We can’t wait for you to meet Brian Bauer, a Navy veteran, entrepreneur, and disruptor in the cannabis financial industry. Abaca is doing in the cannabis financing industry, the services they provide in cannabis banking, and bringing awareness to entrepreneurs seeking financing and resources in this industry.
The Venture Center: I’d like to start with the question, who is Brian Bauer? Tell us your story.
Brian Bauer:
I was born in and around Hot Springs, Arkansas, and graduated from Lake Hamilton High School in 2002. At 18, in the wake of 9/11, I joined the United States Navy and was stationed in Virginia for most of that time.
During that 11-year career, I served as both an avionics technician and an aircrewman and door gunner on the HH-60H Seahawk as part of the Redwolves of HCS-4, which was later re-designated HSC-84. I deployed 6 times to Iraq supporting special operations, our primary mission, and earned the Air Medal 7 times during those deployments. My time in the Navy was a foundational part of my professional development and taught me the importance of a dedicated team.
After leaving the Navy in 2014, I completed my undergraduate degree at UALR in Political Science. I joined the Venture Center as the Operations Lead for the inaugural Fintech accelerators and was eventually promoted to Program Manager and later to Managing Director. It was during my time at Venture Center that I met my cofounders and we founded Abaca in 2017, which was acquired by Safe Harbor Financial in 2022. Today, I’m already busy working on my next venture.
Tell us about your journey to The Venture Center.
I was attending an entrepreneurship class at UALR taught by Joe Bell. It was a great class where we got to engage with entrepreneurs from a variety of business types, from small businesses to startup ventures. He talked about The Venture Center and how they were working to help launch startups, which I found interesting since I wanted to start a business. I joined as the Operations Lead a few months before the first Fintech Accelerator. In many ways, it was a startup in and of itself.
What did you learn from your time at The Venture Center?
I learned so much, and from so many people. Being around entrepreneurs and talented professionals is a great way to pick up skills. I highly encourage people to engage in events or, if there is an opening, work here. Even if it’s taking out the trash…just get here!
Communicating is a skill and it might be one of the most important ones an entrepreneur can develop. We must evangelize our companies to so many different people. We are constantly speaking with investors, prospective clients, partners, or potential employees. Doing this well takes practice, iteration, and being open to candid feedback.
It’s also important to have mentors and friends to help you navigate the unknown. I am lucky to have had numerous people contribute as advisors and friends who I have leaned on, like Wayne Miller at Venture Center. It’s important to have people you can trust.
What was the impetus of your startup ABACA?
After Arkansas legalized medical cannabis in 2016, I received a call from a local attorney working on a permit application for a cannabis business that kept getting declined for banking services. When I started digging into it to learn more, I realized this might be a problem worth pursuing.
The Arkansas market was going to grow and tens of millions of dollars in sales might go unbanked if nobody took on the challenge. The US cannabis industry at the time was about $15 billion in retail sales and growing at 35-40% annually, but banking services were severely limited. The problem was not just in Arkansas, but national.
I started discussing this with people in my network, including my eventual co-founders Dan Roda, Greg Ellis, and John Foley, who I met through The Venture Center. Before we knew it the 4 of us were working on the problem with our various skill sets covering banking, fintech, software development, and law. The more we researched and looked at the market, the more excited we got.
Our first outside capital came from The Venture Center’s Pitch N Pint program. My co-founder John won $1,000 that we were able to put toward our initial marketing and sales campaigns. Before long we were out raising capital, forming partnerships, and going to market.
Let’s talk about ABACA and the products and services it offers. What is cannabis financial services and what is it solving?
Cannabis businesses still find it challenging to get banked and other financial services due to cannabis still being listed as Schedule 1 under the Controlled Substances Act. Abaca offers seamless banking, payments, and treasury management directly to the cannabis industry enabled by its partnerships with FDIC-insured financial institutions.
Our software is unique in that it addresses both the compliance and the servicing needs of the cannabis business. Our back-end Compliance Engine and Compliance Management System enabled us to meet rigorous federal standards for banking cannabis compliantly, while our proprietary Online Banking software enabled us to serve business clients with a cutting-edge business online banking and treasury management solution.
We worked with everyone from small businesses, to service companies, and large publicly traded enterprise cannabis corporations. Prior to the acquisition, we had processed about $4 billion in gross transaction volume through the platform.
Safe Harbor Financial recently purchased ABACA. How did this come about and how has this purchase benefited both companies?
Safe Harbor was really the pioneer in the cannabis banking space. We actually drew inspiration from them when we were conceiving Abaca. However, we could see how technology would make serving cannabis more efficient and so we set about a business strategy to build software to scale the ability to meet compliance while serving the industry.
We were always cordial and friendly with the competition, so we had occasional conversations and interactions with them during in-person and virtual industry events. In December 2021, we bumped into the Safe Harbor CEO at a conference. We had spoken before, but this was our first time meeting in person. From there a conversation started that eventually led to exploring business synergies and ultimately to the acquisition of Abaca after Safe Harbor went public on the NASDAQ in Q3 2022.
What are some of the obstacles and challenges you’ve faced as a tech startup Entrepreneur?
You face a lot of challenges as an entrepreneur in a startup. For us, because the area was so niche there weren’t a lot of investors in the space. Raising Capital was tough, but we did it. We just got told “no” a lot and we pitched over 100 investors and VC firms. Often they declined just because we were serving the cannabis industry. Sometimes they told us how great our business was at the same time they declined to invest. We knew the fundamentals of the business were sound, so we just pressed through and kept pitching investors until we hit our objectives.
Another challenge is mental resilience, and that doesn’t get talked about enough. Sometimes you feel like you are winning on Monday and losing by Wednesday. It is a challenge to navigate those ups and downs. In a startup, you are going to have great successes that are huge milestones. Sometimes those are followed by immense challenges or setbacks.
What is your advice for startup founders?
1. First, be sure you are chasing a problem worth solving in terms of a defined business value. Some of the best companies I have seen are using fairly standard language tech in a way that focuses on solving an easily defined problem at scale. Really take a look at the economic value that is being created with your solution, and not just the technology that is enabling it.
2. Another thing entrepreneurs should know is grit is a huge factor in success. You have to stick with it. Some days you might not feel as though you haven’t accomplished much after putting in 10-14 hours. That is he journey. But keep learning, assessing, solving business problems, and moving forward. If you have grit, you can overcome almost any circumstance the journey might throw at you.
3. The organization and culture are critical to success. As an entrepreneur, you have a responsibility and opportunity to build a great team. Understanding values and purpose helps us do this well. By setting the standard and by hiring with these values in mind, you’ll build more effective teams and they’ll understand what values to use when making decisions for the company and clients.