Editors' Note: This is the transcript version of the podcast we published last Wednesday with Kevin Nafte and Andrea Krell. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy!
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Rena Sherbill: Welcome again to the Cannabis Investing Podcast where we speak with C-level executives, scientists and law and sector experts to provide actionable investment insight and the context with which to understand the burgeoning cannabis industry. I'm your host, Rena Sherbill.
Hi, everybody. Welcome back to the show, great to have you listening. Today, I'm really happy to have on Kevin Nafte and Andrea Krell who are married co-founders of YVY Life Sciences, which is a company based out of Uruguay and it produces sustainable, high-quality cannabis using an innovative agricultural model that they talk about on this show. Uruguay is a country we haven't covered in any sort of depth on the podcast. Although we have covered Latin America in general, Uruguay obviously, as Kevin and Andrea talk about, is the first -was the first country to legalize cannabis and they did that uniquely via the recreational route as opposed to most countries and states who go online with the medical cannabis first.
So, interesting to hear from Kevin and Andrea. Andrea is Uruguayan by birth. They met in Israel. I'll let them tell that story. But Kevin used to be Head of Operations at Flow Kana, which is the largest cannabis distribution company in California. Andrea has a lot of background, founding startups, a micro finance NGO, and listening to them explain their journey, how they arrived back in Uruguay for Andrea and how they arrived to Uruguay for Kevin. It's an interesting story and how they learned about cannabis cultivation up in Humboldt County in Northern California, you know, the place that's known for growing high-quality cannabis and how they're bringing that to Uruguay and they're using this small farm model that uses sustained organic growing practices and regenerative soil. They talk more about that, great to hear a company, you know, giving back to the earth as they're growing from the earth and trying to use a sustainable model, great to hear that. They also give us an insider's perspective of what's happening in Uruguay, but also, in the broader Latin American markets in terms of the regulations there, how it's proceeding.
Somebody on their board for Facundo Garretón, who's known in any South American circles, who was a former Senator in the Argentinean government, he draws a lot of political connections. He's also on the Board at YVY, so great to talk to them about what he brings to YVY and also what it's like to be in touch with Latin American governments and see where they are in their trajectory of regulating and legalizing cannabis. And also they discuss focusing on CBD flower as a part of the requirements of growing in Uruguay as it stands now, but then, they're also pivoting into higher THC cannabis, talking about the best growing practices there.
It was great to talk to Kevin and Andrea and really fun to hear a married couple who are in business together. They were so complimentary, with an 'e', of each other in terms of how they were in the interview. I think they really might be poster children for working and partnering together in life and in business, so fun to talk to them about that also.
Also really excited about our partnership that starts with this week's podcast with Trulieve (OTCQX:TCNNF), which is a Florida-based MSO. It's a company we talk about often on the podcast. We've had Kim Rivers, the CEO on in previous - in a previous episode. Always great to hear about Trulieve hear, what they're doing and really excited that they've come on board to partner with the cannabis investing podcast, really excited to partner with such a great company and I hope you guys keep doing your due diligence on Trulieve, one of our top picks in our #modelcannabisportfolio that I tweet a lot about @canpod1.
So great to have Trulieve on board, great to have you listeners on board, great to hear from everybody, great to keep hearing from everybody. Really enjoy, as I've said before, I will continue to say it because I really do enjoy it, really enjoy building this community together and excited to keep having great voices, great visions in the cannabis field for you to listen to and discuss and dialogue and do your own research on. So great to bring you Kevin and Andrea from YVY Life Sciences today, and great to have you listening in general.
And before we begin, a brief disclaimer. Nothing on this podcast should be taken as investment advice of any sort. And in my model cannabis portfolio, I'm long Trulieve, Khiron, GrowGeneration, Curaleaf, Vireo Health and Isracann BioSciences. You can subscribe to us on Libsyn, Apple Podcasts, Spotify, Google Play and Stitcher.
Kevin and Andrea, great to have you on the Cannabis Investing Podcast. Really happy to have you. Thanks for joining us.
Kevin Nafte: Yes, likewise, thank you Rena. We're really excited to be here.
Andrea Krell: Thank you for having us.
RS: Awesome. So talk to me about how you guys got involved? I imagine you both have your own stories.
KN: Yes, yes.
RS: Talk to me about how you got involved with the cannabis industry.
KN: Sure, no worries. So we'll do it and we'll improvise our joint backgrounds. So I was born in South Africa, moved to Australia when I was 16 with my family and when I was about 21 or 22, I moved to Israel to go study a master's degree in government there, and that's where I actually met Andrea. She lived around the corner from me in Tel Aviv and our roommates. I was studying with her roommates, and yes, my time in Tel Aviv, I spent about 10 years in Tel Aviv. I was working with both the British and Australian Governments, and also, I had my own initiative like kind of - initiative, yes, online initiative for new immigrants in Tel Aviv that I worked with for a few years. And it was during that time that I met Andrea and we became pretty close. We were actually good friends for a long time before and then actually we started going out together.
AK: Yes, I also moved to Israel when I was 18 from Uruguay and studied economics. And while studying, I started our microfinance organization. I spent most of my time in Israel leading this organization and then I joined a tech startup and this is when I got the opportunity to move to California to work in the tech industry there.
