Extraction is considered the most profitable segment of the cannabis industry that touches the planet. But what if the way we’ve been thinking about extraction is all wrong? Do we need to use large CO2 or butane extraction systems when there was a way to extract oil from hemp and cannabis using just air? Here to tell us about it is Russell Thomas, Founder and CEO of Vapor Distilled. Russell, welcome to CannaInsider.
Russell: Thank you, Matthew. Excited to be here.
Matthew: Give us a sense of geography, where are you in the world today?
Russell: I am in Boulder, Colorado.
Matthew: Great, and I am in Austin, Texas. Russell, what is Vapor Distilled at a high level?
Russell: So at a high level, we’re a cannabis technology company. And we’re the only company in the world to develop a process where we extract cannabis using only heated air. We also are the only company in the world to develop a process where we can activate cannabinoids to where they’re usable by the body in less than two seconds. Usually, that process takes 45 minutes to several hours.
Matthew: Wow. Okay. And Russell, can you tell us more about your background and journey and how you came to start Vapor Distilled?
Russell: So I came from the cleantech industry originally. I went to MIT and I dropped out to develop a gasoline engine that had the fuel economy of a hybrid with the torque and power of a diesel. So this was a very small engine with very, very high horsepower and yet it was also fuel efficient. We had 40 patents in that company, some of the brightest minds in the industry. One of the founders of the Carlyle Group, we had an inventor of a Honda VTEC, former president of Chevron Russia, former governor on our board, CEO of a major automotive company, automotive supply company up in Michigan. So it was a very exciting business.
And after I exited that company, I was looking at the cannabis industry growing up around me here in Colorado, and just kind of saw pretty quickly that the pinch point of that whole industry was centered around extraction, you know, started to kind of look at what you take cannabis and extract that into an oil, it’s something that can, you know, retail, at least at the time, for more than gold. And so, had to be something special about that, that type of a point.
And so looked at the other technologies being used to extract. They’re very chemical intensive, use hydrocarbons, you know, propane, hexane, butane, or they used CO2, which was cleaner, you know, and healthier for people to consume, but just didn’t really taste that good and very slow, very expensive processes. And so, you know, everybody already knew about vaporizing, you know, it’s the cleanest, safest, healthiest way to consume cannabis. And, you know, started thinking, “What if you could take that vapor and condense that directly back into a concentrate and use that as a method to extract?” And so came up with a few ideas.
My wife and I, we’re in this together, put everything we had, built a 1200-pound machine actually in our living room, but we never broke any laws. That was one of the things we did from the beginning, we wanted to do everything by the book. So built this machine in there over a period of about a year, you know, did the test work in the house using rosemary. So went down to Whole Foods and just emptied out their entire bulk isle of rosemary, you know, several times a week actually. So I’m sure they thought there was something bizarre going on with a…
Matthew: It probably smelled great.
Russell: Oh gosh, the house was…the neighbors knew something was up, especially when you turn this thing on and the lights would dim, literally, because it’s 12,000 watts. We had our stove slid out in our kitchen with a giant marine power cable going, you know, out of the kitchen, over the counter, into this machine in the living room. But yeah, that’s kind of where we started with this. And it’s just been a journey ever since.
Matthew: What a conversation piece to have a 1200-pound machine in your living room.
Russell: Well, we tried to not have anybody see it while it was there for a while. Too many questions, you know, but rolled it out silently in the night and never brought it back in the house, and did all of our testing for actual cannabis outside of the house and around Denver in different, you know, legal facilities. So it was fun.
Matthew: So can you just give listeners a background of what cleantech means exactly?
Russell: Yeah. So, cleantech is, you know, kind of the industry of, you know, different kind of fuel-saving technologies, cleaner engines, cleaner cars, you know, solar is cleantech. So, you know, not necessarily automotive, but just kind of this industry of, you know, saving energy, I guess is the best way to say it.
Matthew: Yeah. And what do you think like in terms of alternative automobiles, vehicles? Do you think we should be doing more hydrogen or liquid natural gas? I mean, obviously electric has got a lot of upside and we’re seeing that kind of built out right now too, but what about the other kinds of cleantech?
