56. Sowing Seeds, Germinating Biotech Buzz: Grow Everything is One Year Old

[00:00:00] Karl: All right, Seth Yakutan, welcome back to the grow everything podcast. You are the first repeat guest that we've ever had. We claim a lot of people are friends of the they are, but they're not friends of the pod the way

[00:00:13] Seth: you are a of the pod.

[00:00:15] Karl: and just so our listeners know, we talk to Seth a lot.

[00:00:17] Karl: So we're super happy that he took the time to come and talk to us again. What's going on

[00:00:23] Seth: in your world? How are you guys? honored. And I will say , the same thing that I said last time, I just can't believe that anyone would be willing to listen to the bullshit that comes out of my mouth for an hour.

[00:00:32] Seth: So appreciate the platform, to stay in busy. Stay in busy, in the verticals that I'm looking at and, getting ready for the end of the year and getting ready for a new year and JP Morgan and bio Europe and Expo West and three trade shows that are going to happen in, cannabis in that period of time.

[00:00:49] Seth: So just getting ready,

[00:00:51] Karl: Yeah, but listen, you say that people don't listen to you, but in the past year, you've become a force of nature on LinkedIn, , mostly writing about cannabis, but a lot about entrepreneurship, you've become a top voice

[00:01:04] Seth: when it comes to entrepreneurship.

[00:01:05] Karl: Do you know what your numbers have been in the, past year?

[00:01:08] Karl: Like, could you tell us, where were you a year ago and what. it wasn't one of the questions we sent you, but what motivated you to become so active on LinkedIn , and how has that changed your life?

[00:01:17] Seth: Well, great question.

[00:01:19] Karl: your rum said she was going to throw some curve balls. Let me throw out the

[00:01:22] Seth: first one. First of all, it was totally unintentional two things kind of happened for me in the last year or 18 months in November of 2022, made a decision to completely get off of Instagram.

[00:01:36] Seth: I just found that I was mindlessly wasting time caring about people's lives and opinions that I had no connection to, and I wanted that time back. So that left me on one form of social media only, which was LinkedIn. cause I had gotten off of everything. Thing else previously, and in about may of 2022, I realized somehow that I had 22, 000 followers.

[00:01:59] Seth: And just like anything else that I do, I kind of said, gosh, there's gotta be a way to monetize this. I don't know what it is. And I just started leaning into it and that's really how it occurred. So in terms of the numbers, I have looked at the numbers and my numbers are staggering, absolutely.

[00:02:17] Seth: Unbelievably staggering so much so that I've now developed a business to manage other people's LinkedIn accounts and to coach people just generally based upon it. And I actually looked at my numbers last night for another reason, and I'm going to tell them to you, and I'm going to tell you that they are going to blow you away.

[00:02:36] Seth: So year to date in the last 12 months, I have done 2 million impressions on LinkedIn, and that is up 23, 000 percent in one year. And have achieved 27, 000 interactions, however they measure that, and that is up 36, 000 percent over the year. So, the numbers are ridiculous. I guess when you start from zero, it's really easy because numbers don't lie, but , it's been amazing.

[00:03:04] Seth: definitely a platform that I plan to lean into more. I've been able to learn a new skill transitioning from an old bitter Larry David, like character into a young part of the creator economy. Yeah.

[00:03:17] Erum: Yeah. You're definitely an influencer. you're a top entrepreneur voice, very impressive content.

[00:03:24] Erum: I'm always liking it and I'm engaging with it. not only an entrepreneur voice, but you are a biotech and cannabis voice. , one of the first things you did was go on our podcast last year and your episode remains one of the top two, three episodes that we've had. it was a great episode.

[00:03:39] Erum: We learned a lot. I've learned a lot. our audience has been saying that it was one of the greatest episodes. I want to kind of take it back, to a reflection of what has happened since then. So since our last conversation, what are the biggest positive developments you've noticed in the cannabis industry?

[00:03:55] Erum: And what are some new ways biotechs being applied to the cannabis industry?

[00:03:59] Seth: So a lot has happened since then. I'll probably break it up into 2 ways. So the 1st thing is that although there's not a tremendous amount of capital that's available to cannabis companies, specifically in the last. Two quarters or so money has definitely begun to flow into cannabis again. So there's two flavors of that large senior secured loans have begun to flow.

[00:04:28] Seth: So just recently in the last. 45 days, a company called Cresco refinanced a property in New York at very reasonable interest rates. , a company called AYR, which is a top 10 company had about 425 million of debt coming due in 24. They refinanced it, kicked it out to 26 and raised money. A company called Merrimet paid off a loan to probably of the leading vendors in the space called Chicago Atlantic.

[00:04:55] Seth: And refinanced and raised money at a lower rate. So you're starting to see secured debt pricing come down and more money flow on the private side. Leading and best companies, which I would define as North of 10 million to 75 million in revenue and functionally operational, meaning either breakeven or generating cashflow.

[00:05:19] Seth: And there's only about 45 to 75 of those companies in the entire United States. Those companies are able to raise money, not a lot, but they're raising money. So there are four late stage privates. Every single one of which I've talked about on my LinkedIn feed for the last year that have all quietly raised money.

[00:05:37] Seth: So the first thing that you're seeing to me in cannabis is that you've gone from your proverbial nuclear winter to money starting to trickling into the market. On the biotech side, I'm not sure that a lot has influenced what I have done is if you think about my workspace as the old war games room, where I have a bunch of people looking at radar screens, I've started to look at things cause , that's what it is.

[00:06:06] Seth: I've started to have a lot of things be tracked harder, non U. S. markets, specifically Australia. And specifically anywhere that cannabis is being commercialized in Europe is definitely looking more at a medicinal pharma type of model. So I do think I'm seeing things in Australia where more traditional drug delivery methodologies are being deployed in order to dispense or deliver cannabis to patients.

[00:06:36] Seth: I think Germany, Switzerland, where you're growing it, the UK, those are markets where cannabis is being developed in a CGMP type of fashion or attempting to be grown in a CGMP type of fashion and delivered. In a metered way to patients as a medical product, so much so that if you get a vape cartridge now in Germany, you have to go to a pharmacy with a prescription and the pharmacy literally fills the vape cartridge while you're there.