KN: And so, yes, it was actually in California in San Francisco that I got involved in the cannabis industry. I'd always been like consuming cannabis in Israel and other places and obviously, where it was, you know, not legal at the time, but it always found relief, specifically with distress and anxiety and I have also an autoimmune condition that I found some good relief from cannabis there. But it wasn't until I actually came to California, I guess, which is like the mecca of cannabis and was introduced to a small startup at the time called Flow Kana and Andrea has a cousin, also from Uruguay, who had joined Flow Kana as a co-founder and CTO and he introduced us to this really interesting startup and this ecosystem of small farmers up in the Emerald Triangle in Northern California. I got to know the guys at Flow Kana, and soon enough I started working there as Head of Operations. We were a small team at the time, just seven people or so, and our core business at that time was focusing on retail delivery service.
We would buy high quality flower from the small farms up in Mendocino and Humboldt and we would deliver it directly to patients across the Bay Area. And then we started expanding, going into more B2B, so buying a lot more volume from the farms, developing a processing center up in Northern California and setting up distribution hubs across California to sell branded consumer products to dispensaries across California. And so that year and a half that I was working in California really gave me an amazing insight and introduction into the cannabis world, the cannabis business, and all the different parts of the cannabis operations with all the different complexities.
The company grew substantially while I was there. As I mentioned, we started off with about seven people and after I finished up after a year and a half, we were around 60 or 70 people, so that, you know, really gave me an insight I mean in - also into a scaling business. And after we finished up - after I finished up with Flow Kana, we decided to actually move up to Humboldt to live on one of the farms that I had developed a good relationship with and actually do a full cultivation season there learning more around the art of sustainable and organic cannabis cultivation. And at the same time, we were helping this farm and a bunch of other farms with the legalization process with this transition into the legal market. It was just before Prop 94, Prop 64, sorry my mistake, when that came out.
AK: Also while we were in the farms, I guess for me, it was like an introduction to the industry. I've heard a lot from Kevin's work, but then actually living in a farm was eye opening. I think the methodologies they had for cultivation using regenerative agriculture was super interesting and we were living off the grid, which was quite an experience. Also when we were living there, we had access to all these different strains of cannabis and, you know, me as Kevin's partner for so many years, I've always looked for alternatives for his medical condition, psoriatic arthritis. And so, one of the farmers there taught me how to do a cannabis extract and I started experimenting with different strains and were trying them on Kevin.
KN: Yes. And, you know, some of those strains were really great, some of them were super strong. And for the most part, we saw some really interesting and positive results and it was really at that point that we decided we wanted to start something together in cannabis. We'd always dreamt about starting something together something that we - where we could have a lot of social and environmental impacts. And, you know, being in California, it was tough for us to start something there just because neither of us are American citizens. So, you know, visas and starting up some things can get quite complex and also because in California, it's such a developed and saturated market already, it was kind of hard to think of something we could do that would be different to, you know, what's already out there.
So it was really at that point that we decided - I think we actually had to leave the US because we couldn't stay there anymore. Our visas had expired. And so, we said, let's go to Uruguay. I had always wanted to spend some time in Uruguay. Obviously, Andrea is originally from there. I've always wanted to learn Spanish to get to know her family and where she's from. And plus, we had the added bonus that Uruguay was the first country in the world to legalize cannabis on a national level in 2013. So about two years ago, we first came to Uruguay.
AK: Yes. I mean, for me - you know it was quite a decision. By then I've spent 15 years of my life or half my life outside Uruguay and coming back was - you know was kind of like, yes, not something that I've planned, but I always knew that Kevin wanted to try out for a few years and for me as an entrepreneur, it was quite of an opportunity to become an entrepreneur in the country where I was born and having the opportunity to start a business in such a new industry worldwide and with a advantage of being Uruguay, the first country to legalize, it was extremely interesting and challenging at the same time. So we came here, like Kevin said, about two and a half years ago and met with different companies and government agencies and we were like, yes, it seems like things are starting to pick up and so we gather a small team, we did our first cultivation like a very small greenhouse, kind of like to prove our cultivation techniques and it went really well.
So we set up the company and started a model that is based on this experience Kevin had in California working with small, sustainable organic farms and that's when everything started. Last year, we cultivated with three farms. We provided them their genetics. We also did some trainings because most of these cultivators have never cultivated cannabis before. They have cultivated different organic produce so that seemed to be a very good experience for our farmer. I mean this year, was their first year cultivating cannabis. They did very well. We got a very good quality cultivation, and so, this year, we are - we're looking to expand. We're going to be around 10 farms for next year and producing around three tons of high CBD flower.
RS: That's amazing. First of all, I love a great Tel Aviv love story, and you guys have great - you guys have perfect chemistry in how you talk - in how you have this conversation. You guys exactly know when to come in with the other person, so it sounds like you guys have a great partnership, it's great to hear. And also, I love hearing about people kind of doing their own thing in the world, you know, finding a way that makes meaning for them, but also as a way for them to create profits and to create new, I guess, synergy in the markets. So love what you guys are doing over there. I'm interested when you guys were up in Humboldt, were you bringing kind of your business backgrounds or your startup backgrounds as a way to help them kind of grow? Or were you mostly there just to kind of soak up the agricultural component of growing cannabis?
