A Millennial Couple Finds Their Sweet Spot In Cannabis Soda
Forbes [August 9, 2018]
It was never meant to be taken seriously. When Amy Ludlum, 32, and Peter Bishop, 29, co-founders of the San Francisco-based cannabis soda brand California Dreamin’, first came up with the idea for what would later become their business, they just wanted to have fun. The millennial couple was on a camping trip with friends and they wanted to create a healthier alternative to drinking beer and being hung over. To their surprise, the homemade concoction turned out to be a big hit.
“Friends and family who were on that trip started placing orders with us,” recalls company CEO Ludlum. “As soon as that happened, everything started clicking in our minds. It’s an edible but it hits you less a time versus an edible where it takes longer to work. And there’s no learning curve—everyone knows how to drink a beverage.”
Since that fateful camping trip in April 2017, Ludlum and Bishop have devoted all their energies morphing what was a whim into a promising business. This past winter, California Dreamin’ scored a professional triumph after being accepted into Y Combinator’s prestigious seed accelerator program, a rarity for a cannabis startup. And, last week, the burgeoning company, which Ludlum says was bootstrapped for its 2017 launch, announced it had raised$2.3 million in funding from an investor base that included Paul Buchheit, creator of Gmail, former Twitch VP Justin Wong and Y Combinator.
The capital infusion will be used to help expand production and distribution across California. Right now, the product is available in 40 dispensaries statewide.
And yet, amid these milestones, Ludlum and Bishop have struggled with numerous hurdles, both personally and professionally.
Their parents were none too thrilled with the business concept. Frankly, they were horrified. But according to Ludlum, they’re now supportive even though it took them “a few weeks” to come around.
The initial pre-launch testing phase was a disaster. Ludlum and Bishop realized their penchant for sour tastes was not exactly shared among friends whom they asked to sample the product.
“One person called it undrinkable,” recounts a candid Ludlum, who holds degrees from MIT and Oxford. “It was mostly grapefruit juice at that time. Then we came back with different formulas. We got more specific feedback, borderline interrogating people we loved. It took several months but we finally landed our flavors.”
Currently, the beverage, which retails at $8 per bottle, comes in four flavors: tangerine, grapefruit, pomegranate and cranberry apple. The product is a mixture of fruit juice, carbonation and 10 milligrams of THC, an active cannabis ingredient.
Although they do work with a bank, which she is loath to identify for fear of inviting a backlash, Ludlum says the basic infrastructure that exists for entrepreneurs does not exist for those in the cannabis industry.
“Insurance is expensive but real estate is the biggest issue,” explains Ludlum. “If you can find a city that offers the right type of licenses and has warehouses available and in the right zone, you will be paying three to five times the market rent.”
Finding good cannabis lawyers and accountants is also a pricey challenge. A big reason for this dearth in quality is due to the still lingering stigma attached to the industry—even in a traditionally blue state where both medical and recreational marijuana are legal.
Adding to the headache are the exorbitant taxes on cannabis entrepreneurs, which are multiplied in California, where taxes are already soaring.
Despite these drawbacks, Ludlum brims with fervor and optimism for her business. She credits her experience at a bitcoin startup in Kenya for knowing how to launch and grow a company. Prior to this stint, Ludlum worked as an associate in JPMorgan’s foreign exchange department in Chicago while Bishop, a Virginia Tech grad, toiled in aquaponics, an alternative farming system.
When asked how much California Dreamin’ expects to generate in sales by the end of the year, Ludlum declines to quote a figure, saying she and Bishop have estimates but because “we’re growing so fast, it’s premature to say anything.”
Like all forward-thinking entrepreneurs, Ludlum does have a vision as to where she would like to see her company in five years, starting with mainstream acceptance and accessibility.
“I would love to see dozens of beverage brands and beverage types under the California Dreamin’ umbrella and obviously nationwide and internationally,” she says.