VC and THC, the entrepreneurial instincts for selling weed, Grown In podcast tease and more!
In this Issue
Our conversation with cannabis venture capitalist Michael Gruber
Forward to a friend and subscribe to Grown In: Illinois
Lightfoot cannabis policy advisor on the “entrepreneurial instincts” of selling weed
Cresco Labs, Grown In: Illinois, others talk cannabis commercialization with WBBM Radio
Illinois Cannabis Company Tracker: Cresco Labs, Green Thumb Industries, Grassroots Cannabis, PharmaCann, Revolution Global
Roll Call: Toi Hutchinson, Bill Bogot, Dr. Sarah Mann, Charlie Bachtell, William “Beau” Wrigley
Our conversation with cannabis venture capitalist Michael Gruber
Decades before cannabis emerged as a business growth opportunity in Illinois, Michael Gruber started his career as a dot-com venture capitalist in Silicon Valley and has continued his work in Chicago for the past 20+ years.
A Queens native and Kellogg graduate, Gruber is a managing partner at Chicago-based Salveo Capital, a cannabis industries-focused venture capital firm. The firm has 19 portfolio companies in its first fund, which was approximately $25 million.
Salveo is currently raising another fund that will invest in local and national cannabis-related companies. This includes startups that “touch the plant”, such as growers, processors and merchandisers. Other Salveo and personal investment targets are of the “pick and shovel” variety; companies that innovate to normalize a $300 billion dollar industry that is thousands of years old yet still operating largely in the black markets.
In this Grown In: Illinois conversation, Gruber shares advice for newcomers to an industry he embraced about seven years ago. He also shares commonalities and distinctions between today’s cannabis sector and what transpired during the Internet boom, bust and renewal.
Grown In: What advice do you have for investors, entrepreneurs and professional service specialists who are interested in expanding into the cannabis sector?
Michael: The cannabis sector is an amazingly interesting space but, at the same time, interested parties should be aware that it is also quite complicated. The discrepancy between illegality on a Federal level and legality on a state level makes many actions and decisions more nuanced, which means there are meaningful differences across state lines. Understanding the market and regulations is critical. In addition, with the industry growing so fast, it is important to look for strong compliance and governance within companies when deciding where you might want to work. Each person just has to be comfortable with a little ambiguity and, of course, risk.
Grown In: Illinois has several leading growers, processors and merchandisers of commercial cannabis - including Cresco Labs, Green Thumb Industries, Grassroots Cannabis, PharmaCann, Revolution Global and Verano Holdings. How does our industry infrastructure compare to other states, and where do you think we have competitive advantages?
Michael: Illinois is clearly positioned to benefit from the expansion of the cannabis industry. I’m proud to say that Illinois is home to some of the country’s largest and best managed cannabis companies. Still, the state’s medical program had a weak start relative to other states based on a limited set of qualifying conditions, difficult application procedures, and more. This has created an environment where there is an incredible amount of untapped demand from patients and customers. Given the state's stringent licensing program across cultivation, processing and retail, each of the established companies within Illinois will have the opportunity to benefit greatly as adult use is launched on January 1, 2020.
Additionally, Illinois is a progressive leader with respect to the social equity program it has established which will allow for new craft producers and businesses in communities historically impacted by the criminalization of cannabis. Lastly, as cannabis becomes more mainstream and is used for everyday health and wellness, Chicago’s stature with leading pharmaceutical and health care companies, along with being the nation’s distribution hub, will put Illinois in a prime position for the future.
Grown In: Your career as a venture capitalist started in the early days of the dot-com boom. How do these early days in the cannabis sector compare to what you experienced during the dawn of the Internet industry?
Michael: Yes, I worked in Silicon Valley in the 90’s in the middle of the dot-com boom and saw it through to the bust in 2000, and have continued to be a venture investor through today. Also, I had been active in building companies as an operator and being an individual and fund investor.
Then, the innovation and excitement was amazing - and, smart people from other industries joined in by the day. At that time, no one knew what the “dot-com” industry would become, the market was being created… which ranged from new business models to greater efficiency in operations.
Cannabis is different. The market already exists. It’s a product that has been used for over 5.000 years and, today, there is an existing $300 billion global market the vast majority of which is illegal. So, the big opportunity is to take an existing market and to bring it to the legal regulated market.
The excitement level is similar and there is clearly a similar brain migration to cannabis, as some of the brightest from tech and Wall Street make their way into the industry. Additionally, the passion and dedication people have for the plant and its healing properties is so inspiring and I, along with the rest of the participants, should be grateful to the trailblazers that were active in the industry even when illegality hung over their heads.
