How this cannabis start-up survived the COVID-19 supply chain collapse

Frank Qin and David Byer started Mary AG in 2017 with the goal of producing a mass-market indoor cannabis growing cabinet. Their previous hardware experience - having both worked for bike sharing startup Vanhawks - helped them build a supply chain and source enough completed units for a group of beta testers. Just as their first major order was set for production in China, the coronavirus pandemic shut down their plans along with most of the global economy. Mr. Qin and Mr. Byer, CEO and COO of Mary AG respectively, spoke to us about their early scale plans and how those plans were forced to change. That conversation, lightly edited for length and clarity, is reproduced below.

What was the original plan to scale the business beyond the prototype?

Frank Qin: Because we had come from a hardware startup, we had some idea of how to build hardware from scratch. After the proof of concept we had made in Toronto out of cardboard boxes and wood planks, we went to China and used our existing connections there to find a manufacturing partner.

We actually stayed in China and rented an apartment for seven months. We were able to harass our manufacturer every day to make sure things got done. It was absolutely necessary [to be there for that long] because we had to communicate with the engineering teams there, the sales and marketing team and there was always information lost between the different levels. If you are able to physically go there and check in on them every day it really makes progress move a lot faster.

David Byer: We had also made some very thoughtful exclusions in our product. In the Grobo, for example, [ED NOTE: Grobo is among the main competitors of Mary AG] it has built in automatic dispensing of nutrients and pH balancing and there is a lot of hardware that needs to be a part of the machine for that to happen which really drives the price up.

We obviously looked at Grobo very closely as we were doing our final design and manufacturing phases.

We verified one of our suspicions, which was that putting in pH monitoring and balancing automatically is not only expensive but is also problematic since it is something that really needs to be calibrated on a regular basis.

With a built-in unit like that you can’t really clean the sensor, you can’t properly calibrate it for the average person. Then we looked at how much effort that [level of automation] would actually save the user and we determined that you can use an off-the-shelf pH kit for $15 that only adds 10 to 15 minutes per week at the most. 

So we were able to lower the price by 100 percent and just empower the user to do those things themselves. We have a control app that offers in-app support and walk-throughs.

We take our support as less of a ‘we are going to automate and do everything for you’ - because we believe that is an unrealistic standard - and more of a ‘we are going to take this opportunity to teach you about the process as much as you need to know’.

Overall our approach is less of a product and more of a platform. Everything is scalable. We can take this platform and potentially apply it to a potentially much larger or much smaller scale.

Yet of course you have to start small. How did you arrange a manufacturing deal that didn’t require you to commit to thousands of units?

David Byer: Minimum purchase quantities for a cannabis hardware startup like us are definitely sometimes quite big for us. We had that in mind though when we started talking to [our manufacturing partner] and the management team there. They probably did us a huge favour by having a good enough initial price even though we only ordered 200 units for our initial order. They had quoted us on 500 units and we managed to negotiate a way to break that up into smaller chunks in terms of timeline for delivery.

Overall our approach is less of a product and more of a platform. Everything is scalable. We can take this platform and potentially apply it to a potentially much larger or much smaller scale.

Frank Qin: The manufacturer is among the largest in their own industry, so for them they were dealing with tens of thousands of units per year with most of their partners, so for them to work with us on 200 or even 500 units was really minimal for them. That was part of the reason we spent seven months in China.

You had a successful Indiegogo campaign in April 2018 and had 80 beta testers online before the end of 2019, but tell us about early 2020 when you were preparing to make your first major order just as the COVID-19 outbreak was pushing China towards shutdown.

David Byer: We have kind of taken it in a step by step approach in terms of getting a finished product to the end consumer. 

We made some pretty strategic decisions to speed up product delivery. The first thing we did was convince the manufacturer that this was a whole new segment of product that they have no competition in right now, so if they help us get the ball rolling they will be the manufacturer for this type of unit.

We also started by importing everything into Canada as parts and doing final assembly and quality checks here. That allowed us to get our parts here way faster than if we were waiting on fully assembled units. It also allowed us to build our own little team here [in Markham, Ontario] to do the assembly and quality checks and we hired two full time staff hired for this.

That allowed us to get units into the country, assemble them here and ship them to customers a lot faster. That was how we tried to break it up into mini-sprints.

Frank Qin: We had planned to resume shipping [of completed units] in late March 2020 but we did have to adjust our plans and our timeline this year because of COVID 19. It originally hit us when it was in China.

David Byer: Getting inventory out of the country was very, very difficult. Our first round is here, and since we have broken it into chunks we have enough parts for another 50 units right now. That was what we were able to renegotiate to get out of the country fast. Then we have another two shipments each with enough parts for 250 units that is our new expectations.

There was a big backlog of people who wanted to get their parts on a boat and we were in the melee there. It has been quite a bit of changing our quantities and our timelines and renegotiating with the manufacturer to make it easier on them.

There has definitely been a lot more re-juggling. We hope to have our next 50 units out in May 2020 now.

(MAY 14 UPDATE: The last of those units were shipped this week, David Byer says)

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