KN: Yes, I think bit of both, really. I mean, one, the main point was, we were working actually there and getting paid to help with the cultivation, so we were kind of like farm hands, I guess if you like. We were working directly with the head farmer. The farm is called Alpenglow Farms. Craig is the farmer there. He had, you know, 20, 30 years ago of experience in the industry. And so, we were literally helping him throughout the cycle right from the beginning to harvest. But at the same time, you know, I guess based on my experience with Flow Kana and our collective experience in business, we were really trying to help these farms through this legalization process, you know, as you know, coming from California as well, these farms were operating in the black market for the last 20, 30 years.
And all of a sudden having to jump through all these legalization hoops and get ready for this new industry was something that was really hard for them, especially coming from a background of working alone, never writing down anything really for fear of, you know, the DEA, FBI, helicopters coming down and finding evidence that, you know, could put them in prison. In fact, there was one of the farms we worked with, Johnny from Huckleberry Hill you know he was in - arrested and in federal prison for 10 years. So, you know, providing this kind of business administration and just professionalism already was, you know, guiding them through the process, helping them - helping with this extremely complicated process. It was crucial for them at the time and it was a great experience. We got to really understand the pain points which many of which are implicated here in Uruguay. You know, obviously the main difference is that here, Uruguay really doesn't have a traditional black market, if you like, but, you know, we still have growing pains with the regulatory issues here in Uruguay.
RS: Getting to the agricultural side for a second, what did you pick up in California that you've taken with you? And is there anything that you've kind of since learned that you've tweaked a little bit or changed a little bit in moving to Uruguay?
KN: I guess the main difference here is really the lack of cannabis cultivation knowledge on a large scale on a commercial scale. You know, the farms that we work with this year, we work with three farms, as Andrea mentioned, two of which are actually women farmers. They belong to a woman cooperatives that produced medicinal herbs for some local companies here. So they had that background of producing for, I guess kind of another company or third party. And an integral part of our model is the training inspections and quality control.
AK: I think we were really lucky that when we were in Humboldt, we started talking to a friend of my sister here in Uruguay, that was very passionate about cannabis cultivation and producing quality flowers and was following a lot of these farms. And so, we were sharing there what we were seeing in Humboldt and what we were - the practices, the organic practices we were implementing and kind of like comparing notes and that was kind of like the first step in our relationship, and basically, our cultivation model is inspiring in the things that we learned in California, especially talking about originality of their soils.
I think here in Uruguay, they are lucky to have a very rich soil. Unfortunately, in the last few years, there has been a drought and I think Uruguay is experimenting some new things, you know, like having a soil that is losing quality and there's a lot of knowledge from California because the soil up in Humboldt wasn't that good and they kept improving it and I think these are the techniques that we want to bring to Uruguay and implement and it was going to be our half, which is going to be like a central facility for our production, but also our regenerative agriculture educational center.
RS: And when you say that there was no black market in Uruguay, explain to me what that means exactly?
AK: Well, basically, they…
RS: Because there wasn't an established cannabis culture?
AK: There were no big scale black market producers. Traditionally, they would bring illegal cannabis from Paraguay that's kind of in the region, the largest illegal market producer.
RS: And so, what do you think made them be the first country to go legal? What do you think that was that inspired them to do that?
KN: I think a big part of their legalization process was around, you know, public health and safety. So, you know, the goal of trying to get the young generation of the harder drugs that were freely available and easily accessible on the street by providing, you know, decent quality and very, very affordable cannabis was their kind of way of hoping that would, you know, deter the others, incentivize them to buy this cannabis and deter them from using the other products. So, you know, Uruguay's experiments, which it was, you know, the first country in the world, they were really a pioneer with this. They implemented a recreational model first, which was, you know, obviously very different to what most countries do.
Most countries and states start off with a medicinal market, and then they go into a recreational market. With Uruguay, based on this objective that they had, they developed a recreational market where there's basically three channels or three outlets for consumers. The - and it's the only flour that's actually available here in Uruguay and it's only available to Uruguayan citizens and Uruguayan residents. So there's actually, you know, no industry for tourists. And the three main channels for - on the recreational side is you can buy the pharmacies, so the government is actually a contract. I think they work with three or four different companies right now to grow or grow in the exact same way with the exact same genetic that I think has a maximum of around 9% to 10% THC. They grow the product which is then sold back to the government, the government provides these little bags of, I think it's five grams of THC cannabis up to - like I said, up to now 9% for $6 which is available in the pharmacies where Uruguayan residents can go.
They can register their name, I think they have to put their fingerprints, and they can buy up to 40 grams of this product per month. The second way is people can be members of the club. Clubs also have up to, I think, 40 members, if I'm not mistaken, 40 or 50 members. They're allowed to grow 50 plants, sorry, 100 plants in their club, of which, I don't think there's any limit of THC, and each member who pays a monthly fee can also get up to 40 grams per month. And the third way is actually growing your own. So you can get a license, which entitles you to grow up to six flowering plants at a time and that's essentially the recreational market and it was only after this that Uruguay kind of stumbled into the fact that the huge opportunities and potential exists on the medicinal side as well.