[00:07:07] Seth: So I'm definitely seeing more biotech or pharma like methodologies in the dispensing of cannabis in non U. S. markets. So that's one way I've definitely seen a couple of companies. We talked about rare cannabinoids last time. I've definitely seen a couple of companies who have a manufacturing or supply business on the cannabis or on the rare side that are moving into therapeutics.

[00:07:33] Seth: There's a company out of the Pacific Northwest called FloraWorks, which develops and manufactures CBN for the recreational market that's attempting to move that product forward therapeutically in a bunch of different areas. I'm definitely seeing things like Jeff Chen, who used to run the cannabis effort very famously at UCLA for several years and created a company, which would be interesting to you guys called radical sciences.

[00:07:59] Seth: And basically what that is, , a virtual clinical trials organization. And they believe that there's this untapped, , undiscovered universe of therapies among non prescription consumer health and wellness products. So they've effectively created this AI driven virtual DTC clinical trial approach and a lot of psychedelics and cannabis products are using that as the platform to advance their product forward.

[00:08:25] Seth: I think you might have connected with a guy in L. A. named Endo Canna, Len May. and Len effectively uses traditional pharmaceutical level diagnostics to make a prognosticative view of what kind of cannabis you should use.

[00:08:39] Erum: it's endo DNA and actually uses your genetic information to create custom, not formulations, but recommendations of products, which is so if you want to participate in that, you would have to just sign up and they send you a kit with a swab and you swab your cheek and then they do your, DNA sequence and then they.

[00:08:56] Erum: Make recommendations, which is a very interesting method.

[00:08:59] Seth: I talked to him a week or 2 ago, I also think like they develop their own chip to do that. So you're seeing that I have nothing to do with the company and I don't advocate it, but there's a few others that I've seen that what I'm going to talk about next is a few others that I've seen to take that approach.

[00:09:13] Seth: we're going to provide a diagnostic view of cannabis loading. AI and diagnostics on the front end of it. So I saw a startup called X stow bio, which kind of takes lens idea and puts AI and like a clinician practice on it in order to provide you as the patient a better outcome for medicine and you as the clinician, a better.

[00:09:35] Seth: Foot forward, I've also started to look a lot harder at some of the cannabinoid oriented therapeutics companies. There's a company out of Israel that's come back in my radar screen called bio nano SIM, which has a selective CB Modulator for obesity early in the clinic, but moving, there's another company called Barrel Therapeutics, which has taken a bunch of compounds out of Meshulam's lab and is trying to advance those for couple of women's health things.

[00:10:01] Seth: I'm definitely seeing more and more and more stuff. But I'm not necessarily sure that you've seen the biotech side of cannabis therapy much deeper to the consumer or the wellness side of cannabis yet, but I think you will.

[00:10:18] Karl: so do you have any idea in terms of what is consumption numbers look like?

[00:10:22] Karl: overall sales, because I'm curious, like I've been in a couple of conversations with the people in the last couple of weeks talking about the GLP ones, the Ozambics of the world, and how like Walmart is seeing a hit on their revenue because, there's a lot of people buying less food and, there's this thesis that, the GLP ones treat a lot of things and are basically, anti craving drugs.

[00:10:41] Karl: And I'm just curious if. anybody is seeing any, kind of ancillary effect on the sale of cannabis products because people craving it less.

[00:10:49] Seth: you're asking me 2 questions. Let's go to the 2nd question. the sale. And an increased vertical of, pharma therapies to reduce obesity, which is kind of showed up in the last 18 months and been ubiquitized and democratized and talked about a lot.

[00:11:05] Seth: Has that impacted cannabis? I haven't seen any data that correlates those 2 events, So the answer to that question is probably no, I tend to look at is year over year revenue growth for. The top 10 msos as an indicator of health of the industry and your core top 10 msos have pretty much had effectively growth in terms Top line revenue for the last two quarters, four quarters, six quarters.

[00:11:37] Seth: you know, the summation of those is about, I think $2 billion, $1.8 billion a quarter, and it's been that way pretty much since the second quarter of 2022. what it leads me to believe in the data that I'm seeing anecdotally in California is that two things are happening in mature markets.

[00:11:55] Seth: Consumers are becoming sensitive to price, so you're seeing aggregate basket size decrease, but you're not seeing a decrease in people coming through. You're seeing almost an increase sometimes in numbers of people coming through. So, while revenues might be down in mature states or slightly down in mature stores, it's because people are buying smaller amounts.

[00:12:18] Seth: They're not buying less. You've seen states that are coming online go nuts Michigan, which was largely thought a dead state, did really well last quarter. New Jersey's on fire, Arizona's on fire, Missouri's on fire. I started recently working shameless plug with a data analytics company called Roots AI that has the capability to really for the first time measure and look at consumer behavior and see what's happening at a store level in real time with real data.

[00:12:44] Seth: And again, would. Substantiate the trends that it seems like demand is not decreasing for the product.

[00:12:52] Erum: Yeah, I have a question on if this data revealed that the amount of new consumers, consumers that have been convinced versus our friendly stoners from the past that we know that they're not going away, but I've heard of people's parents getting into it.

[00:13:06] Erum: to alleviate some of their growing pains. So just curious if there's any data on like net new customers.

[00:13:12] Seth: I would just caution that I would probably defer to Roots AI to confirm what I'm saying, but the anecdotal read that I've gotten out of there is the following. The reason that that data set is differentiated is if it looks at repeat customers, not new customers, because if you look at things from a probabilistic perspective, every single new customer is a dependent event, whereas.

[00:13:37] Seth: can extrapolate data out of repeat customers in a better way. The data that we've seen there says that there are certain segments that are really, really, really strong. You're a 25 to 44 year old man. That was really strong. to 75 consumer is probably the most loyal. So if you can get that older consumer in a store, they're going to keep coming back.

[00:13:57] Seth: Also looking at aggregate basket sizes out of that data, 1 thing, which I really was surprised by was that concentrates are usually so shatter wax, the stuff that you're going to do dabs with. I always never really paid a lot of attention to and looking at the consumer segment that comes and buys shatter and wax.