Finally, it’s satisfying to know that the lives of people young and old, sick and healthy are being improved through cannabis usage. And, with further research, innovative formulations will be developed for a range of health issues.
Grown In: Talk about your investment strategy for ancillary "pick and shovel" cannabis businesses that "don't touch the plant”.
Michael: Our Salveo Capital fund invests across the entire cannabis ecosystem, which also includes hemp. When we first launched the Fund in late 2016, we were more focused on the “pick and shovel” space based on a host of reasons, which included regulatory uncertainty, poor management within “plant touching” businesses, greater capital efficiency, and what we believed to be more likely M&A activity.
That being said, as the industry matured, we saw changes which made our “opportunistic” strategy drive us to invest in a greater number of businesses that were involved across the entire ecosystem. This includes areas such as cultivation, processing/manufacturing, and retail. Again, given that this industry has many constraints due to federal illegality, there remains a need to create unique solutions for the industry. Ultimately, as federal legalization happens, large established companies across a range of verticals (alcohol, food & beverage, pharmaceuticals, etc.) will be more openly active in the sector. Acquisition will be become a common activity and we believe Salveo will be uniquely positioned to be rewarded during this period.
Grown In: For some or perhaps many, there remains a stigma associated with engaging in anything cannabis-related. Did you ever experience any hesitation engaging in this space, and do you have any words of wisdom for others who want to dive in but may feel some trepidation?
Michael: I have now been involved in the cannabis industry for close to 7 years. The environment back then was quite different than it is today. There clearly used to be a stigma. Before I got involved, I thought hard about that… as it seemed like, once I got in, there was no turning back.. and that I might never get a normal job in future.
Clearly, most were not willing to take that risk. Of course, that is where the opportunity lies - stepping in, when others won’t. Luckily for me, I had been an entrepreneur my entire life, operate well with risk, and had strong support from my family.
Today, cannabis is a hot topic at house parties and in cocktail conversations with many now trying to find an entry point. And so, it is almost like a badge of honor now. It’s amazing to see people talking about their usage or the industry openly where that would have been extremely rare even five years ago.
That being said, with excitement brings a rush of new people to the industry. They may possibly be joining for the wrong reasons, which could set them up for over-hyped expectations. So, I’d say to any would-be newbie cannabis people, come enter the space, but be aware that it isn’t all a road to riches.
Being a successful cannabis company is hard work, so be prepared to roll-up your sleeves and execute.
Forward to a friend and subscribe to Grown In: Illinois
We invite you to subscribe to Grown In: Illinois, particularly if you are in a cannabis-related industry, aspire to work or invest in this area, or are just generally curious about the newest and greenest industry in Illinois.
Lightfoot cannabis policy advisor on the “entrepreneurial instincts” of selling weed
Domain industry expertise that only a few years ago would’ve landed you in jail is now being encouraged and evangelized by Chicago Mayor Lori Lightfoot’s administration.
Bravo.
Beyond city and state cannabis-related social equity programs, established to provide advantages for communities and individuals adversely impacted by the war on drugs, it’s nice to hear Mayor Lightfoot’s policy advisor Paul Stewart give permission to those with a history of selling the plant to leverage merchandising skills acquired in the pre-legal adult-use era.
“We want to redirect that energy,” Stewart explained earlier this month to 200+ participants at a cannabis business panel hosted at 1871 by Chicago-based Cresco Labs. “In what was formerly a black market, a lot of people that (sold the plant) had a lot of entrepreneurial instincts if you will. Now that it’s legal, we want to make sure those people have the same opportunities as everyone else.”
Cresco Labs, Grown In: Illinois, others talk cannabis commercialization with WBBM Radio
Sooner rather than later, Grown In: Illinois will start a podcast chronicling the people and personalities making a positive impact on Illinois cannabis industries.
In the meantime, hear a bit of our voice in this WBBM/CBS Radio podcast from this morning. We discuss new company and job creation environments enabled by the normalization of the new cannabis-infused industries in Illinois, why we are before and after a bubble and more…
Illinois Cannabis Company Tracker: Cresco Labs, Green Thumb Industries, Grassroots Cannabis, PharmaCann, Revolution Global
Each week, Grown In: Illinois shares a thing or two about the six of the largest cannabis companies in the country that just so happened to be based in The Land of Lincoln.
Cresco Labs
A.D. Quig of Crain’s Chicago Business writes how recreational cannabis will be ready for Wrigleyville come January 1. She reports on the zoning scuffle Chicago-based Cresco and its MedMar dispensary faced in order to move to a larger facility at 3500 N. Clark (one mile south of the now Friendlier Confines).
