Pace Functional Energy is Here

New cannabis product development is very interesting to me. Finding products that leverage the cannabis plant to enhance different experiences at different times for different people looks like a decade or so of raw product development opportunity. I am still very often finding out about new ways people are using cannabis. A few years back people started telling me about how they were using cannabis during their workouts or to sustain energy and focus throughout the day. This was about the same time I met Adam and Dylan, the founders of Cantrip, and they said they had their sights set on providing a high quality beverage product to this audience of cannabis users. Now they have.

Pace Functional Energy is Here.

Each can of Pace provides 90 mg of caffeine from green tea and 10 mg of THC for that functional buzz. The flavor Dragonberry features electric dragonfruit and sweet strawberry.

Disclaimer: Receptive Capital is an investor in Cantrip.

MJ Unpacked 2023 Week in New York

It was a great week of meeting entrepreneurs, operators, investors and advocates in the New York cannabis and East Coast cannabis community. The feeling at the events in and around MJ Unpacked was telling.

EVERYONE has their gripe (or multiple gripes). Examples include...

1. Some are frustrated by the slow moving (and sometimes strange moving) progress in New York and New Jersey.
2. Some are frustrated with more Federal failure.
3. Some are frustrated with the absence and poor quality of options to raise capital.

But NO ONE is talking about throwing in the towel.
WELCOME TO NEW YORK.

Speaking of, the highlight of the week was the Welcome to New York Event hosted by the Cannabis Collective where members of the New York cannabis community convened to celebrate the opportunity we have ahead of us. As an executive member, it was a pleasure to see the focus and efforts pay off for Jeffrey Schultz, Andrew Lowitz, Kristina Adduci, Shahbaaz Kara-Virani, Sloane B. and Jes Feuer

If you're interested in joining as a community or executive member, click the link below.

Waiting To Inhale: Cannabis Legalization and The Fight for Racial Justice

Today we’re celebrating 420 by highlighting and encouraging you to purchase a new book by Tahira Rehmatullah and Akwasi Owusu-Bempah, PhD. The title is Waiting To Inhale: Cannabis Legalization and The Fight For Racial Justice.

After over a decade in the legal cannabis industry, Tahira continues to inspire and call for change in the criminal justice system. And just as important, the restoration of the communities harmed by the war on drugs.

We’re proud to know Tahira and we congratulate her and Akwasi on the launch of their new book. This is a critical topic until it is no longer a topic. Link to the book in the comments.

Happy 420 to everyone. Stay safe.

Cannabis is Regenerative
Cannabis is Personal
Cannabis is for Everyone

Acting As If The Next Check Isn’t Coming

“ACTING AS IF THE NEXT CHECK ISN’T COMING…”

Cannabis entrepreneurs who tell us that this as their current mindset seem to be the same cannabis entrepreneurs who have investor interest. Cruel trick, but a reality.

These cannabis operators have resized or reshaped their operations to weather the current pullback. They don’t NEED investment to continue operations or fulfill an order. They know how to operate their business (however cash tight that operation might be). They also know that however long this pullback lasts, it won't be forever.

These happen to be very attractive characteristics to investors who have seen some of their investments vanish chasing unattainable growth.

So, for those cannabis entrepreneurs currently raising capital, maybe spend more time talking about how your current business sustains and less time talking about “Cannabis will be a $60B industry in 2026.”

Incremental Change in Insurance Reimbursement for Medical Cannabis

We in the cannabis industry are used to small, incremental steps towards normalization. We believe it’s these small steps that eventually compound and result in lasting changes in mindset. Insurance reimbursement for medical cannabis is one area where we are seeing this incremental change.

While adult use gets the headlines, the medical use case almost always comes first and builds the pathway for adult use. Once a market graduates to adult use, medical use usually drops off as medical patients no longer bother with certifying, seeing a doctor for recommendations and other key elements to a successful medical cannabis program. Why? Because they don’t see the benefit. They can go to an adult use dispensary, get a recommendation from a budtender and buy the same medicine. So even if I am medical patient, why bother? I would argue that adhering to the medical program and working with a physician is a good reason. But fair point, that’s a little weak for the everyday medical user. When a market legalizes adult use, we’ve seen a few ways that medical patients can and should receive priority in order to receive uninterrupted, frictionless access. Such as medical patient only store hours or priority access to specific pain focused products. But what if your medical cannabis was treated like other medicines and all of a sudden you could possibly get reimbursed for that medicine?

