Creating the industry's leading CPG platform The Cannabis Investor Series sponsored by PodConx is back for the Fifth year. This year, the Series will again feature the cannabis top investors and lenders, reviewing how the current macroeconomic cycle is affecting investing in these sectors, what to expect in 2023 and sharing investment opportunities and strategies. In today's episode, Dan Humiston is joined by Mark Sims the CEO of RIV Capital. Produced by PodConx MJBulls - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Mark Sims - RIV Capital - https://www.rivcapital.com/ Recorded on Squadcast - https://squadcast.fm/
Creating the industry's leading CPG platform
The Cannabis Investor Series sponsored by PodConx is back for the Fifth year. This year, the Series will again feature the cannabis top investors and lenders, reviewing how the current macroeconomic cycle is affecting investing in these sectors, what to expect in 2023 and sharing investment opportunities and strategies. In today's episode, Dan Humiston is joined by Mark Sims the CEO of RIV Capital.
MJBulls - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Mark Sims -
RIV Capital - https://www.rivcapital.com/
Recorded on Squadcast - https://squadcast.fm/
dan-humiston_25_12-07-2022_120423:[00:00:00] Today on I'm J Bulls. We are continuing the fifth annual Cannabis Investor series. Sponsored by Pod Connects, the cannabis industry's exclusive cannabis podcast that actually allows cannabis companies to advertise.
Go to pod connects.com to connect to more cannabis listeners on today's show. We're joined by Mark Sims, the president and CEO of RIV Capital. Mark, welcome to the.
Mark Sims 2: Hey Dan. Thanks for having me.
dan-humiston_25_12-07-2022_120423: I'm glad you could join us. I, I should also welcome you to the cannabis industry because before, joining the cannabis industry, you had a long career as a senior Vice President of strategies and mergers at Scott's Miracle Grow,
and
you moved over to take
take
the reins of RIV Capital. What prompted this move?
Mark Sims 2: Well, I'm sure all your, uh, listeners know them from the lawn and garden industry, uh, so, you know, 150 year old brand In lawn and garden. But back in 2015, they got into the cannabis industry, but selling the very things [00:01:00] that they've sold to consumers. So fertilizer, dirt, things of that nature.
And then they got into, lights, fans, filters,
mark-sims_1_12-07-2022_140433: And so
Mark Sims 2: they were a, a major, or they are a major player in distributing kind of the input supplies for, the cannabis industry. but as we looked at it, we said, you know, that's nice that, that's a nice margin and a great growth business. but really it's the branded side of consumer packaged goods.
That makes all the money, right? And so it's great that you're selling fertilizer to the hops growers, but it's the beer guys that make all the money. and so Scott started looking at how do they get into the branded side of things and then
Over a couple years, I we were able to figure out a way to, provide a, investment into, the cannabis space.
And we had RIV Capital was the partner, 150 million convertible note, that, know, technically Scott's doesn't own any of R shares today, but they can convert. Up for, uh, 42% [00:02:00] of the outstanding shares. And then that gave us capital, uh, along with capital that RIV already had to go and, and look for, investments in the plant touching space.
dan-humiston_25_12-07-2022_120423: I see.
Mark Sims 2: And, and kind of once we did that, they asked me to move over to run.
dan-humiston_25_12-07-2022_120423: Well, it sounds like, a really good match. I mean, you take the RIV capital who formally was known as Canopy Rivers, ton of experience in the cannabis industry, and then they, and then you have Scotts that has a ton of experience in LO and Garden. And you bring in
somebody
like you whose expertise is in and acquisitions. That's sort of the, all the ingredients are in place right now. And the plan is to build out the leading CPG platform. Is that the plan? Yeah.
Mark Sims 2: I mean, what, the way we think about it, so our initial investment is in New York, where we acquired both, one of the, uh, 10, uh, register RO licenses, registered organization licenses, which [00:03:00] allows us to, uh, operate in all the segments, of the business from,
mark-sims_1_12-07-2022_140433: you
Mark Sims 2: know, genetics all the way into retail.
And so that's kind of a, a platform that's gonna be great for the EAM brand that we also acquired, but also it's our desire to bring other brands, uh, from com, , states that have a much more competitive, environment,
dan-humiston_25_12-07-2022_120423: Mm-hmm.