RS: And what's the situation in terms of exporting that? Is any of it exported? Or is it all domestic?
AK: So it kind of like continues the story from where Kevin left it, you know, Uruguay kind of stumbled into this opportunity, and fortunately, the law that was passed was very broad, which allowed for the market to expand in different directions, not only their recreational, and since then, they've developed a way to get license for cultivation and extraction. But there was still a lot of unknowns and I think today, as more and more companies are producing their - they got into a problem, a structural problem of the process in which the Ministry of Health approves these production and, you know, in Uruguay, they're very strict with their quality control, especially for human consumption.
And so, we got into a point where companies have everything ready to export and they're kind of waiting to have the okay from the Ministry of Health and I guess this kind of like stopped a bit the exports although there were a few exports to, I think, Australia and Europe, if I'm not mistaken, but mostly for R&D purposes. We are in the final stages - I mean, Kevin and I helped fund the medical cannabis chamber for a medical cannabis company and together, we are kind of trying to help the government finalize the regulations that will allow for this industry to expand and that includes not only managing to export flowers for an industry that is - in many countries is gone towards a farmer grain, but also long term be able to produce supplements and other types of cannabis products.
KN: Yes. And just to add to that, so with regards to the medical industry here, when we applied for a license, we actually applied for a production license for non-psychoactive cannabis or hemp, if you like, which in Uruguay is classified as up to 1% THC. And we actually got that license through the Ministry of Agriculture and there is - as Andrea said, there is one company here that's already exported, and they exported high THC flower. They have a license from a separate government agency in the Ministry of Health.
So right now we're going through some changes in the industry where basically they're saying if you want to produce medical cannabis, you need to go through the Ministry of Health, which is the main governing agency for cannabis control in Uruguay and everybody else that wants to grow CBD, I guess if you like or hemp for non-medicinal purposes can go through the Ministry of Agriculture. And so we're right in the middle of this current change going on, and right now, this one company is the only company that's actually exported flower and we're hoping - we're hoping soon to actually get permission ourselves actually from the Ministry of Health to be able to export our CBD flowers. We just actually received our GACP certificates last week, our Good Agricultural and Collecting Practices certification, which is a requirement for many international medical cannabis markets for - to import.
RS: It's interesting that even when it's totally federally legal in the entire country, the regulations are still confusing and all over the place and you still have quite a path to navigate there. I'm used to hearing that in the states, you know, like California is notorious for having terrible, not terrible, but very complicated regulations and I always think it's because, you know, it's not federally legal, but I - they make it tough, don't they? It's not a simple business to be in.
AK: Yes. And also, I think that, you know, when - Uruguay is used to exporting. You know that's a - it's a very small country. So I think when they - from the beginning, like when we try to kind of like improve their regulation here, we're looking at the world. Usually Uruguay can go and replicate things that have done in other places in the world, I think is the first time in that - you know we're kind of like making history in that sense of regulating their market before others do. And, you know, I think in terms of like, you know, respecting certain agreements, like the World Health Organization like Uruguay really wants to prefer to move a bit slower but do things right, so we can kind of like comply with all these, say, international regulations.
KN: Yes, and I think, you know, the regulations whether it's California, Uruguay, Israel, that's always going to be the biggest barrier to entry and the biggest - the most - the biggest unknown and uncertainty, you know, especially for investors, because it really can impact on operations directly, and you know, as for us right now is its just we're uncertain as to when we're going to be able to sell our first product because we're waiting for the final approval from the Ministry of Health here in Uruguay. But I think my experience with Flow Kana and navigating those tricky regulations out there really gave us the - an understanding and insight into, you know, coming to Uruguay and just to - you know it's just part of the industry. It's just something that we have to take into account. I know that we just need to have a couple of backups and contingency plans, you know, because, you know, things might change all of a sudden, and we just read there's still a lot of unknowns. One example is also that, you know, just like the US, we actually can't use banking here in Latin America and Uruguay. None of the local banks will work with us and this is a problem that will last until most likely the US legalizes on a federal level or the Safe Bank Act comes through - passes through.
RS: That's interesting, why is that?
KN: I understand that it's because most of the banks in Latin America have certain agreements and partnerships with United States banks, specifically the Treasury, if I'm not mistaken. You know, we work in a lot of US dollars out here and I think in other places in Latin America. And so, the banks here are really afraid to risk having cannabis businesses and lose their partnerships with the US banks.
RS: I guess that's the disadvantage of being first, you know, in an industry as it's working itself out. I guess it's not a simple process in any industry when it's first beginning. So switching a minute to the growing side of things, so you guys are growing mostly CBD forward cannabis flowers, is that right?
AK: Yes. We decided to start growing CBD just because, you know, when we arrived to Uruguay, we saw that those were the first licenses that were kind of being granted and especially for our model since we work with small family farms, their requirements for growing high THC strains in terms of security are very high and costly. And so, by working with small farms it's just more feasible to do CBD cultivations. We know down the line, we're going to diversify the model starting by growing some high-THC strains ourselves and then, you know, farms that started with us at the beginning after a few years, we want to see that their economic status increases. They earn more money by adding this crop and they're able to afford some of those requirements.
