Cannabis Beverages at Thanksgiving 2023

How about some cannabis beverages at your Thanksgiving gatherings this year? Maybe your crazy uncle won't get belligerent, because that's just not what happens when you drink a cannabis beverage.

Before you declare your Thanksgiving shopping done, go pick up some cannabis beverages at the dispensary (or gas station, grocery store or liquor store if you're living in a state that realizes this is where social beverage consumption is headed).

Give your guests a new beverage to be thankful for this holiday season.

#normalizethanksgivingweed

Side note - This is also a great way to get high without annoying your entire family with the smoke cloud you bring into the house from your pre and post walks.

After Ohio Legalizes, How Many Americans 21 and Over Have Access to Legal Cannabis?

Congratulations to Ohio for joining the right side of history. There are a lot of stats being thrown around regarding what percentage of Americans now have access to legal cannabis. I took a look at some basic data from the US Census to arrive at some estimates of my own.

Raw Numbers

Question: After yesterday’s Ohio win, How many adults aged 21 and over in the US live in a state where cannabis is legalized for recreational purposes?
Answer: 132M adults 21+

Question: How many adults aged 21 and over live in the US in total?
Answer: 246.8M adults 21+

So this means 53.5% of adults 21+ now live a state where cannabis is legalized for recreational purposes. The “Just over half” statements check out…initially.

Enter Nuance

Look what happens if we change the definition to those adults 21+ who actually have access via a regulated commercial market. To do this you have to pull out Ohio and Virginia as neither groups of adults 21+ actually have access. We also have to give many other states a haircut as these states allow cities and counties to prohibit cannabis businesses, like retail. We limited CA, NY and NJ by the percentage of population where retail is open by county and NJ by municipality. So that meant reducing CA by 63%, NY by 33% and NJ by 60%.
When we take into account this nuance we’re left with:

Question: After yesterday’s Ohio win, how many adults aged 21 and over in the US have access to legal adult-use recreational cannabis?
Answer: 89.6M adults 21+

So this means 36.3% of adults 21+ now live a state where they have access to legal adult-use recreational cannabis. The “Just over half” statements start to crumble.

I’m going to keep running scenarios with this dataset and other population datasets to see what other interesting insights emerge.

Last Prisoner Project's 5th Annual Holiday Letter Drive

Beyond investing in a diverse set of entrepreneurs, we provide opportunities for our members to discover and participate with organizations who fight for diversity, equity and inclusion in the cannabis industry.

In our opinion, the Last Prisoner Project 5th Annual Holiday Letter Drive is one of the most well thought out and well executed social justice campaigns in the cannabis industry. While it might be early for "holiday drive" activities it's never too early to show support to an unjustly incarcerated individual.

Here are the easy steps you can take

1. Carefully read the Letter Writing Guide and choose a penpal (link in comments)
2. Note their name and id #.
3. Go to their Digital Letter Writing Portal (link in comments) and fill in your penpal's name and id # where prompted.
4. Write your letter where indicated.
5. That's it! An LPP team member will print, post, and mail your letter for you.

Could they make it easier? There is no reason why most people in the cannabis industry can't take 15-30 minutes to write to an incarcerated cannabis prisoner. Over the last two years, the Last Prisoner Project has helped to distribute over 10,000 letters during the holiday season. You can write one, can't you?

The Operator Perspective Mitigates Risk

Many of our investors in the Receptive Capital Syndicate are operators. The operator perspective mitigates risk in investing.

The ability to conduct due diligence through the lens of an operator enables the operator to, among other things, ask the tough questions, manage growth expectations and provide the entrepreneur with more useful feedback. That is most likely why operator investors make great advisors! We have been cautious to lead another deal this year. Candidly, we have not seen many new companies that fit our investment strategy and those who did, were still hoping to raise at unrealistic valuations in a historically timid cannabis investing environment.

