Highlights from Kahner Global's 2nd Annual Cannabis Private Investment Summit Florida
The cannabis industry is expanding at a breakneck pace as more entrepreneurs and investors jump on board what could be a $190 billion global industry that is still in its infancy. The recent Kahner Global Cannabis Private Investment Summit in sunny Ft. Lauderdale allowed many of the leading voices in the industry to bring potential investors up to speed on some of the most recent changes to the rapidly evolving industry and to provide proof that a strong entrepreneurial spirit can thrive even in a difficult regulatory environment. The level of attendance was also a reminder that there is growing interest for opportunities within the cannabis industry among high-net-worth individuals, family offices, and even some institutional investors.
Hosted by Greenspoon Marder LLP and emceed by JJ McKay of The Fresh Toast, the event included seven panel discussions that touched upon issues such as regulatory compliance and the mechanics of CBD extraction, presentations by cannabis thought leaders, a pitch competition involving six cannabis companies, numerous opportunities for networking, and a powerful keynote address on the way that cannabis can be used to improve the lives of athletes during and after their careers by former NHL player and cannabis advocate Riley Cote. The full day of panels, pitches and presentations concluded with a cocktail hour.
Some of the unifying themes throughout the event included the growing importance of Toronto as a hub for cannabis startups, the rise of Europe as a major market for medical cannabis, and a reminder that most banks and venture capital funds in the United States are still waiting until there are fewer regulatory headwinds to fully embrace the cannabis industry. As a consequence of the latter trend, the cannabis market has not maximized its full potential for growth, but it has also meant that family offices, angel investors, and high-net-worth individuals continue to be the predominant sources of capital for cannabis startups.
This particular topic was the subject of the day’s first panel, “An Overview of the Legal Marijuana Industry.” Matthew Ginder, Esq., senior counsel for Greenspoon Marder, was the panel's moderator and deftly navigated the speakers through some of the day's most complex subjects with his fellow panelists, Kevin Hart (CEO of Green Check Verified), John Vardaman (Vice President and general counsel for Hypur), Gian Paolo Veronese (Chief Business Development Officer of Big Rock Partners), and Matt Karnes (Founder of GreenWave Advisors).
The consensus among the group was that the complexity of regulatory compliance may offer some unique opportunities for smaller banks. Mr. Hart noted that the federal restrictions on cannabis that have caused larger banks to eschew the industry could leave the door open to struggling community banks. “Community banks need deposit dollars,” he said. Serving as the banks for members of the cannabis industry could provide them with a lifeline.
Mr. Vardaman added that the cannabis industry should be a banker's dream because it is so regulated. “That means greater transparency,” he concluded.
Despite the subject's complexity, there was an overarching sense of optimism about the future of the industry. Mr. Ginder noted that cannabis is enjoying “more bipartisan support at the federal level.”
Meanwhile, Mr. Karnes gave even more reason to be optimistic about the state of the industry. “We'll see a big surge in growth in 2020,” he said, largely because so many states will begin opening recreational dispensaries late this year and into next year.
The following panel, “Extraction and Manufacturing,” was moderated by Sullivan Adventures LLC Co-Founder Jeanne Sullivan. Ms. Sullivan, a seasoned venture capitalist, told those in attendance that she estimates that just CBD will soon be a $20 billion industry. Consequently, she is “all in on cannabis,” she said. “Why not?”
Ms. Sullivan and her two panelists, Jason Laronde (Director of Sales at Vitalis Extraction Technology) and Rehan Huda (CEO of Green Sky Labs), did not focus on the business side of cannabis. Instead, they examined some of the more technical aspects of extracting CBD from the plant. In particular, the panel focused on some of the differences between using butane versus carbon-dioxide to extract cannabinoids and other compounds from hemp, as well as the future of extraction.
Mr. Laronde believes the extraction techniques being developed by companies like Vitalis and Green Sky will revolutionize how cannabis is studied by the medical community. “You can take the anecdotal, 'I smoked cannabis and got better',” he said, or you can figure out what specific cannabinoids are the active ingredients that allowed you to get better, isolate and extract them, and then make modern medicine.
Mr. Laronde added that there is already a rush for CBD isolates, while Mr. Huda noted that extraction technologies still can be improved by novel techniques. “There's a lot of room for innovation,” Mr. Huda said.
