Pubdate: Sun, 13 Apr 2014
Source: Denver Post (CO)
Page: 1B
Copyright: 2014 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: Eric Gorski

BUDS AND STRAINS

Siblings Behind Thriving Marijuana Business Share a Strong Bond - but
Clashing Opinions on Direction and Dollars Weigh on Them

Sitting at a conference table in his accountant's office, Andy
Williams has a number in mind: $11.5 million.

That, he says, is what it would take for him to sell his stake in the
marijuana business he and his brother started from nothing.

Williams says he would be happy to walk away from Medicine Man if it
meant lifetime financial security and a chance to pursue his next
dream: starting a drum company.

This mid-February meeting was a strategy session for the family behind
Medicine Man, an opportunity to take stock and define goals six weeks
after the first recreational marijuana sales in Colorado.

One chair was conspicuously empty. The other primary owner - Williams'
younger brother, Pete-was unable to attend.

He was with a film crew shooting footage for a proposed reality show
starring Medicine Man, helping orchestrate scenes including one in
which he walks in on a joint-rolling contest and feigns surprise.

There are other, more complicated reasons behind Pete's
absence.

The family bonds that hold Medicine Man together and make it
successful can also be strained, almost to the point of snapping.

The next big thing

Pete Williams, 43, is the mad scientist grower behind Medicine Man, a
high school dropout who likes to stage stoner salons by the living
room fireplace with his posse, dreaming up the next big thing while
smoking one Marlboro Light after another.

He describes himself as someone who gets along with almost everyone,
gives a lot of his money away and compulsively tells the truth. He
says he earned the equivalent of a college degree listening to books
on tape - from the Bible to"Moby-Dick"- while delivering pizzas or
driving railroad parts and beauty supplies all over the West.

"I always try to think best case and not dwell on what could happen,"
Pete says. "I think that helps things go right more often than wrong."

His free-spiritedness can clash with relatives who work at Medicine
Man. That especially applies to his play-it-safe older sister, Sally
Vander Veer. To a lesser degree, it's true with Andy, whose past as a
corporate project manager slightly tempered his attraction to risk.

Case in point is the reality show - Pete's most recent
obsession.

Many reality-show producers have approached Medicine
Man.

"It's invaluable advertising," Pete says. "My whole goal was to make
the Medicine Man name the top name, like a Pepsi or Coke of marijuana.
The TV show is a good springboard for that." His siblings view it
differently. "We have worked so hard on building a reputation as a
serious business," Andy says. "I think TV shows are there to build you
up and then tear you down."

Pete acknowledges the risks. And the family learned of them through an
earlier brush with reality-show realities.

Last year, a video clip for a would-be Medicine Man TV program showed
Pete's daughter, Kala, saying she has smoked since she was 13. The
footage wound up in an anti-marijuana campaign.

It was not the kind of exposure Medicine Man was after.

Despite being burned before, Medicine Man reached an agreement with a
producer of the Fox show "24" to put together a "sizzle reel," a short
clip to shop the concept to networks.

The caveat that satisfied the skeptical Andy and Sally: Medicine Man
had final editing say on the promo. A few scenes were removed as a
result, but the five minute reel still did not ease Sally's concerns.

In it, Medicine Man employees take turns naming marijuana strains
after themselves. Pete stages a sword fight in a grow room with his
22-year-old son, Ryan, who is wearing a large costume panda head he
wears out to clubs. Ryan suffered a broken tooth in the
altercation.

"It's reminiscent of nothing we do at Medicine Man," says Sally, who
started working as controller last year. "Here we are trying to
legitimize a business, say it's not a bunch of stoners, and this comes
along and shows everyone stoned all the time? It's not the truth. My
brother, he doesn't understand business."

These differences help explain why Pete didn't attend the February
strategy meeting. He says his presence would have resulted in a family
fight he didn't want to have.

"I don't think she should have been at that meeting," he says of
Sally. "She is family, but she hasn't been there since the beginning."

Marijuana experiment

By several measures, Colorado's great marijuana experiment is being
very good to the Williams family.

Medicine Man earned $4.4 million in revenue last year when it sold
only medical marijuana, Andy Williams says.

In January alone, Medicine Man brought in $1 million, and then
$750,000 each in February and March, Andy says. He projects revenues
of between $10 million and $12 million in 2014.

That does not mean the owners - Andy and Pete, who each own 40
percent, and their mother, who controls the remaining 20 percent but
is not heavily involved in decision-making- are striking it rich.

Like many new business owners, the Williamses say they are
reinvesting, putting their own earnings and investors' money into an
ongoing $2.6 million expansion of the grow and retail store.

The last few weeks have brought other opportunities, including
starting a long-planned business consulting and working with other
companies seeking medical marijuana licenses in other states.

The spinoff company is called Medicine Man Technologies.

This is Andy's project, his reality show.