This is starting to change but It’s still not clear to us if we’ve begun the turn around. We’ve seen signs of life in September following the HHS announcement and more recently with SAFER making its way through committee for the first time. Companies who are positioned well and called off fund raises in 2022 and 2023 are back out again. While attending the Benzinga Cannabis conference in Chicago last week, we noticed a different energy. We would call it “cautious optimism”. Perhaps the greater investor community is starting to take a page from the operator perspective.

Converting Demand vs. Creating Demand

Investing in the cannabis space, quite often I receive the question “why did you choose to focus your investment group on cannabis?”

“Invest in what you know” is a solid answer but there was available and obvious data that was very helpful. In early stage investing you invest in companies with a new or novel product or service. Inevitably, the question of demand for the product or service needs to be addressed. Who uses the product? Will they continue to use it and if they do, how will they use it? You see where I’m going here?

Cannabis has been used by a silent majority for thousands of years and with each year that passes, the silence is evaporating into an unapologetic consumer base finding new and useful ways to enjoy the plant.

Most early stage companies are out driving new demand for the product. Cannabis companies have an opportunity to not only create new demand but to convert existing demand. Creating demand by bringing new users out of their silence or by trying cannabis products for the first time (or again). Converting existing demand through an existing user base that already purchases and uses the products through legacy channels. Most new industries have the former but not the latter. That opportunity was (one of) the deciding factors.

Hemp Derived Beverage Availability

Regarding cannabis beverages, I would prefer to see regulators focus on regulating the PRODUCTS to ensure the consumers that desire them have SAFE access to them. Consumers have demonstrated demand for these products. Banning them is not the move.

1. Low dose hemp derived THC beverages everywhere you can buy beer (groceries, gas stations, restaurants, etc.) It’s important to maintain strict policies surrounding packaging and branding to ensure that no products are attractive to children. E.g. NO gummies in this channel obviously.

2. Higher dose, heavily concentrated beverages in the dispensary channel. Liquor and wine stores as the comparison here.

3. Eventually there should be a third channel of even higher doses and targeted at specific outcomes that will be available through the pharmacies.

I'm still forming my opinion so happy to be challenged on any points here.
The category “edibles” altogether needs to be broken up into two categories, food and beverage. Cannabis beverages will deserve their own category shortly. It’s already getting its own day.

This Sunday is 820, NATIONAL DRINK CANNABIS DAY, enjoy a cannabis beverage.

I Just Enjoy The Plant. It’s As Simple As That.

“I just enjoy the plant. It’s as simple as that.”

During Kevin Durant’s interview at Game Plan by CNBC and Boardroom, he said, referring to cannabis, “Everyone does it, to be honest, it’s like wine at this point”. This was the line most media outlets lifted. But the line that I remember most is…

“I just enjoy the plant. It’s as simple as that.”

Coupled with his demeanor suggesting “Andrew, this is no big deal”, I admired KD's reaction to these questions. This is exactly the kind of statements and demeanor we need from those with power and influence. Not only has Kevin Durant invested in the industry, here he is on stage just keeping it simple. It’s a plant. It’s time we all start acting as if cannabis is a plant. I’m going to try to incorporate KD’s style into my own communication about cannabis stigma because I think he has this right. Less is more in this case.

Updated Thoughts on Social Consumption Lounges: Summer 2023

I was pretty excited about social consumption lounges. These businesses, if located in one of the East Coast markets, are within our investment criteria. I’m sure it will come as no surprise that we have yet to make an investment. More recently, I'm starting to challenge the viability of the stand-alone social consumption lounge idea purely from a consumer experience perspective.

The premise behind separate, stand-alone cannabis social consumption lounges is flawed. It still may work, but it remains somewhat flawed. I think there are some scenarios that still make sense such as a social consumption lounges adjacent or within a cannabis retail environment. Listening to a recent episode of Coffee with the Collective podcast by The Cannabis Collective with Ariel Palitz, New York City´s first “Nightlife Mayor”, she reinforced and validated this thought process for me. During the show, Ariel was answering a question about the challenges of siloing cannabis in the night life scene. She said that it’s challenging because “cannabis is consumed everywhere”. She’s right. Cannabis is used in a wide array of social gathering places and separating that social use from other social gathering places such as bars, restaurants, night clubs and event spaces doesn’t make much sense.

