Traditional Investors Are Planting Their Flags In Cannabis – with Codie Sanchez of Cresco Capital Partners

codie sanchez cresco capital partners

Pioneer investors with more traditional backgrounds in finance are beginning to plant their flags firmly and confidently in the cannabis space, and here to tell us about this is Codie Sanchez.

Codie is a managing partner at Cresco Capital Partners, a private equity fund in the legalized cannabis space. She previously lead First Trust’s Latin America Investment business and held positions at Goldman Sachs, State Street, and Vanguard.

In this episode, Codie shares her insights on the future of cannabis and some invaluable advice for traditional investors looking to enter the industry.

Learn more at

Key Takeaways:

  • Codie’s background in the cannabis space and her best investments to date
  • Why Codie believes there’s more opportunity than risk in cannabis investment
  • How investors, entrepreneurs, and funds can overcome the stigma surrounding cannabis and get their audiences on board
  • Codie’s advice to investors on how to go about navigating the difficulties that come with pioneering an industry like cannabis
  • The ratio of over-valued, fairly-valued, and undervalued deals Codie is witnessing in cannabis right now
  • The most noteworthy acquisitions and investments in cannabis over the last 12 months
  • Codie’s advice to entrepreneurs trying to raise capital and the do’s and don’ts for pitching decks
  • Where Codie sees cannabis going over the next 3-5 years and the opportunities that excite her the most


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 That's Now, here's your program. Pioneer investors with more traditional backgrounds in finance are beginning to plant their flags firmly and confidently in the cannabis space. Here to tell us about bringing traditional investors into cannabis is Codie Sanchez. Codie, welcome to "CannaInsider."

Codie: Matt, thank you so much for having me.

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

Codie: I am actually in sunny San Diego. California isn't where I typically am, I'm out of Washington, D.C. but today I will not complain.

Matthew: Oh good, good. And I'm in Dallas.

Codie: Nice.

Matthew: Codie, can you give us a summary of what you do?

Codie: Absolutely. So I recently came on as a partner at a private equity fund focusing in the cannabis space called Cresco Capital Partners. And so, you know, we exclusively sort of focus on cannabis investing, your world. And I came on board to really help us institutionalize. We'll be raising our third fund, which will be a very large one. And I think we all sort of believe we're at the tipping point for institutional investors to begin really investing in this space. So that's what I spend most of my time on now, Matt.

Matthew: Okay. Could you share a little bit about your background and journey and how you got started in investing and in particular the cannabis space, what prompted that?

Codie: Sure. You know, I can't say that it was absolutely outlined. I think like many in this space, I was very traditional prior. You know, I went from the Jesuit School of Georgetown to traditional investing on the street with firms like Goldman and State Street and Vanguard and the venture investing with a firm called Magma. And I never really imagined I would have been sort of championing the cannabis industry, to tell you the truth. And so, you know, I'll tell you something though. I started out my career as an investigative journalist, which means, you know, I was working on the U.S. Mexico border writing stories about drug trafficking and human trafficking. And it really taught me to sort of never take anything at face value, right? And so I guess that's maybe why I've had some success in investing because you'd have to question everything and find the root and you can't let others' stigma or assumptions stop you from finding it.

So when I started diving into cannabis originally, because Matt, one of the partners asked me to invest in his fund, I was amazed at what I found under the hood of all of this stigma in general, misinformation. And so I, you know, started digging deeper and invested in a slew of companies and do what I do every time I wanna go deep into an industry, which is go where the game is played, go to all of the conferences, events I could, and I saw this big dislocation happening in the market and what I think might be one of the biggest generational wealth events, you know, and perhaps societal change events in our lifetimes. And so I sort of gave up the more traditional route and said, I want to double down on cannabis in a very strategic and thoughtful way. So the whole experience was traditional Wall Street, you know. Before that was investigative journalism and now it's sort of I suppose, a mixture of asking those right questions and applying it to an investment thesis.