Many states are not waiting on federal action and are passing state-level statutes that require or enable insurance carriers to reimburse patients for medical cannabis expenses. Now before everyone with a medical card and “chronic pain” gets excited, most of these state level bills come with caveats to make sure the casual adult use weed smoker is not being reimbursed for medicine. For example, here on the east coast:

1. New York lawmakers approved a bill that would require public health insurance providers in the state to include medical marijuana as a covered prescription drug and authorize private insurers to do the same (so no guarantee for private insurers).

2. A Pennsylvania appeals court ruled that the state’s medical marijuana law does not prohibit insurers from reimbursing injured workers for medical marijuana in cases where the drug is used to treat accepted work injuries.

As we’ve seen medical cannabis can be a viable option for patients with various conditions, we believe as the New York bill states, “Access to medical marijuana should not be limited to those who can pay out of pocket.”

Cannabis Banking Myths from Cannabis Banking Expert Peter Su

Cannabis will be everywhere. All industries will touch cannabis. If you work in cannabis in any capacity, you need to surround yourself with experts within specific industries. This allows you to operate and make strategic business decisions based on factual information and accurate data, as opposed to hear-say and myths.

One industry that is most frequently in the limelight as it relates to cannabis is the banking industry. And for banking we turn to Peter Su, who has solidified himself as a cannabis banking expert over years of hustle both in and out of the cannabis industry. Check out the article he penned dispelling the 5 most common myths in cannabis banking via Marijuana Moment.

Myth 1: Cannabis companies can’t get a bank account
Myth 2: Cannabis companies can only bank with credit unions
Myth 3: Cannabis businesses transact in cash only
Myth 4: Cannabis businesses can’t get a loan from a traditional bank or credit union
Myth 5: Banks are making bank off banking bud

Keeping An Eye On The Carolinas

The Receptive Capital Syndicate is one of only a few investment groups that is focused exclusively on the East Coast cannabis markets. We seek to invest in entrepreneurs with enough grit to launch and grow in these early-stage markets.

Here is what everyone is talking about:
- Massachusetts just surpassed $4B in total sales since adult-use began.
- The tri-state crown jewel of New Jersey, New York and Connecticut are all coming online right now.
- Florida, Pennsylvania and Maryland have working medical markets and are moving towards adult use (Maryland is currently in first place for this race).

But we’re also keeping our eyes on the states that no one is talking about, like North Carolina and South Carolina. North Carolina and South Carolina? Yes, you read that correctly. The Carolinas are getting closer to the right side of history.

Participating in the Regulatory Process in New York’s Cannabis Industry

Yesterday we submitted our first comments to proposed adult use cannabis regulations as an investment firm. Admittedly, being acutely focused on finding outsized investment opportunities in cannabis on the east coast, we have not spent much time in the regulatory framework process. After speaking with trusted advisors who helped us recognize the magnitude of the moment here in our home state of New York, we decided to submit comments to the OCM with respect to proposed adult use regulations. The regulations, as proposed today, create substantial roadblocks to those of us who wish to deploy growth capital for the New York adult use cannabis market. This was the right time for us to participate however there were a few byproducts of the process that we wanted to share.

1. Connecting with others in the space who were reviewing the proposed regulations and opining in parallel sharpened our pencil and gave us a more well rounded understanding of how regulations effect different stakeholders in the industry.

2. As we worked through our recommendations, it was surprising how often it was difficult to come up with a sound recommendation. For example, we could come up with a solution that would fit our investment model, however in working through the ramifications of the solution we would find that it would create a block for different investment models. Creating useful comments that thread the various needles in this industry is not easy.

3. We were under the impression that there were better parties than Receptive Capital to submit comments. So we initially decided to offer our support to others who were organizing comments to be submitted through an organization or group. We thought that this was a sound strategy to make our voices heard as these groups are better connected to the regulators than we are. Almost every group we connected with were happy to have us, but also strongly encouraged us to submit comments independently. “The more the regulators hear from us on the same points, the better.” This was a good learning moment for us as a firm.

A big thank you to Jeffrey Schultz and Bruce Sterman for encouraging, informing and leading.

If you are reading this and you have an opportunity to participate in the regulatory process, we highly recommend it.

Why Aren’t More People Talking About Cannabis As A Potential Alternative To Opioids?