State liquor licensing outfits think they have alcohol and cannabis siloed but they don’t. Finish your drink at the bar, walk outside, smoke a joint, walk right back into the bar and order another drink. Bring an edible with you to the bar and eat it right after your first drink and a few wings.

Cannabis use in social settings will have to become more nuanced for the type of environment the social use is taking place. For example, beer and wine are served and sold in many places where whiskey is not…and for good reason. Allowing different types of cannabis social consumption in different types of social environments needs to be considered and defined. Cannabis beverages at a bar or restaurant make a lot of sense. Allowing anyone to smoke a joint in a bar or restaurant would annoy almost everyone, including those smoking the joints.

The East Coast markets have yet another opportunity to lead by redefining social consumption for cannabis. Recently New York’s Office of Cannabis Management approved Cannabis Growers Showcases (CGS) as a stop gap to increase access to safer cannabis products. In a Linkedin post they rightly described this move as meeting consumers “where they are”. I am hoping this is a good sign as it relates to the development of regulations with regard to social consumption lounges as well.

If you or someone you know are building a company that addresses this opportunity please contact us.

Celebration at a Cannabis Control Board Meeting in NY

Celebration at the Cannabis Control Board meeting today was so great to see.

"New York Needs You To Run Successful Cannabis Businesses"
- Chris Alexander

Plenty of work to do but it's safe to say the market is working out the kinks and heating up.

1. Expansion of CAURD retail licenses bringing the total to 463 licenses.
2. Grower Showcase is happening! This has been quite the 3 month rollercoaster but it's back on. Details needing to be ironed out, however this is a very exciting development.
3. Universal application process to be presented in September
4. Research and medical Cannabis Program advancements
5. Addressing and adjustments to the Cannabinoid Hemp Regulations.

The Cannabis Terminology Style Guide

When you join the cannabis industry, the terminology is pretty daunting.

A mixture of new words, slang, chemical compounds and more can make it a bit difficult to keep up. And while many in the industry are happy to answer newbie questions, interrupting a discussion (and potentially effing up the rotation) is not always possible. I've been operating, researching and investing in the industry for over 7 years now and when I attend cannabis events, I am very often jotting down a word or two I hear in conversation that I don't know so I can look into it later.

Part of the solution for me has been to stay curious and surround myself with people who have been in the game much longer or focus on an area of the business that I don't. But another part of the solution is quite simple. Find credible sources and sticking with them. Google searching cannabis terminology and data might be helpful. Other times it can lead to more confusion given the treatment of content that includes the word cannabis.

The good people at Oaksterdam University have created a very useful tool called the "Cannabis Terminology Style Guide". This style guide is designed for use in academia and by any journalist, reporter, writer, or public relations professional and that's good enough for me. I highly suggest checking it out and bookmarking it.

New Trainings and Certifications from Vangst, Trym and More

We get real excited when two industry pioneering companies come together to create trainings and certifications to level up the cannabis workforce. See below for a new offering from Trym and Vangst. Level up and join the cannabis industry. We need you. We have work to do.

Why Are We Asking Consumers to Memorize Chemical Compounds?

"Look at those terps!"
"Check out those terpene levels"
"This strain has a lot of terps"

I've been in the cannabis industry for years now and I'm getting a little impatient with "Terpenes are the future of how consumers will buy cannabis" theory. I'm constantly hearing how "good" a cannabis product is based on the same vague references to terpenes that are listed in the beginning of this post.

My opinion is that consumers are going to buy based off quality ingredients, consistency, and brand value transparency...not chemical compounds. The "connoisseurs" or "ganjiers", maybe. Maybe.

