AACE INTERVIEW: Kenny Jen
Kenny Jen of Pilot.com
One thing I miss about the early medical days of cannabis was how we scrutinized the bud far more on the aesthetic, smell, and near-mythical stories behind how it was sourced. As much as I appreciate lab test labels on products today, I miss the feeling of finding new cannabis products like they were rare trading cards.
In my travels for AACE, I meet the most wonderful, smart, kind, and generous people, each one inspires me to do better and I also learn so much from the conversations I have with my new friends. One example is Kenny Jen, the CFO at Pilot.com (and yes congratulations on the one-word URL!). Pilot is a bookkeeping, CFO, and tax service for startups. It’s a great add-on for companies that are looking for fractional CFOS, accounting, credit, billing, and tax advisory. Kenny at first glance is like meeting your favorite friend who you know will make you smile and give you advice that a good friend would give, no strings attached. Here are his insights, advice, and investment in the cannabis industry. - Ophelia Chong
“I'm enthusiastic about ancillary cannabis sectors like data and customer loyalty management where the solution fits a dire need in the addressable market but the core assets being built can be nimble, repurposed, and quickly pivoted to fit a new market dynamic. “ - Kenny Jen
How do you think your work in investment helped you navigate the cannabis industry?
Before jumping full-time into the cannabis space, I spent a couple of years as an investor for a consumer VC fund which got me familiar with the capital intensity and hands-on nature of scaling physical goods businesses. I also learned quite a few lessons from the maturation and success of the better-for-you food & beverage industry and how the drivers of its success are similarly critical to the success of the cannabis industry. My time in consumer venture capital really helped me hone in on matching my strengths to where I saw needs in the cannabis space I could add the most value which were in the supply chain, strategic finance, and consumer brands.
Comparing the new NY state market to Thailand, what similarities do you see and what are the differences?
Thailand parallels the early days of New York's legalization rollout in that you could find someone selling weed at every corner store in the major cities. Where I think Thailand found the right balance is banning public consumption while liberally permitting consumption lounges. Doing so led to a couple of very encouraging observations:
The general public didn't seem to mind cannabis's proliferation as much as I would have thought and I likely attribute this to the ban of public consumption being actively enforced. This provides a tailwind for society's gradual embracing of the plant while avoiding unnecessary scrutiny and pushback.
There is a much higher willingness to pay for cannabis from purchasers in Thailand because the buying experience and brand association are no longer tied to just the product itself but also to the consumption lounge experience, creating the 'Starbucks Effect'. It was remarkable to see truly social cannabis usage where people want to hang out at the dispensary and could order food, play games, or even host a dance competition!
In my opinion, both observations above create the necessary building blocks for true brand building in cannabis whereas public consumption in New York is rampant and the value gap between legal and illicitly sourced cannabis is smaller.
What is most lacking in the cannabis industry when it comes to marketing their products to the mainstream audience?
Lack of sampling programs and opportunities to sample different products significantly hinders brand building as well as acquiring mainstream customers. The food and beverage industry has shown that sampling near the point of purchase is one of the most effective means to convert new buyers. On top of that, cannabis brands that stand for certain lifestyles are unable to effectively connect with the mainstream audiences that live those lifestyles because the brands can't sample their products in major relevant cultural events, thereby cutting off the ability to tie the brand to the experience. As a result, the most effective means currently for brands to market is by giving samples to budtenders and making them advocates by sheer word of mouth.
What are your predictions for the cannabis market when it comes to raising funds?
One or several structural shifts will need to occur that bring about fundamentally new theses on cannabis that new funds will be able to emerge from and raise money, with low valuations providing the necessary tailwind to kickstart the wave. Some of these structural shifts may include:
Legislative changes (taxes, cross-border trade, ease of restrictions, etc.)
The rise of profitable House-of-Brands players like Coke or Pepsi that provide an acquisition funnel for emerging brands and investors to get predictable exits
Significant technological innovation or development that enables brands to get much, much closer to their target consumer and build relationships that yield high lifetime value (ex. Web 2.0 and paid ad spends' role in the proliferation of DTC brands)
Being SoCal born and raised, what were your first impressions of the emerging cannabis market?
I have personally been fascinated with cannabis ever since middle school when a D.A.R.E. officer first taught me about it. I'm not sure why I was so interested in cannabis from the get-go, probably because every other drug required extensive processing while cannabis was just a plant that grew from the ground. Other than that, one of my earliest my impressions of the emerging cannabis market was when I purchased a gram for the first time from the local dealer and I was appalled that it came crumpled in a ball of tin foil. Back then, I was dealing candy bars at school and already started fantasizing about how nice it would be to walk into a well-designed store and buy cannabis packaged like my candy bars. I guess I'm living the dream already haha!
One thing I miss about the early medical days of cannabis was how we scrutinized the bud far more on the aesthetic, smell, and near-mythical stories behind how it was sourced. As much as I appreciate lab test labels on products today, I miss the feeling of finding new cannabis products like they were rare trading cards.
You are observant of trends, where would you invest in the cannabis industry?
If there's one thing for certain in cannabis right now, it's that things can turn on a dime and almost invalidate an entire subsector's existence. Thus, I'm enthusiastic about ancillary cannabis sectors like data and customer loyalty management where the solution fits a dire need in the addressable market but the core assets being built can be nimble, repurposed, and quickly pivoted to fit a new market dynamic.
Where do you see the biggest roadblocks for cannabis brands other than legalization and banking?
Going to Hall of Flowers brings me so much joy and frustration because the event showcases so much of what's awesome about cannabis brands but so few consumers get the opportunity to go there and see these brands in their prime. Because of restrictions in digital marketing and in-person experiences, consumers only get to see half (at best) of what these brands are really about and all these barriers chisel away critical components of what's needed for brands to develop quality customer relationships with sustainable repeat purchase behavior. These restrictions also make it incredibly difficult for brands to attract investment dollars because they're limited in data at their disposal to show brand loyalty beyond dispensary sales. Even well-worn CPG executives in cannabis are working with all their experience tied behind their back because acquisition channels they're accustomed to are unavailable or severely pulled back. If Google or Facebook could allow cannabis ads, that alone would bring the brand side of the industry miles ahead of where it's at now.
If you could put out a pre-roll, what would you call it and would it be infused with _____?
One of my favorite things to do is to hit breakdance practice after smoking a good joint. It really brings out my creativity and natural flow although sometimes I get anxious from the pressure and stuck in my own head. To get the best of both worlds, I would release a pre-roll infused with 1:1 THC + CBD live rosin and name it Headspin.