Unhidden: Trace – Speaking Truth To Flower
In this episode of Unhidden, we speak with Joshua Decatur, CEO of Trace, a sponsor of Hemp Fest 2019, and a company which uses secure blockchain technology to track and verify hemp products from seed to shelf.
Read the transcript below.
Kathryn Blume: You haven’t arrived at Unhidden produced by Heady Vermont. We’re about bringing cannabis – in all its forms – out of the dark ages of prohibition, and into the light of a world which can definitely use some help from this awesome plant. I’m your host, Kathryn Blume.
When the average person thinks about legal cannabis, they probably think, mostly, about how great it is that cannabis is legal in whatever form it’s illegal for wherever they are. In all likelihood, they’re not thinking about verifiable supply chains, accurate testing results and bullet proof data security.
These are genuine issues, though, for the industry and Joshua Decatur, and his team at Trace, have developed what’s basically a private software ledger using, among other things, block chain technology, allowing each step of the commercial process from seed to shelf to be accurately recorded and secured. Now while all of that might all sound a little technical the Trace business model is grounded in what Decatur calls the activist ethos, thereby allowing business owners, as Decatur is fond of saying, to speak truth to flower. So Joshua Decatur…
Joshua Decatur: Yes, my name is Joshua Decatur. I’m the CEO and co-founder of Trace. I’m from South Hero, Vermont originally and I got here by growing weed. I’ve ran hemp farms and medical caregiver grows here as well as large recreational grows in Northern California – Grass Valley area. And in that time, experienced a lot of the core issues at the heart of the industry: scaling and growing. And also saw movements going away from small sustainable farms like the ones I started and worked at. So started Trace with the help of Paul Linthilac, my friend and co-founder to address some of those issues at their core.
Kathryn Blume: So, can you define those issues in a little more detail?
Joshua Decatur: Yeah. So, one of the key problems for us on the farm in Northern California was figuring out how to compliantly do business and sell our product in the face of a lot of new systems and rules that were being put in place. There was a lot of opacity around what those rules were, do we need child safe packaging or not. There was a lot of things like that. There’s also a lot of difficulty using systems like metric to stay compliant, and a lot of those were designed without growers or the growing process in mind.
Kathryn Blume: Who is responsible? Is that the legislature or—
Joshua Decatur: I don’t know if there’s any one party that’s responsible. So, when Colorado legalized the justification, the legal grounding for their legalization was in a court case called Reich v. Gonzales, which said the right of states to establish a recreational cannabis market – or medical market – was grounded in the ability to keep that product in state, so it was— I think the real decision said that the right of the federal government to interfere in any states came from the fact that some of that product could find their way across state lines. So, the inverse of that is if it doesn’t cross state lines, the federal government has no right to intervene.
Kathryn Blume: And is that a state’s right thing or is that—
Joshua Decatur: It’s a state’s right thing, and it was also, I think, just the decision. I’m not a lawyer but I think just that decision set that precedent for justification for intervening in state markets from the federal government’s perspective.
So, Colorado needed the system that would show to their knowledge a gram by gram accounting of all the cannabis being sold over the shelves in order to protect themselves from federal interference in that state market. So, they put in place a system called metric which was offshoot of a company called Franwell which made RFID chips which saw a great opportunity to sell more RFID chips.
Kathryn Blume: And for people who don’t know what those are.
Joshua Decatur: RFID chips are like little signal emitting chips that can be scanned and their signal can be reprogrammed but they can be secured and stuff like that and—
Kathryn Blume: And how are those commonly used?
Joshua Decatur: Most states that use metrics, you have to put one on every single plant. Which as farmers know especially in hemp, it’s not reasonable to do that. You’re in a field, if you’re spreading seed, you don’t do plant by plant accounting, it’s crazy.
So, the other issue at the core of that was any opportunity to increase costs of doing business in the face of regulations was taken by larger companies that saw that as an ability to earn— an advantage of theirs to be able to weather those costs better than smaller less funded organizations and farmers and processors and blah, blah, blah. So, all around bad for small business.