I want to believe that terpenes will play a big role in cannabis product selection because I'm becoming a bit of a nerd learning cannabis science, especially as it relates to pharmacological use cases. But I am still struggling envisioning the day that I or someone else walks into a dispensary or visits an online store looking for the "linalool" section. We don't have to create our own lexicon and confuse consumers. Lavender, gas, citrus, pine, pepper, etc. These are all words consumers use that they understand. Why are we making this more difficult than it has to be? Why are we asking consumers to memorize chemical compounds?

Maryland Launching Legalized Cannabis Sales

Maryland joins the 21st century tomorrow and legalizing adult use cannabis for adults 21+. We celebrate each new state that legalizes medical and adult use cannabis, but especially those located on the East Coast.

Maryland represents a significant opportunity given it's shared border with Pennsylvania and Virginia. And while most think of the opportunity of cross-state business, we think of the opportunity being the pressure these border states will feel once Maryland's cannabis industry begins to grow.

A hearty "welcome to the party" Maryland. We've been waiting for you.

Crabcakes, Football ... and cannabis. That's what Maryland does starting July 1.

Pennsylvania and Virginia, you're on the clock.

Go Terps! (both Terrapins and Terpenes in this context).

Buyer’s Club 2 in Hudson, NY

Buyer's Club by On The Revel in Hudson, NY last week was so good. I wish I had more clever words but that's it. The feeling I've had so many times over the past 5 years of "I can't wait until events like this happen in New York" came full circle. The only thing I have to wait for now is the next one.

With so much negative noise right now in cannabis (especially New York) my biggest take away from this event is that we have a strong group here in New York that is going to make this market happen. I am meeting people in the New York market I admire almost every week at this point.

Very important work that Lulu Tsui and Jacobi Holland are doing here in New York for years now. Really exciting to see how their platform is developing as we enter the next phase of our market.

Let's open some doors and then blow them off.

Sending Updates To Our Membership

Four times a year we send out an update to our entire membership. Today we sent the second update for 2023.

As a reminder, we operate a syndicate (or group of investors) that evaluate and opt to invest on a deal-by-deal basis. While members will receive confidential updates about the companies they choose to invest in, this update is sent to the entire membership. This is a chance for us to communicate with everyone who has shown interest in our thesis and investment strategy.

We typically follow this format:
1. Top of Mind - This is an opportunity for our Syndicate Lead to address the most impactful current topic for the syndicate.

2. Portfolio Updates - Quick hits on the companies we have invested in (concentrating mostly on publicly available information).

3. Informative Cannabis Industry Reads - I highlight a handful of articles from the last 2-3 months that cast a wide net as it relates to the cannabis consumer, removing the stigma, criminal justice and social equity and more. I try to be mindful that most people in our membership are not obsessing about cannabis everyday like we are.

This update’s Top of Mind focuses on revisiting our investment strategy. After 2 years, we thought it was important to maintain transparency with our investors and broaden membership. We wanted to share an excerpt from a this most recent update that fires us up:

“We are undeterred by the recent challenges that face the industry. This risk is built-in. We maintain strong conviction about our investment strategy, albeit, at a slower pace than originally anticipated. But most importantly, we have the strongest conviction in our portfolio companies who all find themselves in strong positions during challenging times.”

Trustworthy Advisors for Early Stage Cannabis Companies

Our advisory practice is focused on early stage companies. Our collective experiences punch above their weight class for this group of companies. We offer our services to a wide range of industry sectors from cultivation to software companies and everything in between.

We like to work with companies who value our time just as much as we value theirs. After spending a combined 15 years in the cannabis industry, here are a few things that make us different.

1. You can trust us.

2. We’re effective, respectful communicators.

3. We’re results-driven strategic thinkers.

4. We’re professionals. We don’t put up with nonsense.

5. We care about facts backed by data.

Please contact us at the link the comments section if you'd like to discuss working with us.

Real Ones Only.

No Nonsense.

Do You Have Your Eye on the 2023 Farm Bill? You Should.

SAFE banking is getting all of the federal reform headlines but the 2023 Farm Bill presents an equally impactful opportunity for the 50 state markets in the US.