Russell: So, you know, not to dwell on electric but, you know, I think that the engine is dead, you know. And this is a person who invented an engine and put, you know, the earliest part of his life and everything into it, never thought I’d actually say that. But I think that battery technology is getting so much better so quickly, you know. The amount of power and acceleration you get out of these electric cars and, you know, more and more, we’re gonna see more infrastructure, you know, available to charge. I really think that’s where it’s going.
The hydrogen fuel cell technologies are just so expensive. They haven’t really gotten to the point that they could make it into the mass market, you know, hybrids you know, they definitely are great because you don’t need to hunt down a plug. But again, batteries are just getting so much better. I think if you fast forward 10, 20 years, everything will be electric, and as I think we all know, we probably won’t be driving cars anymore. They’ll be picking us up when we hail them. May not even need to own them, you just buy a share.
Matthew: I’m looking forward to that.
Russell: Yeah, definitely, it’ll be fun.
Matthew: Well, let’s kind of paint a picture here of what traditional extraction methods look like so people can get a foundation for the way most extraction is being done. Can you kind of describe how traditional extraction occurs and what that looks like?
Russell: So traditional extraction, at least the commercially viable, you know, scalable versions of it, they all center around solvent extraction, and there’s really two flavors of that. There’s your hydrocarbon, you know, based solvents like butane, hexane, propane. There’s CO2, which is, you know, actually a gas, but when you compress it, it becomes a solvent. It can dissolve cannabinoids. And then you have also, you know, ethanol extraction, which is another, you know, solvent. And so with hydrocarbons, you can get a great tasting oil. It’s a very efficient process, you can get good yields with it, but you can’t really call it organic.
You know, if you really, really do it right, you can get a good extract. But most companies cut some corners. They don’t use pure hydrocarbons. And so you have kind of nasty chemicals that can get in the abstract and we still don’t know entirely, you know, how bad health consequences could be from those. With CO2, you can definitely, you know, make a safe extract for consumption, and it’s also safer to do the extraction because you don’t have the same, you know, fire risk that you do with hydrocarbons, but they just don’t taste very good. You know, they end up having a little bit of a sour kind of bitter taste, and the process is usually pretty slow, and the equipment is very expensive.
Ethanol extraction, you can do that organically. It still is a flammable liquid, but it’s a lot safer than, you know, hydrocarbons, but you tend to get…you pick up chlorophyll and other things that come along. Ethanol doesn’t just dissolve oils, it dissolves water-soluble compounds in the plant as well. It can make your extract taste very grassy, kind of bitter, kind of like you’re eating a plant. So that’s kind of the traditional methods that are out there, and all of them can be, you know, you always have a consumable. You have a solvent that you’re using, that you have to replenish, you have to purchase.
Matthew: Okay. And now describe the way that you do it with just air, which seems futuristic to me, and I wanna understand this better?
Russell: So I mean, in its simplest form, you know, you’re taking plant material and you’re driving heated air through it. And that heated air is at a temperature that’s just high enough to essentially distill the cannabinoids directly off of the plant material. You know, that in itself is not that new. You know, if you’ve ever bought a personal cannabis vaporizer, that’s how it works, you know, you’re driving air through plant material. But, you know, the hard part is taking that vapor after you’ve removed it from the plant material and recondensing that in a concentrate quickly and effectively where you’re not damaging the oil, you’re not losing the vapor. That’s the hard part. And that’s really what most of our technology centers around, is recapturing that vapor.
Matthew: Okay, so instead of a solvent, it’s heated air. Is there any other part of the process that looks different at all or any other way you’d describe that?
Russell: Yeah, so I mean, I guess that’s a simplest, you know, way it works. But these machines are actually, you know, really large, you know, scale commercial continuous feed machines. So, you know, you have on the side of the machine is you have a big giant hopper, you fill that hopper with ground cannabis. And inside the machine, you have this hot, fast-moving air stream. And so that hopper, it starts to…it has an arder [SP] at the bottom, it feeds, you know, essentially, powdered cannabis material. We actually grind down a powder into a fast, hot, moving air stream. And pretty much the second that that plant material hits that air stream, it starts to distill the cannabinoids out.
