It started with one simple slogan: “Cannabis is for everyone.”
In less than two years, Diem has built an impressive reputation for growing, processing, and selling cannabis in the competitive Oregon market. Their steady growth has helped the company land multiple investments.
Diem — a play off the phrase carpe diem or ”seize the day”— first set up a brick-and-mortar location in Salem, followed by home delivery services in both Salem and Portland. This landed the company $200,000 from a loyal customer turned angel investor who loved the company’s concept and store experience.
Only three months later, Diem secured another $400,000 investment from a friend also impressed by the company’s progress and growth prospects.
In the spring of 2018, Diem was recognized by Leafly — the world’s largest cannabis website — who ranked the company’s retail location as one of the top dispensaries in the state, describing it as “downright beautiful” and “Instagram‐worthy.”
And Diem isn’t stopping there. The company is now expanding on the heels of a $12.5 million royalty financing deal, and are forecasting that annual revenues will hit $10 million in 2019, growing to $100 million by 2021.
Two men on a mission
“We empower people to live their best lives,” says Chris Mitchem, Diem’s chief executive officer, who founded the company in early 2017 with chief financial officer (and former high school classmate) Frank Kanekoa. “We founded Diem upon a sincere belief in the beneficial properties of cannabis, both to individuals and to communities.”
Mitchem and Kanekoa’s expansion plan is taking the company first into the Massachusetts market, which in late 2016 was the first east coast state to legalize recreational marijuana. Retail sales in that state began in July 2018 and experts forecast the market to surpass $1 billion by 2021.
“We are also considering other east coast opportunities, from Florida to New Jersey, with a lot of attention being paid to what’s going to happen in New York,” says Kanekoa. “Our vision is to help shape and influence cannabis culture moving forward in the U.S., to be at the forefront of this movement that’s changing people’s lives.”
A nail-biting beginning
As many entrepreneurs can attest, Diem’s path to this point hasn’t always been easy, with a few white-knuckle moments along the way.
One of the biggest challenges, Mitchem says, was finding commercial space, with landlords hesitant to deal with a cannabis company.
“Some are open to it, but some think we are the devil,” he says. Diem also ran into landlords who tried to charge double the market rate, believing the business owners must be millionaires if they’re in the marijuana industry.
After a three month search, Mitchem and Kanekoa found a spot not far from downtown Salem, with the aim of opening on the rather auspicious date of 4/20. But only two days before the store was set to open, Mitchem went to city hall to get their last permit, what he thought was the final hurdle.
One problem: A city official said they needed a more detailed parking analysis, and that Diem would have to hire an architect to draw up the plans. At this point, they couldn’t help but panic. “Not only were we not going to open for 4/20, but there was a chance we may not be able to open at this location at all,” Mitchem says.
After spending $2,000 on new architectural design and visiting city hall almost daily to check on the status, the permit finally came through ... two weeks after 4/20.
The good news, however, was they could open the dispensary. Mitchem and Kanekoa could breathe again. “It was the most stressful period of my life, but we made it,” says Mitchem.
While there have been a few other hiccups since then — including a contractor who went bankrupt in the middle of working on their production facility — these experiences turned out to be important lessons for the entrepreneurs, on whom to work with and how to navigate the regulatory process.
This has come in handy as they move into Massachusetts. “We learned to always do amazing research and due diligence in everything we do,” explains Mitchem.
Royalty financing energizes future growth
Unsurprisingly, Diem’s success began to attract the attention of a number of venture capitalists.
After extensive conversations and due diligence, they accepted a $12.5 million investment from Toronto-based Tidal Royal Corp., a leading provider of royalty financing to licensed U.S. cannabis operators.
The funding will be rolled out over three years to help Diem develop and operate a large‐scale cultivation and processing facility, and up to four dispensaries in Massachusetts —one of which might find its home in a 100-year-old building, once headquarters of Hampden Savings Bank.
When the financing was announced on Sept. 4, Tidal Royalty CEO and chairman Paul Rosen said he expects Diem “will be a major player in the U.S. cannabis industry.”
Kanekoa said the royalty financing model was a good fit, because it meant a massive injection of capital for expansion, without having to give away equity in the company.
“At the end of the day, we will be able to go and do something that’s exactly what we’ve done in Oregon on a very big scale,” says Kanekoa. “We didn’t want to sell a portion of the company, so it was ideal.”
For Kanekoa and Mitchem, the financing also validates their decision to take the plunge into the world of cannabis and entrepreneurship.
“There’s a lot of personal pride in building something,” says Mitchem. “As the CEO, I am blessed to be surrounded by an amazing team of talented people, and I am thrilled to meet so many incredible marijuana industry pioneers on a daily basis.”
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