The leading hemp organizations, including the Hemp Industries Association, National Industrial Hemp Council of America and U.S. Hemp Roundtable, created a “priority policy document” that outlines the most important items to consider for enactment in the 2023 Farm Bill. Since this document was released, 30+ state, regional and national nonprofit organizations have signed on in support. The document lists nine priority policies:

1. Regulate CBD Now
2. Hemp As a Specialty Crop
3. Promote Hemp Research at HBCUs, Tribal Colleges and Hispanic Serving Institutions
4. Bolster The USDA Hemp Program
5. Repeal The Hemp Felon Ban
6. Remove the Requirement for DEA Registration of Hemp Testing Labs
7. Permit Hemp Grain for Animal Feed
8. Addressing THC Levels for Hemp
9. Ease Regulatory Burdens on Hemp Farmers

I was pleased to see this coordinated effort and it made we wonder two questions:

1. Can we do this at the national level on the high THC cannabis side of advocacy and lobbying?
2. Do we really need 30-40+ separate organizations at various geographic levels? Or could many of these regional, state and local organizations be committees, sub-committees, chapters, etc. so we could act in coordination more often?

Cannabis Companies Planning to Raise Capital from Equity Investors in 2023

Some thoughts for cannabis companies planning to raise capital from equity investors in 2023.

1. Have a plan to not only deploy the capital but also include in that plan a set of established KPIs to achieve from this capital raise. A pie chart on a slide is no longer good enough.

2. Validate the assumptions behind your plan. Be conservative with these assumptions. Raising capital to fuel unattainable growth leads to failure in the cannabis industry. THIS IS NOT TECH. If you’d like to see some examples…you’re not paying attention.

3. Ask yourself, is this investment needed? Does it add immediate shareholder value? If it does, plow forward and be relentless. If not, I suggest waiting out another 6-12 months and reassessing. If you are one of the few who planned ahead or have a plan for 12-18 months that is cash burn neutral, why raise money now?

4. If you don’t have customers who love at least one of your products or otherwise can demonstrate revenue growth, go back to the drawing board and build something that has one or the other. This isn’t 2019 (or 2021).

5. Stop giving equity to advisors and service providers so early on. Unless this advisor comes with an investment in your business or a significant asset to contribute to the business, do your best to avoid compensating your team of service providers in equity. And if you do, make sure that equity vests or is otherwise granted over a period of no less than 4 years. They shouldn’t get better deals than your future employees will.

A Multi-Dimensional Regional Cannabis Market Landscape on the East Coast

Cannabis is personal. Each person experiences cannabis differently just as we experience our lives differently. Cannabis communities form as consumers seek those who have similar or desirable experiences with the plant.

For that reason, we envision a multi-dimensional regional market landscape on the east coast within the next 5 years. These regional and hyper-regional markets will be driven by consumer demands for products that fit their way of life and deliver the value they seek. Brands who are able to align their value they deliver with consumers’ desires at this regional level will establish a foothold in their respective region.

Here are some examples:
- Top Level Regions: NORTHEAST / SOUTHEAST
- Sub Regions: NEW ENGLAND, MID ATLANTIC, CAROLINAS, GEORGIA and FLORIDA
- DMAs: NYC, PHILLY, BOSTON, DC, ATLANTA, MIAMI

Which brands currently have a head start in these regions, sub-regions and DMAs?

Sensors for Cannabis Growers from Trym

Part of our investment thesis includes a focus on finding technology companies that are solving for cultivation challenges using DATA. As cannabis continues to approach commodity status, we believe this will be THE difference for cultivators.

Trym is a example of a company that has built intelligent software that provides elegant solutions to cannabis cultivation challenges. Their software integrates with the top of the line cultivation hardware available today. And why is this so important?

Trym, or any cultivation software, is only as good as the data it receives. So get your sensors right!

If you’re a newly licensed cultivator of any size, we recommend reviewing Trym’s recently published guide to Sensors for Cannabis Growers.

DISCLAIMER: Receptive Capital is an investor in Trym.