Matthew: Yeah. That little bit of an edge, like, if you're just a little bit scared, should I be doing this, that's my sign that I should be

Codie: Exactly. Well, that's good. I think we all believe that, but then we don't do it, right? And so, you know, after finally talking to all my mentors at Goldman and KKR and Carlisle, who thought I was crazy at first, you know, now a lot of them want to invest with us. And so it does seem that if you face that fear and the few people are naysayers, that's probably still a good thing. You know, if everybody was in on cannabis, we might be a little bit late to the game.

Matthew: Yeah. And can you talk a little bit about your investments to date in the cannabis space?

Codie: Sure. So there's a slew, this one's hard because there's so many that I'm really interested in, and don't get me wrong. There's plenty of companies that I think are absolutely just riding the wave of cannabis growth. But, you know, I think you could start with some of the exits that we've had in this space. That's what originally got me excited about cannabis private equity is I have never seen so many exits realized and unrealized so quickly in a fund before. And so, you know, in Cresco we've had seven exits thus far in two funds. Yeah, pretty wild. And you know, and that's in two and a half years. And so I would highlight, you know, Ebbu was one, it was a research company with sort of a focus on lots of different patents. They sold this to Canopy Growth for, I don't know, 160 million or something like that.

And then we were early investors in Acreage and GTI. And so, you know, they've done great. Kevin Murphy has really led from the front there. Some of the ones I'm excited about coming down the line are gonna be ones I think everybody in this world knows like Harborside, we invested early in them. And so I'm excited to see them go through their public listing, which seems like it's gonna be soon. And then a couple of them that are fun and maybe not as well known are Prohbtd, which is P-R-O-H-B-T-D. So kind of just take out all the vowels and they're media and content company. I think they're worth a follow on Instagram and YouTube to kind of see how pop culture and cannabis are colliding and to see how brands are being integrated into content in a way that users are not only engaging with the content but they're actually buying from them.

And maybe one of the last ones I'm pretty excited about is some good friends of mine started a company called Westleaf in Canada. And so we invested in them. I like this idea they're doing of, you know, experiential, sort of cafes and record stores. They're going to be building those across Canada, very high end. And then the last one was the first company I ever invested in in cannabis and not to make money. And, you know, I'm no saint, we certainly all are in this game to make sure that we're having, you know, purposeful profits. But it was called Texas for Veterans and this one is essentially working with a group in Texas to talk to the legislature in order to get reach and access and research for cannabis for veterans with PTSD. And so, you know, if that one goes through and we actually are able to get the legislature to allow for some licenses in Texas, that would be probably the one I'd be most proud of.

Matthew: Wow. Definitely. That's cool. And what about stigma here? I wanna circle around to that again. So the stigma, I still find it the more you move east in the United States, it seems like it's still there, but it's going away quickly. But, you know, how do you deal with the reticence there and do you have any examples of where you kind of maybe got someone to see the light that was kind of not a hardcore no, but kind of on the fence or what is it that kind of turns the light bulb on for somebody that's not sure or is a little too conservative? I'm curious myself because I employ different strategies to try to get people to look at it a different way. But it is really ingrained in there. And I think when your job security is on the line too, we're saying, like, you know, I'm not gonna invest in this because it might affect my standing, my community or with my peers. How do you lead people through that or do you even try?

Codie: Absolutely. Well, you know, I think there's two things. If it's about capital raising, so bringing in money, I'm a big believer of go find the people that are predisposed to already want what you're selling. So if I was talking to people who were representing our fund from a capital raising perspective, or for the people listening who are companies who wanna raise capital, don't go try to educate people. You know, there's 300 plus million people in the United States and there are many of them. They say 60% that are pro cannabis. So go find the people that are already wanting what you're selling. But I think from a sort of moral imperative, yes, you have to educate people on this asset class and on this industry overall. And I think you're right. I mean, I even think reticence is maybe too small a word.

