Johnny Casali can feel a helicopter approaching minutes before anyone else hears the whack of rotors. It’s a sensitivity that comes from growing up on a Humboldt County “homestead” in the War on Drugs era. Casali’s parents operated a melon farm. They also grew some pot. And they weren’t alone. Thanks to abundant rain and sun, the high canopy of giant trees for camouflage, and the withering of local industries like logging and fishing, growing weed was what people did here. And some of them got really good at it. By the 1980s, Humboldt had become a legendary “brand” among potheads in the know.
But if you lived here, you didn’t talk about it. “You never said what you did,” says Casali. “You always said your parents were carpenters.” His parents divorced when he was 5, and as he grew up he would help his mother tend the plants. During summers, Casali and his buddies would surf, rip around on dirt bikes, and Rambo through the woods, tending networks of well-hidden grows. From parents and grandparents, they learned to make fertilizers out of horse manure, firepit ashes, sawdust, and scraps from commercial fishing boats. To trick helicopters scanning for ground-level plants, they’d grow them in the trees, on wooden platforms hung from branches. When Casali was 15, he even made enough to put a down payment on a piece of property.
They kept at it, even as enforcement heated up in the mid-1980s. “At one point, there were five eradication teams with helicopters here,” says Casali. “Every day was like a little war.” In 1992, Casali fell victim when federal agents stormed into his house, held a gun to his head, and caught the entire operation on film. He and a friend were charged with illegal cultivation, and Casali received a 10-year sentence, which he started in 1996. After completing a drug-treatment program, he got released early and returned to Humboldt in 2004. His mother had died while he was in prison.
Eventually, Casali returned to growing—this time legally, filing for permits under California’s Proposition 215, which legalized medical marijuana, and then under Proposition 64, which opened up the recreational market. Today, Casali grows plants that are genetic descendants of his mom’s. He has swag caps and T-shirts with his farm logo, product endorsements from the likes of Willie Nelson—and a creeping unease that at the end of the day, it might be legalization, and not The Law, that kills both his livelihood and a way of life.
To navigate the turbulent transition to the mainstream, Casali and other growers—many second- or third-generation—are turning for help to an unlikely outsider. Michael Steinmetz’s childhood couldn’t be more different from Casali’s. A serial entrepreneur and former Wall Street investment banker, “Mikey” grew up in a prosperous suburb of Caracas, a first-generation Venezuelan descended from Eastern European Jews who found their way there in the aftermath of the Holocaust. His family went to synagogue on holidays, part of an affluent, tight-knit Venezuelan Jewish community.
Steinmetz attended a Montessori school and was a standout youth soccer player. His parents had separated when he was a year old, and he was raised by his mother, a life coach, and his stepfather. “I was the weird kid reading Deepak Chopra and Tony Robbins,” he says. Like Casali, he had a mother who smoked cannabis, using it to control MS-like muscle tremors. “For me,” Steinmetz says. “It was Mom’s medicine.”
He never suspected that it would one day become his life’s work. And yet, thanks to a remarkable ability to put some of the most skittish people on the planet at ease, the 35-year-old rich kid from Caracas gets visits from Casali and hundreds of other OG farmers to see if the company he founded, Flow Kana, could be their lifeline in the unexpected storm that’s come with legalization. “When Mikey looks you straight in the eye and promises to do the best he can for us, I believe him,” says Casali, choking up with emotion, as he often does. “He’s our knight in shining armor. He’s the best chance we have.”
WHEN WE MEET FOR THE FIRST TIME, Steinmetz greets me with a hug on the patio of his home, on the grounds of the 80-acre Flow Cannabis Institute, in Redwood Valley, California, near the southernmost point of the Emerald Triangle—the legendary pot-growing region encompassing Humboldt, Trinity, and Mendocino counties—which some estimates say produces 80 percent of all the weed grown in California (and a large proportion of all pot sold in the U.S.). Steinmetz has just returned from visiting his mother and stepfather in Miami, his 3-month-old daughter Mia’s first plane trip.
Between cannabis industry events, investor meetings, and regular check-ins with Flow Kana farmers and company offices in Oakland, Los Angeles, and San Diego, Steinmetz travels a lot. But after securing $125 million in funding for his company last February—reportedly the biggest private investment in a U.S. cannabis company to date—he plans to chill for a while. “I’ll still travel around California,” he says. “But I’ve made a commitment to make it back home every night.”
