Ep 281 – Scared Cannabis Investors Are Presenting A Rare Opportunity

codie sanchez entourage effect capital

While many cannabis investors are feeling underwhelmed with publicly-traded cannabis companies, opportunities still abound for investors willing to look past the headlines. Here to tell us more is Codie Sanchez from Entourage Effect Capital, a private equity investment firm dedicated to investing in cannabis.

Learn more at https://entourageeffectcapital.com

Key Takeaways:

  • Codie’s background in cannabis and what led her to become a partner at Entourage Effect Capital
  • An inside look at Entourage Effect Capital and how it’s evolved since it was founded in 2014
  • New ways to invest in cannabis and opportunities that still remain untapped
  • How valuations for private cannabis investments have changed over the last couple of years
  • The vaping crisis and how Codie believes it will impact the industry long-term
  • How MSOs are responding to the Pot Com bust
  • The investments Codie is most excited about right now
  • Codie’s tips for entrepreneurs on how to pitch to investors
  • Where Codie sees the cannabis industry heading over the next few years
Read Full Transcript

Matthew: Hi. I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's C-A-N-N-A insider.com. Now, here's your program.

Many cannabis investors are deflated and depressed with the publicly-traded cannabis companies right now. But opportunities still abound for investors willing to look past the headlines. Here to tell us more is Codie Sanchez from Entourage Effect Capital. Codie, welcome back to CannaInsider.

Codie: Thanks, Matt. Thrilled to be here.

Matthew: Give us a sense of geography. Where are you in the world today?

Codie: I am in Washington DC, so the swamp itself.

Matthew: Okay. And your company has recently had a name change to Entourage Effect Capital. Can you tell us a little bit about that?

Codie: Yeah, absolutely. So, you know, we just went through a rebranding exercise, and for those of you that are, you know, very, very immersed in the cannabis sphere, you'll know that the name Cresco might sound familiar from another big guy out there. And so we changed it to Entourage Effect Capital. And as we were thinking about it, the reason why we did is because we have this very active role we take with our management teams. It's a reason why, you know, probably if you're an entrepreneur and you email me, might get annoyed because we say no to a million things and say yes to very few. But it's because we really can't do this aggressive value-add that we do to our portfolio companies if we say yes to everybody. And so in cannabis there there's a term called the honor effect, which essentially is used to describe sort of a method of endoccanabinoid regulation where all the compounds within the cannabis plant, or we're not sure that all but many of them work in concert to create a sum greater than any of its individual parts. And so that's why a lot of times people will say things like, "This product is full spectrum." So when we were thinking about investing in cannabis and how we do it, there's a word in venture capital called Keiretsu, it's a Japanese word, but it essentially means leveraging your ecosystem or your network to uplift the companies that you invest in. And we thought that's sort of modeled exactly what we wanna bring, this really aggressive backer behind you, not just monetarily so that were the most valuable names on our founders' cap tables.

Matthew: Okay. And you've been on the show before, but for new listeners, can you give a quick snapshot of your background and how you came into the industry?

Codie: Sure. I came from sort of the institutional investing worlds of the likes of Goldman Sachs and Vanguard and First Trust, State Street, if any of those big names ring a bell. And what was interesting is I started my business in one emerging market which was exchange trade fund business, so as that was really starting to come out and dominate how we invest in markets now. And then I moved to a few other emerging markets, including the last one being Latin America. I've always been in sort of these emerging industries and I see a lot, a lot, a lot of parallels with cannabis to that. But I did get into cannabis mostly because of two issues. I mean, you and I have talked about this a little bit before Matt, but I'm Hispanic and I graduated early to do my thesis at the time as an investigative journalist in some of just the absolutely violently-ravaged areas around Juarez and El Paso and Agua Prieta along the US- Mexico border. And, you know, you see things there that you can't really unsee. And at the base of all of it is they were really related to the illegal drug trade. And that started to convince me early on that we had to make some changes to the drug policy there in. And then years passed by and I started to understand the language of finance, and what really was the final trigger was my fiancé is an active duty special forces, military man we could say. And we do a lot with the veteran community, and saw firsthand really the effect of opioid cocktails and how they were destroying families and honestly, you know, killing our veterans. And so, you know, I kept having this question of, "How do we trust these veterans to go to war and die for us and we as Americans say that we have this strong backing for our veterans, but we don't trust them to decide as adults if they wanna use a plant that all the early research shows helps with PTSD symptoms isn't addictive, and oh by the way, has never caused a single overdose ever?" And so when I put those two things together, I put my first money in the space into actually Cresco Capital, which is what we were formally known as in 2014 with a friend of mine who's the founder in Texas, and it was pretty incredible to see the returns and impact sort of cement together with this generational wealth creation opportunity and an ability to have a little purpose with those profits. So that's kind of how I got into the industry.

