Cody Shirk is today's featured Cannabis Investor. The HempTown USA Cannabis Investor Series is back for the third year. This year, the Series is featuring eighteen of the cannabis industry's top investors who review the previous 12-months and share their 2021 investment strategies. On today's episode Dan Humiston is joined by Cody Shirk from Explorer Equity Group. Produced by PodCONX
Cody Shirk is today's featured Cannabis Investor.
The HempTown USA Cannabis Investor Series is back for the third year. This year, the Series is featuring eighteen of the cannabis industry's top investors who review the previous 12-months and share their 2021 investment strategies. On today's episode Dan Humiston is joined by Cody Shirk from Explorer Equity Group.
CI3 Explorer cody Track and CI3 Explorer Dan Track
Cody Shirk: [00:00:00]And instead of saying, Oh, I'm up against these huge pharmaceutical companies or I'm up against these huge, Backed companies that have, tens of millions of dollars in VC money, that the better way to look at it as it and say, we have so many problems with very little solutions.
So there's the possibility that anybody can start a company right now to solve this issue, which is people dealing with themselves in their family and an isolated situation like a hundred years ago. You think that's not an issue. You just hang out, but now we're like, we're going nuts. It's crazy. raising cannabis capital. We are continuing this year's cannabis investor series with another former [00:01:00] guest and a great friend of the show. Cody shirk co-founder of explore equity group. Cody. Welcome back to the show.
glad to be back. Thanks for having me again.
Dan Humiston: I'm always excited to have you on the show because you're always willing to share your latest investment discoveries. And I suspect the reason that you seem to be ahead of the pack when it comes to identifying what's next is because you didn't follow the same road. Most investors did. I'm not going to take the time today to retell the story of how you got here.
So I'm going to encourage our listeners to go back and listen to episodes. 67 and one 60, because today I'd like to pick up where we left off a year ago. You were really interested in magic mushrooms. Can you give us a quick update as to where we are with that?
Cody Shirk: Yeah, so I'll just say, I still love the cannabis industry for what it can be. but, the magic mushrooms industry, which I will just define as psychedelics, there's a lot of cannabis people jumping over to that [00:02:00] industry.
And I don't want to say that I'm not a part of that pack, but I've been, studying deep in the industry for years now. pretty much hand-in-hand with Canada. I just think that the past year psychedelics have become an actual investing opportunity,
, I'm definitely doing a lot in that industry and still, following the cannabis industry, which, People attempted to lump together cannabis and psychedelics in a lot of way. They're very similar, but in a lot of other ways, especially on the business and investing side, they're completely different.
Dan Humiston: I thought it was interesting last time that was a, a direction you'd branched off into. and I know a lot of our listeners had commented on it .
one of the things I've always admired about the way you approach. Finding deals is that unlike most investors who are buried with just tons and tons of decks, then they only take the time to really look at the polished ones. When we spoke last, you talked about how a lot of times you look at decks for good ideas, and then sometimes work with the entrepreneurs to try to find out if there's a real business model in there.
Do you think that's helped you identify [00:03:00] trends?
Cody Shirk: absolutely. And I think for anybody listening to this, when they're looking at the cannabis industry, You've got to assume several things. First of all, this is a new industry, meaning, from an investment perspective. So there's lots of opportunity because there's a, they're not traditional finance people involved in cannabis, so there's gotta be a lot of hidden opportunities.
the second thing is. It's got a bad reputation historically. So anytime you look at any topic, whether it be cannabis, drugs, or anything, that's controversial, there's typically an opportunity when the majority of the population is not paying attention to it. in simple terms, it just means that there's less people to compete with.
. And so when I work with entrepreneurs and the beginning, I've personally found, there's probably just so much opportunity from a financial standpoint, to help an entrepreneurout in the beginning, versus investing in a company that say worth 50, a hundred million dollars.
Guess what that company has got to see an exit that's double what is currently valued at,
Dan Humiston: really?
Cody Shirk: and when you get into the millions of hundreds of millions of dollars, like a double is that's a big deal.
[00:04:00] Like the distance between a hundred to 200 or 500 million to a billion. That's not just like some rounding error. That's a big number. So if you focus on early stage entrepreneurs where you can really help them get to the next day, number one, you probably have a lot more. Skin in the game and what they're building, but also you have more say in how they're going to build it.
I don't mean like you want to control the entrepreneur because that's why you're investing in them. You're investing in somebody who knows something more than you, and you believe in what they're doing, , you help them overcome hurdles that are in every business and every environment.
. So in their early stages, I think for investors looking for good opportunities, you look for things that don't seem to be ready to invest,
, I think there's a huge opportunity to do that. And if you think about business in general, back in the heydays of being an entrepreneur. That's how it really happened. If you look at how they raise money in the beginning, early stage companies there wasn't like this huge VC scene.
It was just like, Hey, let's raise some money from friends and family. And I think that's been lost a little bit here, but, that'll probably come back.