On this day in late June, he has been taking meetings on the patio of the white clapboard farmhouse he shares with Mia and his wife, a former competitive gymnast and tennis player named Flavia Cassani. Surrounded by gardens, a gazebo, and an indoor pool, the house came with the property, formerly owned by the Fetzer winery. Perma-tanned, with black hair going salty, Steinmetz resembles a younger, less sinister version of Mr. Roarke, from the TV show Fantasy Island, the white suit replaced with a Flow Kana T-shirt, slip-on running shoes, and gray athleisure pants made of stretchy space-age material. Just audible above the singing birds are the sounds of construction equipment down the road, where work is under way on a massive warehouse that will soon hold the largest legal stockpile of sun-grown “craft” cannabis in California, and possibly the world. “We’re going to fill up that warehouse with a million pounds of cannabis, dried, cured, and trimmed,” Steinmetz says. “That’s more than all the licensed producers in Canada produce in a year.” (Canada has had federally legal cannabis since October 2018.)
A nearby building now under construction will process lower-grade flower and “trim” into edibles and concentrated oils for vape pens and cartridges. “The idea,” Steinmetz says, “is to be a huge supply-chain partner to other brands. You know the Dutch flower market or the big fish market in Japan? We want to be the one-stop shop for sustainably sourced cannabis.”
Dominating in the California market would be no small prize. But it’s when weed becomes federally legal—which many in the industry believe will happen within 10 years—that Flow Kana’s true value becomes apparent. Instantly, the company would be the largest licensed exporter of triple-A Emerald Triangle cannabis to the rest of the country, something akin to controlling the flow of all the grand cru coming out of Burgundy. Only bigger.
The vision is already unfolding. Today, inside a brown metal warehouse, dozens of workers in white lab coats—a fair number with beards and/or dreadlocks—trim, sort, package, and label cannabis delivered from regional aggregation hubs. In a massive cool room, rows and rows of industrial shelving are stacked with five-gallon buckets, bar-coded and labeled with the strain contained inside. In addition to its own Flow Kana–branded line, the company is the main supplier and distributor for the Willie’s Reserve brand in California, and for Brother David’s, a socially conscious cannabis brand founded by the grandson of Dr. Emmanuel Bronner, the soap guy. Every week, 20 to 40 delivery trucks roll out from the loading bay, stinky with flower and pre-rolls bound for dispensaries up and down Highway 101.
Given the stakes—legal cannabis sales in California are on track to hit $3.1 billion in 2019, with illegal sales expected to add another $8.7 billion—Steinmetz is far from alone in his bid to cash in on the great Green Rush; as of October 2019, there were some 7,000 licensed marijuana businesses in California. But Flow Kana’s business model and its values—and, now, its bankroll—put Steinmetz in a pretty unique position.
Unlike the publicly traded companies that supply the Canadian cannabis market, or vertically integrated U.S. operators such as MedMen or Curaleaf, Flow Kana isn’t in the business of growing weed. Instead, Steinmetz has built what he describes as a “virtually integrated” company, consisting of more than 200 small cannabis farmers, like Johnny Casali, who grow the plants while Flow Kana handles processing, packaging, marketing, and distribution of the harvest. It’s the cannabis version of a collective model that’s familiar to orange growers, dairy farmers, and coffee producers. “Coffee growers don’t roast their own beans,” says Steinmetz. “You grow your beans and then you take them to a centralized plant to get roasted and packaged at scale.”
Flow Kana has stringent criteria for its farmers, both in terms of product quality—the company specializes in premium-price triple-A weed—and growing practices. All Flow Kana’s farmers grow outdoors, under the sun, using organic and regenerative cultivation methods. After harvesting and curing their plants, the farmers deliver them, untrimmed and still on the stem, to a regional aggregation hub, where they’re trimmed and sorted for further processing and testing at the Redwood Valley facility. The best, biggest buds are sold in glass jars as Flow Kana Gold; less-pretty weed is allotted for pre-rolled joints; all the trimmings go into massive bags for pressing into concentrates. Farmers get paid monthly advances based on anticipated sales.
It’s a welcome change from prohibition days, when growers relied on a ragtag hoard of “trimmigrants”—seasonal workers who’d show up every fall to break down the harvest and trim it into salable buds. “It’s not like there was proper HR doing background checks,” Steinmetz says. “Everyone has horror stories about people fighting and stealing from each other.” And worse. One area in Humboldt County, Alderpoint, was recently the subject of the Netflix documentary Murder Mountain.
When Steinmetz first came here, in 2014, the cultivation side was still remote and hidden. “Even though medical was legal,” he says, “people didn’t trust anybody,” He and Cassani, then his girlfriend, were living in the Bay Area. Steinmetz had recently sold a business he’d co-founded in Venezuela, one of the first importers and distributors of stevia-based sweetener, sourced from a collective of small farmers. Now, fleeing widespread corruption and economic instability there, he and Cassani were looking for their next big thing. While Cassani worked on a video game start-up with her brother, Steinmetz struggled to get a foot in the door of the burgeoning medical-cannabis industry, which all signs suggested would soon open up for recreational use, too.