Kathryn Blume: And was that done with the intention of putting those guys out of business or—
Joshua Decatur: Not necessarily. They were def— Everyone is opportunistic. There are opportunists lurking everywhere. But I think what started as something that was required in order to justify the legality of early markets is, and has, turned into something that doesn’t really fit where the market is at and that is too — it’s honestly cost prohibitive for a lot of the scaling that needs to happen.
And at the same time, there’s a lot of really important issues that product tracking and supply chain logistics tools need to solve. People, consumers need to know where their product comes from. People who are growing higher quality need to be able to have data sets that they can put around their products that demonstrate why it’s higher quality and why it’s worth the higher price.
So, it’s not like this is that total odds with the goals of the industry trying to get a complete chain of custody for product and understand what product is and where it comes from. All responsible actors, I would think, want to have some sort of knowledge around that product, especially if you’re a business that’s buying and selling products.
So really, we had a farm, we sold under a label, but we would run out of our own product at certain points of the year and have to buy from other farms. This was really costly and inefficient because we didn’t have access to a shared data set between the regulators and the industry that allowed us to really easily know what we were buying and know who we were working with, and not have to worry about any liability we were assuming because of the product that we were putting our label on.
It’s a really fundamental issue to the market as a whole not necessarily just a compliance issue. Obviously, government regulators are part of this industry the same way that consumers are, the same way that people who make the lights and hydro systems are. So, they need to be part of the conversation and included in generating and verifying data about products and products themselves.
Kathryn Blume: So, describe what it is that Trace is doing.
Joshua Decatur: So, Trace is a verified exchange, so that part of our company focuses on connecting buyers and sellers and us staying as out of the way as possible in that.
And then, we have supply chain tracking tools where people declare what they’re growing, connect with a verified network of test facilities, processors, eventually distributors.
And then, we have regulatory component where that same supply chain and exchange data set is able to supplant the traditional seed to sale tracking data set used by government. So, we’re kind of reimagining how people can get on the same page about what product is, where it comes from, and how much it’s worth – which are all connected to the same exact data points.
Kathryn Blume: So, let’s say— describe what this looks like on the grants. I’m say a grower and at what point do I engage you in the process?
Joshua Decatur: So, when you get your permit, your permit credentials are used to log into the application. This is in a fully-fledged Trace universe. We’ll be rolling out in stages. And then, using the IOS application, you declare your plots of your grow, your batches. We call them lots, so that would be represented by one strain, one harvest where you would eventually apply one chemical test result to, and that’s where it starts. And then, you mark a very basic set of information about it; the date you planted it, whether you’re growing from cedar clone, what strain you’re growing.
All these things, you put that in the application. And then, when it comes time to test, you use the application to connect to verify the network of test facilities. You declare a sample, you package the sample, you send it to a test facility, you get your test results immediately in application when they’re done, and then you can share that product information to processors or to distributors or directly to your consumer if you’re just selling your product as is without doing any processing or anything like that. Maybe you’re selling pre-rolls or just CBD flower or something.
So, it’s really the way you use Trace is really different depending on what type of business you are, and depending on what type of product you’re making. So, that’s part of the strength of the software is that it’s flexible and that doesn’t get in the way of any business process that anyone has to do, but it allows you to choose a verifiable route to market for your product.
Kathryn Blume: And is this a proprietary software that you guys have developed?
Joshua Decatur: Yes, we’ve been on the cutting edge of decentralized technologies building the software. That means that we use a combination of block chain and other decentralized technologies to make it so that data is exceptionally secure, exceptional accessible, and that there is granular security in permissions around who can access what when, so that we keep sort of our privacy and security as bulletproof as possible for our users.
Kathryn Blume: And is that really the marketable strength of what you’re doing? Is that it’s that secure and that specific?
Joshua Decatur: I’d say that that’s one of them. I think our design, and just the implementation of the software is also really noteworthy. And also just core functionalities and features that other software platforms don’t have that are really specific to the business needs of the hemp market specifically right now. So, yeah, it’s a number of things but that data security and that privacy is really unparalleled.
Kathryn Blume: And are you the only guys in the field – or what do your competitors look like?
Joshua Decatur: You know, with the focus on hemp for this type of software, there aren’t many other hemp-focused competitors out there. I think there’s people starting to catch on and but we have over 18 months and over a million dollars spent developing the software. So, we’re kind of in a different league in terms of how it feels to use the software and what it’s able to accomplish and achieve. We’ve been going step by step with a lot of intention along the way, interviewing people constantly. I have a lot of experience in the market but my experience can be very different than someone else’s.