And I underestimated this when I first bought in. You know, I grew up on the west coast and, you know, it's definitely more common out there. I certainly had some stigma and some stereotypes regarding, you know, maybe stoners and, you know, work ethic and all the typical things. And so I don't discount that at all. And, you know, how are we, how do we expect it to change ideas held since the 1970s or you could say since 1937 in an instant, right? But what I've found is the best investors have always been contrarians. You know, like Jobs said, they're the ones who think differently because if you're investing and you follow the herd, there's always a cliff at the end of the road. So I think one of the best ways that I've found to educate people on this is to say, you know, I want you to think about this from a contrarian perspective.

I want you to remove all of the assumptions and I want you to remove all of the stigma that you've heard about this plant and pretend you've never heard of cannabis or marijuana before. And then they'll kind of like, if they're curious humans, they'll get a little bit of philosophical on it, right? And I'll say, okay. So imagine I know nothing about cannabis. And I'll say, and then imagine all you know about it are the numbers that I'm gonna tell you because in my opinion, I'm an investor and nothing opens eyes like math. Math always wins. It's really hard to fight, you know, emotionally against math. And so if you talk about the numbers, then you know, it's very different. There are 147 million people give or take using medicinal marijuana in the US. You know, they're using it for AIDs, multiple sclerosis, cancer, right, Parkinson's.

And then if they say, ''Well, you know, what about addictive nature?'' You know, I think it's fascinating that we can actually see opioid mortality rates are continuing to climb in the non-legal states in the US. So where cannabis isn't legal. However, in the legal states we're seeing a decline in the rate of opioid mortality deaths. That's pretty amazing. And so I just go back to the numbers again and again. And you know, usually I go first to the heart, so medicinal and opioid. And then I go to the pocket book, which is, you know, let's talk about the, I don't know, $1.6, $1.8 billion in tax revenues that we've had since 2014, with 50 some odd percent of that going to K-12 education. And so once you get to the numbers, it's like, huh, well, let's at least have an opportunity to have a conversation and open a little bit the mind to the fact that maybe cannabis is not this, you know, reefer madness, 1960s, '70s idea.

Matthew: Yeah. Now, there's a famous quote that you can always tell the pioneers because they have arrows in their back. If you were talked about some of the exits so far, and that's been really good news, but if you were to get an arrow in your back, or you were to see other investors getting an arrow in their back, where do you think it would come from, which direction?

Codie: Yeah. You know, I think where investors most fear risk or an arrow in their back would be regulation. The number one reason why people won't invest in this space is we're scared of the government, we're scared of government overreach, we're scared of the legal ramifications period. And that is usually enough to stop a lot of investors. The ones that, you know, can speak to their attorney and talk about it a little bit further and get past it, the thing that I think is more likely to hurt them than regulation or government overreach again, you know, the government doesn't really like to bring in $1.6 billion in taxes and get reelected because of all the schools they've been building and then give it all away. So that doesn't seem hugely likely to me. But I think the way that most people are going to get hurt is picking the wrong companies.

And this is where, you know, talk about quotes, history doesn't repeat, but it doesn't always repeat, but it rhymes and there's really nothing that different in this industry than any other one in that you have to be incredibly strategic and do incredible amounts of due diligence on every single company in here. And so, you know, I actually worry about all my fellow Wall Street, you know, Goldman Sachsers who are sitting on 50th floor penthouses investing in cannabis because I think you have to get down into the soil where it grows, right? You have to know where the bodies are buried and you have to really not have your finger on the pulse, but your feet firmly planted upon it in this industry because it is moving so fast. And because there are so many regulations changing that I think where you get into trouble is picking the wrong companies and thinking that because there was a way of early that that wave will always continue and that fundamentals don't matter.

Matthew: Yeah. And then I would imagine being, having some level of diversification because, you know, a bunch of them are gonna fail.