So you have this air stream with, you know, cannabis vapor with plant material, and there, you know, moving through this machine, we separate that plant material out of that air stream and there’s just this big giant receptacle area where the spot [SP] plant material goes, and then that air with the vapor in it continues on to the back of our machine and it gets condensed directly back into a concentrate. And this is continuous, it just keeps on going. So one of the things that’s very special about this is even though it’s continuous, if you look at the actual period of time that it takes for us to extract, it’s less than two seconds. So from the time that cannabis material hits that air stream to the time that it’s condensed in a concentrate is less than a two second period in time.
And during that time, we’ve also developed techniques to ensure that it gets fully activated so we call it flash extraction and it actually…so for those of us that are in the cannabis industry, we’re very familiar with that but, you know, the need to activate the cannabis before you consume it. For those of us that aren’t, you know, the THC and the CBD that have the therapeutic effects in cannabis, they come in an acid form in the plant, so you have THCA in the plant you have cannabidiolic acid in the plant. They don’t really do much for you.
To make them usable by the body, you have to heat them for a period of time. That process normally takes with conventional extraction 45 minutes to several hours. You’re either taking plant material, you’re putting in an oven at a controlled temperature for quite a long period of time to heat activate it, or you’re taking oil that’s been extracted with another method and your heating that oil for a long period of time. And the unfortunate thing about that oil, when you activate it, is the temperatures required to activate it also are hot enough to actually break down some of the cannabinoids, it breaks down the turpenes, the flavonoids, other beneficial compounds in the oil.
And not only do you lose some of the efficacy of the product when you do that, you also get a rather offensive taste. It starts to taste very bitter, very nasty, for lack of a better description. Because we’re doing this in literally less than a two-second period, extraction, activation, condensation, you end up with an oil that is not only, you know, more effective, it tastes much better than other products.
Matthew: Yeah, definitely the taste is there. You were kind enough to send me some samples and it does taste very clean and totally different than a lot of oils I’ve tasted. So, now how much tinkering and planning and iteration does it take to get to this point where you have this working process?
Russell: Gosh, it was a lot of work, you know. So really, I kind of skipped over, before the machine in the living room, there was one in the kitchen that was smaller. And from the initial proof of concept, which, you know, worked surprisingly well, I thought it was gonna be easy, you know. We did the first test and it was just a perfect oil that came out of it. Taking that from a small scale experiment to a large scale commercial machine was just a gulf of work, and I don’t know how to say it any better. I’m really, really glad I didn’t know how hard it would be before I started.
Matthew: Common thing I hear from entrepreneurs, including myself, is like, “Wow, I’m glad to know what this would take.” But you got [crosstalk [00:15:10]…
Russell: Yeah, and aren’t we glad?
Matthew: Yeah. A little bit naive and optimistic, you need that as the fuel.
Russell: Yeah, you know, you gotta love what you’re doing on the journey though, because, you know, it’s always gonna be a marathon. And if you’re not enjoying the journey, itself you’re just not gonna have, you know, the staying power to stay in it. But yeah, it was several years, thousands and thousands of hours of experimenting and, you know, different generations of machines to get it right. It really for economies of scale, for cost of production to go down, to have everything come together, we really needed that continuous feed system and that’s when the technology really, really took off for us. And we’ve done, you know, tens of thousands of pounds of hemp, is what we’ve done most of our RND and testing on. So yeah, it’s a process, always is.
Matthew: And we talked a little bit about the oil and how it tastes, right? And I mentioned my personal experience, but what are most people saying when you hand it to them for the first time and they’re using it as a tincture and they taste it, what’s kind of their reaction?
Russell: I mean, at risk of sounding like I’m trying to, you know, promote our own products, usually the first impression people give is, “Wow,” you know, their eyebrows go up and they’re like, “Wow, that actually tastes good.” And the reason I guess that’s unique is most full spectrum oils, because they all have to have that activation step, that decarboxylization step to make them available to the body, they just don’t taste good. They almost all taste planty, they taste sour, they taste bitter. And this oil, it’s like a hazelnut kind of sweet, nutty kind of molasses flavored oil. So it actually tastes good, and that is not normal of full spectrum oil.