Dan Humiston: Yeah, I'm sure it has. And one of the things that I've always admired about you is that you search [00:05:00] out opportunities and you found a lot of them in other countries, how's the travel ban affected
Cody Shirk: yeah. Travel is definitely not going to be right now. I will not lie about that. but I think it's made each one of us revisit things that we previously just glossed over. So what I mean by that is, when you're looking for opportunities, let's say in the cannabis industry, You may be looking for the most exciting ones, making the news or the ones that have some crazy technology or breakthrough, product.
And when you're forced to not travel, when you're forced to really revisit what you're doing. You start to look back maybe this stuff you scanned over before that, didn't look interesting at the time, but you look back at it now go, Maybe this is a better opportunity. So as far as dealing with the travel, yeah, I haven't been traveling.
I haven't been exploring the world, but, it's given me time to reflect on the things that maybe I didn't give a second chance or didn't spend as much time on that I should have.
Dan Humiston: yeah, that same heading, we'll just keep going with this, with COVID you gotta assume the, that some opportunities are [00:06:00] better today than they were a year ago. Have you seen some of those.
Cody Shirk: absolutely. I'll go back to the psychedelics space and the sense or, and how it's similar to cannabis. And I think that no matter what your mental state is or what your personal situation is, whether you're single, married, roommates, in college, 67, every single person has encountered some type of mental illness challenge over the past couple of months, whether that's frustration with your kids or your dog, how's your spouse or you're lonely, or,like your neighbors driving you nuts and whatever it is, I guarantee you, everybody has going through something and it's brought this.
I'd realization for a lot of people like, wow, I need some help or I need some way to just let my thoughts marinate without being influenced, or I just need to escape
Dan Humiston: Yeah, exactly.
Cody Shirk: I think for the mental health, perspectivethere's been band-aids, there's lots of pharmaceutical products to, Oh, let's help with your depression and help with your sleep.
But I think in the back of all of our minds, we know that they aren't really what you should be doing. It's a band-aid on the situation. this mental health, I would say revolution, I think there's a bunch of other [00:07:00] revolutions happening right now, but I think there's huge opportunity.
For the cannabis plant medicine space and psychedelics even synthetically made drugs. I think there's a huge opportunity for investors and entrepreneurs to be looking at the mental health space. And instead of saying, Oh, I'm up against these huge pharmaceutical companies or I'm up against these huge, Backed companies that have, tens of millions of dollars in VC money, that the better way to look at it as it and say, we have so many problems with very little solutions.
So there's the possibility that anybody can start a company right now to solve this issue, which is people dealing with themselves in their family and an isolated situation like a hundred years ago. You think that's not an issue. You just hang out, but now we're like, we're going nuts. It's crazy.
Dan Humiston: That is so funny that you say that and,that's a very big umbrella. There's so many subsections in that they could be exploited, which would be, just like you said, there's so many opportunities there. Good idea.
Cody Shirk: Yeah. And one thing, I'll just say on a personal note, like I used to be a big drinker, not Not getting blackout every night, but I love beer and I love alcohol. I [00:08:00] love the process of making the drink of enjoying the drink the way it makes you feel. I like all that. What I don't like is two things.
One, I don't like the calories of just, it makes you make you and number two, it's the hangover. If anybody has kids listening right now for me, I have two kids, both on their age of three. You wake up the next morning at 5:00 AM consecutively with a hang over. That makes you want to say goodbye to alcohol together.
So if that is the way that people escape or have some type of mental, I dunno, like ease at night. and you realize this isn't working out for me. You look for other options, which is another reason why cannabis, I think, as our super bright future in the short term, just because people realize Hey, I want to be able to escape or relax in the evening.
and alcohol isn't really mine. best solution right now. And I found that out in the past several months, it was a big wow, I don't need this stuff. And it wasn't even like a huge decision for me. I just just stopped drinking because I hated the hangover. And then a month later I was like, I don't even want it anymore, which is wild to think about.
And I've got to assume that I'm not the only one feeling this which is encouraging for again, the whole [00:09:00] plant medicines industry.
Dan Humiston: For sure. it's not just that you're not at the top of your game when you wake up, even when you're not hungover and you don't sleep as well. . So if that's what you use to take the edge off at the end of the night, I think there are going to be a lot of people transitioning to other options and cannabis is right at the top of the list. For sure.
Cody Shirk: Yeah. And also like just different ways to consume it because the cannabis 1.0 is like, how do we get high or how do we.
ingest as much THC as possible or how do we roll the fattest joint? , if you think about it, that's it's like saying like how many shots of tequila can I do a consecutive is I guess pretty stupid if you think about it. so I think that there's a huge opportunity for investors and entrepreneurs to be looking at companies and products and services that are providing cannabis and plant medicine and a fashion, or a medium that isn't.
That, Hey, let's do keg stands at a party and it's Hey, let's integrate this into a part of our life where, you consuming on a daily basis where it's actually helpful. It's not blasting your brain into, going to [00:10:00] sleep. It's actually like stimulating your thoughts and it's relaxing your mind.
And it's giving perspective on the day and all those things. And there's very few companies actually doing that right now, there's always a lot, but if you look at the industry as a whole, there's a huge opportunity right now to be making low dosed edible. Cannabis products. It's people don't want to smoke.