Codie: Absolutely. Well, and that's why I get really nervous about, you know, investors investing individually in cannabis companies as their main exposure to the space. You know, typically...and obviously I'm biased. I represent a private equity fund in the space. However, when I was an outsider doing what a lot of people are doing today, the first move I did was invest with a fund. And it's what I do in every single space. The first time I was in Latin America, I invested in a fund. The first time I did credit, I invested in the fund. Then I leveraged that portfolio manager's expertise, I got exposure to all the companies in the portfolio and I learned by an expert that had already done the 10,000 hours, instead of having to do the 10,000 hours myself and losing the couple of hundreds of thousands of dollars that people typically do when they're first-time investors in venture companies. It's, you know, it's really hard to get's really easy to get into these deals and then it's really hard to get your money out of them. So you've got to have, in my opinion, got to have a team that has been there and done that previously first.

Matthew: How do you see valuations in the cannabis space right now?

Codie: Yeah. I think that's a question probably I get asked the most after, you know, how it works from a legal standpoint. So, you know, we've looked at something like 1,600 deals, let's say, give or take. And we've invested in less than, I don't know, 1.6% of the deals. So we see a lot of deals and we don't invest in very many of them. Some of the trends that I see in valuation are that, yeah, a lot of the Canadian deals have seemed pretty high from a valuation standpoint, right? Okay. And that's because they're legal. They're a little bit more de-risked than the US market. But the biggest thing that I see in valuation that's interesting is the dislocation or the arbitrage between private companies and public companies. For example, you know, when we're invested in a company, we might be looking at anywhere from three to five times forward earnings or trailing 12, depending on how we're structuring the deal.

And if you apply that to the public markets, those same numbers may be 50 or 100 times. So you essentially have this amazing premium for investing privately that you don't get when you go out and invest in the public markets. And that's because there's a lot of appetite and pent up demand for cannabis. And so cannabis stocks are the easiest way to get into it. But in my opinion, probably the best way to get into them is on the private side. Not everybody can do it. That's one of the barriers to entry, but I've just seen the valuation differential is huge. Besides that, I mean if you look at cannabis companies' valuations versus let's say the broad-based venture, either early stage or even, you know, late stage companies in tech, I actually think cannabis looks a lot more interesting. It just hasn't seen the amount of capital come into the space that we're seeing with the, you know, SoftBank's are raising, you know, $100 billion funds and literally have so much money that capital has become a commodity, meaning it's too easy to have money. And so they're giving it pretty liberally to a lot of deals where cannabis has the exact opposite effect, we're capital starved, right? So for me, I think cannabis valuations on the right deal look really reasonable and if they're not, we can usually negotiate that and given the size of our fund.

Matthew: Yeah, I was gonna ask you about that, but first just off the top of your head, we won't hold you to it, if you were to categorize the deals you look at into three buckets, overvalued, fairly valued and then undervalued, how would you sort those out? What are the percentage breakdowns would you imagine?

Codie: Well, you know, this one's interesting because the reason why we don't invest in companies is typically not the valuation to be perfectly frank. The reason why we typically don't invest in companies is because, you know, the thesis isn't very good, or the team isn't very good, the idea is half-baked. It's, you know, pre-revenue and we're not even looking at the value because they don't have the rest of the deal. So if I get rid of all of those and say, let's say of the actually a couple hundred deals we look at that we're relatively serious, I would say probably 60% of them are fairly-valued to undervalued and 40% are overvalued. But that's also because we're screening kind of a lot of the negative ones away. So you know, if you're an individual investor, accredited investor listening to this, you know, I think the process is like first, you know, talk about the team because that is the most important thing in any business, and then it's look at the thesis and then it's look at their projections. And then finally, after you're incredibly solid on those three, then you start looking at the evaluation and see if it seems reasonable. That's often pretty negotiable.

Matthew: Can you talk about how you can change the valuation and what that conversation is like?

Codie: As an investor, how can I get them to change the valuation?

Matthew: Yeah.