Mark Sims 2: and for brands that are competing and winning in the likes of California, Colorado, Michigan, even, as well as, some brands that may be competing and winning on.
The black market side,
dan-humiston_25_12-07-2022_120423: Mm-hmm.
Mark Sims 2: are potential as they wanna kind of move over. potentially bring them into New York, and give 'em a platform to grow.
dan-humiston_25_12-07-2022_120423: Wow. I mean, a lot of people will, will. Consider New York potentially one of the largest markets, at least in the States, even bigger than California, potentially. And you sound like that's you, you're all in on New York. Then it's, it sounds like that's really where you're planning your flag and that's where you're going.
Mark Sims 2: Yeah, we've committed a ton of capital, obviously just in acquiring [00:04:00] the the ETA business, but also we're using capital to build out or expand the existing, facility that they had so that the size of the facility will triple. And then we're also, we announce that we are gonna build a, uh, what we call our flagship facility.
It's a 68,000 square foot indoor facility in Buffalo, New York. Uh, that is going to be kind of a premier indoor growing environment that we can produce really high quality flour, for new.
dan-humiston_25_12-07-2022_120423: Wow. I you're you, I'm loving it because I'm people on the listen to this show know.
a Buffalo
guy. I grew up in Buffalo, spent my life in Buffalo.
go
Bills this is great, great news for the community. I'm sure everybody is excited about having you in Buffalo, that's for sure.
Mark Sims 2: Yeah. You know, that's one of the things this partner that we are working with, uh, a development partner, they had the land and they had done a lot of the groundwork with, uh, you know, the city, and all the constituents in Buffalo. And , [00:05:00] the city , Couldn't have done more to just embrace kind of what they want to do with respect to not only RIV specifically, but more in general that they want to be, a player in the cannabis industry in the state of New York.
So really a great opportunity great, partnerships that we have in, in the community.
dan-humiston_25_12-07-2022_120423: And the best people up there, you're gonna be so happy with your, with your staff up there. The best people in the world. Let's talk about those, , ,
companies that
that you're looking to move to New York State. how will that look? Will you make some acquisitions?
Will you do funding? What are some of the options?
Mark Sims 2: , if there were the potential to, , acquire some brands, I think we'd be interested. I, I think what we found is a lot of the, these really kind of, uh, operators that are competing and winning, they're not in a position where yet where they wanna sell. but they do wanna expand.
So it, the way
mark-sims_1_12-07-2022_140433: way
Mark Sims 2: we think about it is, there's a big spectrum. You could have an outright acquisition or you could have an outright license deal. We're really kind of, somewhere in the middle where as we approach [00:06:00] partners, we talk about obviously kind of licensing the brand, the know-how, the genetics, for use in New York and, and potentially be, you know, the optionality for beyond, but also, the components of the deals that we talk about.
Also An investment component where we want to invest in their business. What we don't want to have is a situation where, in three, three years, whatever they've, know, built their business and then they move on and find a, a different license partner, or they just kind of move on their own.
mark-sims_1_12-07-2022_140433: So
Mark Sims 2: really wanna kind of have that connected tissue where, you know, as they grow bigger and we help them grow bigger, , . We kind of participate in the upside. There's also the, the aspect of, know, a lot of folks need growth capital. , and so helping them grow the brand, either in their home state or beyond, is also helpful for the brand, in general, which, which kind of helps everything.
So really it's, it's really that kind of the middle tier where there's an investment component, uh, in addition to just the straight brand licensing.
dan-humiston_25_12-07-2022_120423: Yeah, [00:07:00] I think that makes a lot of sense. I, I mean, most brands
have a
Ultimate goal of becoming
national,
national, and it's pretty hard to be a national brand if you're not New York State,
you can't make it there, you can't make it anywhere. Right.
Mark Sims 2: no, that's a, that's a great point. And you know,
mark-sims_1_12-07-2022_140433: the.
Mark Sims 2: Again, a lot of the, the brands when you talk to that are competing and winning in, in kind of, you know, highly competitive states. When you think about coming to New York where it is more of a limited license state, know, it gives you, a real opportunity, as you said, to.