They don't want to go through the whole, process of having a bong or rig or a, dab, Ray, all this stuff. If they just want to have, I want a pill that I eat and it tastes great. And 20 minutes later I feel relaxed and then I wake up in the morning and everything's just dandy. And I love my kids.
And no, there's no conflict. That's yeah. That's bliss recipe book. So I think there's a huge opportunity for those types of products right now.
Dan Humiston: Oh, I couldn't agree with you more. I couldn't agree with you more cause like you said, , I don't want to do anything with my lungs. I don't. So I'm really reluctant to, do anything that may jeopardize. My health in any way whatsoever.a pill just seems so easy and seems so much more efficient.
let's talk a little bit,in the remaining time we have, there's a lot of people that are now thinking, Hey, now's the time to maybe [00:11:00] invest in cannabis? Do you think this is a good time to jump back in or maybe we should just hold off a little bit longer.
Cody Shirk: I think there's two huge opportunities right now. There's one in public companies. And the reason why there's a huge opportunity to public companies is because many of them are fairly valued. If not undervalued. And as a retail investor, even as an institutional investor, you have a huge leg up investing in a public company.
Not only because of the transparency of the filings that are required to provide all investors, but more importantly, because the liquidity. So if you invest in whatever XYZ cannabis company, and their shares go up, whatever, a hundred percent in the year, like you can sell that and get out and make your money.
in the private markets, which is basically what the cannabis industry has been all about the past couple of years from a VC and private investors perspective, you can say, Oh, I'm up 200, 500% on paper, but, go try and get liquidity, go try and take your money out of that deal. Not going to happen.
And so I think for retail investors opportunity right now in the public markets is huge. just because you can invest in a [00:12:00] company that, is doing well, but also is going to allow you to take your profits and run. , the second big opportunity right now is in very early stage companies or actually founding your own company.
So I would say the middle opportunity, which are these private companies that have raised tens of millions of dollars and are still trying to raise them. it's a tough go right now. Number one. Cause you gotta have a big check to get into these companies in order to compete with the big VCs.
But number two, okay, let's say you do get in, like how long are you going to wait until the exit or, what's the deal with that company? Why haven't they had success? Why are they still raising money? Are they profitable? And so when , like you look at the actual profit potential.
Do I put. My money into a company that's been raising money for the past three years, or do I put a smaller sum into a very early stage company with a great entrepreneur? Or do I take some of that money myself and build my own company? And that's what I'm personally doing a psychedelics as I'm building two of my uncles.
Cause I realized, I said, Hey, I can throw around money. All I want. , it's like a horse bedding. I'm betting this company winning, or I can own a hundred percent of a [00:13:00] company that I have funding myself. Yes. It's more work, there's a lot more upside opportunity.
So again, the two big opportunities right now, I think are super early stage and doing your own company. And the other side is the public markets right now for most investors.
Dan Humiston: . And for people that wanted to, work with a company like Explorer, equity group, what are some of the damages to working with you?
Cody Shirk: one big advantage. And I'll say this for all VC firms and . To be clear, we're not really a VC firm per se, where I would say when we were private equity. So we find interesting opportunities and make investments. but we're, we don't have an open fund where we're just constantly deploying and trying to get like market exposure.
We're much more intentional and there's different strategies for every investment, professional. And we're just one of many strategies, but I would say. If you're giving your money to somebody else to invest in the cannabis industry, the huge advantage you're getting as number one, due diligence, I'm not talking about due diligence.
Like how can I analyze this company's financials? Anybody can do that. It's like a math equation, more or less. I'm talking about the deep relationships that VCs and [00:14:00] investment professionals have with entrepreneurs. It's a fund manager's full-time job to be communicating with the entrepreneur. And if you're a retail investor or you're an investor that doesn't want to be on the phone every day with an entrepreneur.
Then you shouldn't do that. You should give your money to an investing professional. They can take care of that. The second thing is, just protections in general. yes, if you're investing in the private markets, there's a very big possibility that your investment will go to zero, all gone, but most, big funds or firms they have.
Quote protections. They structure deals a certain way where there's minimal downside risks, there's assets that are they're collateralizing the deal there's insurance policies taken out. There's all kinds of stuff that a retail investor either can't afford or just doesn't have the time to do. So when you look at a fund, that's charging us a 20% carry and a management fee, a lot of investors, you, Oh, I don't want to pay that.
My name is Sandra and myself and if you're going to be full-time into it, then go for it. But I would say more times than not, it's worth it to pay that fee, to just let those firms and those funds take care of that work and be that full-time employee that's [00:15:00] managing your money.
Dan Humiston: rarely like you said, necessary. It's going to be your job. Why wouldn't you just pay somebody to do it for you? If somebody is out there right now, and they're thinking about investing, I have Cody's. And, explore equity's links in the show notes. So you could follow up with them directly.
We can, you can continue on this conversation offline. I'm sure Cody would be happy to speak with you, Cody. It's always good to catch up. Let's not wait so long. Next time. . Get you back on the show soon.
Cody Shirk: thank you so much. yeah, let's, let's move this industry forward and, take a realistic view to what's going on and, and make the right actions. So I appreciate you having me on again.