Codie: Yeah. Well, you know, again, this is a capital-starved industry for the most part. So usually on these deals when they're earlier stage, capital is an issue. They need more capital. And we're oftentimes the lead or co-lead on the fund, or on the deal, I would say something like 60% of the time, we're either leading the deal or co-leading it, which means we get to set the terms. And so what we're looking to do here is make sure they don't set evaluation that's too high, that they won't be able to get more capital for at later rounds. And look at the industry on average and see what do we actually think this company is, you know, worth. And typically it's really pretty easy to do because if we're this far off in the beginning and, say I look at the company and I say like, "You guys are worth three times your trailing 12 from a revenue perspective," or maybe I'm looking at it an EBITDA perspective, whatever number is right for the sub sector that we're in. And they say, "No, no, no, we're 10 to 12" and they fight me on that quite a bit, then we're probably not the right fit for them because the last thing we wanna do is have the investor be unhappy in the deal. So we might just say, "You know what, like, I hope you're worth 10 to 12, that's awesome. I hope I'm wrong, you know, come back to me if, you know, you end up having more difficult time raising. But we're more in the three to five times range." And it's pretty much like that. And if we're too far off, then we're probably not the right mix anyway.

Matthew: Yeah, that's a good way of doing it. You don't wanna make any enemies at the same time, you don't want to resentments and things like that. So that's smart.

Codie: Yeah. And typically, like, you know, our investor, our companies that we invest in, we're very, very actively-involved and that's sort of the value that I think we try to bring to the table. And so there's a trust factor. There are a lot of these guys have never raised a ton of money before so they're sort of trusting us to make sure that we're helping them set the right valuation. And there is a lot of mutual alignment that we are setting it the right way because you want to make sure the founders are incentivized to continue grinding. And if you set the valuation too low and they don't get enough equity out of it in the long term, you hurt yourself as a venture capital fund. So I actually think there's a lot of alignment there.

Matthew: Yeah, there's a lot of levers and things to consider there. Good point.

Codie: Yeah, absolutely true.

Matthew: Okay. So we're starting to see some big players from different industries step in and make acquisitions. Are there any acquisitions or mergers that you've seen in the last 12 months that were particularly meaningful?

Codie: Sure. You know, at first I, of course wanna say all the big guys, right? I think it's astounding that we've seen billions of dollars plowed in by some of the largest beverage and, you know, tobacco companies out there, like Constellation Brands. I also really thought the deal with Sandoz and Tilray was interesting in Canada since Health Pharma companies are gonna play in this space. It's not necessarily an acquisition but, you know, distribution agreement. But you know what actually amazes me is I was reading the other day, Matt, a UBS cannabis industry report, which is also fascinating that all of the firms on the street now have a very boring, very long, very traditional report on cannabis and they...

Matthew: I would imagine it'd be boring. UBS writing about cannabis.

Codie: I know. I know, but you know, you can tell they're just trying to figure out a way in the door. And they had listed 60 notable M&A events since, I believe it was the beginning of December, 2018. So to me it wasn't actually even what are the big huge acquisitions, it was let's look at the scale. It's not just a few dominant names buying in. It's a ground swell of cannabis M&A activity. And it's pretty pervasive. And these aren't deals where companies are making acquisitions and M&A without cashflow, and these are just ideas and there's, you know, no pent up demand. These are real businesses getting bought out and restructured and creating leverage. So I was amazed at that number.

Matthew: Yeah. And what do you think about a profit margin squeeze here? It's something I think about, particularly if a company is touching the plant, but not so much if they're in a market where the licenses are difficult to get. But I do think about it and then I'm like, are we just in the golden era right now where that doesn't matter so much for the next few years? What do you think about the profit margin picture?

