Investors Talk Cannabis After Coronavirus: How Is The Industry Changing?

Cannabis investors and experts came together Monday to discuss the effects of the COVID-19 pandemic on the industry at the Virtual Benzinga Cannabis Capital Conference.

Tim Seymour, CIO of Seymour Asset Management, moderated the closing panel, “The New Normal: Investor Perspectives & Preparing for Recovery,” which featured:

• Yoni Meyer, partner at Casa Verde Capital
• Matthew Nordgren, founder of Arcadian Fund
• Matt Hawkins, founder and managing partner of Entourage Effect Capital
• Roderick Stephan, partner at Altitude Investment Management
• John Lykouretzos, CEO of FocusGrowth Capital Partners

Cannabis Legislation After The Coronavirus 

“The fact that cannabis was deemed essential was the shot in the arm that we really needed,” said Entourage Effect Capital's founder Hawkins.

This development is very likely to lead to advanced conversations about cannabis in Capitol Hill and could push state legislators into finding ways of improving tax and regulation for cannabis products, he said, adding that legal cannabis is a great vehicle for tax revenue in times of crisis.  

Casa Verde's Meyer also said the COVID-19 pandemic can help speed up the legalization process — while reminding investors and companies that legislative processes have their own development times.

“This will be a critical turning point in terms of opening up the space from a banking point of view and getting institutional investors more comfort, but at the same time, it’s not like the faucet just turns on and now funding is coming from all sources and you’re paying with credit cards at all your dispensaries tomorrow,” he said. 

Cannabis Survivors Today, Leaders Tomorrow

“Some cannabis companies are currently on life support, they have very short cash runway [and] they’re going to have to focus right on survival. Today’s survivors are going to be tomorrow’s leading companies,” said Altitude’s Stephan.

The investor said that if a company has less than three or four months of cash runway, they’re in “crisis mode.”

Meyer said that some companies on Casa Verde’s platform, most notably on the ancillary side, actually increased revenue during COVID-19 lockdowns thanks to increased transaction rates. They include delivery platform Dutchie, track-and-trace provider Metrc and point-of-sale company Green Bits.

“These businesses are well-positioned to weather this storm,” he said. 

New Cannabis Opportunities Arise

Nordgren, the founder of Arcadian Fund, highlighted some specific consumer patterns that surged during the lockdown periods of April and May.

“When stimulus checks come in, people buy more cannabis, almost directly. You’re starting to see people use this downtime to really identify with new products. I think we have to expect these to be long-term consumer patterns that are going to benefit the industry,” he said. 

Lykouretzos also said the coronavirus pandemic could bring new cannabis opportunities. 

“I think of telemedicine as one of the first opportunities. Patient and consumer consultants are trying to move to online at an accelerated rate,” said the FocusGrowth Capital Partners CEO. 

An ongoing trend in general medicine is catching up to medical cannabis, with over 24 states allowing for temporary remote prescribing.

“I think marketing, by far, is the biggest risk and opportunity. We need to be thinking about digitally native marketing. The ability to communicate digitally, not in person, paves the way for new technology that enables brands to connect directly with the consumer.”

Lead image by Ilona Szentivanyi. Copyright: Benzinga.