Following these two educational sessions, Mr. McKay introduced six companies to the stage: Hyperponic, Pistil, Saku Cannabis, VerdeMed, Toast, and Province Brands. This diverse group of companies was demonstrative of just how many facets the cannabis industry has and just how much room for growth it potentially has for investors and entrepreneurs. They presented to three veteran investors, who served as the contest's judges: Ryan Ansin of Ansin Investments, Lokesh Chugh of The London Fund, and Michael Willner of Willner Capital.
Hyperponic has created a fully automated CropTower that can cut down the costs of growing cannabis to $75 per pound, according to Chief Marketing Officer Arthur Fyvolent. Its vertical design is evidently so efficient that it reduces water usage by 95% and produces as much as one hundred times the amount of an outdoor grow in the same amount of space.
Pistil is a vertically-integrated producer of CBD-rich hemp. Greg Vermeulen, Pistil's President and CEO, expects the CBD industry to be worth $22 billion in 2022 despite being a less than $1 billion industry at present. To satisfy that enormous surge in demand, Pistil hopes to work with farmers in parts of the United States where tobacco was once king to create a network of thousands of small-scale hemp growers who all grow clones of their CBD-rich hemp plants.
Nicole Conners, the Founder and CEO of Saku Cannabis, believes that the biggest problem in the cannabis industry is the learning curve. Just in California, she said, there are 10 million people who are curious about cannabis, but not currently consuming it. Her goal with Saku Cannabis is to demystify the dispensary experience in their twenty-five locations within California and to reflect the more immersive culture for cannabis with their own brand of cannabis products.
Province Brands, meanwhile, has brewed the first beer from cannabis. What is perhaps most remarkable about the beverages brewed from cannabis, according to Chief Strategy Officer Lauren Maillian, is that they are low-calorie, low-sugar, gluten-free and are great-tasting, not to mention the sustainability efforts Province Brands prides with using the waste stream of the cannabis plant to brew their product.
Verdemed, a medicinal cannabis platform for Spanish-speaking countries, hopes to penetrate markets in Central and South America. President and CEO Jose Bacellar noted that the regulatory hurdles in the Latin nations that have legalized medical cannabis may be high, but that these difficulties pale in comparison to the reward for cornering these markets.
Finally, Eddie Miller, Co-Founder of Toast, hopes to create the first successful luxury brand of cannabis pre-rolls. By assembling a group of highly experienced brand builders and speaking to consumers' desires for increased transparency, better-quality items, and a line of products with various CBD to THC ratios, Toast aims to become one of the most recognizable names in cannabis.
While the rest of the attendees had lunch and networked, the judges deliberated. Once the event had reconvened, the judges announced that they felt Pistil had the best pitch.
Former Philadelphia Flyers enforcer and cannabis advocate Riley Cote for Athletes for CARE and the Hemp Heals Foundation then gave his keynote address on “Athletes and Cannabis.” In particular, Mr. Cote discussed how it can be used as a proactive medicine that can be part of a wellness regimen, not merely as a reactive treatment for pain management or anxiety.
The panel following Mr. Cote's address, “Medical Cannabis: The Truth Behind the Future,” was moderated by Doug Walter, a Trustee of the Broward County Firefighter's Health Trust. Mr. Walter was joined by Doug Sommerville, the CEO of PlantEXT; Kevin McGovern of McGovern Capital; and Marek Jasinski, the CEO of 100THX Inc.
Much of the focus during the panel was on the growing importance of the European Union. Mr. McGovern noted that medicinal cannabis is legal in 29 European countries, while Mr. Sommerville added that, “The global market is really a medical market.” According to Mr. Sommerville, there is a growing desire to invest in the cannabis among European investors. If the United States cannot do more to attract them, they may ultimately decide to work with Canadian companies.
Mr. McGovern echoed his concerns about the cannabis market in the United States, though for different reasons. “I think the FDA is going to come down and restrict the use of CBD more so than they do now,” he told those in attendance. For those who are looking to invest in cannabis, he continued, it would be wise to look to companies that are producing products that utilize other cannabinoids, such as THCA or CBN.
According to Mr. Jasinski, one of the most interesting aspects of the cannabis industry at present is the study of these lesser-known cannabinoids, particularly how they interact with one another.
