Saving Rural America With Cannabis Software

Imagine you're driving through the rural American West, you know, South Dakota, Wyoming, big sky country. You pull into one of these small towns, custer, maybe hot springs, and you see the usual signs. Main street's a little too quiet. Yeah, the storefronts are aging. Exactly. And you know, the young people have mostly left for Denver or, you know, Rapid City, the local economic plan is, well, it's usually just hoping a tourist buys a postcard. It's what we call the begging bowl model of rural development. Yeah, you're just waiting for the government or maybe some philanthropist to drop a check in the bucket. It's slow. It's bureaucratic and it just, it rarely works. It doesn't really move the needle. Right. But today we are looking at the stack of documents that proposes something completely different. What if the savior isn't a government grant? What if it's a $52 million empire built by one guy driving a Tesla cyber beast, no less, who plans to turn these towns into like a futuristic AI hub? Sounds like science fiction, but we're looking at the actual business plan for the Black Hills consortium and empires the right word. This isn't just a nonprofit. No. It's this, this whole web of seven different entities. You've got cannabis software, real estate, a media company, AI, all stack together, a self-sustaining economy. That's the idea. Yeah. So we're going to unpack this whole vision 2035. The projection is a campus valuation of over half a billion dollars. But we're also going to look at the founder, Luke Alvarez, and his compensation package, which let's just say it redefines nonprofit work. It does. It creates this real tension. The documents call it a masterclass in founder economics, and it really challenges how you think about saving a small town. Okay. So let's dive in. First, we have to set the scene. The Southern Black Hills. Alvarez think this area needs a consortium in the first place. What's actually broken? It's something developers call the vacuum effect. You've got rapid shitty. It's the big regional hub. And it just sucks up all the talent, all the business, all the funding. The benchmark for this whole region is an organization called Elevate Rapid City. And there's sort of the gold standard there, according to these notes. Oh, they are. They do a great job. They have 7.2 million in revenue, 14 staff members. And they focus 100% on just that one city. They're the big dog. Yeah. And that leaves all the smaller towns, Custer, Hotsprings, Newcastle, just fighting for the scraps. That's it. Alvarez's whole thesis is pretty simple. Why should eight small towns have less power than one big city? But he hits a wall. You can't raise $7 million in taxes from these little towns. The tax base isn't there. No, you can't squeeze blood from a stone. So you can't tax your way to prosperity, and he refuses to beg. He has to build something that funds the mission itself. Exactly. And this is the secret sauce in these plans. The Black Hills Consortium or BHC, it's not one company. It's a holding company. Like a solar system. That's a great way to put it. At the top, you have the nonprofits, trade association, the education foundation. They do all the public good stuff. Okay. That sounds pretty standard. That sounds like a chamber of commerce. Right. But underneath, that's where the engine is, the four profit companies. We've got the session media, a content studio, Eric Labs, an AI accelerator, a cafe called the OP. And the big one, the one that makes it all work. Monumental highs. Which is, I had to read this twice, a cannabis technology company. It is. A sauce platform, software as a service. It's for cannabis compliance and documentation. I just have to pause on that. The irony is so thick. We're talking about saving conservative rural America with weed software. Yeah. It's definitely a pivot from cattle and mining. But you have to look at the financials in the source material. Monumental highs is already pulling in $1.8 million in revenue. It's a high margin tech product. And in this model, all the profits from the cannabis software, they flow up and subsidize everything else. Okay. That explains the OP cafe section I was looking at. It's projected to lose what $124,000 in the first year. In a normal business, you lose six figures on a coffee shop. You fire the manager. Right. But here, the cafe isn't really a business. It's a lifestyle amenity. It's a loss leader. It's there to make the campus feel cool. To give the engineer a place to get a latte. Exactly. The cannabis software pays for the cafe for his losses. Because the cafe helps attract the talent who builds the software. It's a cross-subcity model. It's like SimCity. You build the park to keep the Sims happy so they'll work at the factory. That's a perfect analogy. And it diversifies the risk. If donor money dries up, the nonprofit doesn't die. The software company just writes a check. It replaces charity with commerce. Precisely. All right. So the structure is clever. But we have to talk about the founder economics because this is where the documents get really specific and where it stops looking like a normal nonprofit. I'm looking at the CEO compensation justification file. Yes. This is where it gets interesting. The documents explicitly compare Luke Alvarez, the B.H.C. founder, to Tom Johnson. The CEO of that other group, Elevate Rapid City. Right. So Tom Johnson makes a good salary, about $396,000, very standard for a CEO of an organization that size. And Alvarez matches that to the dollar. On the nonprofit side, he pays himself $396,649. But that is not the whole picture. Not even close. Because he's not just an employee, he's the owner. So you add in the profit distributions from the full profits that SaaS money, plus the housing allowance, the vehicle allowance. And the total year one package is almost $1,000,000 to be exact. That is a staggering number for a rural development leader. You expect these jobs to be a little sacrificial? Well, the documents argue there's a big difference here. It's the difference between a hired CEO and a founder. Okay. Break that down. What's the argument for a million dollar package in a region where the average income is maybe 40,000? It comes down to risk and asset creation. Tom Johnson didn't mortgage his house to build Elevate Rapid City. He's a manager. He serves a board. He didn't write the code. No. Over his owns 100% of these LLCs. He built the campus. He built the product. He's putting his own net worth on the line. So he's saying, I'm taking the risk so I get the reward. Exactly. And the founder economics document points out that this cash compensation, the million dollars, is only about 2.7% of his total equity. Which is though? He's sitting on $35 million in assets that he claims he built from scratch. So his argument is, I'm not looting the company, I'm taking a dividend from the machine I built. He also frames it as an efficiency thing. He says he's managing eight times the city's two states, 58 staff members eventually. Right. And from pure profit and loss perspective, the defense is that it's sustainable. The whole ecosystem generates 7.4 million in revenue. Even after his million dollar compensation, the company's still retained about 328,000 in earnings. So as long as the businesses are in the black, the salary is justified. That's the argument. But let's talk about the perks because it's not just cash. He's taking 30,000 a year for housing on his own campus and a $37,000 annual allowance for two Teslas, a Model X plaid and a Cybertruck Cyber Beast. Okay. Let's play devil's advocate. You pull up to a town council meeting in a dying mining town in Wyoming driving $100,000 futuristic tank. Do people see a visionary or do they see a guy who's completely out of touch? That is the gamble. But he actually addresses this in the minimum viable funding document. He calls the Cybertruck a billboard. He a billboard. Think about the brand. He's trying to convince young engineers that the black hills can be the next tech hub. If he drives a Ford Torres, he looks like a bureaucrat. He looks like the past. If he drives a cyber beast, he looks like Elon Musk. He looks like the future. He's projecting success. He's saying you don't have to live in San Francisco to drive the cool car and build the big company. It really challenges that sort of poverty mindset of nonprofits, doesn't it? That you have to suffer to do good work. He's saying abundance attracts abundance. And from a finance perspective, he's leveraging it. The plan is to finance the truck with just 20,000 down. It's aggressive, but it's consistent with the brand he's selling. Speaking of leverage, we have to talk about the real estate. This might be the most brilliant part of the whole plan. The entity called passcreek holdings. Right. This is based on what the document's called the Todd Gask Playbook. The concept is simple, but it's really powerful. The founder personally owns the land and the buildings through a holding company. Yes. Then his operating companies, they pay him rent. So Luke Alvarez is the landlord and the companies he runs, the nonprofit, the SaaS company, are the tenants. Correct. Then they're projected to pay passcreek holdings $144,000 in rent. Now, to me, that sounds like moving money from your left pocket to your right pocket. What's the strategic advantage there? It's asset security. He's created what are called captive tenants. Most landlords worry about vacancies, right? What if my tenant leaves? Luke never has to worry about that. Never. He controls the company, signing the leases. This guarantees the revenue stream for the real estate, which makes the land itself much more valuable. And he keeps 100% of that land value. That's the one thing he's not selling equity in. Precisely. Yeah. And he uses this to solve another huge problem, housing. You can't hire 58 tech workers if there's nowhere for them to live. Right. There are no apartments. So passcreek is going to build a tiny home village and apartments right on the campus. So he hires the staff, pays them a salary, and then they turn around and pay him rent to live in his tiny homes. It's a closed loop. He solves his own hiring problem by building housing. And he builds his personal equity by having guaranteed tenants. The documents project a land value, jumping from 2.6 million to 35 million by 2035. And I'm guessing the tax benefits are pretty good. Oh, massive. He gets depreciation on the buildings to offset his personal income while his companies write off the rent as a business expense. It's a very, very efficient wealth transfer machine. It's incredibly sophisticated, but usually to build something like this, you need millions and seed capital. But I'm looking at the minimum viable funding number and it's it's surprisingly low. It really is. To turn the key, he claims he only needs $170,000. How is that even possible? He's talking about a half billion dollar empire and he's starting with the price of a used condo and Denver. Well, he's not starting from zero. Remember, the cannabis software is already making money. He has cash flow. But 170 is just for the legal setup, the first key, higher staffer named Hannah, three months of operations and a down payment on the cyber truck. Of course. The truck is in the minimum budget. You have to respect the commitment. It is non-negotiable. But this all leads to how he handles donors, which is also really different. Elevator Rapid City, the benchmark, has a capped donation model. You can only give up to $50,000, which creates scarcity. It makes it feel exclusive. Right. But BHC is using what they call the plus ultra model. It's uncapped. You want to give a million dollars. Great. You're a visionary. It's an abundance mindset. Yeah. They're betting that there are wealthy people who want to write a big check for a rural project, but no one's ever asked them. And he's also selling equity in the for profits, not just taking donations. Yes. But he's very careful about control. He's only offering up to 15% of the specific LLCs. His page is literally, I'm not selling my company. I'm inviting you to join me. He refuses to drop below 85% ownership. That's a confident position. I'm keeping control. I'm the landlord. I'm paying myself a million dollars, and you should feel lucky to invest. It only works if the valuation is real. He's valuing the sauce company at 18 million, which is a 10 times revenue multiple. If that company grows to 50 million, like the goal says, early investors do very well. And if it flops. Well, Luke still owns the land in the buildings. The risk is structured to protect the founder's core assets. Let's shift to the future here because he's not just building a campus quietly in the hills. He seems almost obsessed with media. No, the media strategy is really aggressive. He's treating the whole project like a content engine. They have a partnership with an influencer called Create 208 to film the entire campus build. So it's like HGTV meets Silicon Valley. That said, exactly. They're targeting headlines in business insider architectural digest. The headline they actually want is the $52 million empire saving rural America by broadcasting the whole process. They attract more talent, more investors. It's a flywheel. Right. If you see this cool campus being built on TikTok, maybe you want to work there. And it's not just general tech either. They're going all in on AI through Eric Labs, the accelerator. And the thesis is fascinating. The idea is that AI is the great equalizer. You don't need to be in San Francisco to code AI anymore. All you need is a laptop and a sterling connection. The rural isolation isn't a disadvantage anymore. BHC wants to train rural founders in AI, invest in them, and take a 7% equity stake in their startups. And what's the end game? What does the scoreboard look like in Vision 2035? It's massive. 200 companies in the accelerator, monumental highs hitting 50 million in revenue, and the total regional valuation, the campus plus the companies hitting $1.1 billion. It feels like a tycoon strategy. I don't think of a nonprofit director when I read this. I think of the old railroad barons. Tycoon is the right word. He's building infrastructure. He's basically saying, if the government won't save these towns and the market ignores them, then I will build a machine that forces the market to pay attention. And that really is the core tension, isn't it? We're so used to the idea that public service requires some kind of sacrifice. Right. The selfless volunteer. This model says public service can be a path to enormous personal wealth. It forces you to look at intent versus outcome. The defense in these documents is that as long as the entities are paying their own bills, his compensation is justified. Basically, if Custer, South Dakota becomes this thriving tech hub with great jobs, do the locals care that the guy who did it made $39 million and drives a cyber beast? Or are they just happy their kids don't have to move away to find a good job? That's the bet that ambition is a stronger motivator than charity. Looking at the roadmap, the very next step is that $170,000. That's the spark plug. That's all it takes to start this engine. Once that money is in the bank, the LLCs get formed, Hannah gets hired, the truck gets ordered. And the reality show begins. It is audacious. It's risky. And you can't deny it's interesting. Luke Alvarez claims he built a $35 million empire with a laptop and that he can save the rural West with cannabis money and AI. Whether he's a visionary or just a very slick operator, well, the math is on the page. The execution is everything. And that execution is going to be very, very public. It is. So here's the final thought for you to chew on. We always talk about saving rural America like it's a charity case. But what if we treat it as an undervalued asset class just waiting for a takeover? Does it matter if the motives are profit driven, if the town actually gets saved? I think the people in the southern black hills are about to find out. Thanks for taking the deep dive with us. We'll see you next time.