Matthew: Interesting. Well, I definitely wanna be with you and your boyfriend when the zombie apocalypse descends upon us.

Codie: Yeah, you do. He's a bit of a prepper, so I think he'll be ready.

Matthew: Now, is there any contrarian ways to left to invest in the cannabis space? I know when I got into this space it was kind of still gritty and there's kind of like the guerilla investments and just like all these things that are in gray areas. Is there anything left in the contrarian department, ways to invest?

Codie: Well, I would say much more today than even, you know, three or four or five months ago. And a couple of different, you know, statistics. I know there's two ways to look at it. One is, first and foremost where we've seen most of the money flow into cannabis has been in public markets, right? We've seen a lot of money flow into the Canadian LPs, the Canadian companies. We've seen a lot of money flow into these sort of SPACs and RTOs on the public basis. But what you gotta remember is private companies outnumber public companies 80 to 1. So we have a heavy bias towards private. There's something like 30,000, 35,000 private businesses across just the U.S. which kind of tells you how nascent this industry still is, and there is going to be this continual progression towards consolidation and towards sub-sectors underneath consolidate into main players, which for us is good because our portfolio companies theoretically get acquired or make acquisitions. So the first contrarian way, I think, is a lot of people talk about it, but not very many people do it, is still investing on the private side. And second, which I think we're gonna talk about a little bit today more, is distressed. I mean, I think right now is probably one of the most interesting times I've seen since 2014 to invest in the cannabis space, which, you know, for people listening, maybe they're screaming at me right now because given the correction we've seen in the markets, that might be bizarre. You know, for those of you that don't know, the capital markets have had that serious downturn with, you know, anywhere from at the low end, 20% of reduction and valuations to 80%, 85%, 90% reduction evaluations on the largest, even publicly-traded cannabis companies. So, you know, you'd say, "Well, that doesn't seem great." But we think that this is actually a really positive thing. One, it actually makes companies go back to being rational. Two, it is always about the price that you can buy investments at. So there's a saying that investors use, which is, "Fortunes are made in the downturns and collected in the rallies." And so our belief is right now is one of the best times to invest in cannabis because for those people who have money and can do a creative M&A or tuck-ins, so buy companies and add them to what they're already doing, and double down in a distressed market, there's probably no better time to do it than right now.

Matthew: Yeah. So you mentioned distressed a little bit. I mean, valuations get more reasonable terms, get more reasonable. But what are you seeing out there in terms of, you know, distressed markets and how you're capitalizing on them and how you see other investors capitalize on them? And do you see startups, you know, making concessions that maybe you were asking for but weren't getting before?

