I’ve often encountered entrepreneurs trying to start a business that’s just doomed to failure. Most of what my success has been is just dogged persistence. I’m not easily dissuaded.
- Trying to do everything alone. One of the primary goals of any founder is to rally people to their cause. Multiple people with multiple skill sets make everything easier. The definition of leadership is rallying people to your cause.
- Minimize greed. So often I hear founders who are petrified to give up any equity to anyone else. Their point of view is: This is mine, this is my baby — and that’s a great way to fail.
- Overestimating the value of an idea. Entrepreneurs can be super protective of their ideas. Their attitude is like, ‘If I tell you, it’s like I’ve described cold fusion to you.’ Actually, all of the value of the business is in the execution of that idea. The actual idea is only 5% of the business; the other 95% is your effort. You should be able to tell anyone and everyone about your great idea without worrying about it being stolen.
Generating new business, increasing your profits, or at least maintaining your financial stability can be challenging during good times, even more so during turbulent times. Can you share some of the strategies you use to keep forging ahead and not lose growth traction during a difficult economy?
We are entirely committed to providing the highest quality manufacturing and supply chain solutions possible while keeping our costs as low as possible — and we iterate on that constantly. Frankly, I’m not satisfied for long with any solutions that are stopgap or half-measures.
Something that NewTropic does that’s unique in our industry is that we partner closely with our clients, and we invest in their success. We use a revenue-share model, which means our success is tied directly to our brand partners’ success. We also don’t produce our own brands that would compete with our clients, so we’re 100% focused on our clients’ brands. That sounds like a simple thing but it’s actually very rare in cannabis manufacturing.
Beyond that, we also can provide our clients with financing for their raw materials and inventory — which is a huge benefit since credit is extremely difficult to come by in cannabis given that it remains federally illegal. And then sometimes we’ll even hire in a client’s own workforce. Since they already know how to produce the client’s SKUs, why not have them in-house? We can source biomass if needed, as well as any other materials or components in the supply chain, as well as produce fully-compliant packaging and labeling.
Basically, our services cover the entire cannabis supply chain other than growing and retailing, and a client can even utilize our cannabis licenses so they only need focus on sales and marketing, while we handle everything else.
Here is the primary question of our discussion. Based on your experience and success, what are the five most important things a business leader should do to lead effectively during uncertain and turbulent times? Please share a story or an example for each.
1. Stay present. Being the boss doesn’t mean taking time off and letting the staff handle things. Particularly during an uncertain time, being onsite and visible to employees, leading by example, and maintaining the pace is crucial.
Every day in a company that’s getting off the ground is a mini crisis. There are always long-term crises looming in the background along with the short-term crisis happening right in front of you, like an unhappy employee, for example. That describes literally every day of our existence.
2. Never forget that cash management is one of your most important skill sets. Being able to plan for down times, to look ahead and track the curve, to be sensible and prudent with spending — all of these basic financial lessons pay enormous dividends when times are tough.
A time I did that poorly was with one of my first businesses back in my early 20s. It was 1999–2002, and there was this sensation back then that everything was possible and money was plentiful and always would be. We built out infrastructure expecting that it would be trivial to raise additional funds and I didn’t put those funds together. We ultimately sold that business but we could have done better if we hadn’t run out of cash. The only thing that ultimately kills a business is when it runs out of money. Businesses can be unprofitable for decades as long as they can continue to capitalize the business with investor money.
3. Making money is more important than raising equity. Don’t get me wrong, I rely on my investors and am honored that they have given me their trust (and their funds), but none of that matters if I don’t make money for them and for the business. It can be very challenging for an entrepreneur to balance the need to raise money with the need to earn money, because both are important. But both are incredibly time-consuming. The more that you can bootstrap your own business, using money you generate to build equity, the more independent you’ll be in your efforts to seek equanimity.
With the beginning of Emerge Digital, we simply matched ads with people and made money in the middle. All of that matching of buyers and sellers became automated but I was focused on getting to revenue- and cash flow-positive as quickly as possible. That’s true with all of my businesses. The counter to that is that I couldn’t really go out with NewTropic and build a manufacturing plant without investor cash. There’s no way I could do it by brokering cannabis unless I had 10 years to do it, so there are limits to that approach, but when I hear about businesses that are instantly obsessed with raising $2 million in investor capital, I always wonder if there isn’t something they could be doing to produce revenue,
4. It’s all about the team. New entrepreneurs often feel that every detail must be attended to personally, but in truth, the most important thing a CEO can do to weather hardship is to have the right team. The right players, coupled with an internal culture that supports and encourages, are the key elements for success.
Hiring Todd Christian as SVP of Operations when we started was a smart thing to do. My co-founder Nelson Becerra and I had no real true manufacturing or cannabis expertise before we launched NewTropic, so we brought people onboard who could handle those job functions and do them successfully. This year of filling out the C-suite at NewTropic was a lesson in putting together the right team to be successful. I think we’ve made some pretty good decisions there.
5. Stay focused. It can be difficult, particularly during a time like our current experience with the COVID-19 pandemic, to remain laser-focused on your business, but it’s paramount.
It would have been very easy for us to say to our investors that the Covid-19 made it too difficult for us to operate, no one feels safe and we have to put this on pause. But to me, being in business is about overcoming adversity. Short of the building burning down, it’s our job to generate profits as quickly as possible. Obviously we do everything to ensure our employees feel safe and comfortable, but it has to be in concert with the idea that this business has to make money. How can we make this successful regardless of Covid or the current economic environment? To get through that, we have to be better at hiring and training people faster. We just have to build it into our model.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
All the greatest decisions I’ve ever made have felt obvious at the time I made them. So, I guess my life lesson quote is: If the decision isn’t obvious, just wait.
The last time I rushed a decision was back in my advertising days and we decided to shut down a trading platform because of concerns about security. We were getting hacked. We made a panicked decision to shut down a trading desk and that turned out to be the catastrophically wrong decision and probably ultimately led to the company’s demise. I didn’t feel it was right but everyone was screaming for an answer. Leadership needs to be decisive and make decisions with little information, but it’s always your prerogative to suggest that the team slow down.
How can our readers further follow your work?
Check out our website, Newtropic.com. I often update it with new blogs that examine the different aspects of our business. Please also follow us on LinkedIn: https://www.linkedin.com/company/newtropic/