Today's featured Cannabis Investor is Morgan Paxhia. The Cannabis Investor Series Sponsored by TWO12 is back for the Fourth year. This year, the Series will feature eighteen of the cannabis industry's top investors, reviewing the previous 12-months and sharing their 2022 investment strategies. On today's episode Dan Humiston is joined by Morgan Paxhia from Poseidon Asset Management. Produced by PodConX TWO12 - https://www.two12.co/ Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Morgan Paxhia - https://www.podconx.com/guests/morgan-paxhia Poseidon Asset Management - https://www.poseidonassetmanagement.com/
Today's featured Cannabis Investor is Morgan Paxhia.
The Cannabis Investor Series Sponsored by TWO12 is back for the Fourth year. This year, the Series will feature eighteen of the cannabis industry's top investors, reviewing the previous 12-months and sharing their 2022 investment strategies. On today's episode Dan Humiston is joined by Morgan Paxhia from Poseidon Asset Management.
TWO12 - https://www.two12.co/
Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Morgan Paxhia - https://www.podconx.com/guests/morgan-paxhia
Poseidon Asset Management - https://www.poseidonassetmanagement.com/
RC Poseidon
Dan Humiston: [00:00:00] on the MJ bulls podcast, we are continuing this year's cannabis investor series with another former guest and Western New York native Morgan. Paxio from Poseidon asset management, Morgan. Welcome back to the show.
Morgan Paxhia: Thank you and go bills
Dan Humiston: go bills
I was just home this weekend.
Morgan Paxhia: A couple of weeks ago for the first time in years. So it was great to see Buffalo.
Dan Humiston: . It's on their eyes to talk and proud talking proud.
Morgan Paxhia: I'll have my 7 1 6.
Dan Humiston: So do I. Well,
this is like your third year doing this with us. And last year, we were definitely at a different place than when we spoke
Morgan Paxhia: Well,
Dan Humiston: to kick things off. I want to give everyone an overview or hoping You can give everybody an overview is how things have changed over the last 12 months for cannabis investors.
Morgan Paxhia: It's, it's funny, this industry moves so fast, but in so many aspects, it also feels like Groundhog's day, where it's just, we keep going through the [00:01:00] same cycles over and over again. And when I'm talking about those cycles, I'm really talking about the public markets, , the multiple expansion than the multiple contraction.
And here we are, again, at a low point, hopefully a low point certainly feels like we're at a low point. And and it won't be too long again before we'll be talking about, very nice high evaluations again. But the one thing that does change , or continues is the growth. Do you look at the scale of the industry, that depth of the industry, the health of a lot of companies substantially different than we've seen really.
Especially for the largest companies, their costs and capital are reaching, , points that we've never seen before. And their balance sheets are in the best shape they've been in and they're, , stabilizing their margins and, , making a lot of progress. And you say all that.
And then at the same time, we're also still having really interesting dynamics happening like here in California. , California is about to enter a period similar to what Oregon and Washington went through years ago, where we're having massive price compression of flood of over [00:02:00] supply. Still limited access with municipalities, not opening enough retail.
And so you're seeing, huge price compression and we think there's going to be a lot of companies. Sadly wiping out here in California and I couldn't feel it more of a stark contrast to companies like GTI and Cura leaf and, the largest companies that are just powering ahead with very strong annualized growth and margins.
And so, it's amazing part of this industry is we're still early at things are still highly dynamic. And, we just always got to keep an eye on the, on the horizon and, and keep going.
Dan Humiston: Yeah, for sure. How are your companies doing.
Morgan Paxhia: It's it's very interesting with how we construct our portfolios, where we have a lot of different exposures. So certainly, , the mantra of east of the Mississippi things are cranking. And then, certainly out west here it's it's going to be a true test of operational execution and teams.
And so we're actively engaged with our companies out here. And then you see a lot of interesting things happening on tech. I think tech for the first time in [00:03:00] our time in this industry is getting pretty good interest in valuations. You saw this year.
That massive transaction with Lee block leaf logics and green bits. You saw Jane recently announced a hard million dollar round at a very high valuation. And so there is interest. Now you have Weedmaps as public Leafly may be going depending if it goes through the spec or not.
So really interesting dynamics on the tech side which is great. Exciting tech companies that we've worked with for a long, long time, like a headset and Flowhub and competent cannabis and, and work. And so I'm very optimistic about that. And it's also interesting about this industry to your earlier point about how it's, talking year over year.
The depth and the complexity of our industry is just amazing how big it's become such the point where, there is a need a demand for new startups to come in and help fill areas of the industry that didn't exist before. Because it's just getting so complex. And so we're really excited about what we're seeing on the [00:04:00] earlier stage side of companies.
Then we've been deploying capital in that area as well, because we see needs. We see it in our portfolio companies. They can only tackle so much. They have big. Areas that they're addressing, but they have more that they can't touch. And so that just creates opportunity.
Dan Humiston: Yeah. Especially, like you said, for all these new companies that are joining the industry now, there's so much opportunity. for an early stage company, that's considering getting financing, maybe like 2022, they're thinking about it. What should they be doing now?
Morgan Paxhia: Yeah. So I say all this, and then in the backdrop is one of the more challenging capital environments we've seen again, where w capital is substantially dried up. That started earlier this year when you had. It was really the the blow up that caused prime brokers to pull back to retreat.
And so they started shuttering access to institutional accounts. Cause we actually had institutional money dipping its [00:05:00] toe in this space and they've been forced back out. And now you've seen the converse of that, where it's just been all short pressure for months, but that has a trickle-down effect.