Codie: Yeah, that's a great question and something we think about a lot. I was actually talking with Matt Hopkins who he founded Cresco. And so he's the one who brought me into the space. And it's one of the reasons why we're biased towards, you know, let's say vertically-integrated brands for example. Profit margin squeeze is just a reality. It's an inevitability in my mind that the price will come down for flower and it already has. And in fact, that's kind of a good thing, right? It's democratization of the flower, which allows for more access for all. So I think what we see is absolutely the price is going to come down and so there's going to be a margin squeeze. However, what we haven't seen yet in cannabis that we see in all other industries is a real premiumization right?

We haven't seen brands emerge that will be price elastic where users don't really care about the cost. They want the experience, they want the brand, you know, it's why you buy, so you pay so much more for one type of wine, then another type of vodka or for this type of name brand medicine versus another one, right?

Matthew: Right. The Tiffany box.

Codie: Exactly. And so...yes, which is a great example. Yeah. So I think I'm comfortable with the price coming down because we wanna be with the premium brands and then also we wanna use the different type of product variance. So, for example, if we say that flowers lost, let's say like, I don't know, maybe 10% of dollar share while vape pens have gained maybe 14 points over the comparable time on average across states, and it varies widely, the average selling price for vape pens is $37. And the average price for flowers, 26. So even while we see a decrease in, you know, the percent that flower is sold and in the margins there, we're actually seeing an increase in the more expensive product that has better margins. So I think there's a lot of ways to play this game, but it's again, why you better have your finger on the pulse because this is happening so fast and I'm not sure the trends that are happening today will be the trends that continue over the next year or two.

Matthew: Yeah, agreed. And what about pitch decks? I'm sure you look at a lot of pitch decks and there's entrepreneurs out there who are listening, but also other investors. When you look at a pitch deck, what's the kind of lens you're using and is there anything you say, oh my gosh, they forgot this or this was really helpful that they included it?

Codie: That's great. Well, yeah, I'm sure you've seen a ton of pitch decks in your day, especially in this space. But yeah, I mean, I think if I have to look at it broadly, the single biggest mistake I think investors...or I'm sorry, I think people seeking investment make is they pitch investors only once. So you get your pitch deck, you hear about everybody going up to Sand Hill Road, or in this case maybe they're talking to all the cannabis PE funds and they do 100 pitches and everybody says no. And finally they get that one that does, right? But when it comes to somebody giving you money, it's a purely trust play. And the biggest trust factor is that, you know, most businesses don't fail. Founders give up.

And so if I was a company looking for funding, I would stay in front of those that you want as investors and slowly and continuously drip on them with your results. So even if your pitch deck is pretty bad in the beginning, let's say, I would ask for feedback on it, I would ask if you could continue to stay in touch as you develop your thesis. Any, you know, investor worth their salt is gonna say that's fine. And then I would keep asking for feedback continuously. I think that is the single biggest way in which most people get big checks signed. And then the other idea I think is, you know, have an understanding of your numbers. What I see a lot of time by founders are big ideas and not a lot of particulars in how they're gonna get there. I want to know that those founders know their unit economics down to the penny. What are your costs of goods sold? How did you get to those numbers? How could those numbers change? What are your predicted sales targets? Why? You know, what are the things that have to happen in order to make that happen? What are your costs going to be overall? How are you going to eventually pay yourself a salary? What's your runway? I wanna know all of those numerical and dollar-oriented items in a pitch deck. And typically pitch decks are heavy on visuals, heavy on creative and ideas and light on numbers.

Matthew: Yeah, great points. Great points. And can you explain what a down round is and what the best way to handle that situation is? I mean, this is not something that's very fun to talk about because usually it's kind of a situation that people aren't excited about, but it happens. Can you just kind of walk through that?

Codie: Yeah, absolutely. So a down round is essentially, it really means that the company probably priced their last round of fundraising too high or I guess, you know, something could happen pretty catastrophically in business that necessitates the round being less. But essentially just means that if a company raised, you know, I don't know, x dollars at $1 million valuation, they need to go out and raise their next x dollars. But the street and investors don't value their company at $1 million anymore. They value it at $500,000. And so this has a really negative connotation in venture because it's usually investors have an anti dilution provision, which means that the investors will gain more of the company at the same price as that new round of investors. And that essentially means the founders get less money.