Matthew: That’s true, that is true. You kind of learn to tolerate the kind of grass clippings taste, but I definitely enjoyed not having to experience that. And this is kind of a strange question, but how come nobody’s thought of this process before? I mean, does this type of…is there something similar from another industry that you drew on here? You know, how come no one else is thinking about? Is there like a herd mentality? Or is this just, you know, a thought from outer space that entered your mind? I mean, how did this…I mean, I’m just trying to think how, how did this happen?
Russell: So I think a lot of people were really approaching this more as a chemistry question. I came from the cleantech industry, you know, I’ve done a lot of work on efficient engine technologies, making engines run cleaner. So I really was looking more at, you know, how do you capture something out of air, you know? And so I think I just came at it from a different angle, more of a mechanical angle than a chemistry angle. But, you know, like I said, I mean, vaporizing something, you know, driving air through a material to volatize out, you know, the essential oils and compounds, that’s not new. Being able to capture that out of a moving air stream, that is very new.
Matthew: Yeah, yeah.
Russell: And we actually have right now, we just went past 39 patents, or just got to 39 patients. We actually have an in-house patent attorney now because we’re so IP-centric with what we do. And so, we have several patents around the core technology to actually…you know, this flash extraction, vapor extraction technique itself, we have that from the machines that do it to several different versions of that, the methods to do it, many patents on the chemistry. We also have a very, very exciting water-soluble compound that we’re creating that is super stable forever. It’s been a real challenge for the industry as well. So we do have a PhD chemist in-house as well who’s also our patent attorney. So we’re very aggressive in that IP space. You know, really, again, at our core, we are a technology company. Our first technology just happens to be this extraction technology.
Matthew: And how much is the cost per gram to extract with your method versus a traditional method?
Russell: So I have to be careful giving exact numbers, because I’m sure competitors would love that. But what I can say is we have…you know, every solvent system, it always has a consumable, always has something you have to replenish, something you have to purchase. We use air. That costs a whole lot less, you know. So, I mean, it is literally an order of magnitude less to extract using our system than any other method. You know. And when you combine that with, you know, the automation, you know, we’re taking several steps in the extraction process, we’re combining them. You know, we also have developed this much, much more efficient faster, you know, decarboxylization or activation step as well. And, you know, getting that right was another key part of this process, you know. And so, we have a fractional cost to extract, that’s the best I can say.
Matthew: Sure. And so what’s the business model here? People are wondering, like I’ve been to your website and you can’t, as an individual, purchase the oil, so how does that work?
Russell: So, you know, the model we’ve chosen to adapt is really, you know, if you think about Qualcomm as a company, nearly every cell phone in the world has a Qualcomm chip in it, you know, it’s kind of in the background, it makes the best phones work. Same with, you know, Intel, they’re the microchip…they’re the chip inside of the computers and whether the brand is an Apple or a Hewlett Packard or, you know, a Dell, a lot of consumers, you know, they want that product because of that Intel chip. So that’s kind of the core model we’re adapting.
So we take, we source, you know, really, really good industrial hemp from good farms, we test it, we make sure it has no trace of pesticide-heavy metal. Make sure that it was grown legally. It’s also very important in this industry, this is really a compliance industry, it’s not just the cannabis industry. You gotta do it all right. And so we take this well-grown hemp from farms, we extract it using our technology, and we wholesale kilograms of CBD, cannabidiol. And so, we essentially…you know, the companies, we support the best brands in the industry by giving them what we believe is the best oil in the industry. And that’s our business model.
Matthew: And just for North American listeners, that’s 2.2 pounds is a kilogram. So what about terpenes here. Now, this is something, you mentioned flavonoids and terpenes a little bit, but the preservation of terpenes, creating a terpene profile is something that’s becoming increasingly important, and the ability to affect experience is really driven a lot by terpene. So, you know, the vaporization is happening, the heat element is there, how do you look at when the terpene gets affected? Like is there some critical threshold where the terpenes are affected from heat or other processes in traditional extraction?