An activist named Amanda Reiman helped Steinmetz land a volunteer gig consulting on operations at a dispensary in Oakland. His job was to study the whole operation—work in customer service, check out processing, get to know the brokers who dealt directly with growers. One day, over a joint after work, he convinced one of them to take him and Cassani on his next trip up to the Emerald Triangle.
They followed the broker up to Arcata, in northern Humboldt, and all the way back down into Sonoma wine country. It was life-changing. The only cannabis farms he’d seen till then were indoor, artificially lit, “industrial” grows. “For the very first time,” Steinmetz says. “I saw cannabis in its rightful place, in the soil and under the sun, and alongside a whole set of diversified vegetables and other crops.”
One of their last stops was the Mendocino farm of Casey O’Neill and his wife, Amber, who organized a community barbecue. Neighbors brought weed to share, but also vegetables, goat cheese they had made, meat from a pig they had slaughtered. “It was the most amazing, wholesome meal I’d had since moving to California, and it was the most endearing community,” Steinmetz says.
A few weeks later, Steinmetz headed back. He spent three weeks going farm to farm, trying to decode the farmers’ business and culture. “Each was more beautiful than the last,” he says. While his guides kept him out of the most dangerous areas, there were sketchy moments. “You’re going along these roads in the hills and it’s all ‘third road to the left after the really tall redwood tree with a couple of bullet holes in it,’ ” he says. “Once, we stumbled onto the wrong property and were greeted by a shotgun.” But for the most part, Steinmetz was able to connect with locals.
For the very first time, I saw cannabis in its rightful place, in the soil and under the sun.
After a summer spent going deep into the weeds of the pot farmers’ business, Steinmetz and Cassani were ready to roll out Flow Kana 1.0, an app-based delivery service that let licensed medical users buy mason jars of weed labeled with the name and website of the farm it came from. “We were going for radical transparency in the supply chain,” Steinmetz says. “No one was doing that then.” With about $500,000 raised from friends and family, and inventory sourced from O’Neill and four other farmers, Steinmetz, Cassani, and two cofounders officially launched in February 2015. They celebrated with a Great Gatsby–themed party in a Berkeley Hills mansion, complete with a performing aerialist, which got lots of media coverage. (Flow Kana still throws some of the best parties in the industry.)
After raising an additional $3 million, they kept the delivery service going for a while but started focusing on a wholesale distribution model. “I thought this region could become a global brand,” Steinmetz says. “Because these guys are producing 80 percent of the cannabis, if I put enough of them together, I’d have enough volume to compete with bigger guys.”
And then came Proposition 64.
STEINMETZ RECALLS ELECTION DAY 2016 as bittersweet. On the one hand, Donald Trump had won. On the other, California voters had voted to legalize adult use of cannabis. And in the midst of all this, Steinmetz was on the verge of making a big, risky decision: to buy the Fetzer winery property. He’d learned about the place from a Flow Kana farmer named Cyril Guthridge, who lived on the land next door. All that the company really needed at the time was a 2,500-square-foot warehouse, but when Steinmetz walked through the old winery buildings, he says, “I knew that this was the physical manifestation of the dream five years out.”
But the property’s $3.6 million price tag was more than Steinmetz had raised since starting the business. He turned to a cannabis-focused investment group called Poseidon Asset Management, founded by siblings Morgan and Emily Paxhia, with more than $100 million under management. “I liked the way that Flow Kana was approaching the business—creating efficiencies of scale so that small, craft farmers could stay in the business and compete,” Emily Paxhia says. “That’s the way we wanted to see the industry expand, too.” Paxhia helped bring together a group of four investors to buy the property and rent it back to Flow Kana, with the goal of selling it back after seven years. (The company bought it outright in less than two.) After working through the details of the complex deal, Paxhia was even more impressed with Steinmetz’s business acumen and gave him seed money, which led to a $22 million series A in July 2018, joined by New York City–based Gotham Green Ventures and Roger McNamee—an early investor in Electronic Arts, Sybase, and Facebook.
In addition to housing Flow Kana’s processing, warehouse, and distribution center, Steinmetz aims to capitalize on the property’s mix of man-made and natural attractions to create an upscale canna-tourism destination. Wrapping up our talk on the patio, he offers me a tour. Passing Cassani and a handful of Flow Kana employees practicing yoga in the shade of some trees in the yard, we climb into a black all-terrain utility vehicle, parked next to a black BMW wagon, and their dog Koa hops into Steinmetz’s lap.