Codie: Yeah, it's a great question. I mean, we've seen shares, you know, public company shares come to 52, 53-week all time lows. And so what that means for companies that are out there raising right now is that it's not a particularly fun time to be an entrepreneur raising. Now, my heart always goes out to entrepreneurs because I've been one, I've raised capital, I've sold a company before. It is a grind. So, you know, we are there for you and feel that portion of it. The opposite side of it is for companies that have real business models, that have actual revenue, that have reasonable expectations, this should be a good time for you. You're going to have to lower evaluations. I mean, there's sort of like four questions we ask our founders to ask themselves right now today, which is one, do you have 12 to 18 months of runway? Two, do you have a real handle sort of on your finances and cash management? Three, are you right now today profitable with the money that you have currently? If you aren't, can you get to profitability? And four, do you consider yourself a top performing company in whatever you're doing, your space is. And by top I mean top 15 to 25%. And if you answer yes to those four questions, you are sitting pretty to raise right now. If you didn't answer yes, it's time to go out, in my opinion, and think about raising, probably not at great valuations, but get in with investors where they will be able to help you get to the next level. And as an investor, what we're starting to see is, you know, listen, we don't want to take advantage of any companies ever. So what we would do is make investments where we say, "Your valuation right now is too high. It's not a substantiated by the market. It's not substantiated by a revenue. And there is no premium right now that you get for being a cannabis company from a valuation standpoint." However, what we will do is say, "Listen, you're gonna come down on the valuation and what we're gonna do is set some terms so that if you hit all of those revenue numbers that you say you're going to hit or all of those milestones, we'll give you an opportunity to claw back some percentage of the company."And so then it's a win-win because we can actually move forward with cash. But the message for entrepreneurs today needs to be, you've got to revise down your valuations because down rounds are coming, and you wanna be the one with cash on hand when the market is ripe for acquisitions.

Matthew: Okay. And what do you think? How do you think WeWork has played into market sentiment? Because, I feel like we had Lyft then Uber and now WeWork. And WeWork seems like there's been a mental transition in investors'r's mindset where it's like everything was about, you know, venture capital and growth, growth, growth, growth, growth, forget about profit, what is profit? It's so far back on the back burner that we don't even think about it. It's gotta be about this geometric growth. And then all of a sudden the terms of WeWork just seemed so agregious overnight and investors kind of flipped. Where do you think that has affected sentiment and is this kind of a phase transition or just kind of a blip on the radar?

Codie: Yeah. I mean, I think investors that listed on public exchanges a few years ago had a great time. They were able to raise a ton of money incredibly fast. But the problem that they made, or the decision that they met that I don't agree with was that they put out really high expectations. And so those expectations were not being met in the cannabis space. It's really not dissimilar from the same problems as you said that WeWork has had, or you could say Uber, Lyft, Slack, Peloton. I mean, we've seen it sort of across the board that there's a move away from a market share focus and towards earnings and cash flow. So there's two things happening there. One, I think that's, again, rational and reasonable. And two, that's why in cannabis, there's a unique differential. For WeWork, you have the SoftBanks of the world with, you know, hundreds of billions of dollars that can inflate these private company prices. In cannabis, you don't have any of those institutional investors able to invest. The largest cannabis funds are less than $300 million in assets. There's no lending, there's no leverage on the space for the most part. So the interesting part in cannabis is I think you want to be a private company now where you can be long-term thinking in your growth and execution, and as investor, you wanna be on the private side because capital is not a commodity in cannabis. So while we have the SoftBank throwing around way too much money on these companies making WeWork valuations crazy, in cannabis we don't have that issue. So entrepreneurs do have to be scrappier, but investors are compensated much more for every dollar they invest in this space, in my opinion,

Matthew: Are some investors cashing out or taking some chips off the table right now when they're seeing the opportunity to do that or what's your kind of feel about that?

Codie: Yeah. I mean,we certainly see it on the public side. And I think it's easy for market participants to really overthink the downturn. It has been, it has been painful seeing that the valuations sort of plummet like they have, and yet for me, it's really relatively simple. You take a product which is consumed by tens of millions of people if you have the black market and you convert the product to the legal channel. So if the base level is if that's what we're doing without any innovation, without any financing on top of it, without, you know, anything else besides that, this industry is going to grow sizeably. So the part that's fascinating to me and really useful for investors is there's a big arbitrage opportunity happening. On one end, you see public stock prices really sort of fall in, and on the other end, if you were to walk down Abbot Kinney let's say that, you know, famous street in Los Angeles and you were to walk, you know, let's say you sit on one of the sidewalk cafes there, and I was to say to you, "Hey, tell me, you know, look at all the people passing by and what do you notice? What do you notice about just what commonalities are there?" And you were to watch for two or three or four minutes. What you would quickly see is people have one of two things in their hands. They have a coffee, okay, that's pretty standard, or they have a MedMen bag. And you'd see these little red bags everywhere because the truth is that consumers have not stopped consuming just because public stocks have felt a downturn.