Why aren’t more people in cannabis talking about this?

Cannabis is a potential alternative to opioids because it has been shown to be effective at treating pain. From multiple recently published studies, adult use cannabis markets have a measurable positive impact in the fight against the opioid addiction crisis. And it’s a fight worth fighting. “Opioid overdose deaths in the U.S. between 1999 and 2019, nearly 500,000 Americans died from an opioid related overdose (Centers for Disease Control and Prevention, 2021).”

In a study recently published in Social Science by Samantha Marinello and Lisa M. Powell states with medical cannabis laws (MCL) saw an 8.5% decrease in opioid prescribing relative to states without MCL. These findings are consistent with previous studies published between 2014-2018 which observed reductions in hospitalizations related to opioid dependence, abuse or overdose.

In a separate study recently published in Health Economics by Shyam R. concluded that states that enacted recreational cannabis laws from 2010-2019 led to a reduction in codeine dispensed at retail pharmacies.

Cannabis as a pain management alternative has ZERO overdose risk and far less addiction risk. So what are we waiting for?

Who is developing cannabinoid-based products that specifically target opioid replacement?

The “I’m High Right Now” Campaign Is Smart

Why do we think the “I’m High Right Now” campaign is so smart? Attacking both institutional and individual cannabis stigmas head on in one campaign.

The Cannabis Media Council’s first move should get your attention merely from the fact that they convinced a powerhouse traditional publisher like Hearst to partner on this messaging. Instead of simply taking the money and running the campaign. Partnering and being part of the trade announcements shows that an institution like Hearst is ready to step out of the institutional cannabis stigma that has hindered the industry and our broader cultural norms for decades. Publishers of all sizes are watching this move as they endlessly consider the question “when should we get into cannabis?” (The answer is “5 years ago” by the way.)

Individual cannabis stigma still exists today but it’s shrinking. We often see pitches from entrepreneurs who are looking to “break the stigma” and their target audience is young people. News flash, most young people don’t have a stigma towards cannabis. They are growing up watching the legalization movement, choosing it over alcohol and are well informed on health and wellness products. You know who isn’t over the cannabis stigma? Grandma and Grandpa. And they might have the most to gain from cannabis when you take into account the probability of finding a cannabis-based product that helps with pain, sleep, loss of appetite and the list goes on.

And as a bonus for the entire cannabis industry, the Cannabis Media Council just ran a campaign for us all to gain the attention of the age group with the most buying power in history. “We want it to be category-growing kind of work and a tide that lifts all boats on a national level.” Just saying… mission accomplished in our view.

We’re thrilled to see this effort get the attention it deserves and we look forward to future campaigns from Cannabis Media Council. We’re also fortunate to call Cannabis Media Council founding board member Annie Davis an Advisor to Receptive Capital.

Miss Grass Homecoming in New Jersey

Lots of attention on NY and well-deserved. However there is a very exciting story happening in NJ. Miss Grass, a female-founded, female-led brand, originally launched in CA, is taking the state by storm in homecoming fashion for Kate.

After watching the brand from inception in 2018 as a media + marketplace product focused on consumer education, it was a pleasure to walk into a dispensary on the east coast and purchase some Miss Grass pre-rolls. This is a brand anchored in consumer education on display. Thoughtful, unique design and messaging (recently refreshed). Visually appealing and inviting. The box of matches is a fitting touch. The promise of enhancing your experience or “times” is certainly delivered. NJ being the 5th state the brand has entered successfully, we feel confident saying that while most cannabis brands are talking about it, Miss Grass is actually doing it.

Cheers to the Miss Grass team for actually doing it.

FWIW, the Ascend store in Fort Lee has a pretty thoughtful floor design for consumer education purposes with many approachable displays. I knew exactly what I wanted because I went there specifically to get Miss Grass pre-rolls so I pre-ordered and the pick up process was as simple as it should be. First time using Dispense as well. Sign up was easy. Elegant and clean UX.

Confusing the Customer in New York

A legal adult use cannabis market is not possible in New York if the illicit retailers can operate in plain sight and confuse the consumer without consequences. Identifying over 1,300 shops suspected of selling cannabis illegally is a clear warning signal to the regulators and law enforcement that if this is not addressed, the legal market will not have a chance to grow to a size that could convince some of these operators to leave the illicit market and join the legal market.