RS: I know some listeners have asked this before. Talk to me about like best growing practices in terms of genetics. I know there's an issue with growing hemp and CBD side-by-side with THC flower. Can you talk to me about things that you've learned to do that the best way possible?
KN: Yes, sure. I think, you know, one thing with regards to Uruguayan genetics is there isn't a lot off-genetics here. So actually, for our first production, this last year, our first commercial production, we had to import genetics from Switzerland, which was also quite a complicated process. You know, part of - as Andrea mentioned, we also have plans to start an R&D project where we're going to test. We have a whole bunch of different strains and varieties that we bought from different parts of the world that we want to grow here and test, see which ones are stable and see how they grow here with the Uruguayan conditions. We know they're really good strains and varieties that grow really well in California and Colombia and other countries in - around the world. But, you know, we have no idea how they grow in the conditions and soil here in Uruguay.
So we're very much at the beginning phases of that. You know, as I said, this year, we're looking at getting a couple of other high CBD genetics from the United States and from Europe. And so, we still have a lot of research and a lot of experimentation to do with regards as to how they could potentially grow together with THC. I mean, based on the regulations, the licenses, we'll have to keep those cultivations completely separate. First we'll have a CBD cultivation here and then in a different part of property that's completely enclosed and, you know, with full security, we'll have the THC cultivation. So, you know, but as I mentioned, yes, we still have a long way to go in terms of the R&D with regards to genetics, and specifically here in Uruguay, and I think that's something that the government also really wants to invest more in.
Actually, at the end of last year, they just passed a law to try and facilitate and encourage a lot more R&D. And obviously, Uruguay is quite a strong player with regards to agriculture and I think that's where they see themselves adding the most value is really in the R&D process because they know that they - you know they won't be able to compete so well with other countries like Colombia that can grow probably, you know, a lot more and a lot more cheaply than just Uruguay. So the R&D is something both we want to do as a company and also as a country. I think that it wants to be a lot more investment there.
RS: So talk to me about where you guys see YVY's place in this ecosystem. I know it sounds like it's still being figured out with all the regulations that are coming about, but I guess within the next year, a couple years and then a few years out, where do you guys see yourselves in the market?
AK: I think from the beginning, because of the big impact that working and living in those farms in California had on us and being social entrepreneurs, we care a lot about the social and environmental impact of YVY. And from the beginning, we envision developing a brand. We think the future of the cannabis industry is in brands, and for us, developing a sustainable medical cannabis brand with final products that will be mostly targeting the wellness industry that's kind of how we would like to position ourselves.
KN: Yes. So we want to focus mainly on the cultivation side. So we're currently developing this model of small - a network of small standardized and sustainable farms, which essentially we'd like to replicate and export to other countries across Latin America and potentially in other continents later on, you know, where we can grow also, you know, for example, in Colombia or Peru, we can grow quite a few more cycles per year, and in opposite seasons as to what we're currently growing in Uruguay. So we're really focusing on the cultivation because, as Andrea said, we want to build a brand. And the essence of that brand that we want to create is based on our cultivation practices in this unique cultivation model that we're doing all around organic regenerative agriculture, small farms, and high quality.
So we'll focus on the cultivation and the final products, the brands in the end. In the middle, we're going to be looking for partners that can help us, you know, with the extractions, with the product formulations in key markets, for example in Brazil or where we currently talk to some people in Australia, you know, look at white labeling partnerships to get those products done, but to always have the final products with the YVY brand that, you know, connects directly to our cultivation model.
RS: And how has COVID affected things?
AK: Well, I think, you know, we were about to start harvesting when we had the first few cases here in Uruguay and we were kind of lucky because we had already purchased all the protection that we needed in order to harvest following the GACP certification. So we all had to wear these funny suits and hats and masks and gloves. And so we had everything purchased. And then I think we were lacking staff to help us with the harvest, and with COVID, a lot of people were not being able to work. My sister is actually an artist and she like within days recruited a group of 20 artists, all fully suited with masks and gloves ready to go. So we were really lucky in that sense and kind of like, yes, we were already aligned with all the protection that was required at the time.
KN: Yes, yes. I mean, as Andrea mentioned, I think, you know, a lot of things could have gone wrong, especially with COVID. But really - we were really fortunate in that. We managed to find this group of people that were unemployed and, you know, we obviously kept the protocols, the safety protocols of COVID. You know most of that team was working from home for that period. But, you know, for the large part, we actually had to be in the field harvesting, and so just wearing all our protective gear. So it was also really great to be out in the countryside and, you know, with all the cannabis plants, when all this craziness was going on in the cities and, you know, we had to be stuck inside. So I think we were really fortunate there.
RS: Nice, nice. Glad to hear that. Talk to me about Facundo Garretón coming on board and how much that helps you in terms of, I guess, navigating the regulatory space or how else he benefits YVY.
