"From Schedule I to III: How Cannabis Regulatory Changes Could Reshape Investment Landscape" Ian Dominguez, the founder and chief investment officer at Delta Emerald Ventures, joins Dan Humiston to discuss cannabis industry investments and the potential impact of regulatory changes on the market. The conversation focuses on the shift from cannabis being classified as a Schedule I to a Schedule III substance and its potential implications. Produced by PodConx
"From Schedule I to III: How Cannabis Regulatory Changes Could Reshape Investment Landscape"
Ian Dominguez, the founder and chief investment officer at Delta Emerald Ventures, joins Dan Humiston to discuss cannabis industry investments and the potential impact of regulatory changes on the market. The conversation focuses on the shift from cannabis being classified as a Schedule I to a Schedule III substance and its potential implications.
Ian highlights that such a change could attract more capital into the industry, similar to how states with legalized cannabis are already functioning to some extent. However, he cautions against assuming an immediate windfall, drawing parallels to historical instances where sudden profitability led to frivolous spending and discounting.
He emphasizes the need for technology in the cannabis sector, especially for operators facing increasing competition and the necessity to drive costs down. Ian sees significant potential in technological advancements to help operators improve efficiencies and remain competitive. He points out that while Multi-State Operators (MSOs) usually get attention, smaller, independent operators also drive innovation in cannabis retail.
Regarding investment opportunities in the cannabis industry, Ian suggests that individual retail investors can benefit from learning and networking within the industry but advises against navigating it alone. He emphasizes the value of collective learning and sharing information. Ian invites people to explore their newsletter and events for insights and learning opportunities.
MJBulls - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Ian Dominguez -https://www.linkedin.com/in/iancdominguez/
Delta Emerald Ventures - https://www.deltaemerald.com/
Recorded on Squadcast - https://squadcast.fm/
[00:00:00] Today on the MJ Bulls Raising Cannabis Capital Podcast, we are joined by Ian Dominguez the founder and chief investment officer at Delta Emerald Ventures. Ian, welcome to the show.
Thank you so much for having me.
Well, I'm really excited that you could make some time for us today.
And I know this is going to be a really interesting show, especially for our investor listeners, Delta Emerald. In ventures invest in cannabis companies and your portfolio is just full Of some of the leading cannabis industry companies. So your perspective is going to be really valuable as we get into this conversation.
Your firm is known for its ability to leverage data and use that data to identify. Opportunities within the cannabis sector, which makes, I really feel like you're the perfect person considering all the potential regulations that are coming down, that are being discussed, how those are going to impact us and what the future of cannabis investing is going to look like.
And I figured we could maybe just jump in [00:01:00] and talk about, maybe we just start right off by talking about the proposal of changing cannabis from a schedule one one. Product to a schedule three. How do you think that's going to impact the industry?
Yeah. So that primarily is going to just cause more capital to come into this space. The fact is that from a boots on the ground perspective, a lot of this world is already living as if it were kind of schedule 3. And what I mean by that is that in states where it is legal. And which is the vast majority of the population.
It's already some degree of legal today. So it's, we're just on different time horizons right now. So safe sorry. Schedule three being pulled forward or that actually occurring sooner rather than later, it would be fantastic for the industry. I guess my kind of point is that. All this is moving very fast anyway.
So when I'm to be in it and see it happen live, this is the way, this is the way I perceive it.
Yeah, I know. I speak, I spoke to a [00:02:00] couple of the bigger MSO CEOs and they were excited about. How much capital or how much cash would fall to their bottom line? A lot of the expenses that they can't deduct right now, they're going to be able to deduct, which they felt like would really give them a real shot in the arm as far as growth goes.
Do you think that would, do you, would you agree with that?
To some extent, yes, but I'm reminded of the story of. Berkshire Hathaway's beginnings. And one of their key insights was not to continue to invest in textiles knowing that the returns on capital there were not long for this world. So I guess the reason I'm bringing that up is that it might seem like suddenly there's a windfall, but.
When people have windfalls, some people start to do silly things with money. And so this is when you start to see things like discounting take root. And so you never know what's actually going to happen from that type of from that type of quick change.
That's a, that's an interesting perspective, which I have not heard anyone say before, but you saw that early [00:03:00] on, especially with the when the valuations were just out of sight. There was a lot of frivolous spending, I guess is the probably this, probably the kindest way to refer to it.
And, that kind of leads me to some of the other opportunities maybe that you're seeing from your vantage point. And in addition to what the, are the real obvious ones like schedule three changes, what are some of the more nuanced, more things that you think will have some impact on the industry?
