It’s no secret investing in the cannabis space has been like navigating a minefield in the last year, but some of the top investors in the sector believe the downturn in the Canadian cannabis market in the past year has created opportunities in the U.S. market.

'Bong-To-Boardroom' Cannabis Management

Roderick Stefan, partner at Altitude Investment Management, LLC., said that in today's climate, cannabis companies can’t afford loyalty to unskilled management.  “The CEO might be a bong-to-boardroom CEO,” Stefan said.  “The industry is going to a stage right now where we need professional management.”  Leading Canadian companies Aurora Cannabis Inc (ACB)  and Canopy Growth Corp (CGC) are among the producers that have recently replaced founding CEOs.

Thomas Haug, CEO and managing member of Aspen Tree Advisory, said the weak market has created buying opportunities, but investors need to be selective and know what to avoid.  “It’s a buyer’s market, the end of last year and beginning of this year ... I think that has created a big rollup opportunity for the right players in the space. I’m a buyer of management teams,” he said. 

Active Cannabis Investing

Tahira Rehmatullah, president of T3 Ventures, said passive investing is no longer a viable strategy in the cannabis space.  “Gone are the days where you can make an investment and cash out after a certain number of years,” she said.  “The biggest key with management teams now is being able to have line-of-sight with everything that’s going on and make adjustments in real time as opposed to waiting until you run out of money and then have to raise emergency funding.”  

Codie Sanchez, managing director at Entourage Effect Capital, said cannabis investors are no longer interested in the growth-at-all-costs business model. “We’re not interested in market share-grabbing companies,” Sanchez said.  “If that is your model in cannabis, whether you’re in Europe, whether you’re in Canada whether you’re in the U.S., it’s probably not a great model for this market.”