Mitch Baruchowitz is the managing partner at Merida Capital Partners, a private equity investment firm founded in 2016.
Based in Maryland, Merida Capital specializes in cannabis-related investments such as cultivation infrastructure, data & technology services, pharmaceutical development and life sciences, and medical cultivation.
Since 2016 they have invested over $23 Million into the cannabis space.
Green Flower recently sat down with Baruchowitz to ask him about some of the biggest questions in cannabis investing today.
1. Why did you get into cannabis investing?
I got into it originally to help my friend, who’d begun using cannabis to treat pain after being tragically hit by a car and paralyzed. He moved to Colorado due to their medical cannabis laws. He had questions on the legal/finance side, and we discussed it daily. After enough conversation, you could begin to see the evolution of the business. Once medical became legal in Connecticut and we won a license, I got involved full time in cannabis investing.
2. What does cannabis investing look like since our country hasn’t federally legalized?
There are two major ways to play it. The first is publicly traded stocks from US or Canada that trade in either Canada on the TSX or CSE or the US OTC where companies like Kush or TerraTech trade.
Then there are the private entities, which make up 90% of the investments here in America, which is all done with equity investment or convertible notes. Angel investors and professional investors are putting this money into businesses such as growers and concentrate producers.
3. What countries is your firm investing in and why?
Merida is investing in countries like Italy and Europe, and we see a lot of companies in Australia, and Africa looking for capital. For us it’s about valuation, looking for countries that are still growing their cannabis sector instead of the already developed ones.
4. What advice would you give to someone looking to invest in cannabis for the first time?
Do your due diligence before you invest. Look at the executives running the company and find out what their reputations are. Double check all the information you’re given. You can’t be lazy. A lot of business models have aggressive projections; make sure they’re realistic. It’s an exciting opportunity to invest in cannabis, but don’t let that get in the way of doing the work.
5. What are you the most excited to see happen in the next couple of years on the medical or recreational side?
The continuing field of research on the Medical side. Recreational cannabis is great, but discovering more and more properties of the plant and how it can help people is the most important work being done in cannabis. Any medical innovation gives those suffering from pain or other issues another arrow in their medical treatment quiver.
6. Do you think that cannabis will be federally legal in this decade?
Absolutely. Within the next 3 years.
7. How should one start investing in cannabis? Are there any areas that look better than others?
Find an area that you’re excited about and start researching companies that address those areas. If it’s cultivation, trimming machines, tracking technology, cannabis education, or whatever else sparks your interest, start doing your research. At worst, you’re going to enjoy the learning process.
8. Where are the new areas for investment in the future? Innovations in medical, recreational, extraction, growing?
Cannabis is starting to see a maturation process that is expanding every area for investment. There are new pharmaceuticals and formulation science as well as edible science. There’s been innovation around new transdermal delivery technologies as well as agricultural technology on the grow side. You can almost 100% automate a grow at this point. Again, find what you’re interested in, and there will be companies innovating the process that you can look to invest in.
9. What are the main challenges that have come up investing in the cannabis space?
There is so much innovation and so many companies doing interesting things that managing data flow and prioritizing investments requires a lot of attention to detail as well as keeping an eye on the larger movement of the market.
10. How can entrepreneurs best impress potential investors? How do they stand above the competition?
Put as much energy into the organization of your company and your corporate information marketing materials, and know your business plan in depth. You need to have the answers to every angle of your business that investors may ask. Be ready to communicate what you’ve learned and be honest about the challenges of your business so that investors understand what they’re getting into. Being able to communicate the challenges of your business and how you’re addressing them is as impressive to investors as being a purely successful company since no company is perfect.
11. What are red flags that investors look for when considering cannabis ventures?
The corporation’s personality and reputation. How are they thought of by other companies that they work with? How do they behave? Do their corporate documents grant shareholders protections and rights?
Companies that treat shareholders well are looking for finance or strategic partners in their new venture. Companies that don’t have strong shareholder protections are just looking for money and not for true finance partners.
12. What lessons have you learned so far investing in the cannabis space?
You have to make sure you like the work, whether you’re an investor or an operator. You have to challenge yourself to embrace the lessons, both good and bad. It’s going to be hard work like any other business, and even if it’s an exciting field like cannabis, you need to like the hard work. There’s a lot of challenges, and there are successful people who are tackling them with energy and excitement. But it all starts by being excited about the challenging parts.
13. How do you manage expectations?
Be realistic. Work hard to have an accurate picture of companies and markets. After so much time working in cannabis investment, our expectations are modest because we use a variety of cross-referenced information. Focus on the facts and the information first and let that lead your expectations.
