Is Crowdfunding Your CBD Business The Wave Of The Future?

Money

December 30, 2019

Green Entrepreneur Staff

TruBrain makes drinks and bars packed nootropics (aka “brain food”), which contain amino acids, nutrients, and minerals that are consumed by the brain and said to directly support cognitive function. It seems only natural then that the company has plans to launch products using the hottest brain food in the high-function market: CBD. But rather than raise money through investors alone, CEO and co-founder Chris Thompson is spearheading a unique, $1 million crowdfunding campaign that will help finance this ambitious expansion by letting anyone buy an ownership stake in the company. We talked to Thompson about his company and his unorthodox fundraising approach.

Origin Story

I was at Unilever at the time, just out of business school. What I noticed: here you have all these type-A folks trying hard to get ahead, all trying to make their mark. The natural instinct for a lot of us was to put in more hours, but that didn’t work because it wasn’t a unique advantage. Too many others just like you were willing to put in the time. I concluded that the only way to get ahead-and actually enjoy life at the same time-was to be more productive in a shorter amount of time. To have more impact in fewer hours. This meant finding a way to break through mental blocks and fuel your creative output. So I tried to tweak various things like my sleep, managing stress, shutting out distractions at the office, working out at lunch. And eventually, I arrived at diet.

At Unilever, I had access to tons of research on high-function foods. I was working with the brand team at Lipton. They did the seminal research on brainwave optimization with one nootropic that is in green tea. But they essentially shelved the research because they didn’t think it was practical to use. They wouldn’t be able to communicate all of that at shelf, and consumers wouldn’t be able to digest the science even if they could.

At that point, I became fascinated with niche functional ingredients and started to research and test various high function nootropics. I was driven by the fact that big brands left such a huge opportunity for innovation by entrepreneurs. I wanted to take my CPG brand domain experience and start a brand that would bring these benefits to the masses.

My approach was to do things that I saw were weak about Unilever. I wanted to measure the quantitative impact on the brain. I wanted investments you could measure and improve upon instead of the murky branding investments of large CPG. And I wanted to bring real meaning to people’s lives, to have an emotionally relevant brand with an authentic impact.

All this brings us to current day, where our mission is to make high-function nootropics accessible.

How The Company Stands Apart In A Crowded Market

TruBrain’s approach is unique in that we are focusing only on the quantifiable cognitive benefits of cannabinoids, and we study, measure, and validate these benefits with QEEG brain wave measurement. These findings indicate that cannabinoids in combination with our Nootropics work very well by tempering anxiety and stress, which clears the way for the Nootropics to increase blood flow and oxygen to parts of the brain associated with executive function.

We believe we are the first company to come up with a commercial application for consumers that combines cannabinoids with bioactive Nootropics.

The Decision To Crowdfund

We went through StartEngine’s tech accelerator in 2013 and got to know CEO and co-founder Howard Marks very well. He basically won us over with his pitch about how equity crowdfunding is the future, how it has major advantages over only doing institutional rounds of funding with venture capital firms and the like.

So far we are loving it. This campaign focuses on turning customers into “Investomers,” which has worked very well for other companies building direct brands. We already have VCs backing us. Some have been very collaborative with TruBrain and continue to take active roles on our Board of Directors. We enjoy this institutional support. But just as we believe that the best brain food shouldn’t be reserved for only a select few, we don’t believe that only the wealthy should have the opportunity to invest in growing companies. Our loyal and passionate customer base represents a large, embedded growth opportunity. Crowdfunding helps us capitalize on that opportunity, creating an enthusiastic community of thousands of supporters. This makes our brand much more powerful than it would by simply accepting investments from institutional investors.

Challenges In The Industry

The high-function food and beverage products industry is highly saturated, fiercely competitive, and sensitive to international, national, and regional economic conditions. Many competitors in the market are larger, more established, and possess greater resources than we do. Our future success will be largely dependent on our ability to leverage our unique business model and produce innovative, high quality products and services at competitive prices.

We are tackling this challenged by not “shying away from contact” with the customer, by engaging with them and embracing their need, and by resisting the urge to hide “behind the keyboard” and shy away from the customer voice.

When a company is enjoying a period of success, you just want to savor and enjoy and feed your ego. But it’s precisely during this phase that the team has to be incubating the next wave of improvements with the customer. You have to “self scout” or run the “blue team, red team” exercise.

Knowing all these things is 5 percent of what has helped us solve this challenge, and the other 95 percent is just having the Grit (yes we think it should be capitalized) to do it even when you don’t want to.

Best Advice About The CBD Market

Just to curb the enthusiasm. A lot of CPG industry veterans think of CBD as “just another ingredient.” I think folks have to appreciate that viewpoint. CBD might be a very functional ingredient, but it still is an ingredient. It’s not magical. We see some pretty absurd notions out there in the marketplace, like a company specializing in CBD just for advertising. You wouldn’t see that for Kombucha, or Vitamin C, or caffeine, so why do it for CBD?. We think folks should, by all means, channel their passion and enthusiasm for this new industry, but also keep some sense of sobriety.

Biggest Opportunities In Cannabis

What is really interesting to our science team with respect to R&D is that, with more than eighty unique cannabinoids, and dozens of terpenes in the cannabis plant, there is so much to explore. We think CBD has tremendous cognitive potential, but it’s mechanism of action is mediated by other receptors in the brain and body. We are truly in the early stages of observing CBD’s qualitative and quantitative (EEG) impacts on brain wave states.