The business is selling not just experience in growing and selling
weed but also hope - the idea that by putting Medicine Man's
credentials on a license application, it will be a difference-maker in
states that are restricting the number of licenses. The unexpected
happened, too. One day in early January in the Medicine Man parking
lot, a man walked up to Pete, shared some of his business background
and expressed interest in getting involved in the Colorado marijuana
industry, according to Pete.

The businessman was Robert Ehrlich, a former commodities trader who
founded Robert's American Gourmet Food, manufacturer of Pirate Brands
snacks. The company was purchased last year for about $195 million in
cash.

At first, Pete says he told Ehrlich there weren't any Medicine Man
shares available. But as he got to thinking about the disagreements
within his family about the direction of the company, he began to see
Ehrlich as a potential ally and a business partner.

For Pete, the future of Medicine Man hinges not just on exposure from
the reality show but on a whole package of aggressive moves.

He wants to manufacture edible-marijuana products. He also wants to
open social clubs where people can hang out and smoke weed, a
challenge given that state law prohibits pot smoking in most venues.

And he envisions a marijuana theme park for adults called New
Amsterdam.

His brother is more interested in getting the consulting and licensing
company off the ground, completing the building expansion and breaking
ground on a greenhouse grow, considered to be the next frontier for
marijuana production in Colorado.

Pete also strongly supports branching into greenhouses. Sally is more
reluctant.

"Would you sell out?"

The conversation that followed Pete's parking-lot introduction to the
creator of such items as Pirate's Booty baked rice and corn puffs went
something like this:

"I don't want you to be offended," Pete said, "but would you sell
out?"

"Yeah," replied Andy. "For the right number, I'll sell
out."

The number in Andy Williams' head started becoming real to
him.

He valued the company at $28.8 million, a figure he reached by
estimating earnings for this year and multiplying that by six.

If Andy's share was worth about $11.5 million, selling out would give
him enough money to live off the interest and leave the rest to his
children, who are 3 and 9, Pete noted.

Andy was tired and worn down. He and his wife are going through a
divorce, and his health was poor. Andy says he suffered blackouts and
was hospitalized three times in recent weeks, the result of low blood
oxygen and an elevated heart rate. He has since improved.

"I think illness has a lot to do with the spirit," he says. "It just
manifests itself somehow."

Andy says he is proud of what Medicine Man has become and enjoys his
work, but it is not what defines him. He feels pulled to new
challenges, always has, and began to plan for the drum company.

"There is a little bit of vanity in me," he says. "I want to be known
as one of the pioneers in this industry. And if I got out now, it
might not be written that way. If I stayed in, maybe I would."

A conference call was arranged between prospective buyer and
seller.

 From the beginning, Andy says he was skeptical about the deal because
of Colorado's two-year residency requirements for ownership.

Brian Vicente, a Denver lawyer who co-authored Amendment 64, said his
firm has helped structure several deals for legitimate out-of-state
investment, including loans and convertible notes that transfer
ownership once residency is established.

Vicente estimates that more than one-third - and perhaps closer to a
half - of Colorado marijuana businesses have out-of-state investors.

The conference call did not go well.

In Pete's view, Andy was too aggressive, bordering on belligerent,
essentially saying, "Here is my offer, take it or leave it."

"He was stern when he didn't need to be stern," Pete says. "Andy was a
jerk in the meeting, and I think that turned them off."

Within a few days, the deal had fallen through.

The Williamses say they are not sure exactly why. Andy says Ehrlich
"didn't blink" at the asking price, but he didn't make an offer, either.

A publicist for Ehrlich said he was out of the country and unavailable
to comment.

Andy says he understands where Pete is coming from, but doesn't think
his tone had anything to do with what happened.

"My brother thinks I'm a tyrant," Andy says. "But when it comes to
business, it's about numbers. It doesn't matter if I was a jerk or not
a jerk."

The Williams siblings agreed in advance that if the deal did not
happen, they would put their differences behind them and move on for
the well-being of Medicine Man and the family invested in it.

For Andy, that means putting his heart back into building the Costco
of weed, which was the plan all along.

For Pete, it means hoping the reality show materializes and putting
off, at least for now, some of his grander visions.

For Sally, it means continuing to watch her brothers
closely.

"I wrangle my brothers on a daily basis," she says. "They are both
looking at shiny objects all the time, and I am trying to have them
focus on what needs to be done day-to-day."

Pete concedes that he can be too trusting of others and that Andy can
be a good check on him.

But Pete also thinks he knows better than his brother that standard
business decisions don't always work when the business is marijuana.

"We have a really good family, where you can argue but you can let it
go, too," Pete says. "Very rarely will we come to a point where we
disagree so much that there is not a compromise in the middle.

"We're usually on the same main road," he says. "Every once in a
while, we want to take different branches."  
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MAP posted-by: Jo-D