Russell: They most certainly are, you know. A lot of people when they first talk about, you know, they ask us, “Well, wait, this is a heat process, you know, how hot is it? Is it gonna damage the terpenes?” And what the other side of that is, you know, any edible oil or any oil that’s even going in a vapor cartridge, because, you know, like a little vapor cartridge, they don’t get hot enough to fully activate the oil, so you need to activate it before you put it in the vapor cartridge. And again, that activation step takes 45 minutes to several hours and traditional methods of decarbing oil, they annihilate the terpenes. The best way to say it is they annihilate. They break them down, they volatize them out of the oil, because you’re talking about, you know, well over, you know, 200 to 250 degrees is a typical decarb temperature for a long time. The terpenes just boil out of it.
Our process is like pasteurization of milk when it comes to activating. It’s so fast that it doesn’t…there’s not enough time to damage the terpenes, there’s not enough time to drive them out of the oil. So if you have actually measure our oil compared to other activated oils, you’re going to have many, many, many more times terpenes by weight in our oil than you do in other activated oils. And that’s on the first pass without adding them back in. So we get the original terpene profile that’s in the plant, and that makes it all the way through our extraction and through our decarb process and into the final product. Whereas other activated oils usually what they’ll do is they’ll actually add terpenes back in to boost them back up. So we don’t have to do that.
Matthew: Right. Now, there’s nothing necessarily wrong with that, but it’s just exogenous, it’s not something native to the oil that was extracted, so…
Russell: Yeah, nothing wrong with it. It just costs…you know, you’re not gonna get the original strain profile the same way you would as if you just keep all that intact from the beginning. But it also costs money, you know, so from a business standpoint, you know, the more things you have to do to kind of reconstruct that oil after you go through this, you know, traditionally brutal, you know, decarbing process, it makes the oils more expensive. You know, again, that’s one of the reasons that we can do this at such a lower cost is we don’t have to do all these extra steps.
Matthew: Yeah, this is fascinating subject. So let’s rewind just a little bit again. So the chlorophyll, can you just describe what happens to that again? And for people listening, chlorophyll is the green planty material that’s a color in the oil. Just go over one more time how the heat element is just never there to begin with. That’s why you don’t have to remove it.
Russell: Yeah, yeah. Absolutely. So, you know, traditionally, if use ethanol, for example, that’s one of the extraction processes that really picks up a lot of chlorophyll. Solvents touch the plant, you know, and it really it happens even with hydrocarbons, even with CO2 to a lesser extent than ethanol, but it happens with any kind of solvent. You’re touching the plant material. Therefore, you’re not only going to extract cannabinoids, but you’re also gonna get things that you may not want in the oil that affect the flavor. Chlorophyll typically imparts a grassy kind of plant taste in the oil. And some people really don’t like that. They find, you know, it really affects the flavor. We don’t extract chlorophyll at all because we don’t touch the plant with a solvent. We only touch the plant with air. And so our oil has zero chlorophyll in it. And so you get zero grassiness in it.
Matthew: Okay, would you compare this to sterilization or pasteurization of milk?
Russell: I think that that’s really just the perfect analogy for our flash activation. You know, when you’re pasteurizing milk, you’re trying to sterilize it, you’re not trying to cook it. So what you’re doing is you’re taking milk, you’re running it through these thin tubes that heat the temperature up above the boiling point of the milk really quickly, and then they immediately cool it back down. And it just kills any bacteria in it, but it doesn’t cook the milk, it doesn’t alter the flavor. And it’s a very, very fast process. That’s the same thing we’ve applied to activation.
It literally happens in seconds. We have over 99% activation in less than 2 seconds. And so it’s so fast that you don’t damage your turpenes, you don’t break down cannabinoids and, you know, it’s hot enough. It’s done just the right way for just long enough and with enough, you know, other things going on in our machine. I can’t say everything we do because we had to nail that too, you know, that wasn’t just something that came along with, you know, just the way we extract. We had to actually tweak things to get that activation right. But it results in the same thing as, you know, uncooked milk, sterilized but not cooked.
