Smoking a joint just off Bay Street in the courtyard of the Toronto-Dominion Centre is Narbé Alexandrian, the 32-year-old president of Canopy Rivers, who saw 1,523 pitches for investment capital into cannabis companies over the past year.
On this day, Alexandrian sparks a Blueberry Kush indica preroll from Haven St. It’s a celebratory joint because earlier that afternoon he successfully completed a $10-million investment into TerrAscend Canada Inc., a subsidiary of TerrAscend Corp., which owns the Haven St. brand. “This,” he said, the smoke still in his lungs before his long exhale, “is my champagne.”
Before joining peers that evening in a box for the opening of the Toronto Maple Leafs season, Alexandrian and I smoked our own joints then ducked into The Pub on York Street to split a pitcher of beer.
Ben Kaplan: Since legalization, has smoking weed become more prevalent on Bay Street?
Narbé Alexandrian: Yeah, but even to this day when we ask potential employees what they think of cannabis they jitter a bit before they answer in a way you’d never see if you asked someone if they drank. That little jitter makes you realize the stigma still exists, even though you’re seeing more people coming out as cannabis users on Bay Street.
BK: So how can the companies you invest in take that stigma away?
I think there’s an over-negativity in the industry right now that isn’t based on anything that makes sense.
NA: Get into the lifestyle. Think of consumer packaged goods companies. You see Molson ads everywhere – at a hockey game, in the name of a stadium, on television. They hit you in multiple locations. Cannabis, with the current restrictions, we can’t do that. The restrictions will go down over time but if people don’t talk about cannabis, the stigma will remain.
BK: Do you have any trepidation of being the president of a public company smoking a joint in The Globe & Mail?
NA: This is what I believe in and I have to stick with it. Although I do have to admit that the thought – ‘what am I doing?’ – did cross my mind.
BK: Can you be successful in the industry and not get high?
NA: To run a company that’s operational in cannabis you need to try the product, at least to know what your consumers are thinking.
BK: What do you do exactly?
NA: I run a venture capital vehicle and we invest minority stakes into companies and watch them grow and then exit either through having another company acquire the company or by taking the company public. We have 18 portfolio companies and cannabis entrepreneurs come to us for investments.
BK: Are they any good?
NA: Some are good, some are horrible.
BK: How much time do companies have to beat back the black market and erase the stigma before going bankrupt, getting acquired or being shut down?
NA: If the U.S. legalizes and makes marketing more relaxed than in Canada, it will be devastating for Canadian companies.
BK: How so?
NA: We have a head start, but we can’t do anything because of the restrictions. It’s completely illegal to market here, but when the States federally legalize – and it’s not ‘if’ but ‘when’ – let’s say in three to five years.
BK: In three years, weed will be federally legal in the U.S.?
NA: You’re seeing too many steps forward for it not to be. The Safe Banking Act allows you to invest in companies peripheral to the cannabis industry without touching the plant and as the U.S. inches toward federal legalization – 33 states currently have medicinal or recreational cannabis – it’s getting to a point where it’s gone too far to go back.
BK: What does that mean to investors of the Canadian cannabis brands?
NA: When the United States federally rolls out legal cannabis, they can do it in a number of ways. There’s the California model: where the packaging can look like whatever the brands want, and they can advertise on billboards. If you’re a cannabis company in Canada and can’t do that, and all of our products look exactly the same – with no logo – that means Canadians watching American TV and internet sites will get exposure to the U.S. brands. It will destroy the Canadian brands from ever going into the biggest market in the world.
BK: Thank God we’re stoned. Tell me about the joints we just smoked.
NA: It gives you a body buzz and it’s aromatic, that’s why we weren’t coughing. It’s a relaxation type of strain. You’ve never tried it?
BK: I can’t keep track of the strain names. I just buy whatever hybrids the budtender recommends.
NA: If you took all the strains and put them on a chart and looked at which dot was closer to indica or sativa, you’d find they all border the hybrid very closely. If it’s slightly more indica, they call it indica, but they’re all very close to being about the same.
BK: The buzz I can say is certainly worthy of your $10-million investment.
NA: Thank you. Earlier we announced our $10-million investment into TerrAscend, which is a multistate offering in the U.S. and a licensed producer in Canada, and they also sell in Europe. They’re a fully-integrated company that does everything from seed to sale. It’s a momentous occasion – very appropriate to smoke Haven St. today.
BK: A guy asked me this morning if he should invest in Canopy or Uber. What would you say?
NA: Canopy. Because where the stock prices are at now, we haven’t seen this in –forever. If you believed the hype in April, why not believe the hype now when the stock prices are down?
BK: Maybe the fad is over.
NA: I think there’s an over-negativity in the industry right now that isn’t based on anything that makes sense. Take vaporizers. Vaporizers hurt a bunch of people in the U.S., but the studies are showing that was because of illicit products. So then why are we punishing the legal market for following the rules?
BK: What’s the worst cannabis pitch you’ve ever heard?
NA: The terrible ones are extremely terrible. You see a company come to you and tell you they’ve done nothing, but are valuing their company at a billion dollars.
BK: You’re kidding.