This is important work and another example of an East Coast market with a "clear as day" lesson to learn from cannabis markets out west.

While we strongly believe this issue needs to be addressed, we don't see the upside in punishing those who are operating a non-compliant retail location. A simple order and warning mechanism to cease operations for the time being. We need more legal retail locations before any strong action is warranted. We need to solve the product availability and consumer confusion problem first.

Old Pal “Baked At Home” Hits The Mark

This product hits the mark and, in our view, provides validation for the "cannabis will be everywhere" element of our thesis. The cannabis plant is so dynamic and we have decades of product innovation ahead of us. That is what makes the consumer side of this business so attractive to us as investors.

Some people may see this as a "clever product". We see this is as a company who knows their customer base and provides straight forward solutions to their needs in the form of a product. Making your own edibles seems daunting. This product makes it possible.

Cheers to Old Pal for keeping it simple and sensible when it comes to new products. Will this be a big category? We don't think it matters. This is a showcase of cannabis product development, branding and marketing maturing in the cannabis industry and we're very excited about it. And we can't wait to try them...

Step by Step Process of How Our Syndicate Works

When you become a member of the Syndicate, you're under no obligation to invest in any deals. You are only showing interest in receiving information about the deals and committing to keeping any information you receive confidential.

The Syndicate Lead invites members to participate in or pass on any given deal. The Syndicate members pool capital into a special purpose vehicle (“SPV”) that invests in a single company alongside the Syndicate Lead, on a deal by deal basis.

Here is a step by step process of how an investment is completed through the syndicate.

1. Syndicate Lead leads ongoing sourcing and evaluation of investment opportunities.

2. Syndicate Lead completes necessary due diligence and secures allocation from the target investment company.

3. Syndicate Lead sends an Investment Memo to the Syndicate.

4. Syndicate members review the materials and decide whether or not they would like to participate.

5. If a Syndicate member chooses to participate, they make a non-binding commitment to invest in the SPV.

6. Once commitments meet or exceed the allocation from the target investment, the opportunity is closed to the syndicate.

7. Shortly thereafter, those members who participated in the SPV will receive closing documents for review. 

8. Participating Syndicate members review and agree to the closing documents and wire funds. The investment is now complete.

Sounds like a lot of work? Receptive Capital provides administration services including document review, signature and investment management.

Have more questions?

Who I Am and Why I Launched the Syndicate

I’m Rick Bashkoff, Managing Director of Receptive Capital. Prior to joining the cannabis industry, I held senior positions at one of the largest record companies in the world, a pioneering media tech startup, an enterprise SaaS company in growth mode and an early stage cannabis tech company. I specialize in building long-term, mutually beneficial partnerships and I’m highly skilled in the creation and execution of a wide variety of business models and business plans. Throughout my career I have been an active investor through personal investments focused on technology, CPG, cannabis and crypto.

A lifetime cannabis enthusiast, I have served as a cannabis information resource for my family and friends for decades. What began as light conversation and cannabis stigmatized jokes at my expense, started to turn into impactful conversations as my friends and family began understanding the benefits of the plant. 

My “cannabis will be everywhere” moment was in the summer of 2016. I began researching and investing in the cannabis industry as a passion project. This initial research effort quickly turned into a transformative career change. I began volunteering for CannaGather, the largest cannabis meetup in New York, working directly with the founder and team to organize the monthly meetups. I then worked as a cannabis-focused entrepreneur in residence at Five Four Ventures, a venture capital firm in New York. Following my time at the VC firm, I began consulting directly for cultivators, brands and technology companies in the cannabis industry. Leveraging my extensive network and operations and business strategy experience, I assessed business plans with a focus on revenue growth and fundraising. In July 2021, I joined Lucid Green as an SVP and GM of two of their business units.

Over the past 5 years I’ve enjoyed getting to know the cannabis entrepreneurs of today’s successful companies and I want to do more for the next generation of cannabis entrepreneurs. After building a resourceful network in the cannabis industry and seeing an opportunity to invest in early stage cannabis companies, I’ve organized a group of early stage investors as a vehicle to do more for cannabis entrepreneurs on the East Coast. The West coast states have acted as trailblazers and there is much to learn from the pioneers from the industry. However, the East Coast presents an undeniable opportunity to “do cannabis right” and I hope to be part of the effort to create a robust, inclusive and innovative cannabis industry in the East Coast states.