The following panel, moderated by John Pinto of Hinsdale LLC, looked at the “Benefits of an Investment Fund in The Cannabis Industry.” Matt Hawkins, the Founder of Cresco Capital Partners, provided one such benefit rather succinctly: Because the cannabis market is in the process of maturing and will soon begin to attract institutional investors, smaller investment funds can enter the industry now and reap the rewards of being on the ground floor when significantly larger amounts of capital begin to flood the industry.
The other panelist, Joyce Cenali of Big Rock Partners, saw yet another benefit for those who invest sooner rather than later. She believes that many of the cannabis companies that are worth less than $100 million now will more than likely become the companies that expand and buy up smaller companies rather than be bought out by corporate behemoths themselves. Investing in the right company could mean placing a stake in a future empire.
Following a quick refreshment break, the next panel, “Investment 101 for Family Offices,” focused on a similar topic as above. However, moderator Todd Rosales of the Cooper Family Office explored the subject even further during a very informative discussion with Ryan Ansin of Ansin Investments and Scott Stevens, the CEO of Grays Peak Capital.
Similar in substance to what Mr. Hawkins had said, Mr. Ansin noted that family offices are in a prime position to pivot into the cannabis industry. Institutional investors, he believes, are still a few years away from moving into the industry, which means smaller investors can have a far more significant impact now than in the future. He also believes that the cannabis industry will see its most expansive growth relatively soon, as he thinks institutional investors’ entry into cannabis will defined by an explosive influx of capital.
Both Mr. Ansin and Mr. Stevens did express some concern that this rapid period of investment could constitute a bubble. However, Mr. Stevens believes that family offices will be able to weather any resultant storms better than they did in the aftermath of the dotcom bubble because their operations are more sophisticated than they were twenty years ago.
“Learn as quickly as you can and approach situations wisely,” Mr. Ansin said. While getting in on the ground floor of a company can be very lucrative, one should never sacrifice diligence for potential gains.
Alex Fang, CEO of Sublime Canna, then took the stage to give an insightful look into the effort to use traditional branding techniques in the cannabis industry. His presentation, “Cannabis Brands: Built or Bought?” questioned the wisdom of trying to manufacture a brand image that is independent of consumer experience. He contends that brand identities evolve as consumers become more familiar with a brand's products, provided the brand can offer a consistent product, and that it would be a mistake to attempt to shoehorn an identity onto a brand without consumer input.
Mr. Fang remained on the stage for the penultimate panel, and was joined by Amanda Byrd, the Chief Marketing Officer of Philter Labs, Inc., and Jeff Smith, a Partner at Kapno. This panel was moderated by investor Bill Brothers and continued the discussion of the difficulties of branding in the cannabis industry.
Before the final panel, Garyn Angel, attendees were treated a presentation by the Founder and CEO of Magical Butter. One of the brightest stars in the world of cannabis, and an entrepreneur who may have missed his true calling of motivational speaker, Mr. Angel urged investors to embrace cannabis.
The final panel, “Why Cannabis Investors Are Seeking International Opportunities,” discussed the reasons why some investors are exploring opportunities in foreign cannabis companies. Led by moderator Douglas Hannah, Managing Director of Silverleaf Venture Partners, the three panelists—Private Investor Richard Yates, Greenspoon Marder LLP Partner Sander Zagzebski, and William Muecke, Managing Partner of Artemis Growth—agreed that Toronto is becoming one of the major global hubs for cannabis startups, that Toronto will become a major gateway into the U.S. market, and that investment opportunities in Latin America could prove risky due to the fickleness of many governments in Central and South America.
Following the event, Rachelle Gordon of CannabisFN said, “I was really impressed with both the diversity in experience represented throughout the day as well as the exclusive, boutique nature of the event as a whole. The room was buzzing from start to finish and it was clear that CannaBrunch events are THE place for ultra high net worth individuals, family offices, and funds looking to enter the burgeoning cannabis space to learn, network, and conduct deal flow.”
She concluded: “Kahner Global obviously takes their time when it comes to curating both their speaker list and guest list.”
Wrap-up provided by Kahner Global’s PR PARTNER kmacconnect pr team Jay Fox, Joe Flattery and Kim Macleod.