KN: Yes, sure. I think we were really fortunate to find Facu. We actually had an experience with some previous investors that didn't go very well, that left us in a really precarious situation, you know, kind of in - we were in survival mode for a long time. And then, we met Facundo just through some introductions through some people here, some other fellow entrepreneurs, and, you know, we clicked straight away with him. I think we met with him once and we really felt a great connection with him especially finding someone that has this combination of, you know, government experience, him being a National Senator for Tucumán for the Argentine Government for the last five years. He's an entrepreneur. He founded one of the first Fintech startups in Latin America in the 90s and he's also very involved with social impact. You know, so finding someone that we completely align with in so many ways was great for us. And he's been fantastic.
I mean, he led the first round that we just did. He brought on also a bunch of different investors from - mostly from Argentina, that all come from very specific industry sectors that can all provide a lot of value to YVY such as, you know, pharma, technology, agro, strategy, regulations, health, etcetera. We're actually in the final stages of finalizing our advisory board with these, what he likes to call, smart money investors.
And he's great; he's a very active investor. You know, even before I think we signed an agreement with him, he had already done so much, you know, with us and so much - he helped us so much. He also has a really big vision, a very strategic vision, you know, he just thinks more on a regional level and, you know, he's already starting to think how we can become, you know, one of the biggest companies in Latin America. So it's great to have someone like that, someone that's also an entrepreneur, and not just an investor. We can really confide in him and ask him advice, and, you know, he thinks the same way as us.
And what's really interesting is that he sees this project as kind of like - with a lot of parallels to his first project when he founded that project in the 90s, very similar situation. You know we had the dot com bubble you know late there and, you know, most of his competitors kind of died and his company was able to survive and flourish. And he also had to deal with all these crazy regulations. The world just, you know, wasn't ready for the Internet back then. And so, he sees a lot of parallels with cannabis, with what we're doing and with what he did back then. And yes, we're really appreciative and really grateful to have him on our team.
RS: Yes, I think he's not alone in that feeling in terms of the comparison between the dot-com bubble and what's happening with the cannabis industry now.
KN: Right.
RS: In terms of raising capital, especially with I mean, I know it's difficult to raise capital in the best of circumstances for a cannabis company, but even within COVID, so you guys are - you feel like you're in a good place in terms of where you are in terms of capitalization and your path to, I guess, profitability?
AK: Yes, I think complementing what Kevin said before, we were really lucky to meet Facu before this happened and, you know, throughout COVID and we were trying to close the round. He kept supporting us and he understood also all the problems we were having in terms of regulation because of his experience in the 90s. And I think he - with his previous business experience and investment, I think there's a lot of people out there, very smart people that trust him and really believe on, you know, entering this space with all the uncertainty because he wanted to be involved in this project.
So in that sense, I think, you know, closing around in the middle of COVID would have been impossible, you know, if it wasn't with him and I think that put us in a position where we can continue with our business plan as planned and we don't see any delays on reaching our goals.
RS: And when you reach out to these small farms to partner with, is everybody kind of excited to come on board? Are any of them reluctant to come on board?
AK: Well, I think at the beginning, when we first went out and looked for farms that were very reluctant, they didn't know there was such an industry as medical cannabis. They only knew about the recreational side of the plant, and so they were a bit suspicious. But I think we've come a long way since then in the last two years. This industry has become more like more mainstream here, more known for all farmers and is seen as an opportunity. And so, especially now with the economic situation after COVID I think a lot of the farms are willing to jump into the opportunity to diversify their crops and add on a crop that promises a lot.
RS: So how do you decide who to partner with?
KN: So we have a - we've developed now kind of a structured plan around - and selection process, you know, choosing farms. So we actually - recently we're about to close the 10 new farms that we have for this next year. And basically what we did was we - you know we put on our websites some information about us, about our model and where we asked interested farms to fill out a form, a Google form online. We have an expert's agronomic team that goes through all the applications and identify farms that would be really suitable for our model and we have certain requirements. You know, obviously, you know, having - not having used agro chemicals or pesticides for the last four years that have certain minimum amounts of infrastructure.
We also look at the profile of the farmers, you know, in terms of their - the potential discipline they can have because we know that this - it's not like growing other crops and they need to be really active in terms of, you know, following out exactly how we say it needs to happen and, you know, what products - what is, I can't think of the word in English, I guess inputs, yes, to use for their production, you know, making sure they record all the details daily because this is crucial for our GACP certificates. So, you know, we're still very much developing this model, but really this year, it gave us a really good - well, this - the previous year I should say, gave us really good insights and it was kind of like a pilots where we were able to also test a lot of our assumptions and collect a lot of data, which has now enabled us to kind of roll-out this new - this model this year.
AK: Yes, I think after this last harvest it is easier to, you know, visit a farm and say, okay, will this farm comply if the auditors would come to certify as a [GACP] and then from there it's kind of easier to decide which farms to take on board. But, yes, we did [open] an online form where farmers can put all the details under agricultural practices and I think what's going to be a challenge in the coming years is to get more farmers online and start using a mobile application for them to record all the details of their cultivation, which we think that - you know it's easier to stay on paper for farmers, but I think it's good to train them to start using more technology.
KN: Yes. And just following that, I mean in terms of our model, if we're going to - you know if we want to export and replicate it and maintain some sort of standardization between all the farms, it's essential that we use technology and, you know, sensors throughout the process and that's our agronomic team is able to have real time access to data points as to what is, you know, going on at different moments in the cycle of the plants.