[00:14:18] Seth: They're the most frequent and the most loyal and usually the biggest ticket. If you have 12, 15 percent of your customer base, that's coming in and buying the same product and spending a lot of money. . The big insight that I gleaned was, got to go after them. But to your point, I am seeing.

[00:14:33] Seth: A lot of stickiness in the retail storefront level with an older consumer who's willing to come back to a store.

[00:14:40] Seth: And what about in terms of

[00:14:41] Karl: like, Setbacks or positives when it comes to regulations at both the state or the federal level? are those having an effect on consumption? I mean, you mentioned Michigan, going strong, but it's been legal in Michigan for a while if I remember right.

[00:14:54] Karl: But what about, any other states

[00:14:56] Seth: that have recently come online?

[00:14:57] Karl: I mean, you mentioned New Jersey going full force too. Jersey's been online for a while. And, as I mentioned this, we were coming on, I've got two dispensaries under me in Dumbo. It wasn't enough to get one across the street.

[00:15:08] Karl: Now there's actually one in my building. Both illegal. I am guessing.

[00:15:12] Seth: Well, I won't comment on the ownership of the one in your building. I mean, it might have something to do with that our relationship. But. two thoughts there. Setbacks and opportunities and then maybe how I've seen biotech inter interweaved in that as well, if there's an angle there.

[00:15:25] Seth: so I think there's probably three things that have happened recently that are interesting. the most interesting thing to me is where is cannabis not allowed. Okay, so start there and there's basically four states where cannabis is still fully illegal. South Carolina, Kansas, Wyoming, and Idaho.

[00:15:44] Seth: So that leaves you with essentially 46 and out of those 46. CBD is effectively, or some form of cannabis is permitted, I think, in 14

[00:15:54] Seth: of them or 13 of them, which gives you about 32 or 33 states where some form of cannabis is legal. So, I start to look at it that way. Maryland and Ohio, since we got on the phone, or we did an interview last time, both went from medicinal to recreational, which effectively, usually. or quadruples the size of a market instantly.

[00:16:19] Seth: So seen that happen and those have happened at least in Ohio in response to voter driven legislation. So that was a very big deal. And when a state does that. It's just going to blow up. It just is a lot of the dynamics that exist change and it causes risks for people that are currently operating there and then opportunities for new people, which I could get into something else.

[00:16:43] Seth: That's really been on my mind is the farm bill. The farm bill was effectively extended for a year with no changes and remember what the farm bill permits is the farm bill permits the growth of hemp. With levels below a very specified level. And with what you extract out of the farm bill, you can out of those 4 states that we mentioned, you can pretty much sell that product with some nuance and all the other.

[00:17:12] Seth: 46 states. Um, the other thing that Farm Bill kind of preserves the extension of is the Delta 8, Delta 9 intoxicating cannabinoid loophole that exists where you can take Farm Bill derived hemp and extract out of it Delta 8 or Delta 9, which is as intoxicating as what you can get from cannabis, if not more intoxicating.

[00:17:35] Seth: And that product is available at Almost any smoked bacon convenience store that you're going to find and you can buy it direct to consumer over the internet. So there's a very large market there, which concerned about what was going to happen to Farmville and that's been punted. The other thing I've been looking at as it relates to biotech, and this is something that many people may not be aware of, there are 8 DEA licensed cannabis growers and operators in the United States that have largely been granted licenses to grow cannabis Research purposes, the 1st of which was in Mississippi.

[00:18:11] Seth: It was at the Mississippi school of pharmacy. And a lot of people have heard about that, but there's another 6 or 7 companies that have the same. License and I've seen a couple of those show up recently for either capital or other things. there's a woman that know. Who she is, I don't know her personally, who's named Suzanne Sisley, out of Scottsdale, who has an entity called Scottsdale Research Institute, you know, and what they do is they grow GMP derived cannabis and try to use that as a clinical trial site, to look at smoked and vaporized cannabis flower.

[00:18:45] Seth: And psilocybin for pain and PTSD opioid reduction and all that. I've definitely seen an uptake in

[00:18:50] Seth: capital raising efforts around those 6 or 8 companies in that vertical who are trying to raise capital for DEA regulated and approved cannabis for medicinal studies. And, if you just. Google DEA approved cannabis suppliers, there's a list on the NIH website all of them. So I've definitely seen that, more and more and more in terms of things which are changing.

[00:19:15] Seth: That's really

[00:19:15] Erum: interesting because, I remember in our last conversation, we talked a lot about, levels of which cannabis is produced. So the regulations on the growing and then the distribution of cannabis and actually. Just to be clear, there's cannabis and then there's the THC cannabis, that's a little bit more regulated. But right now, we're still talking state by state. There has been no federal level regulation to the sale and purchase and flow of product besides this DEA licensed growers for medicinal

[00:19:45] Seth: purposes. That's correct. Yeah.

[00:19:48] Erum: Interesting.

[00:19:49] Seth: and to that point, Aaron, that's the catalyst,

[00:19:52] Seth: We talked about it last time and people talk about it all the time, which is that, cannabis is still a schedule 1 narcotic, in. The United States, and until that changes in some way, shape or form, and I'm not going to express an opinion of which way it should go or how it's going to manifest.

[00:20:10] Seth: But once that changes, it is at least micro watershed, if not a macro watershed moment for the industry.

[00:20:17] Karl: you see a lot of companies and you've talked a lot about Mostly positive developments overall, who's having a hard time and why

[00:20:27] Seth: well? Most people are having a hard time not to shamelessly plug my linkedin but earlier this week I did A post about how much capital there is not in cannabis. And again, , we talk about these amazing corollaries between biotech and cannabis and, , programming note, I'm going to put up a post about that soon.

[00:20:47] Seth: it's in the works. And I think it'll be interesting. The point that I was going to make is that if we're all biotech entrepreneurs and operators, if we go to JP Morgan, we're going to end up at a coffee. Table or at a cocktail party, and we're going to be complaining how little capital there is in the space and how all the investors are hoarding it and how we can't understand why Pfizer and, GSK are making the decisions that they're making, So, we're in de facto, a very tough capital market, always in biotech, the biotech investing universe is 27 times larger than the cannabis universe. 27, so. the first problem that plagues cannabis is that there's just not a lot of money. So start there. There's probably four things that I've seen since our last conversation that exacerbate those challenges.