Matthew: Right. How do you think the vaping crisis has affected the industry, and will vaping make a comeback?

Codie: Yeah, I mean, you can't talk about it I think without saying that sort of a tragedy it is that this is even happening, and that it seems to be hurting, you know, our young people more than anybody else. But my opinion there is that is really, that sits squarely on the shoulders of federal legislation, because if we had guidelines on this industry and tracking and we did not allow the amount of black market stores to be out there, we wouldn't have this. That said, it is far from a deathblow. You know, don't get me wrong. We were very concerned initially about what was going to happen, and as we saw sort of gut reaction and overreactions by States like Massachusetts, you know, outlawing vapes. But we've seen across the industry 20% to 25% decline in vape sales on average while sales of cannabis-related products up overall. So consumer goes into the dispensary, they may not buy as many vapes it looks like, but they're replacing that with edibles or flower. And so, you know, the long-term growth rate of 20% that we see in 2019 and we think we'll continue throughout the few, you know, oncoming years hasn't changed. So we're actually revising our estimates up of what we think the total sales will be for consumer products in the U.S. in cannabis to 13 billion from 12.8 billion. And that's because we're seeing higher sales in California, Oregon, Massachusetts overall.

Matthew: Yeah. I wonder often how much bigger the legal California market would be if taxes were lowered further, because it seems like it's still thriving from all estimates, the black market is, just because it's so much cheaper. I mean, there's no regulation in the black market, so you could be getting pesticides and all these other things that you don't want and you don't know, you know, what conditions the plant was grown in. But, I mean, do you have any sense on how much bigger the California market would be if, you know, if there was no black market or it was reduced to 80% or 90%.

Codie: Yeah, I mean the estimates all say that 60% to 70% of the cannabis market in California is elicit or is black. And that's huge. To me, that's got to be underestimated it because how do you even report on that? I mean, I know that there are, you know, 3000 stores that are in California as illicit enterprises and only about 800 legal ones. We actually saw this last month that California licenses went down, they contracted a little bit, which is actually a good thing because for the first time ever, really since legalization happened the state is going after illegal enterprises and they're no longer re-issuing temporary licenses to those that didn't get up and running properly. So you're actually seeing a contraction which we think will be good for the market overall. If Weedmaps actually does take off all the illicit stores, I think there's a big bump towards the end of the year when that's supposed to finally go through. And so overall, it seems to me like we have a lot of room to grow in California. But, you know, we have to have legislators that allow us to do that. I mean, I know they kind of funnily in California, they said that we should have $1 billion in tax revenue from cannabis this year. Now, I don't know where they got that number. It sort of just seems like they liked the idea of having that many zeros, but when in essence they only were able to get about $280 million in revenue. And when they dug into the numbers, the reason why is because of the amount of illicit activity that still goes on in California. So I'm sure you saw that they just allowed for tax deductions in California, sort of maneuvering around 280E. And I think if they continue to allow that to happen, we'll not only see cheaper products for consumers, but we will see a lot more volume.

Matthew: Yeah. Now, we've talked about a lot of sobering issues here. What makes you most optimistic about the future of the industry?