Grow the business, but also grow the brand.
you've obviously got a huge, uh, social influence that, know, New York has on the rest of the country, if not the world. You've got Wall Street there, right? So, if bankers are, enjoying your product on the weekends, that's, that's not a bad thing of just kind of spreading the,
mark-sims_1_12-07-2022_140433: and, and
Mark Sims 2: growing the.
dan-humiston_25_12-07-2022_120423: Yeah, I, I, I can see it now a lot. Let's, let's shift, switch gears here for a second. A lot of liver listeners [00:08:00] are a little sour on cannabis stocks because of the volatility
and
RIV Capital's a publicly traded company you trading on the Canadian Stock Exchange.
Why
is now a good time for investors to get back?
Mark Sims 2: Well, I, I think it's really interesting, that here we sit on December 7th cuz We have. know, safe banking. So when you think about what's a potential catalyst for the whole industry, probably coming into 2022, a lot of folks were talking about, well, we need the politicians to do something it took 'em all year. but it looks like there's, there's maybe a shot again, I'm not gonna go here on record to say that it's absolutely getting done, cuz I'm not gonna bet. The politicians can, can thread the needle that well. but you know, we, we heard it's probably not gonna get attached to the defense bill, just for, for various reasons, but there's a, a great shot that it can get attached to the Omnis bill.
So again, as your listeners think, About, the time to get in. I think that's gonna be a [00:09:00] definitely a, uh, a key event in a lot of the stocks, know, lagging upwards, with that safe banking. But then I think it opens up a tremendous opportunity, So, Safe banking on its surface. And again, I haven't seen the bill, know, the earlier versions, it really only fixes the transactional banking piece.
So it doesn't like cure all ills. It doesn't mean Morgan, JP Morgan's gonna start investing in cannabis. But what it does do, in my opinion, is it's the initial crack in the glass, right? So if you're giving these trans, these banks safe harbor from a transactional perspective, other folks are going to look and say, well, gee, why don't I get Safe Harbor?
If you're an insurance company, you're gonna say, why don't I get Safe Harbor? And why can't I approach that? If you're a professional services firm, And you're trying to sell audit services. Why can't even say I, why don't I get safe harbor? And so I think it's that crack that all these other industries start to come in and as other industries come in, additional capital would come in.
know, ideally you'll see multiples expand, but you'll [00:10:00] also have growth capital. That allows a lot of these businesses that are capital constrained today to have the, the fuel to invest in their businesses, and, you know, build bigger moats, whatever you want to call it. and so I think it's a, you know, could be an exciting time Now if safe doesn't get passed, I think then
mark-sims_1_12-07-2022_140433: You
Mark Sims 2: need to be very selective in kind of, you know, where you, where you put your dollars.
But there's definitely opportunities as folks continue to, uh, grow their businesses. And, know, I think a lot of the MSOs, including ourselves, you're really trying to be as efficient with our, our dollars that we're spending as possible.
dan-humiston_25_12-07-2022_120423: Yeah, like I you say, a lot of times the industry will never be smaller than it is today. only growing. It's only growing. A lot of states are gonna pass laws. There's just the potential is there. There's gonna be less, less money going to the illicit market.
It's gonna happen. And so, you know, now [00:11:00] might be the best time. Who knows? Well, we're gonna have all R capital informations in our show notes. So if you're a cannabis company that's looking for funding, or maybe to be acquired or maybe to get. To join RIV in New York State, I'm,
you're
an investor, uh, don't, you know, take a look at the RIV stock.
I'm sure it's, I'm sure if you, uh, click the links in the show notes, somebody from Mark's team will be there to help. Mark, this is exciting stuff. I'm glad you're in Buffalo. I'm really I like you a lot better now. Even better than before. So
mark-sims_1_12-07-2022_140433: Oh,
dan-humiston_25_12-07-2022_120423: thanks for your
Mark Sims 2: well I, I'm, , I am a Browns fan though, so, you know, there's only so many things we can agree on, Dan.
dan-humiston_25_12-07-2022_120423: I'll give you that. I'll give you that. Well, mark, thanks for being on the show today.
Mark Sims 2: Absolutely. Thanks so much.