[00:21:36] Seth: I have been exceptionally vocal and obstinate that whoever wins California is going to be some of the most important people in cannabis in the world, which is why I am focused here. The market still has not fully corrected itself. And we'll still go through probably another two or three rounds of correction until it has right sized.

[00:21:59] Seth: So since we last spoke, two major things have happened in California. In June, July, the largest distributor in the state went bankrupt. That was called Herbal. in cannabis, there's a middle layer layer that if you're a product and you're taking it to a store, you either have to self distribute that product to the store, or you have to hire a third party distributor to take it to the store.

[00:22:25] Seth: And unlike the others in the state, what herbal had done was Herbal bought the product from the company and carried that AR and it acted kind of as a bank in doing that. And at its peak, herbal was about 300 million in revenue. It lost select and pack stone and rock garden, which were three of the largest customers that had, it dropped to about 110 ish million in revenue it went under.

[00:22:48] Seth: So herbal going under was.

[00:22:50] Seth: There's this thing on Wall Street called triple witching hour. It was like a single witching hour event. It wasn't a environmental disaster for the whole market. But if you were caught up in the herbal mess, it was a nightmare. And there's some companies who did not survive that mess.

[00:23:03] Seth: So, that happened to the biggest lenders in the space kind of shut off the end of last year, which we talked about. And then yesterday, yesterday, a fairly large delivery service called grass door. Yeah. Essentially went belly up as well. So starting to see a seismic shift in the market where companies that have not.

[00:23:25] Seth: Been able to either raise sufficient enough capital or operate effectively, are starting to crumble. And I will publicly say that I believe that 1st, 2 quarters of 2024 that there are 4 retailers that are on my radar screen in California. That each have anywhere between 7 and 20 doors, and I believe that 2 of those will go bankrupt or be sold as well.

[00:23:50] Seth: So that's the first thing that I'm seeing, which is further correction in California. A second thing that I'm seeing is that the cannabis industry seems to like to sue the hell out of each other. So, in the past couple of months, there have been 3 or 4 pretty The nominal lawsuits cookies has been sued by 2 or 3 different of its investors in exceptionally salacious allegations.

[00:24:15] Seth: I have commented on that publicly before, and I will just say that if you read the lawsuit, allegations are very

[00:24:24] Seth: not friendly. I work for a company called glass house. they're probably my single biggest, cannabis. were famously sued by a company called Catalyst here in Southern California. Alleging unfair business practices and other things. I was also part of the Ease Green Dragon merger and Green Dragon ended up suing ease for that merger.

[00:24:44] Seth: And I think Cresco has sued ably for, truly for poaching employees. So the infighting on the lawsuit side of the industry has kind of upregulated significantly. And I don't know that I've seen that in other Interestes in the same way

[00:24:59] Seth: The third thing I'd say in terms of challenges is that New York State is kind of still a disaster, and I believe it will be a disaster until, your kids are in their thirties. I've lost kind of faith in the political. Process in our country and in politicians in general, and whether it's New York state or Washington, there have been 3 or 4 rounds of licensing in New York state, and they've completely mismanaged every single round.

[00:25:24] Seth: And I think this round is going to be worse, and don't see a path for me to participate in New York state in cannabis. For the foreseeable future as a result of that. the other thing that I would probably say to you in terms of challenge is, is that you've had the drumbeat of federal change, but you haven't had any.

[00:25:40] Seth: Already around federal change and given the lack of complete clarity or complete Ability to make decisions in washington dc in general and this upcoming election Which kind of scares the shit out of me on both sides I don't see cannabis getting pushed to the front of the agenda in the foreseeable future.

[00:25:59] Karl: was just going to make a couple of You said there's 27 times more investment in biotech than in cannabis, which I find to be super interesting. And I guess it doesn't surprise me. I agree with you. the New York thing continues to be a disaster.

[00:26:15] Karl: it's like, I've said it before, between here and Berkeley center, which is about a mile and a half from me, I probably have 20 illegal, bodega dispensaries. I mentioned there's two in Dumbo, one across the street from my building, one downstairs in the building. That was kind of surprising.

[00:26:29] Karl: They just popped up out of nowhere. and I see a lot of people gone in there. I don't know how New York is going to fix that at all. I felt like there was something else I wanted to say about biotech and JP Morgan, but now I lost my train of thought. So, Yaron, why don't you ask about ketamine and psychedelics?

[00:26:44] Karl: Actually,

[00:26:44] Erum: before I go into that, I mean, I think one of the things is that New York State, and correct me if I'm wrong, they only have five growers? Something like that. It's very limited amount of licenses and they only have like three legal dispensaries. very, very small. Although people are buying, despite whatever regulations there's going to be people growing, there's going to be people buying.

[00:27:05] Erum: And so that's always going to be happening. I think what's really interesting. I recall one of your LinkedIn's cause now you are the biggest LinkedIn influencer in the space. you mentioned the concept of asset light companies.

[00:27:17] Seth: So you

[00:27:23] Erum: mentioned asset light companies. So. Companies that are just buying the herb and creating products from it can win, You have this perspective on that. Do you still believe that? Can you touch on that in terms of companies to be built, get the product, B2B style and sell directly to the market without having to have all this land and other high capital expenditures on

[00:27:44] Seth: their books? Well, let's talk about.

[00:27:46] Karl: Two separate questions that you've kind of asked right which is new york state new york state is probably the state that I follow the least your numbers sound about right ish I just looked it up just to interrupt. So there's supposedly 463 licenses were issued in july of this year But only 20 legal dispensaries were open at that point and I believe in rome.

[00:28:08] Karl: It's four in new york

[00:28:09] Seth: city Go in the city. So, as he will have complained every time. Yeah. So let's, talk about just the New York state dysfunction and, why there's 2 wheels of dysfunction. the 1st wheel of dysfunction is that there's no enforcement. And I don't know how that changes.