After checking out the Big Dog Saloon, a vintage Wild West cowboy bar with a dirt floor and swinging doors that now hosts company events, we follow a winding dirt road up to “the Ranch,” a recently renovated hilltop clubhouse where Steinmetz and Cassani entertain and put up visitors. Buzzing through the rolling green and tan landscape, Steinmetz points out wild blackberry bushes and heirloom fruit trees. He gestures to a ridge where the eco-bungalows will go, imagining guests taking delivery of baskets of local produce and cannabis on their doorsteps, between hiking, swimming in the pond, and meeting actual pot farmers. As the afternoon light goes gold, we encounter wild turkeys, quail, and an all-white European fallow deer, a buck with a full rack, descended from a herd raised by William Randolph Hearst and released nearby in the 1940s. It feels like we’ve spotted a unicorn.
“There are plenty of opportunities in cannabis to invest in something and flip it in a year or two,” Steinmetz says. “Luckily, our investors believe in the problem that we’re trying to solve and really want to see us do it, not just pivot around and chase dollar signs.” Of course, it’s one thing to ask wealthy investors to be patient—it’s quite another to tell farmers that things will be much better five years from now. The worse-than-expected growing pains of legalization have increasingly cast Steinmetz in the role of Reassurer in Chief. Proposition 64 hit farmers with hefty licensing fees, a cultivation tax, restrictions on self-distribution, and a slew of environmental, workplace, and tracking rules to comply with. California’s consumers are charged one of the highest cannabis excise taxes in the country: 15 percent, plus local and county taxes. Local regulators have been slow to approve dispensary licenses—there are now only about 500 legal dispensaries in a state with 40 million people. And rules intended to protect small farmers have been consistently undercut, allowing Big Cannabis interests to set up industrial operations, concentrated in Santa Barbara County, where the world’s largest legal cannabis farm—covering 147 acres—is now being created.
During the 2019 growing season, farmers worried that oversupply in the market would sink their wholesale prices. Meanwhile, the black market has prospered. After a year of legal sales, as much as 80 percent of cannabis sold in California is estimated to come from illicit sources. The situation has pushed some licensed growers to “divert” at least some of what they grow out of state, and led many more to take a hard look at their choices. “There are moments where you think, ‘Wow, now we really look like those jackasses everyone said we would look like when we signed up and stuck to the course,’ ” says Simon Evers, a nearby farmer. “One of the reasons we worked with Flow Kana was we thought they could help us weather the storm.”
Back on our tour, Steinmetz and I are taking in the view from the deck of the Ranch with a handful of Flow Kana farmers and some out-of-town employees, sampling a pre-roll of a new strain that’s rich in an obscure cannabinoid called THCV, which is supposed to curb anxiety and suppress appetite (“Jenny Craig weed,” they call it). After a couple of thoughtful tokes, Steinmetz lays out the three-part solution to the farmers’ pain: Massively increase the number of legal retail outlets. Crack down on illegal dispensaries. And reduce taxes. (CA Assembly Bill 286, which would reduce the cannabis excise tax from 15 percent to 11 percent and suspend the cultivation tax, is awaiting hearings in the legislature.) Steinmetz also has been pushing for an industry-wide grading system, to ensure that growers of AAA cannabis get the prices they deserve. “In new industries, they always overregulate first, and then peel back layers,” Steinmetz says. “We just have to get through the next couple of years.”
Apart from advocacy, branding, and efficiencies of scale, Flow Kana offers farmers something that the big guys never could: an authentic sense of community. That’s reinforced by lots of real-world, face-to-face contact. Steinmetz and Cassani host quarterly picnics that bring together their entire farmer network, as well as more intimate gatherings here at the Ranch, bringing together farmers, investors, company execs, and potential business partners.
On the night I’m visiting, they’re joined for dinner by neighbors Cyril Guthridge and his wife, Anna, along with glowing newlyweds Simon Evers and his wife, Jennifer Gray, who could be models for a Patagonia line of weed. There’s wine and a refrigerated case full of beer and fancy seltzer. An array of Flow Kana products sits on a side table. At dinner—excellent takeout Indian food laid out on a rustic wood banquet table—the conversation turns from runaway sheep to problems with keeping accounts at local banks. Steinmetz listens more than he talks.
Being a prominent cannabis CEO has given Steinmetz access to lofty company—in 2016, he was invited to Richard Branson’s Necker Island, to speak at a kite-surfing competition/pitch event, where he managed to get five minutes in person with Branson, one of his heroes. But he and Cassani are clearly at home here, hanging with the neighbors. “I feel like we gravitated to Mendocino because we felt for the first time in the U.S. that same sense of community we had back home,” Steinmetz says. Now, all he has to do is to save that community. “It’s a massive weight,” he says. “What we’re fighting for is not a couple of numbers on a bottom line. These are real people in real communities and real livelihoods that are at stake. We know what we’re going to get to. We just don’t know what bumpy roads and what paths we need to take to get there.”
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