So, we really preserve a design ethic that starts with listening to our users and listening to people in the supply chain, and then building things to fit their needs really specifically. So because of that process, because of our background, because of the team we assembled, because of the really specific hemp focus right now, there’s really not a ton of comparisons to be made out there.
Kathryn Blume: And is the intention to be able to expand into recreational, personal use, THC, medical?
Joshua Decatur: Definitely. I mean, I think we want to expand and apply the software and the capabilities we’ve built to a lot of things. People have the same questions about their CBD and their hemp that they have about food, that they have about their clothing that they’re wearing. I mean there is really an endless list of applications to bring an application that provides better transparency to consumers, and more efficiency to businesses that are operating in a socially responsible way.
Kathryn Blume: So, you see yourself being able to expand beyond hemp?
Joshua Decatur: Yeah, eventually. We’re starting small, and we need to start small and we need to start applied, and hemp is really a supply chain, and I think in most need of the type of software that we’ve built, if you stack it up against a lot of other industries out there. Also it’s just where we have the most expertise. Yes, we hope that other industries learn from what we’re doing whether that’s us or not, who knows? We’re going to solve this problem first and go from there.
There are a lot of lessons to learn from the challenges that the hemp industry is trying to tackle right now because a lot of those problems haven’t necessarily been solved in other industries. They’ve just been glazed over, or overcomplicated to the point where there’s a lot of confusion and we’re trying to cut through that from the start with hemp.
Kathryn Blume: So, when you were putting the company together, did you know who all the members of your team were going to be or were you—
Joshua Decatur: No, definitely not. No, not at all and it just kind of happened naturally. Starting a business is a lot of parallels to be drawn from— for me, it kind of felt like casting a play or something like that. But yeah, we’re really trying to build a company where people can be innovative, people can apply their skill sets to really fundamental problems, make as much of a creative space as possible for technical work to be happening in, and that happens over time.
But really grateful for the team that we have right now. It’s been a real blessing to me and a lot of other people I know in the company who are here since the beginning that we got so lucky meeting the people that we did and bringing the people on board that we have.
Kathryn Blume: Was it hard to get startup funding?
Joshua Decatur: Yeah, for sure, very difficult. It started with Paul and I taking a huge personal risk with a personal investment in the project. We both put a lot on the line to get the ball rolling. We started to see some results from that right off the jump. And once we had a physical product -software you could look at, that people could interact with – it became much more obvious what the potential was for what we were building, and then it started to roll from there.
So, it’s definitely not easy. It took early risks, and I’ve been through my fair share of failures before this project and I’m sure have failures to come, so it’s really just about trying to be creative about how you get things done and bring people together. And sometimes, it’s not about money, sometimes it’s about belief in and sweat equity and having people to really see how cool a project could be if it’s brought to life.
That’s how it works. Things like this in general whether it’s running a farm or running a tech company, it takes everyone and a lot of people to be involved, applied, excited, and thinking really deeply about all the different elements that go into it. Each little bubble within the company is the universe unto itself. I don’t know if that’s an answer but there’s really not—
Like from my experience doing this, and from talking to other people, and from past experiences, I don’t think there’s one narrative that fits every single startup or every single company or every single farm. It’s always— you have to look at what you have immediately around you and go from there.
Kathryn Blume: When you get pushback, when you are confronting the naysayers, what kinds of questions are they bringing up?
Joshua Decatur: We haven’t had too much pushback. I mean the pushback we’ve gotten is mostly, I’d say, like, people have privacy concerns about what’s going on with their data. We only collect data that you would be sharing with people you’re doing business with anyway. And then, in terms of who has access to it, it’s only you and the people you share that file with. So, like, we really primarily listened to people in building the software, and I think that’s created a more collaborative community and our users and the company itself – which is great. But that’s been one of the main areas of pushback.
Kathryn Blume: And have you had any trouble getting financial services or even finding a landlord who would host you given the fact that you’re in the cannabis industry?