[00:28:26] Seth: So I spent four weeks in August in New York city, in the city in Soho. that Soho Chinatown little Italy area, I think there's more illegal shops there than anywhere I've ever been. And I bought. My 16 year old son with me and I went into 44 stores and I brought him in everyone and I wanted to see what was there, what I could buy, who was looking over my shoulder and were they going to do anything?

[00:28:51] Seth: Because I had a 16 year old kid with me. Now, my son's about 64, so he looks like a man, but I'll tell you every single one of those doors. Had no enforcement had no legality to it had a bunch of brands that I have seen on shelf in California and not a single one of them had a had a problem selling weed to my son So just as an FYI

[00:29:12] Karl: So just to interrupt you as you go on for those who don't know when you go to a dispensary in California Before you go in they take your ID They verify your ID And so before you can go in and buy any product, you've already like

[00:29:25] Seth: passed a test.

[00:29:27] Seth: No one in New

[00:29:27] Karl: York is doing that. I haven't gotten to the legal ones. I don't know, Rob, if you have, but what you're describing, Seth, is exactly my experience. You walk up to the counter and buy

[00:29:34] Seth: whatever you want. It doesn't matter how old you are.

[00:29:36] Seth: So 1st problem that you have is enforcement. Okay, the 2nd problem that you have is that the licensing problem is broken. The licensing machine in New York is broken and. further exacerbating that is we talked about lawsuits. Every time someone's issued a license, a bunch of people sue them top of it.

[00:29:54] Seth: , it's a messy system. And until, the enforcement system. Gets fixed. I think it's hard if you continue to have a legislative group, which is going to change its mind on its regulations every point in time. And you're going to have a bunch of people that feel disenfranchised for some reason, because they're not getting awarded this golden ticket, which isn't a golden ticket, which is just not a golden ticket.

[00:30:16] Seth: I think you're going to have problems in New York for a while. You would ask the second part a question there, which is about models that function and what about asset light models, So I've talked a lot about the fact that I think that there are probably. 70 to 100 companies in cannabis in the United States that have somewhere between 10 to call it 75 million in revenue and are either near break, even or generating real cash flow and profitability, and they kind of break down into about 4 or 5 different models, The first model is they grow their product. Sell it in a single state. So put a brand like your beauty or put a brand like a golden state into that box. That's one box that functions. You have a second set of companies that are called inverse license or semi asset light brands, where they'll take over someone's facility.

[00:31:15] Seth: In another state in what's called a management services agreement, and they will then install their S. O. P. So they'll rent someone's license, but they'll do the manufacturing and they'll do the sales and they'll do the distribution. And that's a very, very, very successful model in certain product skews and 2 companies timeless and grown edibles are probably the masters of that.

[00:31:40] Seth: So they're each in 5 or 6 States, they're generating, mid. Range, double digit revenues and both extremely profitable and rolling those. Models out in 7 to 10 states. So that's the second model that clearly functions. A third model that clearly functions is I'm going to have a grow and I'm going to have two or three stores to support that grow, and that's all I'm going to do, so I'm going to focus on growing just enough product to sell it through my stores on a limited footprint basis.

[00:32:10] Seth: And there's probably six companies that I know that have that model in a state or two states. There are certainly people who can operate just retail operations effectively. I did a piece on a company in California called Embark, which is the leader of that, right, race. their trick is that they seem to be able to win licenses in municipalities where there's only one or two stores, and they're very, very good at what they do.

[00:32:35] Seth: And then there's the AssetLight brand model. And I do believe that the AssetLight Brand model work you just have to be very very efficient at it and probably the 2 most efficient companies at it are a company called old pal and a company called backwards I think it's hard to start that model and be efficient at it, ?

[00:32:54] Seth: Old pal raised a lot of money, establish itself as probably one of the leading brands in its lower segment, lower price tier in California, and then to kind of go multi state in this asset light model where they effectively are a packaging company, meaning if they go to Massachusetts, they're going to find somebody who's going to grow and process, they're going to show up with their packaging.

[00:33:17] Seth: And they're going to say, fill my package and we'll help you get it into the store and promote the brand. That's a licensing deal, So Old Pal is going to pick up high single digits to low teens of the revenue that's generated in the state. And so long as Old Pal can keep its GNA at corporate low enough, that's a model that functions.

[00:33:35] Seth: But remember, if they're doing, a hundred million in. Total revenue in the U S maybe they're picking up seven to 15 million of it in their pocket because they're only really licensing the brand to go multi state. Probably the most effective brand doing that right now is a company that you're going to see everywhere called Packwoods.

[00:33:56] Seth: So Packwoods is a beast. , it's two guys that are largely from the traditional market. That came up with effectively a blunt, a glass tip blunt, wrapped in a tobacco leaf, rolled in keef. So it's a gigantic item and they've rolled that into kind of seven or eight different markets. So they have a THC division where effectively outside of one or two States, they take an asset light model.

[00:34:25] Seth: They have very iconic branding. , they've taken that into just smoke and vape in the non cannabis market. They also, because they're known for their wraps. They're the stuff that goes around the product, they've been able to take a product and put it into C store and convenience and non cannabis.

[00:34:45] Seth: So that's an entity which probably, has mastered the asset light packaging model. they're also in the D89 side of the business. So, you know, 1 of the interesting things there is that if you lined up their product, if you looked at their cannabis, a bit vapor. And their smoke or nicotine vape, and you looked at their D8 vape, you think they're the same product, the packaging of them is not unique enough to be able to say, Oh, well, that's this. This is so they built brand affinity, around what they've done historically in the legacy market and rolled it out into a much, much, much bigger business. But do think that that model works. and you know, there's definitely other models that work.

[00:35:23] Seth: The asset light model is really hard to do from scratch. You need to establish presence somewhere and then roll out from there to do it.

[00:35:32] Erum: So we talk a lot about cannabis, it's an example of a schedule one narcotic now becoming a little bit more, accessible, I guess, or, just a little bit more marketable. but there are others. There are others that are coming into market. There's others that are, being used regularly for recreational purposes and also used for new ways of treating different types of diseases.