RS: And is there a anything - or I mean I imagine there's something that surprised you from the first harvest that you've taken away with - that you've taken away from it, can you give us an example or two of that?
KN: Yes, sure. I think, you know, the first harvest we actually did was, as Andrea mentioned before, it was really just a pilot to kind of prove the concept and go through the motions and for our team to learn as much as possible. I think in that first harvest actually the genetics that we were able to get were more like industrial hemp genetics. And so, you know, we kind of grew these long, thin, skinny little plants that produced a lot of seeds and really we couldn't do anything with it afterwards. You know so we knew that we had to focus on genetics that would, you know, more like cannabis in the sense that they grow terpene rich, you know, to kind of CBD flowers and that's, you know, we learned a lot from that even just finding reliable and reputable genetics providers throughout the world is something that we - you know it's super complicated and we learned a lot about that and how to kind of identify these people.
RS: Given your guys' experience, do you feel like the best cannabis is grown outdoors on smaller farms?
KN: Yes, for sure. Based on my experience in California, and definitely, I think, you know, the plants that are grown outdoors, you know, full terpene profile, that they're directly under the sun that are grown in high quality living soils, you know, there's no substitute to it and as well as in small batches. You know it's impossible to have that attention to detail and that quality when you're growing extensive, you know, huge amounts of just the same - you know same genetic. You know, for us, it's crucial to grow the product in a - in its natural ecosystem where we're contributing, you know, to the ecosystem around it and trying to build a full circle, I guess, if you like, a full loop.
RS: So YVY is - do you guys have any plans to like go public or anything?
KN: No, not quite yet. You know, where I guess, our experiences talks us to, you know, kind of keep it lean, keep it simple, until we figure out the basics, until we perfected the models, until we have, you know, a substantial income and revenue coming in. And then potentially we'd look at, you know, an IPO. I mean, we're open to different scenarios that really - you know we're in this for the long term. You know, we didn't quite agree with the approach that many companies took going directly to the capital markets straight away without even having, you know, one plant in the ground that - you know and their value basically as a result of their speculative future agreements. For us, you know, we wanted to build something that, you know, is actually tangible, that has legs on the ground, that has plants, you know, a team that has revenues, you know, and then start looking at potential partnerships, strategic partnerships in, you know, different parts of the region. And perhaps later on, we'd look at some sort of IPO.
RS: Yes, something we talk about a lot on the podcast is how, you know, the companies that had the flashy press releases and the exciting deals announced and all these like huge numbers in front of them, a lot of them are gone. You know, they're definitely not the leaders in the space anymore.
KN: Right.
RS: So we talk a lot about how you have to be lean and smart and responsible protectors of capital before you can excite more and more investors I think. So I guess you guys already learned that lesson.
KN: Yes, yes, for sure. And I think, you know, just to add to that something that our model allows us to do because of the uniqueness of it of outsourcing the small farms, we really don't have the capital expenditure, the CapEx that most companies do. You know, we have really - we haven't spent anything on our own facilities and we already have, as I said, you know, over 300 kilos of production, so that sense kind of like this type of model, you know, where we kind of outsource everything as opposed to doing everything vertically integrated was something that was really important to us to keep as lean as possible.
RS: So the plan is when do you think... or you're waiting on more regulations to come through in terms of when you guys will be selling your first products?
AK: I think in the next few weeks, we are really going to see. I think the new government that started on March actually with COVID quickly understood that this - the situation of the companies at the moment is pretty critical and we're working directly with the Presidency here in Uruguay to fix the regulation and be able to start exporting. So I think next month sometime we'll be able to export.
RS: Very cool. So you guys are in direct contact with the government?
AK: Yes.
KN: Yes, we spend a lot of our time on government relations and lobbying. That's a massive part of, I guess, the industry everywhere with the complicated regulations, and Uruguay is a small country. So, you know, it kind of - it's not that hard to access and get direct access to key people, key decision makers here.
RS: And then, talking about like Latin America in general, you know, we hear a lot about Mexico probably going legal at some point soon. What do you see in terms of the Latin American - you talked also about being in touch with people in Brazil as well, where do you see that kind of going forward in the next few years? And also, how much do you think kind of COVID may affect the changes there?
KN: Yes, sure. I mean, with regards to COVID, I think a lot of countries are starting to identify cannabis as potential relief to this economic, you know, kind of depression that's happening now post-COVID. So I think we'll start seeing a lot more like speeding up of policies by potential governments to implement cannabis regulations to try and stimulate the economies in various places.
With regards to Latin America, there's definitely a lot going on. You mentioned Mexico, which I think we hope to see. I know their implementation got delayed, they were supposed to make the announcement earlier this year. We're hoping by the end of this year to see something happening there, and from what I understand, they're going directly into recreational market as well. Brazil, at the beginning of this year, they legalized the importation of extracts and final products by focusing on a farmer grade, a pharmaceutical industry.
