Where will the cannabis investment opportunities be in 2023 with Silverleaf Ventures Partners The Cannabis Investor Series sponsored by PodConx is back for the Fifth year. This year, the Series will again feature the cannabis industry's top investors, reviewing how the current macroeconomic cycle is affecting the cannabis industry, what to expect in 2023 and sharing investment opportunities and strategies. In today's episode, Dan Humiston is joined by joined by Andre Haroche and Doug Hannah the co-founders of Silverleaf Venture Partners. Produced by PodConx MJBulls - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Andre Haroche - https://podconx.com/guests/andre-haroche Doug Hannah - https://podconx.com/guests/doug-hannah Silverleaf Venture Partners - https://slvp.co/ Recorded on Squadcast - https://squadcast.fm/
Where will the cannabis investment opportunities be in 2023 with Silverleaf Ventures Partners
The Cannabis Investor Series sponsored by PodConx is back for the Fifth year. This year, the Series will again feature the cannabis industry's top investors, reviewing how the current macroeconomic cycle is affecting the cannabis industry, what to expect in 2023 and sharing investment opportunities and strategies. In today's episode, Dan Humiston is joined by joined by Andre Haroche and Doug Hannah the co-founders of Silverleaf Venture Partners.
MJBulls - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Andre Haroche - https://podconx.com/guests/andre-haroche
Doug Hannah - https://podconx.com/guests/doug-hannah
Silverleaf Venture Partners - https://slvp.co/
Recorded on Squadcast - https://squadcast.fm/
andre-haroche: [00:00:00] Good to be.
Doug Hannah: Thank you for having us.
Dan Humiston: have that I've talked to have ever have ever said
Doug Hannah: Well, you know, Andre and I are, are firm believers that, you know, you gotta be eating your own cooking. And so we, we said a long time ago, and we have d different variations. If, if we're. If we're gonna lose money, we wanna lose our own money before we lose somebody else's, you know? Or if we're gonna, uh, learn policies, let's, let's develop our SOPs, let's develop how [00:01:00] we, view and do due diligence on companies.
With our own capital, kind of go through that learning curve and then raise capital off of what we did in our first partnership, which was just Andre and I 50 50. So SVP one went out, did 10 investments, and we learned a tremendous about this industry and doing due diligence and the way people operate, the culture, it taught us, uh, a lot.
And, uh, from there we've been able to springboard and launch still relief, I think. Andre, we've done what, 32 investments now to date, and so we've been active.
andre-haroche: Yep.
Dan Humiston: to
andre-haroche: Dan, just to add to Doug's point having skin in the game and what that means, I'll tell you a quick story. I can't remember what date, what, what investment it was. Probably wasn't even cannabis. It maybe going back several years. Somebody said, I love this company. This is a great company, and something inside me didn't like it.
I can't remember what it was, and then I turned [00:02:00] to the person. I said, Well, would you put your money? And the expression changed. The look got different and the individual said, You know, probably not for this reason and that reason. So when you get that skin in the game, when you're an investor in your own funds, you really think little bit differently.
You think on behalf of shareholders, you think of risk differently and you look at upside as well.
Dan Humiston: got happening to you just
happening I just can't imagine that
andre-haroche: Famous rule of forecasting, you can. Call a number or bottom, or you can call a date, but you [00:03:00] can never do both. So , I can't call a bottom right now. but I will say it's, the valuations are incredible, especially if you look at the MSOs, the publicly traded multi-state I mean, these co these stocks are trading at less than two times sales.
These are big businesses with hundreds of millions of dollars in sales and tens of millions in profit. And they're trading like, like really boring low growth companies. Meanwhile, they're very, very high growth. it could stay nasty for a while. Investing is an emotional, uh, business.
And when people's emotions are at their worst or they're upset, they're not necessarily gonna bring out their or their pocketbook. and so we could be skipping along a bottom. Hard to say if we're at the bottom, we could be skipping along a.
Doug Hannah: I,
I think part of the issue here is we have a limited amount of investors that are comfortable investing in a space that's still federally illegal. So let's just say there's a thousand investors out there. Those thousand investors who are probably including [00:04:00] myself, Overcommitted to cannabis at this time.
So putting more money in at these valuations is attractive. But at some point, discipline has to step in and you have to say, Hmm, I'm already 20% in cannabis, 15% in cannabis, and don't wanna be overallocated. So I think the challenge with the industry today is finding new investors who are gonna be comfortable with all the dynamics that cannabis has to offer.
That's a heavy lift in a tumultuous. Difficult, challenging environment.
andre-haroche: and.
to add to Doug's point about new capital coming in, it's a great. . we think that, capital will probably enter this space when there's more and more of a hint federal legalization or even discussions around safe banking or something to that effect. You know, institutional capital can be fickle.