So a couple of things. One is just to level set, we believe that the cannabis industry will be bigger than the alcohol industry, which is a 300 billion industry today. We also believe that technology spend in this industry is going to at least 20x in the next 10 years. And the reason we think that is actually related to something that we have already talked about.
This concept of, say, MSOs and limited license States [00:04:00] on a long enough time horizon, more and more licenses go into every market competition increases in every single market. And that is a given. So once you accept reality that high prices are not going to save you, then you have to start to figure out how to drive costs out of your system.
It's not about a land grab anymore. It's not about. Trying to drive as many people to the store as possible. It's about making sure that your business can stand on its own feet. And technology does a very good job of helping operators do that very thing. This is what this is where we see a lot of opportunity.
The last part I would add is that I think a lot of attention is placed on the multi state operators. Totally get that. Love that for them. What we see is some of the most interesting questions and asks for, and demands for software are actually coming from what we call like single state operators or multi location operators, say like a five.
Or 10 store operator. They ask [00:05:00] very different questions than what an MSO asks of their technology. So we see that and it excites us because it's this kind of second tier that's really pushing the envelope on what is possible in cannabis retail.
That's really, that is really interesting. And it makes a lot of sense when you say it. I mean, you're right. All the attention goes to the MSOs, but
Yeah,
They make all the headlines, but the but there's a, but there's a disparate, a huge portion of the industry is not MSO and how do they stay competitive, which falls back to your former point is with technology.
That's one of the, so in addition to the MSOs needing technology the non MSOs are really going to need it to stay competitive as their markets get tighter. Yeah.
This is actually my hope and dream that a mom and pop, if you will, has the wherewithal, the ability to actually compete. And when you know, like we do, that most consumers are very convenience oriented. Like, [00:06:00] it's not like people are driving across town to go to a grocery store typically, right?
The same thing kind of applies with cannabis. So you take a state like New York, where there are caps to how many retail places stores, any entity can have, you already know, it's already written that is going to remain a very fragmented market and it's huge. It's probably the biggest market in the world so it will get there and it's not going to be enjoyed pro rata by the MSOs as they currently enjoy of the overall market today.
And that, who knows what happens with new states and their legalization timeline. But New York is a pretty big deal.
yeah. . Yeah. Well, you're right. It's it could be that one of the biggest markets, they always talk about California being the biggest market in the world, and I think New York could really rival them. The speaking just before I put a finalize, the the MSOs a lot of the MSOs are public and or most of 'em I think are publicly traded companies, and a lot of our listeners.
We're really hurt when their price is tanked. [00:07:00] And I think it's a good lesson. I think it was a good lesson at the time. I hate, and I I guess I'm going to roll into another question here is given that as a backdrop, is there an opportunity for. Just a retail investor to make good bets in this industry, or is it probably a better place for professionals like yours, like you are to help people, got to guide people or what is the advantage or disadvantage to working with somebody like you or a professional investor in the cannabis industry versus trying to do it on your own.
So, yeah, this is a tough one. I'm on one hand, Peter Lynch would say, invest in what you know. And that's really what I do. I know data and I know cannabis. And so this is my calling and I try to make it my job to be as well informed as possible. And. For what it's worth, we, as a group, Delta Emerald, we are interested in sharing this information.
We have a a newsletter that goes out mostly [00:08:00] to, to executives in the industry. But we also even put on an event called Canada Data Con that's open to the public from a live streaming perspective. And that really dives into... What's going on under the hood. What are the, what's the cutting edge or what's the state of the art for cannabis technology?
No one has the perfect answer to this. We're all trying to figure it out and I'm trying to create a world where people feel comfortable. In sharing stories and learnings, because trying to do this all yourself is really a fool's errand. And like, we can lift each other up in that way. So I think and the last part about that is that, like, you don't have to take a swing.
Now you can consider all this time as learning. And you don't have to be right all the time. You just have to know when to make a big bet. So, so consider the whole journey to be part of the learning process and trust that you will arm yourself for more information for when the time is right to really take a swing.
Man, that's good advice. That's really good [00:09:00] advice. And I'm going to put all of Ian's information in the show notes, including links to their website. So maybe from those links, can you get access to this, to that newsletter?
The newsletter is, so, yeah, there's a way to request and there's just a kind of a short getting to know you a process for that one and then. Canada data cons also on the websites and you can learn about it. It has its own website as well.
Oh, that's perfect. Yeah. So, so I'll have all the links in the show notes. So if anybody's interested in learning more or speaking with Ian or somebody from his team there'll be a great opportunity for you to do that. Ian, I really appreciate you being on the show today. Great insight. And I would say some insight that we as a group have not heard before.
So I appreciate your perspective on things. Love to have you on the show again in the future, but thanks for being on today.
It was my pleasure. Thank you so much.