Codie: Yeah. I mean, I think first and foremost you've always gotta look to the consumer. You know, right now in the global economy, everybody is talking about all the varying data points and what could happen with a slowing global economy. And, you know, we have, you know, sort of 2% growth in the U.S. which is very low. We have the industries overall sort of stalling, maybe going up slightly towards the end of the year, a lot of contracting industries. Literally, the only industry in the U.S. is growing with double digit growth is cannabis. So, you know, that U.S. shoppers spent $9.8 billion on legal cannabis retail last year. So if we think about that going forward, the consumer is always the most important part for economic growth and for industry growth. So that's what I look to first. Not to mention, we're starting to see more and more legalization happening. I think we'll get more allowances around tax and safe banking, potentially even the States Act. And I do really think we're going to start seeing more of these black market clients convert as the prices come down and maybe even with some of the negative press surrounding vaping. So, I mean, I'm obviously biased, I'm in cannabis. But I think when we're starting to talk to investors, you're seeing for the first time institutions are getting interested because they don't see the crazy exuberance we saw in the market previously, and they're looking at these same growth numbers. And history doesn't always repeat, but it rhymes and it tells us that this leads to investment returns.

Matthew: Okay. Is there any recent investments you made that you're excited about? I mean, I know it's hard to kind of highlight one or two because they're, you know, obviously you invested in them all for a reason. But is there one or two that you think has a particularly good story you'd like to talk about?

Codie: Sure. I mean, I, you know, I don't wanna call any of my babies ugly. And so we support all of the portfolio companies. We have about 43 now, but I'll just talk about some of the recent investments we made so that way I won't be picking favorites. Let's see. Well, you know, let's, we're talking about California. So let's talk about some California companies. There's one in particular called Cann, which is C-A-N-N, and the website is drinkcann. This one I think's fascinating. It's run by two guys who are former Stanford grads, Bain consultants, and it is a little bit like a white claw if you could imagine, but with THC in it. So, a spiked seltzer with THC but be beautifully designed, like the ingredients are all, you know, whole foods quality. You absolutely cannot taste anything to do with cannabis in it whatsoever, and it's microdosed. And so it's, you know, 2.5 milligrams. And the idea is that we replicate this social aspect of drinking. So you can have two or three or four of these little cans and taste delicious. You might wanna sip on them just like you would, you know, any sort of seltzer water during the day. But it turns out that they have cannabis and them and the brand is just killer. You'll have to check out the website. The guys are super creative.

Matthew: That sounds good.

Codie: Yeah, so that's one. And then the other one I'll highlight that I think we're gonna fit a lot, or maybe I'll highlight due to be equal opportunity, but Urban Leaf and NorCal. NorCal's the big guy, they've been around for awhile. Their management team is killer. They're a dispensary and branded product display in California and the North, and then in the South and they're kind of starting to meet in the middle is Urban Leaf, and I just love their model of cannabis consumption buses. So they ship people in from old folks homes, from the beach in these branded buses to their dispensaries. And because of that, they have the highest, one of the highest grossing dispensaries in the country. So they're just retail machines. Yeah. If you're ever in Pacific Beach or Ocean Beach or Mission Beach, you'll see these big, huge black sort of party bus looking things and they're just waiting there to shuttle tourists back and forth. So I love seeing that innovation in the space.

Matthew: How about for startup founders that are listening? What can they do to make sure that their pitch really resonates with you as an investor or other investors?

Codie: Sure. Well, let's talk about it in a little lens of this market in particular. And, you know, I've written a decent amount on this. So if you go on LinkedIn and check out any of the articles I've written, I try to make it easier on entrepreneurs to fundraise. It's never fun. I don't think any entrepreneur I talk to ever says they're having the best time ever getting told no constantly. But, you know, one thing I do kind of say to them as I joke that only your mom really wants to fund your dreams, that investors want to fund your future revenue. And so the real focus that I see missing in the cannabis space is a focus on the financial aspect, really, understanding what is it going to take from a cash perspective to get to your growth and projection goals. How are you managing to that? Do you have a strong understanding of what happens if some of those licenses or regulations change and your revenue gets cut in half ,by 50%? Are you prepared for that? And are you being really realistic on the margins and the unit economics and the cost that you're gonna have to acquire customers? And so, you know, you can have a great idea in cannabis, but if you really don't know how to back it up numerically, I think you get in trouble in this market more than ever. So make sure that you're leading with like very detailed financials, very detailed projections and how you got to those assumptions. And remember that, you know, you cannabis is typically the decks I see are less about you creating the next Facebook, you know, YouTube, Instagram, whatever, Space X, and really you're taking a business plan and saying that you have some unique spin on it, but you're not really recreating the wheel. And so focus a little bit less on the dream and a little bit more on your revenue potential and why this is a unique opportunity.