[00:35:55] Erum: two that come to mind, we have ketamine and psilocybin. They've been. Coming up in our world a lot, particularly ketamine. I've been hearing about it a lot, on other podcasts, it's getting big in the world of, Silicon Valley people. I also have seen a lot of Facebook ads.

[00:36:12] Erum: Where, it's like, take this assessment to see if you qualify for our ketamine subscription. there's a lot going on in terms of being able to access this. I'm thinking this is legal. don't know if Facebook regulates that part of advertising, but curious if you've seen what's going on in these spaces, , which companies are coming up for what uses, any thoughts on that front?

[00:36:36] Seth: Well, myth of my deep and intense knowledge of all things Would take a big hit if I didn't have an opinion here, So, I do have some very strong opinions. I have casually observed psychedelics as a class of compounds since 2018. And the real reason that I've observed them is that when you look at plant medicine in general, Plat medicine seems to, for a long time, have a great deal of efficacy.

[00:37:05] Seth: It's just very, very, very hard to translate that into a pharmaceutical product. Maybe you guys can recall, one of the big cancer drugs was actually like, the dude went into the Amazon and found toad venom and turned it into something. Remember that? I don't remember what that was, but so you have this long legacy of plant medicine working.

[00:37:28] Seth: The problem with plant medicine, though, is plant medicine doesn't really fit into a pharmaceutical paradigm. And if I've, waxed upon this before, do it again. I've led the effort for eight traditional pharmaceutical co development deals, Or partnerships. And pharma products usually require.

[00:37:44] Seth: issued composition of matter patent known mechanism of action, synthetic manufacturing at scale, safe and repeatable dosing regulatable claims, So anytime anyone comes to me with a plant based medicine, usually there's problems. Why? Usually it's pretty well known. So you can patent.

[00:38:01] Seth: That usually there's more than one active, so you really don't know how it works. And if there's more than one active, it's usually hard to scale. Anything in plant medicine. Psychedelics really, and cannabis makes that even harder because it's federally illegal. Psychedelics though. Psychedelics fits into pharma model really, really, really well.

[00:38:20] Seth: Why? It's usually one small molecule. If I'm the first to market and I can't patent it, I can get exclusivity around it because I'm going after some kind of a rare disease. If I'm really smart, I can probably synthesize that molecule and make it analog to it, or I can put something around it to make it proprietary.

[00:38:38] Seth: And it's one thing. Now it might not be a legal thing, but it's one thing. So it fits into the model a lot better. so to your point, I've kept an eye on psychedelics for a while because of that, Because that's the one thing in plant medicine that seems to work really well, seems to have a huge level of unmet need.

[00:38:55] Seth: And it's not a lift for pharma, it like fits into what they're doing. I break psychedelics down into effectively, four cohorts. You have a group of people that are in drug discovery and drug development, and there's probably, 25 publics that I keep an eye on and 25 privates that I track, You have a group of probably 10 or 12 companies that are in the manufacturing and synthesis side of it. And I don't really keep as much of an eye on them, just because I think that that's going to get democratized plenty of places where you can manufacture these things. The other area that I look a lot at. Is treatment clinics and wellness centers. Now, it's the treatment clinics and wellness center side of the industry, which I think is honestly to me the most interesting. so there's 2, you pretty well known public companies and field trip and numinous that I definitely keep an eye on because most of these therapies, at least the ones that are the furthest along in the clinic usually are going to require some.

[00:40:01] Seth: assisted delivery modality. So you're not just giving the patient the psychedelic. You're giving the patient the psychedelic in conjunction with a course of therapy over a period of time. And I believe that. Until that becomes unhinged, people like field trip and numinous and awaken and levity and braxia are going to be important.

[00:40:27] Seth: there's another big private 1 called retreats. There's also the 4th cohort, kind of a CPG and adult use side of things. there's 3. Public companies in that vertical that I look at, there's a private company in that vertical that I look at. there's also, several states and you're probably bordering on 15 or 20 where either psychedelics have been decriminalized or legalized.

[00:40:52] Seth: So, to your point, looking hard at the space, if I break it down further, What I tend to look at is three different things. I think you have about 120 companies that are involved in some way, shape, or form in the therapeutic drug development of these compounds.

[00:41:13] Seth: and honestly, for me, outside of probably 6 or I don't care. and the reason that I don't care is that , maps has a PTSD, you know, effectively MDMA product entering phase 3 compass has a psilocybin entering phase 3 and awaken has a ketamine entering a phase 3, , outside of that, you basically have 1, 2, 5 companies, GH research, mind med, be more apex.

[00:41:42] Seth: That have phase 2 B's ongoing in either psilocybin, LSD or DMT effectively for depression, anxiety or alcohol or PTSD outside of that cohort of companies, you have. seven drugs that are either going to be approved or not in the next two or three years, and I think Pharma buys a couple of those companies, , and if we just look at a probability adjusted development program, two of those drugs get approved.

[00:42:05] Seth: One of those companies gets bought by Pharma, and the rest of them die. On the therapeutic drug development side. I'm not as interesting because there's a cohort, the cohorts formed, there's an advanced stage of the cohort, and the advanced stage of the cohort is going to dictate how capital flows into the rest of the cohort and the success of the rest of the cohort.

[00:42:24] Seth: What's really interesting to me is the clinic side. How are you going to deliver a drug to the patient? And the other thing that's the most interesting to me is what I'll call the CPG side of things, because you have, just like in cannabis, fairly non enforced, unregulated market where every cocktail party that I go to or every dinner that I go to, the first conversation is, do you know somebody who can get me microdoses?

[00:42:47] Seth: So what's really interesting to me and where that market develops is that I think, the pharma side is going to shake out like pharma usually shakes out, but the real opportunity is on the delivery and the consumer side of things. And I think you're seeing a lot of efficacy there, and you're seeing a lot of people specifically in their 20s and older who are looking for a plant based wellness solution.

[00:43:11] Seth: I think because they've seen the relative toxicity of pharmaceutical products and are skeptical of them more skeptical of them that I've ever seen something happened in our generation, which is very important, which is COVID caused people to question science. and that has transformed the thematic thinking of, the therapeutic landscape in a way, which I don't understand, but it's, true.

