Friends turned cannabis entrepreneurs have big U.S. market ambitions
As kids growing up in the Vancouver, Wash. area, Diem founders Frank Kanekoa and Chris Mitchem were exposed to cannabis in very different ways.
Mitchem’s father is a marijuana advocate who grew plants at home in the sauna, while Kanekoa’s grandfather was a sheriff who regularly cracked down on marijuana grow-ops.
“It’s kind of funny,” says Kanekoa, “if you search my name online you see pictures of me and weed on our company website but, if you dig a bit deeper, you see my grandfather busting marijuana farms.”
Today, the former high school classmates run Oregon-based Diem, founded in early 2017, which grows, processes, and sells cannabis through a brick-and-mortar storefront in Salem and offers home delivery in both Salem and Portland. The company has 35 employees and expects its roster to surpass 100 people by the end of 2019.
“Our 10-year objective is to sell cannabis product — either marijuana or hemp-derived — to one billion different people,” says Mitchem, 31, the company’s chief executive officer. The company’s slogan, “Cannabis is for everyone,” underscores the pair’s belief in the pervasiveness of the plant that’s powering a global market projected to hit $31.4 billion by 2021 — up from about $7.7 billion today, as more jurisdictions liberalize their marijuana laws.
Diem currently holds seven marijuana licenses in Oregon and is actively pursuing nationwide expansion. It’s next major market is Massachusetts — the first state on the east coast to legalize recreational marijuana.
“There is so much potential in this industry,” adds Kanekoa, 31, Diem’s chief financial officer and head of marketing. “We have the opportunity here to build something significant.” To that end, Diem is forecasting its annual revenues to hit $10 million in 2019 and to grow to $100 million by 2021.
The pair won’t confirm or deny if they smoked weed when they met back in high school in 2001, but the self-described “nerds pretending not to be nerds” were both ambitious students at Skyview High School in Vancouver, Wash. who played football and were members of the Science, Math and Technology Magnet program for advanced students.
After university, Kanekoa landed a job with JP Morgan in New York and was later transferred to Seattle. Mitchem started working at medical device company Stryker in Silicon Valley.
Despite pursuing different careers at opposite ends of the country, Kanekoa and Mitchem stayed in touch regularly. “The bond of being away from home and really pushing ourselves in our careers was something that kept us united,” says Kanekoa.
Once recreational marijuana became legal in various states — starting with Colorado and Washington state in 2012 and Oregon, Diem’s home state, in 2014 — Kanekoa and Mitchem started to discuss the various business opportunities they saw cropping up.
“Cannabis was always at the forefront of our minds,” says Kanekoa, who was meeting a lot of entrepreneurs in the space as part of his private banking job at JP Morgan. He left that role in 2016 intending to invest in cannabis. He tapped his contacts to discuss potential opportunities with major players such as Snoop Dogg’s private equity firm Casa Verde Capital and Privateer Holdings, a large private equity fund.
At the same time, Mitchem was getting antsy to start his own company and was passionate about the legalization of cannabis, based in part on his upbringing. “Seeing my dad, who is a successful businessman, and his friends, who are also successful professionals from many different fields, use cannabis while maintaining normal and productive lives, showed me the absurdity of cannabis prohibition,” Mitchem says.
Despite loving his job at Stryker and its entrepreneurial environment, Mitchem needed more. “I had this fire in me to be an entrepreneur,” he says. “It was hard to leave Stryker, but I wanted to build something myself. It can be a path to wealth and to personal enrichment in your life beyond money. This was my opportunity to get behind something that I was passionate about and do my part to improve the world.”
Combined skill sets
While Kanekoa met with various cannabis investors, Mitchem invested in a medical marijuana farm, where he spent a significant amount of time. “I remember thinking to myself, ‘this industry is cool. There is so much going on. It’s in the process of exploding,’” he says.
Shortly after, the pair decided it was time to combine their talents and interests to start their own company.
“I saw an opportunity to work with one of my best friends, with a complementary skill set, in an industry where we could have a significant impact,” says Kanekoa. “We felt that, if either of us is going to be in this industry, it doesn’t make sense not to do it together. Who better to take a bet on than one of your best friends and someone you respect.’”
Passion beyond business
It was more than the business opportunities that convinced Mitchem and Kanekoa to start Diem. It was also the chance to be part of a movement that’s helping people live better lives in different ways, either through pain management, enhancing their experiences, or keeping them out of jail for petty marijuana crimes.
“It is not about money for me, it is more about the opportunity to do something significant with my limited time on the earth,” says Mitchem. “Cannabis has something that a lot of industries don’t. We’re actually helping people.”
Kanekoa and Mitchem say the business partnership has also strengthened their long-time friendship. “We have always been great friends, but this has pushed it to an entirely new level,” says Kanekoa.
Now, the pair’s parents couldn’t be more proud of their entrepreneurial endeavor. Mitchem’s father, Steve Mitchem, is an investor and co-founder, as well as the company’s master grower in Oregon. And while Kanekoa’s parents were hesitant at first, they’re fully on board today. “Now they are incredibly supportive and happy for us,” says Kanekoa.
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