Matthew: Okay. And what do you think is one thing that's gonna surprise people about the cannabis industry in the next year that they're not ready for?

Codie: Well, I'm actually pretty optimistic on regulatory changes, not just in regards to legalization. This surprised the heck out of me. But, you know, Gavin Newsom, who's the governor of California, just passed eight laws in Canada, I'm sorry, in California that were all pretty positive for cannabis industry overall, lessening a lot of regulation. Let me tell you one thing about California. They very seldom lessen regulation.

Matthew: Right, right.

Codie: So yeah. I mean, so a perfect example is they've eased the burden of product testing somewhat. And so they basically allow companies to retest products to correct for small errors or discrepancies rather than destroying tested products. So you've seen some, you know, there's been some news articles about companies in Canada having to throw away tens of millions of dollars of product because of either the way that it was grown or it didn't meet their specs. And so California is kind of addressing that small issue. They're starting to address 280E on a state by state basis. And so what I actually think we're seeing is states finally stepping up to the power that they have internally to help create really vibrant cannabis industries. And it's not all of them, but I mean Maryland's now allowing edibles, Massachusetts is potentially going to roll back their vape ban, Chicago, many more sort of municipalities and counties within Illinois have agreed to have cannabis, you know, some portion of the cannabis value chain represented in their counties. And I don't think I was positive on this happening. And with this legalization push, what you're essentially doing is just adding automatic sales to an industry where nothing else has to happen, but these regulations decrease and these companies gain profitability.

Matthew: That's interesting. Codie, I'd like to transition to some personal development questions to help listeners get a better sense of who you are. With that, what do you think is the most interesting thing going on in your field besides what you're doing? So if you had to do something else besides investing but stay in the cannabis industry, what do you think you'd focus your time on?

Codie: Yeah. I mean there's a couple of areas we are looking at pretty aggressively that I'd love to fund somebody. And so, you know, for one, when you look at some of the most valuable portions of other industries, it's not always necessarily the, let's call it plant touching or the retail branded products or the dispensaries or retail. For instance, in alcohol, one of the most valuable portions of it is the distribution of alcohol. And in cannabis, we don't really have strong distribution roll-ups. So I think there's something really interesting about who could do that well. Same thing with delivery. We see a lot of problems with the people who are doing the delivery right now. Could that be done better and more intelligently? In tandem with that, the biotechnology that we're seeing in this space is fascinating. I think it's a either a zero or a 10 X, but more maybe a 100X. But if we start to get biosynthesis creating THC and CBD as have, a lot of guests you've had on the show talk about, I think that we have a completely three standard deviation event that changes the industry a lot. So we invest in things like that as a hedge to make sure that we have a balanced portfolio, which is why, you know, I don't like to ever invest in just one company. So I think I would be doing some variation of those, not to mention something in Europe, because Europe is definitely about three to five years behind the US and I think also ripe for investment.

Matthew: Now, Codie, you're one of the few guests I have on the show that travels more than me and you go to a lot of interesting places. So if there was for some reason you couldn't go back to all the places you love again, which place would it bother you the most? Which city would have bothered the most that you couldn't return to?