[00:43:35] Seth: I think that catalyst has caused people, , to say, well, what else is there for me? If you go to 3 oncologists with, stage 2 breast cancer, they're all going to tell you the same thing. Well, here's what you need to do. And then it's, radiation and chemo. Well, is there anything else?

[00:43:48] Seth: There's nothing else. So, that's what I think about that sector. think it's going to be very, very, very important. and I'm. Waiting, observing.

[00:43:57] Erum: , the clinical side, the delivery side, and how it's being presented and accessible to people are younger.

[00:44:04] Erum: I saw that on that Facebook ad, the ad was, are you depressed? Do you have anxiety? Take this assessment, , because ketamine could be helpful to you and it does come with therapy. Like I was going down to see, like, what is this? The company is called Mind Bloom. That was a company that was, seeing those ads it's not just the drug.

[00:44:23] Erum: It is the process too, like having therapists be there for you, feeling that you're heard and then feeling safe to take it because you already have. All your expectations and going in it, knowing what to expect versus you're just given a pharmaceutical drug, not that it's like psychoactive or anything, but it's not really helpful.

[00:44:41] Seth: I mean, I mean, listen, the other thing I'll tell you is I might sound like I really know a lot of things and. don't, I just have access to a lot of information and I get a lot of research and I see a lot of things. So as an example, okay, I advise a fund that has been on most early stage of things like psychedelics and advanced materials and, eco, it's a young guy out of, Texas, whose name is Ford Smith and his funds called ultra native.

[00:45:14] Seth: So ultra native was one of the first investors in maps and maps has a public benefit corporation that they're went out and raised money for and have been raising money for to get their drug through a phase three. So I got invited as an investor to help. invest an allocation into maps, So, I've seen under the covers of the inner workings of a lot of these things. So the knowledge that I have in some of these things is not just. I'm opining out of ether. I've seen. A global pharma level team put forth. One of the most detailed investor presentations on a sector that I've ever seen, I'm basing opinion upon that.

[00:45:52] Seth: the numbers that I rattle off are because I'm on the mailing list on the cannabis side of every single major investment bank, and I get pushed all of their institutional research. I think I share that with you guys on a monthly basis. So, the opinions that I derive are not just because I'm sitting here, like ruminating in a room full of smoke.

[00:46:10] Seth: It's because I'm taking all of this data and I'm kind of saying, all right, well, how's that going to play out?

[00:46:16] Karl: And what I was going to add to this is, we're also absorbing a lot of this data, less on the cannabis side, but more on the biotech side. And I see the cannabis legalization and usage, I mean, it's been long overdue. I mean, knowing that the farm bill came along and. hemp had always been a very important plant for the country. It is on the dollar bill. It was essential up until it became illegal, but there is like societal forces.

[00:46:42] Karl: And I think it's interesting that you mentioned, you have this doubt in science, but I also think that there's so much change going on and if you catch me in a bad day, what I'll say is. This decade, the twenties is really about cannabis and psychedelics. And those are going to be by the end of the decade in widespread use.

[00:47:00] Karl: I mean, you say you see it when you go to a cocktail party, we see it too, but then the next decade given the amount of uncertainty is going to be about. Drugs and, euthanasia and assisted suicide, because there's going to be people who are just not going to be able to take some of the things that are potentially in front of us.

[00:47:14] Karl: that's when you catch me on a bad day. but, we shall see. And that's also based on the information that we're, taking out.

[00:47:19] Seth: I don't want to end on a negative note. So

[00:47:25] Karl: that can sound very harsh and I'm not a harsh person. I'm very optimistic.

[00:47:30] Seth: cannabis is very tricky because you have a bunch of white guys in suits and white women in suits And companies that are doing somewhere between, 250 million a year and a billion dollars a year in revenue growing and selling a product that you have a lot of people that aren't arrested in jail for.

[00:47:50] Seth: And sitting in jail. so, one of the problems that you encounter in the legalization of cannabis at any level is how do you, compensate society for that? And I don't know how you do that. where it then manifests in cannabis specifically is that because it's so capital constrained, you have a bunch of people that have either operated in the legacy market or affected in some way by the criminalization of cannabis, who kind of believe that. Cannabis should get

[00:48:24] Seth: different rules or different sets of constraints that apply to other businesses and the regulatory framework that you have in each state is such a maze. It doesn't make it easy. So I'm just going to give you an example. I don't know what the attrition rate is of biotech companies, but I know there's some statistic we've looked at that, 70 percent of businesses that are started within a year fail within 18 months. Okay, I don't know if it's a higher attrition rate in cannabis, but what I do find is that the legacy part of the cannabis community can't understand that not every caterpillar is going to turn into a butterfly in biotech.

[00:49:01] Seth: you've come to accept the fact that most companies are going to blow up. And I think as cannabis begins to mature, I think you'll see maybe a greater acceptance that just not every company is going to work. I don't know how that translates back into doing something for the socioeconomic inequality that exists in the commercialization of cannabis, but it's all part of that mix and it's going to be part, I think, of the cannabis and industry maturation process.

[00:49:30] Seth: Yeah,

[00:49:31] Erum: one of the big topics New York, and I know that's not your favorite market when it comes to cannabis, and I don't know if it's just smoke and mirrors or like just a marketing ploy to, say that, okay, we're going to award some licenses or, people that have been disadvantaged, criminalization of cannabis, so I don't know how that actually Plays out in numbers.

[00:49:54] Erum: Is this disadvantage community now flourishing? I mean, will it take some time, or is it just smoke and mirrors,

[00:50:00] Seth: I am officially standing up and getting on my soapbox now.

[00:50:07] Seth: The term is social equity, there's not an audience here, but to the extent that an audience listens to anything I have to say, I can't think of many places that social equity has actually worked. it's the right thing. It's a great idea, but instead of. Awarding people that have been affected by cannabis licenses or using people that have been affected by cannabis to empower other groups to get licenses.

[00:50:35] Seth: What they need to do is they just need to give these fucking people money. so if you look at what's going on in New York, I don't know how many retail stores New York is going to allow to exist. don't know how many retail stores New York is going to support. if I just deconstruct the backend economics, I don't care what you're giving these fucking social equity people.