Joshua Decatur: Really lucky with landlords. You know, we’re in the Karma Birdhouse. They’ve been very supportive from day one. For us, it’s been a perfect place to grow the company when it comes to— Sorry, what was the other thing you were saying?
Kathryn Blume: Banking, insurance.
Joshua Decatur: We’ve had problems with banking. Even as someone who doesn’t actually— You know, we own a permit holder. We’re an affiliate but like even still an institution that will go unnamed rejected us very early on the process. But yeah, we’ve found great people since then. VSECU has been wonderful for us, and very supportive of the local industry broadly.
But yeah, you just got to fight through all those things. All that stuff people will just throw wrenches in your gears, and you’ve got to figure out what gear they’re in and rip it out, keep the train rolling. I’d say we’ve had some pushback from people against the whole concept of having some sort of tracking or chain of custody information or stuff like that, which I understand.
Kathryn Blume: Is that from the old school growers who like to keep things in the woods?
Joshua Decatur: Look, I’m an old school grower who likes to keep things in the woods. But at the same time, you can’t ignore the motion of the tides and the reality is hemp is federally legal now. It’s moving forward. People are cutting corners, making bets, inferior products. And those backwoods kind of guys, from my experience – or gals – grow superior products.
So, this chain of custodies and real classification of product and understanding of quality levels within hemp, and within hemp extracts, from my perspective is to help companies so that they can compete, smaller companies that are maybe family run or individually run so that they can compete against large scale agribusiness in Kentucky and other states that are going to hopefully be making isolate cheaper, but hopefully just that [chuckles]. So, that’s kind of the perspective we have here, and I think that’s largely been shared by a lot of the hemp community.
Kathryn Blume: So, as someone who’s been in the cannabis industry in many different forms, in different states, in different stages of legalization, how do you see cannabis legalization, culture, business progressing overall? Are you hopeful or do you feel like it’s going to get undermined by big business and it’s just going to—
Joshua Decatur: Well, I’m an optimist, so I’m generally hopeful in life. But it definitely hasn’t gone perfectly and there has to be concerted efforts by people to make their voices heard around what they envision for the future of cannabis as a product; capital C, cannabis, hemp included there. There has to be real focus on social justice issues at the heart of the cannabis product itself. It’s obviously been used as a tool for the war on drugs to primarily imprison black and brown people for the same exact types of behavior that non-black and brown people were doing, but those folks were incarcerated at much lower rates.
These things can’t be ignored. They have to be addressed in rules and legislation. That’s our stance as a company and my stance personally to be supportive of things like that and then the industry focus on economic development and social justice as policy is written. But that’s about the community really coming together and rising up and demanding that.
Kathryn Blume: Any other questions that the average person might have about what you’re up to that I haven’t asked you? We don’t need to get into details of how block chain works. And then a miracle occurs…
Joshua Decatur: I’d just say digital pen instead a digital pencil. If you want any more detail than that, send us an e-mail. We would be happy to get into it. But I think as a company, I feel really lucky that we are able to work in hemp as a tech company working on a cutting-edge software. I feel like there is a cultural shift that’s happening in the world broadly, and our company has a huge role to play, borrowing from the culture around hemp and cannabis to start to change the paradigm in things like tech which are obviously impacting every sector right now.
So, I would say that yes, we are a tech company working in hemp. As far as our vision for the company, for the types of software we’re building, for how we can use it to effect change in the world. It really borrows a lot from the activist spirit at the heart of cannabis and hemp more broadly. If there’s anything anyone should know about our company culture and our world view, I think it’s probably that.
Kathryn Blume: Beautiful, thank you so much.
Joshua Decatur: Yeah, for sure.
Kathryn Blume: And that my friends is it for this episode on Unhidden. I’m your host, Kathryn Blume. Thanks to the whole team at Heady Vermont; Erin Doble, Monica Donovan, Christina Hall, Kelly McDowell, Karen Santorello, and our canine overlords Oso and Luna. Thanks also to Joshua Decatur and the whole team at Trace, and to West End Blend for our vivacious theme song.
You can find Heady Vermont on Facebook, Instagram, Twitter, YouTube, iTunes and headyvermont.com. Look for the Unhidden Podcast at Sound Cloud, iTunes and wherever fine podcasts are sold. We’ll see you next time.