Investing In Early Stage Cannabis Companies Since 2014
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Investing In Early Stage Cannabis Companies Since 2014
"There are very blurred lines between the wellness aspect of cannabis and the recreational side"
Welcome to Four PM — a daily newsletter that delivers cannabis industry analysis, interviews with industry leaders, and all of the latest news.
What does it mean to be an investor?
An investor is given the challenge of taking a sum of money and turning it into a larger sum of money by making a series of calculated bets on companies with the goal that these companies will increase in value in the coming years.
With this, there is effectively a system of meritocracy in place where every investor is competing to see who can generate the highest returns.
In the cannabis industry, investors can purchase the stocks off cannabis companies on the New York Stock Exchange or the Canadian stock exchange, and in the case of accredited investors — they are afforded the opportunity to invest in privately owned cannabis companies.
For today’s edition of Four PM, we sat down with Alexander Gastevich who has been successfully investing in early-stage cannabis companies since 2014.
Alexander Gastevich is the Vice President of V. Gastevich Investments
What was the insight that led to you investing in cannabis in 2014?
Growing up in Chicago, my brother and I had used the plant in high school and were very familiar with cannabis.
My parents had used cannabis decades previously and fostered a family dynamic of open inquiry and exploration with moderation.
In this modern-day everyone has probably had a family member that's been afflicted by cancer or an ailment where one of the symptoms can be alleviated by cannabis.
Having known people who went through this it was clear that we needed a much more systematic way to access cannabis like it is today with 36 states having legalized cannabis for medical purposes.
This was the insight that led us to invest in cannabis and it truly became a family business.
What are the trends you’re paying closest attention to in the cannabis industry today?
We are paying very close attention to “phase three” of the industry in the U.S.
Phase one of the cannabis industry was led by the legacy operators in Colorado, California, and the Pacific Northwest and was defined by a wild west for capital markets.
The second phase of cannabis has been dominated by the emergence of large multi-State operators, and these MSO’s have attracted the most attention from the media, and most of the capital coming into the space.
Phase three seems to now be emerging and we have really seen ancillary, dominated by tech, and brand companies begin picking up attention on the private and public side.
Many of the ancillary companies are non-plant touching, which is appealing to institutional investors and provides a pathway to listing on the NYSE and NASDAQ.
Following the presidential election, we saw a marked change in the amount of attention and capital flowing into cannabis.
When we were investing in 2020 during COVID, I was amazed at the opportunities we were seeing and the amount of time we had to diligence opportunities. You can't even begin to fathom doing that today because there's just so much demand.
Lastly, cannabis becoming more environmentally friendly is something we are watching closely with indoor cultivation having 25x the carbon footprint of outdoor cultivation. If cannabis companies are seeking to have an ESG focus, which I think it will long term — then we have to start preparing.
You recently expanded your focus to psychedelics. What was the insight behind this decision?
I think of Ben Kovler's frequent reference “history rhymes with itself”.
The psychedelics industry rhymes in many ways with cannabis, however, it’s an important distinction to make that the psychedelics industry is likely to evolve via a purely medical route where companies are competing for I.P.
This will allow them to develop some type of moat around whatever their business is through FDA approval for the medical use of psychedelics for a host of ailments that people have.
We see this as an opportune time with the pandemic having highlighted the mental health epidemic that's been going on, in the U.S and around the world.
There must be something about the mindset of a cannabis investor that is drawn to the psychedelics space as we have frequently received the question “do you invest in the psychedelics space”, and now we can say that we have.
What has you most excited about the future of the cannabis industry?
The normalization of cannabis amongst different demographics.
For example, I'm now seeing my in-laws, and their families increasingly having conversations such as “Hey, maybe I'll use a cannabis balm for the first time.”
A lot of people entering this baby boomer generation are starting to have joint pain and they are increasingly turning to cannabis.
There are very blurred lines between the wellness aspect of cannabis and the recreational side and it’s certainly possible to start at one point and move to others and we will likely see this evolution continue to occur & evolve.
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