[00:50:55] Seth: But unless you're giving them like a million bucks to run a store for a year, it doesn't fucking matter what you're giving them. Cause they're probably not going to succeed as business people. So like The problem with social equity licensing is that it's been put forth as a political notion.

[00:51:13] Seth: With the right intention, which is I'm going to help people who have been affected by cannabis, but I don't want to say it's smoke and mirrors, but it's kind of like destined to fail because you're not creating a competitive landscape advantage for them. You're not giving them money. You're not allowing them to compete more effectively against the 10.

[00:51:36] Seth: Adult ships that are there that have already gotten bullets and weapons and are ready to go. And you're creating a situation of false hope and false expectation. Are some of the social equity people going to be successful? Sure. There's a social equity. License aggregator in L. A.

[00:51:51] Seth: who's effectively holding 10 or 12 social equity licenses. And if you drew a circle around, city and county of Los Angeles, it's a great footprint. They've opened 1 store. And they're trying to get rid or find someone to invest in all of their other stores. They can't. So social equity just is destined to be flawed.

[00:52:12] Seth: it's, in my opinion, been a very nice political chip that people have played. In order to find a way to do something to empower people that have been affected by cannabis, but I really can't think of many places where it's actually worked.

[00:52:29] Erum: Yeah, one of the things I heard was, I'll have to check my notes on this and maybe you guys know, but there was the pardon for A number of people that were in prison for the distribution of cannabis. And then, , they were like released from jail because it was decriminalized in that state where they were released. So should they have gone to jail for distributing, , cannabis when now all these people are making all this money, no, they should not be in jail anymore, unless there was multiple accounts of different things and cannabis was one of them, but if they were just selling it on the street and maybe, yeah, there was a law at the time, now there's not a law, but.

[00:52:58] Erum: Still, I it's illegal to sell cannabis without a license, so they could still go to jail, but I

[00:53:03] Karl: want to, be mindful of time.

[00:53:04] Karl: Iran, why don't you ask the last question?

[00:53:06] Erum: Seth, again, I would like to say that I am very impressed by all of your advocacy for entrepreneurs or your entrepreneurship advice that you provide on LinkedIn. It's been, , very inspiring to see, but for our audience who may not have followed you on LinkedIn, but soon will follow you on LinkedIn after they hear this.

[00:53:23] Erum: What advice do you have for aspiring entrepreneurs that are looking to get into the cannabis space? Thanks. Biotech space, I know you already provided some to bits of advice, but to sum it up, what are some of your. Tips, I guess you can say

[00:53:35] Seth:

[00:53:36] Seth: how I'm going to answer that is to talk more thematically, About what's important to me and why I look at things.

[00:53:42] Seth: One of the things that's really important to me is cohorts, and we've talked about it a few times, I think as an entrepreneur, before you start a company, you really have to understand where you fit in the landscape and why you fit in that landscape does what you're doing deserve to be a company.

[00:54:00] Seth: So, as an example, earlier, we talked about the psychedelic. Cohort landscape, we talked about 4 different verticals in that landscape, and we talked about all the companies in each vertical. So where do you fit? Because the 1st thing that someone like me or my analyst is going to do is I'm going to say, figure out where they fit.

[00:54:20] Seth: Now, inside baseball for you as the entrepreneur, you're thinking, Oh, I need to figure out why I'm better than those companies or how my features and benefits contrast those companies. For me, it's totally different for me. It's how many people are there? are they there? Who's invested? How much of invest has been invested what's left?

[00:54:39] Seth: So, for me, the reason I want to put you in a cohort is I want to see, are you fundable? Are you competitive? And is there more money that's going to come in the space? So that's the first thing is don't underestimate the importance of knowing your cohort and where you are. The second thing, which I will say, and I'm starting to say this more and more and more is numbers just don't lie.

[00:54:59] Seth: They just don't lie. So if you have an operational business and You have numbers, if they're good, tell me why they're good, if they're bad, tell me why they're bad, don't sell me sunshine, because I'm not going to believe that it's clear and sunny, I'm going to believe it's cloudy, understand the importance of your numbers, because ultimately the quantitation of those are going to Okay, Either help you, or hurt you.

[00:55:26] Seth: And for me, usually the biggest red flag is if I can't get the numbers to make sense, if there's something about the numbers that just doesn't click for me. I can't, I'm done. And the third thing that I would say, and this is very, very, very difficult for people to understand. And it's taken me years of pain and suffering and learning.

[00:55:47] Seth: Allow, don't force, allow, don't force. If you want to make your own luck, you want to be persistent, you want to take every you want to take the meeting when someone says no, or inclines to say no, you don't go back seven times, going to turn them off. And if you put out, here's what I'm trying to do, and here's what I'm trying to accomplish and.

[00:56:11] Seth: You can come on the ride with me or not. I've now found in the last couple of years specifically that message resonates. And what ends up coming back to me might not be exactly what I want, but might be what I need. It might not be the fact that someone's going to invest in your company.

[00:56:28] Seth: It might be that you made a relationship now and they do something for you two or three years from now. But I think I've found that forceful. used car mentality to fundraising or to running a company , just doesn't work. So, for me, it's just allow don't force and those are probably the 3, biggest things that I found are, secrets, for lack of a better description, and they've served me very well.

[00:56:54] Erum: Awesome. That's great. Those are hot tips. I I think, , those are going to be a very helpful for our listeners, I think not only in business, but also in life allow don't force, you know, when you're just, living every single day, I think the cohort thing is something that, You've mentioned before, and it's very important. I do like the fact that you're talking about a position versus being competitive. I think that's a really, really great, , great, great advice for our, aspiring entrepreneurs that are listening. So thank you so much, Seth. Always, always, always a pleasure speaking with you.

[00:57:22] Karl: we will definitely have you back.

[00:57:25] Seth: Well, I'm so appreciative of your time. I'm so appreciative of the relationship. I'm very appreciative of the platform and I am wishing everyone a happy Thanksgiving and a healthy and peaceful 2024 for the entire planet. Please, please, can we stop the madness?

[00:57:46] Seth: Yeah. All right. Thank you, Seth. Thank you guys.