Russell: Not that cannabis and milk are quite the same thing, but yeah. You know, one other thing that I wanted to touch on that, you know, with terpenes though, and solvents, so, if you think about a plant, you know, you think about hops, think about mint, you know, think about rosemary, think about other herbs, the terpenes, the essential, you know, flavors and terpenes in those oils, they’re locked down in the plant material. They’re not just on the surface of the leaf, the surface of the plant. You know, cannabinoids, on the other hand, they tend to be on these long trichome glands that make marijuana and hemp, you know, look kind of crystally and shiny when you look at it.
So with a solvent, it’s very easy to just kind of melt those cannabinoids off the outside, but if you really want to boost your terpene content in your oil, you have to dive down into the plant. If you dive down into the plant, there’s other things in there like chlorophyll, you know, other things that impart flavors in the oil, to make the oil darker, lower the quality of the oil. So you kind of have this dilemma, if I want a higher terpene level my oil, I gotta dive in the plant, but I’m gonna pick up chlorophyll, I’m gonna pick up things I don’t want.
So one of the things that we really do differently is, we grind to the powder, you know, before we extract. If you do that with a solvent extraction, you’re gonna get a terrible tasting oil. So we’re opening up the plant, exposing more of the terpenes to the extraction process. And we also…you know, when you take, you know, even at the cellular level, you take this plant material over the boiling point of the terpenes, it literally ruptures out of the cells. We get all of them, and we don’t get any chlorophyll. So we don’t have this trade-off. So we end up extracting more terpenes, and then we take better care of them when we activate them, when we activate the cannabinoids. So it’s two things going on.
Matthew: This is great. So, will you be licensing this technology to other companies at all? Or is it gonna all stay in-house and be the kind of Intel inside model or where do you see this going long term? So, I mean, how do you wanna extend your brand?
Russell: So really, a lot of people wanna buy our equipment. We get calls literally from all over the world, even Australia and New Zealand. You’d be surprised at all the people who want our equipment. We don’t sell our equipment. We don’t rent it. But what we do do is we source material and we sell kilograms of oils. So we are keeping it in-house right now and, you know, there’s a lot of reasons for that. We know we have something very special. And, you know, we wanna be the only source of this oil in the world. And we also wanna make sure that, you know, it’s the thing about CO2 extraction, about butane extraction. There’s companies that do that well, there’s companies that do that very poorly.
With our process in a way, you know, it is a brand. You know, we’re the only company in the world that extracts with heated air. And so, by us controlling our equipment, we make sure that it’s done right every time, you know, that nobody’s cutting corners on quality, consistency, you know. And so, when people say, “Wow, that was a, you know, vapor extracted or vapor distilled oil, that was a flash extracted oil, flash activated oil,” we don’t want them to associate that with somebody who just didn’t run the equipment right. And so, we’re taking better control of our quality, for lack of a better way of saying it.
Matthew: Okay. Very fascinating. And where are you in the capital raising process?
Russell: So we just closed around a few months ago. As a company, we’re very well funded. We have very big customers, we get more customers every day. It’s been a very exciting, you know, fun process. This is one of those right kind of the launch point when the company is starting to really, really come into its own. So, we’re not really raising capital at the moment. However, you know, as we look at how fast this industry grows, you know, how big it’s getting so quickly, you know, we are contemplating, you know, potentially a large raise in the near future to build even larger capacity equipment out, you know, in particular, to serve the hemp and CBD side of the industry.
Now, the difference with, you know, the marijuana side of things versus the CBD, you know, industrial hemp side is, you know, just the amount of pounds that people extract in the CBD space, you’ll literally be harvesting, you know, hundreds of thousands of pounds that need to be extracted in a short period of time. And so we do want to, you know, continue to expand our abilities in that and be able to grow faster than we could organically. So potentially, we may be looking at that over the next year.
Matthew: I love what you’ve done here because it reminds me of the blue ocean strategy where there’s an existing marketplace in a segment seems totally defined and there’s leaders. But you’ve kind of splintered off and created your own segment which you can lead, and with your intellectual property, it’s almost impossible to follow unless there’s a significant change. So what an exciting way to do things to maintain profit margin, do things your way, and innovate the marketplace, so well done.