Codie: Well, I have two, Matt, because I just, I do love to travel, but there's this place that I'm even hesitant to say. If you weren't from California, you won't know it, but it's called Sunset Cliffs in California. And it's right by Ocean Beach. It's tucked away on the other side of Point Loma across the Bay from downtown San Diego, and it is the weirdest little hippie community right on the beach. And I think it's a little bit of a throwback of what it must've been like in some of these coastal communities in California for decades. So that's one where I'd be sad if I could never go back there because I'd like to, we have a place there, so I wanna keep that place forever. But then for maybe more exotic climbs, there's a place in Brazil called [inaudible 00:31:20], and it's about an hour up the coast from Rio. And it looks like if you were to take sort of maybe New Orleans, like that French colonialism architecture and plop it down in the middle of the Amazon alongside a Bay with tiny islands that kind of look like they're from maybe the Philippines or Thailand. And if you were to put that all together, that's [inaudible 00:31:43]. And so I spent some time there and it's just one of those places where you could forget the rest of the world existed.

Matthew: Oh wow. Great answers. I hadn't heard either of those before. So, well done. Codie, what kind of investor is a good fit for your fund?

Codie: Sure. Well, you know, the thing about the private market is we have to have accredited and qualified investors. So there are sort of minimum requirements you have to have. But in tandem with that, I really think what I've found for our type of investors are these are investors that are curious about the space overall. We do have some investors that are really passive, but a lot of our investors are family offices, trusts, holding corps that really want to figure out how to make their mark in the space too, and we do kind of a unique, I think, job of educating and keeping our investors updated on the space. We offer co-invests where they get to sit down and speak individually with a lot of our portfolio companies because our belief here is that these companies that, you know, maybe can't go and own their own company right now but could privately invest in them, they'll be the future acquirers. And so our investors are typically those that wanna do more in the space than just singularly invest.

Matthew: And what kind of entrepreneurs or established businesses do you wanna hear from that's a good fit for your investing style?

Codie: Well, first and foremost for entrepreneurs, what I really wanna see increasingly is an ability to execute on the set plan and transparency in everything that you're doing. And this market, it really shakes out who the good entrepreneurs are and who the not so good entrepreneurs are. And the really great entrepreneurs are the ones that we have constant communication with because they're, everybody's always going through challenges in your business. I mean, you have to be kind of a sociopath to wanna be an entrepreneur because it is so hard building a business, and only in this day and age do we actually think it's a sexy thing when in fact it is, you know, a little bit of a masochist that you have to have inside you. And so one, we want an entrepreneur that has that relentless dedication to execution and then it's also super transparent about what is not working, because we can often help absolutely change the trajectory of a business when we get the heads up early enough about what's going on inside of it. It's largely why we required board seats and all of that. So there's that. The second aspect would be we are looking for businesses that fall into a few different verticals. One, we're largely not doing cultivation unless there is a moat around the business or industry, such as we might do a cultivation license in Germany because there's a very limited number of them and they have a unique path to market for instance. But we probably wouldn't just do one broadly. I am very interested in companies in the lab space, in companies in the beverage space, like the one we just invested in. And I'm really interested in distressed companies right now. So, you know, increasingly we're looking to add companies into our portfolios and we're looking to do that at valuations that are attractive. And so if somebody out there is having a company where everything's not going perfect and that scares them from going to get investments, that shouldn't be the case. We can come in and help a lot of times and we can do a lot of things with turnarounds and tuck-ins to our portfolio companies that really can make something that's not doing great by itself, really powerful when paired with another company with strong operators.

Matthew: Codie, as we close, can you let listeners know how to find Entourage Effect Capital as well as, you know, startups, investors and where to find you also on social media, just all the ways that people can get in touch with you?

Codie: Yeah, isn't the internet fun these days? We're just about everywhere. I mean, entourageeffectcapital.com is our website. I would say I'm most active on LinkedIn and Instagram, probably the company as well. So I am at Codie Sanchez, C-O-D-I-E is first name on both of those. And if you are an investor that wants to invest in the fund, feel free to reach out on any of those platforms, same with entrepreneurs. And if you are an entrepreneur, keep a thoughtful eye on sharing your actual financials and how big of a company you are, etc when you send. That will get you quicker up the chain.

Matthew: Great. Well Codie, thanks so much for coming on the show and educating us. Again, we really appreciate it and good luck to you in e verything you're doing.

Codie: Thanks Matt. Love the show. Thanks for having me.

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