So first in the Publix, when capital starts to get tighter, Or only accessible to the few that has trickled down effects all the way into private markets. And then it goes to late stage private markets, growth stage private markets, and then early stage private markets. And there's just less and less capital as you go through the life cycles.
So if I were a young company today maybe looking at that first round of venture financing. Something we're always professing is having your ducks in a row. Do you have a data room established? Do you have everything in place? Do you have marketing materials? Are you pretty clear about what you're going to do with the capital, how long that capital is going to last you what is your defensible position?
Who are you, who is your team? Very fundamental venture and That's everything that we're looking for. Between us , and, with the recent addition of Patrick Ray and CLA daily Poseidon has a really exciting team. We have so much experience across venture and they have [00:06:00] so much experience for what they did at canopy Boulder for years and years.
So, it's really fun to be working , in that earlier stage venture again with them bringing , some fresh energy to the team and, bringing some additional experiences. , it's been a lot of fun working with them, but that's where venture needs to be in our industry is, you gotta take it seriously if you want institutional capital from fund managers
Dan Humiston: That's a great advice. And I see you launched a third fund and you already had made some investments. I think I saw three, maybe four investments already are those that stage is that the type of companies that you're looking
Morgan Paxhia: Yeah. So I can't speak to specific about what we're doing with that strategy. However, yes, we have been putting out some announcements about what we have been investing in this. We've been deploying capital as we've done for years and years. And certainly those if you look up that recent press around what beside has done with companies out of the.
Dispense and a long time colleague of ours in Colorado it's, the name is obscured a bit, so it doesn't really [00:07:00] mention, but it's in the press release, but yeah. So it's really pre series a is what we consider it. We just think that is a very interesting part of where our industry is right now to be deploying capital.
And this comes off of, what we had to do. And fun too which was all growth stage companies and what we were seeing that landscape at the tail end of deploying that fund. And it's very reminiscent to when we first started with fund one, when all there was a were earlier stage companies, so it's flexing that muscle again that we had early on, but it looks so different this time around.
So it was so different, we have just a treasure trove of data at this point versus. When we started in 14 and 15, really deploying capital.
Dan Humiston: Yeah. well, you're getting back to your roots at gas, but you are taking a different approach or doing something different. I saw that you filed for an ETF. Can you tell us anything about it?
Morgan Paxhia: Yeah. So we're in our quiet period. So not too, too much that we can talk about. But you know, Poseidon is as a institutional firm in the [00:08:00] industry we are constantly evaluating. Where there are opportunities for investors that want to work with beside. And, well, actually This was an idea I had. And I penciled out as a goal of mine back in, 2017? And it was too early at that. And so, coming back around, as we were continuing to build this item , the conversation came back up again, and we have a partner that's going to really be spearheading that whole endeavor , and partnering up with a great firm advisor shares.
If anybody knows, they have the the ETF SSOs also Yolo and vice. So they've been very active in cannabis for years. And so we're going to join as a sub-advisor with them with this new product. So if anyone wants to check it out go to advisor shares.com, you can see the preliminary perspectives.
You can put your information in and they'll send it to you. And then you'll be up to date . As that comes to fruition. So very, very exciting. Now Poseidon from our perspective is pretty much becoming a full suite asset management firm. From having an ETF product all the way through to our private funds and still so [00:09:00] much more to go.
It's very, very early in cannabis. I can't believe we've been doing this for eight years and I know the camera doesn't really show up, but a lot of gray hairs later,
Dan Humiston: Well, I, that, that's really exciting. I guess before we wrap, what are some of the advantages just maybe you blow your own horn here from working with Poseidon,
Morgan Paxhia: , we have always taken an institutional mindset from day one of building beside and when Emily and I sat down and pencil this all out back in 2013 when we had that eye , on the horizon again, about what we would be building.
And, what would be the best for investors of all sorts? We didn't know when institutional capital would come, but we figured at some point and we wanted to build a firm around that. So we recently filed deciding to become an sec registered firm which is just another step forward in, in institutionalizing who we are.
We have a dedicated chief compliance officer. So from an investor perspective, I feel like. Taking all of the steps that we should be taking. As fiduciaries, we take [00:10:00] that responsibility extremely seriously. People say I don't joke enough around, some things and because I don't, when it comes to money and people's money, we have a lot of respect for that will work incredibly.
For our investors and our investments we are constantly on the phones. Emily's right now in a board meeting in the other room. The team is constantly on the phones with companies. Traveling Celia is heading off to Boston this week for an event. Patrick and I are heading to Boston later in the month for an event.
We're all going to be at MJ on packed doing a whole thing with a bunch of portfolio company. So we really try to put a lot of effort with the dollars that are provided to us , putting it to good use as best use as we think we are able to do in this industry.
There's a lot of firms out there at this point, when we started beside and there were no other funds and now I can't even tell you how many funds are out there. But there's a lot of infrastructure we have built over the years, a lot of knowledge and very proud of what we've done.
And so I do think that is an advantage of working with beside and because we do care.
Dan Humiston: [00:11:00] Well, I think that's. Comes through and all the investments that you make and just the, just working with you, it comes through. And if anybody wants more information, we'll have Morgan and Poseidon's info in the show notes. So if you're a cannabis company looking for growth fund, or you're an investor that wants to talk about working with Poseidon to manage your cannabis investments, just click the links or go to pod connects.com. Morgan. It's great to have you back on the show. Thanks for doing this.
Go bills.
Morgan Paxhia: go bills. Let's do it for a fourth year in a row next year.
Dan Humiston: Except unlike the bills. When we go with those four years in a row, we're not gonna come back with empty handed, right?
Morgan Paxhia: That's right. You gotta, you got to break the curse of the Bambino at some point.