CRLBF Ticker – Careers at Cresco Labs
Green Thumb Industries
Chicago-based Green Thumb Industries plays a cameo role in the Betting On Cannabis feature story published by The Nevada Independent. In 2014, the state of Nevada issued an edict prohibiting any state gaming licensees to have any involvement in the cannabis trade.
Earlier this year, GTI acquired a company called Integral Associates, which operates Essence Cannabis Dispensary in eight states for $290 million. Integral was started by former Tropicana casino exec Armen Yemenidjian, whose father Alejandro “Alex” Yemenidjian served as CEO of Tropicana from 2009 to 2015.
It’s a good read, particularly for those who are living in a state that is rolling the dice on the expansion of the cannabis and gaming industries in 2020.
GTBIF Ticker – Careers at Green Thumb Industries
Grassroots Cannabis
Former Dr. Pepper Snapple Group and Cadbury executive Joe Bayern was named president of CuraLeap Holdings. CuraLeap, based in Wakefield, Mass., acquired Deerfield-based Grassroots Cannabis earlier for $875 million in cash and stock. That transaction is expected to formally close next year.
PharmaCann
Chicago Tribune and Pioneer Press reporter Genevieve Bookwalter reports on the past, present and future of MME Evanston Retail, a dispensary owned by PharmaCann currently located in the city-owned Maple Avenue garage.
Revolution Global
Hundreds of jobs will emerge from the soon-to-be completed expansion for what will be Revolution Global (formerly Revolution Enterprise’s) 650,000 square feet growing facility in Delevan, Illinois, reports the 25 News television station out of Bloomington-Normal.
Roll Call: Toi Hutchinson, Bill Bogot, Dr. Sarah Mann, Charlie Bachtell, William “Beau” Wrigley
A few words about five pioneers and personalities impacting Illinois-based cannabis industries.
Toi Hutchinson – Illinois Cannabis Regulation Oversight Officer
Dubbed the Illinois “Pot Czar”, Toi Hutchinson was appointed by Governor Pritzker in September 2019 to oversee a myriad of agencies that impact the commercial cannabis sector. Those agencies include the Department of Public Health, the Department of Agriculture, the Department of Commerce and Economic Opportunity, the Department of Revenue and the Department of Financial and Professional Regulation. Previously, Hutchinson served as a state senator for Illinois’ 40th District on the south side of Chicago. In December, a seed was planted in the press suggesting that Hutchinson’s appointment somehow defies the Illinois constitution. Regardless, the integration of these government agencies to oversee cannabis is critical to industry development.
Bill Bogot – Partner, Fox Rothschild LLC
Described as a “Cannabis Law Trailblazer” by The National Law Journal, Bill Bogot co-chairs the Cannabis Law Practice Group at Fox Rothschild LLC; the firm has 40 attorneys nationwide focusing on the emerging sector. A specialist in highly regulated industries, Bogot also wrote many of the regulations for the Illinois Gaming Board. His client work includes licensing, business formation, operational plans, shareholder agreements, mergers and acquisitions, and regulatory compliance.
Dr. Sarah Mann – Mindful Medicine Clinic
Dr. Sarah Mann, Cannabis Physician, owns and operates a medical dispensary in Barrington that has certified hundreds of medical patients. In addition, Mann is an instructor at Oakton Community College, which offers a certificate program for students interested in working as patient care specialists in cannabis dispensaries. The Mindful Medicine Clinic blog posts everything from what constitutes the continuum between THC and CBD to how to properly smoke from a bong.
Charlie Bachtell – Founder and CEO, Cresco Labs
After cutting his teeth as general counsel for Guaranteed Rate during and after the financial crisis, Charlie Bachtell leveraged his experience in highly regulated industries to co-found one of the largest commercial cannabis companies in North America. As CEO of Cresco Labs (CRLBF) based in Chicago, part of Batchtell’s mission is to combat the preconceived ‘Venice Beach’ notion that many have of the cannabis industry. Perhaps he can start with councilmembers of communities like Naperville and Bolingbrook, who argue that Marijuana is bad for their brands.
William “Beau” Wrigley – CEO, Parallel (formerly Surterra)
While Surterra is an Atlanta-based company that cutivates, processes and distributes cannabis in Florida, Texas and Nevada, it is managed by an iconic Chicago name. Parallel CEO William “Beau” Wrigley formerly ran his family’s famous multi-billion dollar chewing gum company based in Chicago. In 2018, Wrigley’s family investment office Wychwood Asset Management led a $65 million venture round in the company, which also includes Jimmy Buffet as an investor.