Russell: It’s been fun, you know, and it’s…But yeah, fundamentally, we believe we have by far the lowest possible cost way to extract cannabinoids. And if you just think about it, fundamentally, heated air just doesn’t cost the same as solvents. You just don’t have those costs. And by the way, just because we haven’t touched on it, we’re definitely going into, you know, the marijuana space as well. Right now, we’re focusing most of our efforts on hemp and CBD because it’s such an amazing market. It’s been so much fun to just watch this, you know, come into its own over the last few years, but we also are in both sides of the spectrum, you know, marijuana and hemp.
Matthew: Okay. And we’ll get the details from you on how accredited investors can reach out to you at the end. But first, I want to go to some personal development questions, Russell. Is there a book that’s had a big impact on your life or way of thinking that you’d like to share with listeners?
Russell: So I guess, you know, I read a whole lot. I typically just when I need to know something about a subject, I dive into it until I figure out what I need to and then I go onto the next thing because I’m just so busy. So I guess, you know, I do read a lot of “Harvard Business Review” articles, you know. Right now, I’m going through, you know, their 10 best reads where they just condensed their best articles on everything from sales to change management, things like that. And it’s these nice little condensed, you know, nuggets of information. I guess I still love, you know, it’s an old classic, you know, “Good to Great.”
Russell: It’s an old book but, you know, those principles of just, you know, hiring truly passionate people who just love, you know, what they do for the sake of doing it, you know, everything from our extractors to our engineers, to our chemists that we hire, truly just love the journey of what they’re doing, you know, that’s influenced me from the beginning. It’s still a good book, even though it’s old book.
Matthew: Gotta get the right person on the boss, right? That’s the motto there.
Russell: Yeah. And, you know, that’s kind of what I’ve really focused, you know, it’s like recognizing somebody’s spirit, you know, that entrepreneurial spirit, you know, it’s like every day when you’re in this new industry, in this new company, like you have to be in the space to know like, hey, I don’t actually know all the answers of how to do this. I’m gonna throw my hat over the fence, and I know I can get there. I don’t have the answer today, but I know that I can figure it out, I know I’m gonna get there. If you look for that when you hire people, my gosh, you know, it’s like a feedback loop where you have all these people who are excited about what they’re doing, they know that they can get it done, they’re okay with existing in the space of hey, yeah, new industry, new company, new technology, new market, but I know I can figure it out.
And even when you come to work and you’re having a bad day because, you know, it’s a marathon, not every day is good, you know, if you surround yourself with that kind of a team, man, they lift you up even when you’re having a bad day. And so, I guess, you know, it’s not just coming from that “Good to Great” book. There’s just you have to learn to recognize that in people, and that’s when your company takes off.
Matthew: Is there a tool you consider helpful to your team’s work or productivity that you’d like to share?
Russell: You know, this is gonna sound kind of nerdy, but man, I gotta say, I believe in the almighty power of spreadsheets, you know, Microsoft Excel to answer every question in business, you know. So we actually…you know, everything from purchasing hemp and what potency and what price, you know, to, you know, all of our pro formas, to even, you know, improving the processes of our machinery and engineering, you know, calculators, we do very intense spreadsheet work, and it really helps us answer the questions. So, you know, nothing exciting there.
Matthew: No, yeah, I agree with you.
Russell: I don’t know how people used to do business without spreadsheets. It’s just, you know, you can think that you have the answer, sometimes intuitively, but until you actually let the numbers answer it for you…you know, let the numbers be your guide.
Matthew: I think the web-based, shareable spreadsheet is one of the biggest advances for me, because I remember before they were shareable and you’d always be, “What version do you have?” I don’t see that. It’s like, everybody’s using a different version of the spreadsheet. Just making that web-based has been huge.
Russell: That we definitely use a lot of, you know, cloud-based sharing, version control. Definitely a lot of that. You know, I guess in terms of other tools too, you know, our machines are…we program our own equipment, we had our own user interface. Everyone who’s in our extraction department carries around a tablet that it actually shows all the parameters of our machine running on it. We monitor over 60 different data points, literally some constantly, some every few seconds. And so every part of that process we have our eyes on it at all times. So we use a lot of, you know, kind of web-based or, you know, web-based, cloud-based controls. Have to make sure you keep all those very secure, though, because you don’t want somebody hacking your machines.