There aren't too many institutional investors in the space today, and the minute they sent a turn, Again, from skipping across the bottom [00:05:00] to maybe a big upswing because of legalization, you'll see new money come into the business and that's when valuations will probably change.
Dan Humiston: should.
andre-haroche: It should
I saw a study one of our portfolio companies had shared with us, and they looked at the institutional ownership of, of publicly traded cannabis stocks compared to. Alcohol, tobacco, other, consumer staples, quote unquote sin, stocks, et cetera. And the numbers were, it was apples and oranges. I mean, let's say it was 70 or 80%.[00:06:00]
Something to that effect. institutional ownership in those companies, those traditional alcohol, tobacco companies, and it was less than 10% owner. In cannabis stocks. absolutely, to your point, if any of those people start buying at the margin or even retail, um, you would see valuation skyrocket.
And a little bit of that has to do with, especially retail, is access to the markets. It's not easy to invest privately as we know, but it's also not easy to invest in some of these Canadian Um, some, online brokerages have access to that, but if you.
list on Nasdaq or list on N ysc or other American onshore exchanges.
You'll see a lot more retail investors investing in those companies as well. And that should buoy cannabis stocks as well as the private company valuations too.
Doug Hannah: you know, I, I gotta go right back to Andre and I's thesis. When [00:07:00] we started Silver Leaf, we've been focusing on the tech and the science. We like companies that have an ip. We talked about this, last year on your podcast. we like the companies with ip, but we really believe at some point when there's descheduling or say banking and.
The publicly traded companies that are tied to the N Y S C and the Nasdaq wanna enter like Google and Amazon, they're gonna pick off these companies that Andre and I have been, investing in, and companies that we've made bets in, because they're gonna want those revenues. They're not gonna wanna build it themselves.
And so we think companies like, you know, iHeart Jane, uh, Dutchy, Uh, Herbal Nace. I mean, all the companies that are, you know, predominantly tech companies, maybe herbals not in that same category, we think are gonna be really come attractive to these publicly traded companies to, to grab their revenues.
andre-haroche: Yep. I wanna add one to that list. Green Check verified. [00:08:00] we're on the board of that company. Great company. It's a tech regulation, technology platform for banking. and just think that that's, banking, as you know, is, is a challenging cannabis. This company's figured out a way to connect dispensaries with banks and monitor their transactions rather to make sure that, um, they're compliant.
Things like this, we think one goes legal are gonna be really, really hot because we know that the banks are gonna wanna get into the space. They're gonna to figure out how to regulate manage the, this book of business. And, you know, tech plays and niche companies like that are gonna really take off.
Dan Humiston: I round of
andre-haroche: Yes,
Dan Humiston: companies In the
Doug Hannah: [00:09:00] Sure. Yeah. I mean, it's really our experience and it's, it translates into how we look at investments. Andre and I will obviously gravitate towards. An experienced team that if there's a little bit of choppy water and there's some bad weather, they're gonna figure out how to get around it. gosh, we've probably reviewed over 2000 pitch decks at this point.
We really kind of know what works and doesn't work, but we've also seen how. Certain teams are just really able to execute versus teams that just can't execute. I've used the example multiple times. We don't wanna invest in somebody that takes three hours to watch 60 minutes. We, we wanna invest in guys that, are speed to market.
They always figure out how to get over the hurdles when needed, and they deliver and operate based on their business plan, and we're. Continue investing [00:10:00] even in higher rounds to be as supportive as possible.
andre-haroche: let me, let me cut in. Doug's brought up some excellent points, but one of the biggest, think as to why you. A professional fund manager or somebody who's an expert in an industry, I used to think you could be a generalist, you could be good at everything. And I realized after working with Doug for the last, you know, four years now in cannabis, that being a specialist and understanding an industry is invaluable.
If we see a brand new pitch deck there's a logo there, chances are we. CEO or we are friends with somebody who knows that CEO on that logo. can call them up and say, Hey, XYZ company sent us a PitchBook and your logo was there. What? Tell me what, what's it like to work with this company? And every now and then we'll get a CEO saying, Geez, I never heard of 'em.
So . So, but look, for the most part, people are, are good actors in the business, but we really get to vet. through our network, through the relationships we have, [00:11:00] and we can uncover what maybe is a stretch versus what's a fact in some of these stories and, and pitchbooks from companies.
Doug Hannah: One more point to add to Andre In SVP one, we didn't have those relationships. We couldn't call CEOs and vet numbers, and we couldn't understand that. If somebody was putting something in a pitch deck, is it real or Are they embellishing today? We can drill in based on the data, based on , the previous underwritings that we've done.
we can pretty much figure out if there's stuff in the pitch deck that we think is far or is, is achievable.
Dan Humiston: it it
andre-haroche: Yeah.
Doug Hannah: [00:12:00] Thank you, Dan.
andre-haroche: Thanks, Dan. Pleasure. you.