These 5 VCs have high hopes for cannabis in 2021
Cannabis has always been essential to some. Thanks to COVID-19, cannabis is now an essential business and many companies are entering 2021 after seeing huge gains in 2020.
TechCrunch surveyed five key investors who touch different aspects of the cannabis business. We asked these investors the same six questions, and each provided similar thoughts, but different approaches. Despite remaining headwinds, the future is looking up for most cannabis businesses, according to these investors.
Morgan Paxhia, managing director of Poseidon Investment Management, put it this way: “2021 could be nothing short of amazing for our industry. We expect capital flows to pick up massively from pent-up demand, good public markets bringing more IPOs, lots of M&A and new innovative startups coming on scene. We see opportunity with social equity for the first time, driven by private markets rather than poorly constructed regulations. It’s going to be fun!”
- Morgan Paxhia, managing director, Poseidon Investment Management
- Anthony Coniglio, CEO, NewLake Capital
- Emily Paxhia, managing partner, Poseidon Investment Management
- Matt Shalhoub, managing partner, Green Acre Capital
- Jerel Registre, managing director, Curio WMBE Fund
Morgan Paxhia, managing director, Poseidon Investment Management
2020 was a blockbuster year for cannabis. What advice are you giving your portfolio companies entering 2021?
Typical mantra for us, stay focused. Markets, deals and valuations are volatile in our industry but we all have to do our best to tune out the noise and focus. I’d say a great example of a team with focus is GTI. They have executed against a strategy while many of their supposed peers have done very irrational deals, impaired shareholder value, etc. GTI continues to march down its path and their results are showing.
How is COVID-19 changing the cannabis landscape?
2020 was an inward-facing year as most companies could not travel, capital was tight and macro was uncertain. This inward work has led to a lot of fundamental improvements for operators. There are others that got one last puff of wind but their businesses are too impaired and will continue to fall to the wayside.
2021 could be nothing short of amazing for our industry. We expect capital flows to pick up massively from pent-up demand, good public markets bringing more IPOs, lots of M&A and new innovative startups coming on scene. We see opportunity with social equity for the first time, driven by private markets rather than poorly constructed regulations. It’s going to be fun!
From retail to SaaS to research, there’s a lot of inroads to investing in cannabis. What sector of the business do you see has the best opportunity for growth in 2021?
We are bullish on select state markets. For example, new adult-use markets in NJ and AZ and existing markets with new growth prospects opening in CA and NY.
SaaS could get very interesting as there are several players reaching scale that are garnering mainstream attention.
International opportunity is mostly Mexico. It is the largest federally legal market that will just be opening in 2021. Many have not taken this one seriously but we have and are very proud of the efforts that went to moving such a monumental step forward.
The history of drug enforcement in the United States has been deeply unjust and racist; as we enter a period of growing legalization, are there things that startups and investors can do to address that inequity?
The industry, meaning established companies, entrepreneurs and investors need to drive solutions here. Regulations have been terrible and only exacerbate the issue. We have been putting a lot of thought into this area for years, watching various aspects such as the missteps taken by government and the unfortunate poor intentions from supposed investors.
We see a path emerging here that is collaborative, simple and should be attractive to capital providers. Stay tuned.
Who are some leaders in the cannabis space — companies, founders, growers?
- My sister Emily is a co-founder and rock star! She is a true leader in this space on so many levels.
- Ahmer Iqbal, CEO of Sublime — Ahmer took the role at a very challenging time and with very little capital was able to rebuild the company into a leader in the CA market.
- Jason Wild — Not only is he a savvy investor, he puts his money where his mouth is. Outside of Poseidon, I do not know any other person in this industry that puts up so much of their own money into what they believe in.
- Coleman Beale, CEO of Bastcore — If you are not familiar with the industrial hemp renaissance in the U.S., look no further. This technology-driven hemp-processing company is rejuvenating textiles in the U.S., using domestically grown hemp and processing for uses in such textiles as denim.