Matthew: Sure. Sure.
Russell: So yeah, those two things really help us a lot.
Matthew: Now, I’m gonna ask you a Peter Thiel question. If people don’t know who that is, he’s the founder, one of the founders of PayPal, first investor in Facebook, and just a really well-known VC and deep thinker. And one of the questions he asks people is, what important truth do very few people agree with you on?
Russell: So I am a big believer in social enterprise. I think a business needs to be a business for the business sake but I think that you can do it the right way. You know, a lot of people say that, you know, you can’t have a business that is profitable, that makes us money, you know, and also make quality product at a good price. You know, also take care of your employees, respect your employees, give them good benefits. You know, create a work environment where people actually look forward to coming to work. In fact, you know, we sometimes have to almost lock the doors on the weekends. I am not kidding, people love to work in our company. You can have both. And I think that, you know, as a company gets bigger and, you know, becomes really profitable, I think it’s important to set an example that you can do things right while you’re making money. You don’t need to cut corners with quality to make money. You can solve a lot through better technology, better automation.
Actually, I don’t know if people would disagree on that part, but I really have a lot of respect for companies like Ben & Jerry’s. You know, they tried from the beginning to do things right. Still had a great exit, still made a ton of money. You know, Patagonia, great company, makes great products, very profitable, but they also are very…you know, they also try to do good in the world as they grow. And, you know, I think as we create businesses in the space, as we create, you know, great businesses in general, why not set an example? You can take care of employees with benefits, you can pay people better than minimum wage and, you know, the kind of performance you get out of people when they know that you appreciate them, you acknowledge what they do, people just, they take a bullet for the company, and it’s not that hard. I don’t know if I’m putting that in the right words, but…
Matthew: No, no, that’s very helpful. Maybe you could talk a little bit more about how you create a culture like that. Like what are the specific steps you do to create a culture like that? Because a lot of business owners realize there’s a huge advantage to that, apart from just good karma, it helps the business, everybody’s excited to be there, it’s a place that just feels, you know, like your work home.
Russell: Yeah, I mean, I think that one of the things we found is most important is when somebody, you know, goes beyond, puts effort in, make sure you really authentically acknowledge them for that. Don’t just say it’s great, you know, say why it’s great. Give them a few examples of what they did and the difference it made, you know. Then they really know that you saw what they did. That you appreciated what they did, you know. And, you know, we really try our best here to make a very collaborative work environment. You know, we encourage everyone in the company from every department, “Hey, if you see us doing something dumb, if you see management do something, please speak up, you know, and don’t be afraid to speak up. And, you know, if we disagree with you we’ll still disagree with you.”
You can’t take everybody’s advice all the time. But giving people that ability to know that, you know, they have a safe space to walk into my office and say, “Hey, I think we could do this better,” is really important. We believe in employee ownership here. Everyone in our company has a…they get a small, you know, bit of equity that vests over time and, you know, they really view it more as their company. You know, as we get big, eventually we will have to stop giving out equity, but we always wanna do some kind of profit sharing so everybody feels like they have some ownership. This isn’t just a job, it’s not just a company they work at, it’s their company.
Matthew: That’s great. Thanks for that. Well, Russell, as we close, can you tell listeners how to find out more about Vapor Distilled, and connect with you? And for, you know, potential investors or people that are interested in buying oil from you, how can they reach out to you and find out more?
Russell: So I would really love customers to reach out to us more than anything. But yeah, so our website is vapordistilled.com. And you can also email us at [email protected] So both of those are good ways to get to us.
Matthew: Great. Well, Russell, thanks so much for coming on the show. This is really educational and it’s really fascinating what you’re doing here. I’ll be curious to see how fast this grows and how much it’s adopted. But I’ve definitely enjoyed the samples you sent me. So thank you for that, and I wish you well in 2019.
Russell: Well, thank you, Matthew. And I know it’s getting a little late, but Happy New Year.
Matthew: Happy New Year.
Russell: Let’s all make it a good one.
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