Exclusive Interview with GrowGeneration Co-Founder and President Michael Salaman
Hydroponic equipment supplier GrowGeneration (OTCQX: GRWG) serves the agricultural space, including the hemp and cannabis industries. Funded by big names like JW Asset Management, Gotham Green Partners, Navy Capital, and Merida Capital Partners, the company is experiencing 100% year-over-year growth and targeting further expansion. Co-Founder and President Michael Salaman spoke with New Cannabis Ventures about the company’s footprint, funding and growth strategy.
The GrowGeneration Team
Salaman, a longtime entrepreneur, and his partner Darren Lampert, now CEO of the company, started GrowGeneration in 2014. The pair observed the emergence of growers in areas like organic food and cannabis and saw an opportunity to create a national hydroponics company in a previously fragmented industry.
Today, the company has 157 employees across multiple teams including executive, accounting, IT, M&A, and sales. The team brings expertise from public companies, purchasing, hydroponics, and more. GrowGeneration is focused on creating a company culture that attracts and retains top talent. All staff members have access to the company’s options plan, according to Salaman.
GrowGeneration has also attracted talent to help advise the company as it grows. Bob Nardelli, the former CEO of Home Depot, has been appointed a strategic advisor. Nardelli helped grow Home Depot into a $90 billion business, according to Salaman.
Footprint and Expansion
The company’s stores are warehouse-style locations staffed with knowledgeable salespeople and stocked with just-in-time inventory. GrowGeneration has 23 locations across nine states. The company takes a first-mover approach to emerging markets. The company is continuing to expand its California presence, and it is looking at emerging markets like Illinois, Missouri, New Jersey, New York, Florida, Arizona, and Texas.
In addition to opening new stores, GrowGeneration is expanding through acquisition. The company has completed more than 10 transactions over its lifespan with more in the works, fueled by recent financing. The M&A team takes a disciplined approach to vetting potential acquisitions, looking at the people, the market, the return on capital, and the accretive nature of the acquisition target.
Customers
The company has developed a national supply chain that serves a diverse group of agricultural customers. Large multi-state operators account for about 15 percent of GrowGeneration’s business today. The company’s external commercial sales team, made up of about 10 individuals, pursue large commercial customers like MSOs and big agricultural companies.
GrowGeneration is also aiming to create value in its supply chain for hemp farmers. For example, the company has invested in a processing machine that enables hemp farmers to dry their product in high volumes.
GrowGeneration’s stores also handle a significant amount of foot traffic. Each week, approximately 6,000 customers (such as small- to medium-sized operators) walk through one of the company’s stores.
Raising Capital
Last year was transformational for GrowGeneration, in large part due to capital, according to Salaman. The company’s 2018 funding from institutional investors including Gotham Green Partners, Navy Capital, and Merida Capital Partners has helped the company expand. Another $12.8 million in financing this year , with each of those investing further along with JW Asset Management, will further drive store openings and acquisitions.
For Salaman, successfully raising capital is about execution. If a company follows through on its plans, the investment community will respond. He notes that the same group of investors participated in funding GrowGeneration in 2018 and 2019.
Continued Execution and Growth
GrowGeneration, a profitable company, has released guidance of $60 to $65 million in revenue and EBITDA of $0.14 to $0.18 per share for 2019. The company expects to surpass $100 million in sales in 2020. In the meantime, the company has an application to uplist to the NASDAQ. Salaman expects the same type of dramatic 100% year-over-year growth the company has been achieving to continue while GrowGeneration remains profitable.
The company is focused on attracting the right talent and executing its growth strategy as it pursues the ultimate goal of becoming a multibillion-dollar business with hundreds of locations across the country.
To learn more, visit the GrowGeneration website. Listen to the full interview:
