Interview with Joel Sherlock (Vitalis Extraction Technology)
On February 21st, Joel Sherlock, Co-Founder & Chairman of Vitalis Extraction Technology, will speak at Kahner Global's Cannabis Private Investment Summit in Fort Lauderdale, FL. This event gathers industry leaders and investors for a day of collaboration and networking
A serial entrepreneur and business leader, Joel is a born connector who has been building great teams and delivering the expertise to execute. Joel has been at the helm of 9 successful start-ups and corporate exits, including one of BC’s top private real estate brokerages, a national first action sports e-commerce company, a successful corporate consulting firm and a few private equity funds.
Joel’s time is now focused on Vitalis Extraction Technologies, Spectrum Asset Leasing and Doventi Capital.
Vancouver is home to Doventi Capital, the Private Equity fund he co-founded to support professionals in the growing legal cannabis market. Vitalis Extraction Technologies in Kelowna BC is an industry leader in manufacturing industrial CO2 Extraction equipment. Spectrum Leasing (Toronto, ON) is an asset backed lender designed to support the entrepreneurs and manufacturers in the world’s fastest growing market.
Coming from a finance, real estate and tech background, why did you choose to get involved in cannabis?
It all started with a real estate deal In 2011, we had a warehouse building and I was approached by group with an offer. It was listed for $10/square foot, but they came in at $12. That seemed like a strange negotiation strategy to me.
They proceeded to informed me they had a license to grow cannabis, as well as approval from the mayor and a business license. After laughing and ushering them out of my office, I called the mayor and health Canada out of pure curiosity. Turns out this was a real program and I had some reading to do. After much diligence we took the deal.
As it turned out, the relationship could not have been better. They were ideal tenants, and upgraded much of the infrastructure. A true win/win. At that time the MJ market was very small, so quickly we started to see more deals.
Why did you focus on extraction?
I understand real estate and equipment finance, I am no expert in cultivation, so I struck to what I understood at first. As the market grew and the cultivation companies started to scale you could see the competition brewing. While I feel there will always be a strong craft market, I feel a lot of the cannabis market will get commoditized. Look at any other market, like alcohol, many of the strongest companies are those that control the brands, their processing (or manufacturing) and distribution.
Also, when it came to the processing equipment investment all you need to do is go into any Starbucks, all the equipment is the same. There is a very important reason for that. Franchises and successful brands are all about consistency of experience, a standard processing platform, be it an espresso machine or CO2 Extractor.
We decided to focus on one platform that would efficiently deliver on all our extraction needs. The desire was for bigger pumps, larger capacities and options for colder pressing. Initially we were looking for 5 to 10 machines and the current producers were not that willing to move. I reached out to a friend (and brilliant engineer, James Seabrook) who was building oil and gas extraction equipment.
James took my small idea to a whole new level. With his experience and expertise he quickly sketched multiple upgrades and simple fixes for some of the industries biggest challenges. He was able to create a machine that could do all of our processing. We could run low-quality trim (often used for chocolate and edibles) one day, and the next, do a subcritical run on high-quality flower to retain terpenes, flavor and whole plant extract - all from the same platform.
What are the different ways to extract?
Generally speaking there are a few major methods: butane, alcohol, C02, rosin presses to name a few. We focused on CO2 for sale and expansion. Canada and a few markets currently prohibit Butane (light hydrocarbon) extraction methods for a mired of reasons, as we started in investing in Canada’s medical system we have been focused on the selectability and organic properties of CO2.
We found that subcritical CO2 (very cold liquid CO2) generates a beautiful whole plant extract, retaining the terpenes and full flavor. While supercritical gives us very competitive throughput.
What would you like investors to know that are new to the cannabis market?
When I talk with anyone looking to invest for the first time I remind them that this is a new market, With that said, it borrows from so many others. Agriculture, alcohol, tobacco, retail, distribution etc. As the market evolves it will start to look more like the professional enterprises that it is quickly gaining on. I do remind them to not forget this is still a very new market with some unique challenges and that will come with volatility. In summary always do your research, lots of research, also lean on the experts from other markets.
When we started working with James (a professional oil and gas engineer) we learned that some of the extraction vessels were not registered and stamped by a professional engineer, in all other industries anything that goes over 15PSI needed to be stamped and registered. So it was natural that we made the decision to build for where the market was going, to ensure that all our pressure vessels were stamped, certified, and up to professional code. This way no matter where the regulation changed or inceased our (and our clients) investments are safe.
Another question I get often revolve around Brands. When looking at brands, do they have a roll out strategy? How will they bring a consistent product to each market when every state requires different licenses and you will need a processing facility in each.
In many of these deals the numbers can be intoxicating, the excitement buzzing, however competition is also building so focus on those deals and companies with great teams and phenomenal execution as I feel they will prevail is this rapidly evolving market.
What’s new on your horizon?
We have a lot of exciting R&D projects on the table, we will have much to announce in 2018. Lots of innovations that will improve client’s throughput, decrease runtimes and lots of additional automation. We have to keep some things in the vault for now ;)
Also we have started to ship our R series 200 and 400-liter systems. We originally developed the R series for hemp processers, and we now have cannabis companies looking at 400-liter machines options, they are 16 feet tall, a testament to the demand of extracts and edibles.
Lastly, and what I think excites me the most is the additional markets that are coming on line, Australia, Germany, Columbia. With the world watching as Canada legalizes recreational use in July, I think there will be much more excitement to come internationally. Not to mention it is a wonderful time to be Canadian!
The Cannabis Private Investment Summit brings together the best and brightest cannabis entrepreneurs and ultra high net worth investors & family offices. It is the premiere summit for institutional investors, family offices, and ultra high net worth investors. For additional information, please visit www.cannabrunch.net or email us at info@kahnerglobal.com.