So, you know, as we mentioned before also, we're in touch with a few people there. We see that as a key, key market, especially because it's our neighbor, it's on - you know on Uruguay's doorstep. The same with Argentina, another huge, huge potential massive country. Obviously, they don't have anything quite yet. They've got something, some sort of small little regulation up in one of the Northern provinces but I think it's mostly for research purposes. But, you know, our understanding is also that the government there is looking at implementing a regulation potentially by the end of this year.
So, you know, just for us with having Argentina and Brazil on our doorstep, that's a huge, huge potential for us, especially as we're, you know, obviously five years ahead of them or even a bit more. We've got the cultivation knowledge and all the operations dialed in. And then, yes, there'll definitely be other places in Latin America. Another example is Colombia. They're very much on par, I think, with Uruguay.
There are a bunch of producers there, some really good companies out in Colombia, and they also have amazing conditions to produce high quality and, you know, very affordable cannabis. And then, you've got other countries that are starting to come online like Peru, Ecuador. I think Paraguay is about to come out with some sort of legalization. So it's really interesting. I mean, we'll see a completely different landscape probably in six months. And I really believe that with COVID now, countries will start to speed up those processes assuming they understand the economic potential and the opportunities that cannabis industry can have.
RS: Yes, I agree. I think we've - it's crazy how this pandemic has affected the industry in different ways. But I think even in the States, you know, seeing that it was deemed an essential, you know, amenity item, I think excites a lot of people, even given all the depressing news everywhere. It's kind of like maybe this is what it takes to spread the gospel of cannabis and to get governments on board. It's an interesting, you know, little tweak to the narrative there.
KN: Right.
AK: Absolutely.
RS: Yes. Andrea, so in the end, are you happy that you went back to Uruguay?
AK: Yes. I'm actually really happy. I think the added bonus there that we forgot to mention is that once we got here and we decided to stay, we also decided to start a family. And so, we had our son almost two years ago. My mother is extremely happy and it's just nice to come back and spend time with the family and, you know, hopefully have our kids, you know, like, you know, in contact with their cousins I think something was - it was very hard living abroad, away from our families. And I think when you have your own family, you really want to make sure to - that you're close. We are never going to be close to both of our families because Kevin's family is in Australia, but for the time being, it's just nice to be here and feel I'm back at home.
RS: Yes. And any advice you would give to partners or spouses wanting to start a business together? I mean any tips for them?
KN: Well, I think communication is key. I mean, I think we've been really lucky that we've been together for a long time, over 10 years, and we started off our relationship as friends. And we were entrepreneurs working in our separate projects, but kind of together. And yes, I mean, it's still very much an ongoing, you know, progress. We still definitely have our moments where we, you know, we want to rip each other's heads off for something. But for the most part, you know, we - yes, yes, it is - it's love and, you know, we often find ourselves just talking about YVY all the time and forgetting just to talk about what I don't know, normal couples generally talk about when they're together. So, you know, finding that balance, I think is crucial.
AK: Well, on the other hand, like for me as a woman, like he was very important that once I start having kids, I'll have a partner that will be fully engaged in the process, you know, and I feel that by starting a company together, we do everything 50:50. You know we take care of YVY, our baby and our boy and we're constantly kind of like dividing tasks and taking turns and…
KN: To the extent actually that our son Leo sometimes calls me, mama and Andrea papa. So, you know, we kind of have very, very mixed roles.
RS: Love it. So anything you - you know it's actually funny I was - when I was researching you guys, I saw Kevin, I think you were supposed to - maybe both of you were, but I saw Kevin maybe you were supposed to be at CannaTech like right now like today?
KN: Yes, right. Yes, yes, we were.
RS: Yes. I thought it was funny we would have seen each other anyways.
KN: Right, right. We were really excited actually to get to Israel. I mean, Israel, as we mentioned before, it's, you know, where we spent more than 10 years of our life there. We consider it a second home of ours. And so, we were super excited to get to Israel and, you know, as we were planning our trip and then when the whole COVID happened, and, you know, obviously, they canceled flights, we were super bummed that we couldn't make it and we're still hoping that there's a chance we can potentially get there later this year, especially just to escape the Uruguay winter and get to - you know, get to those beaches in Tel Aviv in the summer. But yes, you know, Israel for us is also a strategic place with all the amazing work that happens in Israel on the R&D side, we'd love to connect YVY with Israel somehow at a later stage as well.
RS: Well, I hope that conference still happens in October. I hope you guys get there and I hope to talk to hopefully face-to-face. Before we go, is there anything you want to leave listeners with or tell them how to find YVY?
KN: Yes, sure. We - you can hop on to our website, it's yvylifesciences.com. We also have a Facebook page, its YVY Life Sciences. We're on Instagram and LinkedIn. We'd love to hear from you. We're always happy to talk to anyone about the industry to where we're super passionate about it and, you know, we're, yes, always happy to talk about it.
RS: Well, Kevin and Andrea, it's been truly a pleasure. It was really great talking to you and like I said, I hope maybe one day soon, if the world figures itself out, we can we can talk face-to-face. But I love to hear what you're doing, love that you're working with, you know, small farms and spreading good messages through cannabis. So hope to talk to you soon. But thanks for talking to me today.
AK: Thank you for having us.
KN: Yes, thanks very much, Rena. We look forward to meeting soon.