NA: I feel bad for them – they’re so far detached from reality that you wish they could get the education they so badly need. It’s such a waste of time. Someone went out and made a pitch deck, spent time on it, and it’s ludicrous. Cannabis has given certain people a miseducation.
BK: Who got their pitch just right?
NA: The ones with data are the ones that stand out. The ones thinking in a whole new light from what everyone else is doing. The ones acting like a non-cannabis company in the cannabis world – that’s where the industry is going.
BK: So, who’d you invest in that does that?
NA: Headset. I felt the pain point Headset was trying to solve: trying to create data in the cannabis space, in real time. I was at MJ Biz [conference] last year, walking the exhibit floor and came across the second largest cannabis beverage manufacturer. They were giving out samples of a blueberry cola and we took a sip, and it was nasty. Coke wouldn’t make it. I asked: ‘How’d you come up with the flavour?’ And it was clear they blindly went into their idea without looking at anything any consumer had told them. I knew: cannabis needed data.
BK: What did you do?
NA: I went to Nielsen, who holds data for everyone except cannabis. They didn’t touch cannabis. So then we talked to data companies and found Headset, founded by the three co founders of Leafly, the strain review company. Well, as soon as Leafly was acquired, these guys left to start Headset. Headset does real time data on how things are selling in dispensaries across the U.S. and Canada. I can find out in some little town in Colorado which indica has high THC above 15 per cent and how much volume of it is being sold at what price and through that you can understand what’s selling. Consumer behaviour. For instance, CBD and THC hybrids that are 9:1 CBD to THC sell 60 per cent more than hybrids with a 10:1 CBD to THC ratio. And why? No one knows. But the consumer sees the ‘nine’ and gets attracted to that more than the ten. That’s good information.
BK: So you opened up your chequebook.
NA: At the same time we were looking at them, Nielsen was looking at them and they did a partnership, so yeah, we invested. It was $4-million and they provide data to players in the cannabis space – it was a fantastic investment and ... hey, how am I doing?
BK: Great. It’s funny. I’m still sort of high and I go in and out between really understanding exactly what you’re saying to worrying about typical stoner stuff, like I hope my recorder is working and I wonder if he’s going to pick up for the beer.
NA: Right now I kind of feel like I’m on the down end of my high and I was just noticing how everything I say is around tech and data and I know it’s because I come from the tech industry. The tech industry was very competitive in terms of investment, but in cannabis people are just taking pitches and putting money into companies on the same day.
BK: I find that shocking because we keep hearing the industry is crashing and no one is investing any more.
NA: They’re investing, man. Especially when it comes to the smaller players. People are investing all the time and they aren’t doing their due diligence. It’s still that people are seeing a person who made six times their money three months ago, going, ‘Why can’t I do that?’ But what they don’t see is that three months changes a lot in this industry. In this industry, you have to understand that every day you’re on a rollercoaster.
BK: What’s the biggest problem facing Canadian weed brands?
NA: A lot of cannabis companies are heavy on debt. They did convertible debt deals, so that in the future investors could pull out when the shares are higher than they are now and either make a profit or be paid back their money. When everything is going up, it all makes sense. I’ll give you 10 per cent more than you invest and you can buy back your shares. The expectation is the stock will go up 20 per cent and they make 10 per cent – everyone’s happy. But what happens if you’re not going up and they don’t cash in that equity and the time comes and the debt is going to end? Should I make it into equity at $3 when it’s selling at a dollar or ask for my money back?
BK: Ask for your money back.
NA: Right, but the company is like: ‘I spent that money two years ago.’ For a lot of these companies, that day is going to come someday soon.
BK: Where is CBD at?
NA: If the government took the chains off, these chains that say we can only sell CBD at dispensaries, a non-psychoactive product similar to Omega 3 proteins, if we freed CBD products, this industry still could become huge. Canopy Rivers is a global firm, but even Canada would be huge if we could just sell CBD at a drug store – like they do in the U.S.
Three months changes a lot in this industry. In this industry, you have to understand that every day you’re on a rollercoaster.
BK: Is this the first time you smoked today?
NA: I never smoke at work and, even if I go for a lunch, I won’t have a glass of wine. There’s no recreational time during work time. I need to be 100 per cent. At home later, that’s a different story. But not when I’m working.
BK: What are investors still getting wrong about investing in weed?
NA: How legitimate the public companies that are doing cannabis are. The amount of restriction Health Canada puts against you and how much you have to lose as a public company is insurmountable. CannTrust doesn’t happen every day and Canadian public cannabis companies stick to the rules, because they’re terrified. But investors got scared off from CannTrust. It made a big impact on Canadian companies and when one of the companies known to be reliant and trustworthy – a company that has trust in its name – does that, it rattles the structure.
BK: How come?
NA: It’s like if you go to a store and steal a pack of gum for a dollar or use a counterfeit dollar to buy that gum. You get prosecuted more for the counterfeit bill then for stealing, because when you steal the gum, it’s an individual crime, but when you use a counterfeit bill, you’re messing with the system. [laughs]. I’m going deep.
BK: My editor said you were a get.
NA: That’s the first time someone has said that. I just hope you were recording. And I’m happy to pay for the beer.