Investing During A Recession (Podcast)

Summary

• During a recessionary environment is historically when VCs make a ton of money.
• Narbe Alexandrian, President and CEO of Canopy Rivers, the venture capital arm of Canopy Growth, returns to the show.
• We discuss its portfolio, TerrAscend capitalizing on New Jersey going legal, and building one's thesis in the cannabis market.
• We also cover creating brand equity, being customer obsessed and finding the disruptors.
• Pushing edibles to the next level with automation and why most companies wouldn't choose vertical integration unless they had to.

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Narbe Alexandrian, President and CEO of Canopy Rivers (OTCPK:CNPOF), the venture capital arm of Canopy Growth (CGC), returns to the show. The fund has a diversified portfolio of cannabis industry investments that includes licensed producers, cultivation & sale applicants, pharmaceutical formulators, branded developers & distributors, and technology & media platforms. Canopy Rivers is a lifecycle investor in both early stage and late stage cannabis companies. Narbe is also a Sessional Instructor at the Schulich School of Business, teaching technology entrepreneurship and venture capital within the undergraduate and MBA programs.

Topics include:

• Made 18 investments since Narbe last appeared on the podcast. Has been playing out since their thesis last year - if it's not forced upon you, vertical integration doesn't make sense. Have been seeing companies strip down to see their core strengths and timing it correctly with the market.
• Vertical integration success, companies like Trulieve (OTCQX:TCNNF) - what helped companies like them was focus. Large MSOs typically focused on 8-10 states, but companies like Trulieve, or TerrAscend (OTCQX:TRSSF) (in Canopy Rivers' portfolio), focused on key states, not spreading themselves too thin before they gain market share. But if left to own devices, companies likely wouldn't choose to be vertically integrated.
• What they like about TerrAscend - close to 200% increase in share price in capital markets. Narbe asked them about going to California initially but TRSSF felt like the East Coast was the place to put their energy. With New Jersey going legal, especially bullish now, especially if neighboring states continue to go legal, which seems inevitable. Perfect timing with incredible management team.
• Makes sense for governments to start out conservatively, but over time, regulations for cannabis will be closer to alcohol industry. What Narbe looks for in investments: market size & understanding traction (the easy parts), and understanding management (the harder part).
• Investing in a recessionary time. Good deals on great times. Historically, it's these times when VCs make a ton of money. Companies founded in a recession. Optimistic about what's coming.
• Thoughts on beverage side of the cannabis space. Lot of naysayers, but alcohol is a multi-billion dollar industry, this is a form of consumption that people like and are used to. But initially drinks were too sweet or not consumer friendly. Canopy Growth (CGC), Cann, Hexo (HEXO) are now all focused on low-THC drinks. Narbe believes 20% of the market will be dominated by beverages within 4-5 years.
• Thoughts on Europe cannabis market. Growing in fits and starts and now everything is on pause because of Covid. It is going to happen, but why so many companies have pulled out is because it could take years before that happens and no one knows when it will. Especially because it's a more conservative area.
• Why Narbe thinks Democrats are more favorable for cannabis. Thinks we should see some form of legalization within 4 years. Reviewing Narbe's 2020 predictions for the industry and his thoughts on the next few years.
• Canopy Rivers' dispute with PharmHouse. Investment made at a different time when there was an undersupply of cannabis. But general thesis remains true.

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