Howard Lee says he hasnât smoked a joint in forever. But the longtime Seattle tech veteran is definitely riding high as he leads a secretive startup called SĹRSE Technology that is looking to be a major player around the red-hot CBD and cannabis craze.
SĹRSE has been active for more than three years and has been âunder the cover of darknessâ for the last two, working hard on science that allows it to convert CBD and THC oils into a water-soluble product that can be infused more seamlessly into beverages, food and topicals.
The company, working out of an industrial area in Seattleâs Fremont neighborhood, just raised $5 million and $9 million to date. Lee was the onetime CEO of PhotoWorks (previously Seattle FilmWorks) and he was co-founder and CEO of Spoken Communications, which was acquired by Avaya Holdings in 2018.
âIâm the last guy to be in the cannabis space,â Lee said this week. âI hadnât done any cannabis work, cannabis anything, until some of our original investors came to me and said, âHey, what do we do with this license we have in Washington state?’â
SĹRSE doesnât own a cannabis license and is not a cannabis company, or Washington 502 as theyâre often called. Itâs a food technology company that works with cannabis companies who license its technology â also called SĹRSE. Clients use SoRSE, which comes in powder or liquid form, to make their own products that are sold in stores.
The startup has caught the attention of traditional tech investors and some venture capitalists, as well as someone who is big in the craft brewing space, Lee said. Santa Monica, Calif.,-based investment firm Science Inc. led the Series A round. They have had a hand in Dollar Shave Club, Seattle-based pet-sitting giant Rover, and scooter-sharing service Bird, among other things.
CBD-infused products are a hot trend everywhere, as the naturally occurring chemical in cannabis is being credited with providing relief from inflammation, chronic pain, anxiety and more. Short for cannabidiol, CBD does not make a user âstonedâ the way THC, or tetrahydrocannabinol, is known to do.
Last year The New York Times asked Why is CBD Everywhere? and dug into why some consider it âa perfect cure for our times.â In April, CNBC reported on restaurant chefsâ interest in CBD- and cannabis-infused food, even though the FDA prohibits it because cannabis remains illegal at the federal level.
Michael Flemmens is vice president of science at SĹRSE, and he explained how THC and CBD molecules are essentially oils and how his companyâs proprietary emulsion is safe and consistent for consumers.
âIf you try and put oil into water it floats right to the surface,â Flemmens said. âSo our tech is all around how you can take an oil, break it down into really small, stable droplets and then have it distributed very homogeneously in the column.â
âEveryone says they have what we do, but no one has delivered,â Lee added. âWeâre literally the only company thatâs delivered, consistently, water soluble CBD and THC.â
Water solubility means that the product distributes evenly throughout the whole container of liquid itâs being added to. So for instance, the first sip from a bottle of liquid â âpowered by SĹRSEâ â containing 20mg of CBD will have the same milligrams as the bottom sip. And the tech allows that even distribution to stay put for a year.
âWhat you would find in many drinks today is it would separate into a little ring up here,â Lee said, pointing at the top of a beverage bottle. In a state like Washington where THC-infused beverages are legal, settled oil at the top of a drink could potentially hit a consumer âlike a sledgehammer.â
âSome THC beverages are 100mg. Thatâs a lot for some consumers,â Flemmens said. âIf we oiled out, the first sip youâd get all 100. Probably not a great afternoon, right?â
SĹRSE says its technology also adds greater control to the timing related to when a user will feel the effects of a substance and for how long â the onramp and offramp. And it masks the taste and smell of cannabis that can be prevalent in some products.
SĹRSE has 29 employees working across science, sales and marketing, as well as those consulting and managing its current customer base of about 30 partners. Scott Riefler is the chief science officer and he previously worked in food science at TIC Gums â the people responsible for making gum chewy. Before that, Riefler was in the aerospace industry and Lee called him the guy âwho invented the glue that holds all your planes together.â
Lee considers what his scientists are working on to be more of a platform â like Gortex â and he said the breakthrough for the company has been in understanding food technology, speed to market and getting the right people to actually help drive the product.
He said itâs been a lot of work to find food science people with startup experience, and to meld all of that together. But the company is cash-flow positive and profitable and âthe freight train is just leaving right now,â Lee said.
And SĹRSE is well positioned in Seattle, along with other innovative tech companies, in what some consider the âepicenter of cannabis culture in America.â As GeekWire reported in April on pot tech startups, technical talent from homegrown giants such as Microsoft and Amazon, along with hundreds of smaller startups, mixes with a spirit in the region that âgets itâ and understands the business opportunity.
Flemmensâ eyes go wide when he thinks about the possibilities.
âIf you think about [SĹRSE] liquid and powder and you go to the grocery store, with the exception of fresh produce and meats, thereâs probably nothing in the grocery store that doesnât have a water or a powder component to it. So thatâs what I can make,â Flemmens said. âCosmeceuticals, beverages, baked goods, processed foods, candies, confectioneries. Essentially thereâs not too much in the grocery store that we couldnât make.â
SĹRSE is powering Happy Apple, a top-selling THC-infused beverage in Washington made by Green Med Lab, which operates out of the same Fremont building. And itâs inside Mad Tasty, a La Croix-like 20mg hemp extract sparkling water that was developed for Ryan Tedder, the frontman for pop-rockers OneRepublic.
SĹRSE is also in the bedroom. Velvet Swing is a cannabis-infused lubricant that is supposed to provide enhanced blood flow and sensation around erogenous zones and give women potentially longer, stronger orgasms. Lee called a leading topical in Washington.
âYou would not think that this would really impact a womanâs orgasm. Iâm like the most skeptical person in the world about this stuff,â Lee said, squeezing a dab of the stuff onto the tip of his finger. âWhen two women who came to me said they could do this I literally fell out of my chair. I said, âNo, come on, you got to be kidding me.’â
SĹRSE scientists created a batch and tested it and then tested it again on more people and the majority were saying the sex was better and the orgasms were better. Women over 50 told the company it saved their sex lives. Others said it saved their marriages.
Lee believes the attraction to cannabis-related products is all part of a larger trend around people wanting to take more control â over what they eat and whatâs happening with their bodies. SĹRSE is not synthetically created and is naturally made with natural ingredients, he said. They donât âdo anything crazy to itâ and he thinks thatâs what people are looking for.
As Flemmens sees it, the potential is there for CBD to touch every product market. Much of that is skewed more obviously toward health and wellness and market verticals that track that way. Picture a wrap or yogurt or something aimed at a healthy lifestyle.
âTo date we havenât had a request for a CBD-infused donut â not to say itâs not coming,â Flemmens said. âWho knows? If they feel like they could sell it, theyâll make it.â