This can be negotiated, but it typically makes future rounds more difficult to raise because there's a feeling that something's wrong in the business. Either the founders aren't very good at determining the cost or the value of their business or their business had some sort of negative impact and so they had to go backwards. And in companies where we like to see hockey stick-shaped growth, going backwards is not great for future fundraisers.

Matthew: Right. So they're kind of saying, I have to put more money in to eventually get this money out or do I cut [inaudible 00:30:05] here and runaway. But I got to leave some money for the founders in here so they're incentivized. So, there's a lot of chess going on here. I think that's, you know, that's where the opportunity is where it's opaque like this. So it's fun to hear you walk through that and hear the thought process. Okay. So what about a business that is already generating, say seven or eight figures in revenue? And I'm thinking of some right now in my mind, but they're not a purely speculative startup. They're more mature. They don't necessarily need the money, but they say, hey, if I can get it with the right terms, I can expand, I can do more, but I just don't wanna get's not worth it to me to get the wrong terms. But at the same time, investors are saying like, "Well, I want some higher returns." So I mean you're looking for the right investor, but how would you counsel somebody in that situation, a startup that is doing pretty well already, but they don't wanna give away the farm?

Codie: Yeah, absolutely. Well, we actually typically invest a little bit later stage. So seven or eight figures in revenue is about right for us. We've done some real seed stage more back in the day, but we've kind of matured with the market. So this is sort of in our wheelhouse. And what I would say is a couple fold. One in my opinion, you always wanna raise when the money is easiest to raise. And so I really am a firm believer in right now in cannabis we're at an incredible period to go out and raise money. There's a lot of wind at your back. You know, we're at a 10-year bull market, more than that now, we're in 2019. But you know, we're at one of the longest bull markets in history. And if I was a founder that thinks that I'm going to need some capital in the future, I would go raise it right now today.

If you do have a strong seven or eight figure business, you probably will get good terms. So at the very least I would say my advice would be go start talking to the players that you think are aligned with your business. Go start talking to the firms or the individual investors that you want to have a smart money in strategic partners regardless, get a little bit of a feel for what would the offer be? Are they even interested? And start having those conversations now because there is nothing worse for getting bad terms than a sense of desperation. So you did not wanna have to go and raise when you really, really need it and your runway is going low and, you know, this is your last option because investors, you know, that means it's more risk for them, which means that they're gonna take more return from you.

Matthew: Okay. And I know this is a totally subjective answer I'm gonna ask you for, and the circumstances could change right after we hang up here. But if you had to put all your investment capital into one market category or segment within the cannabis space right now, assuming the valuations were fair, what sector do you feel most bullish about?

Codie: Oh, this is such a good one. So difficult because I always would say it's not about the sector, it's about the team, which sounds cliché except it's absolutely true. However that being said, we don't like to invest in grows right now, pure grow play or real estate. We've done those in the past. We don't think that's the best return, risk return trade off right now. We do really like strong, differentiated, vertically-integrated plays. So I think there's some premiumization there. And then increasingly, which is very hard to do, it's brands, right? And so, you know, our portfolio right now has the biggest allocation to brands, ancillary services and vertically-integrated. And I think we will keep doubling down on brands, but it's gotta be the right ones because brands, you know, vertically-integrated, if you can get scale and you have your capex, right, and you understand the regulatory structure and you have the right team, not that it's not difficult to do, it's very difficult to do, but it's pretty straightforward. Brand is like magic, right? You know, you've got to have this magical mixture. And so it's really important to us to find the right brands. But I think the right brands are gonna be where all the money is going forward.

Matthew: It is. There's something about brands, like there's some big brands in the cannabis space where I've been in their facilities, you know, I see the extracting oil from trim and making this or that and the end products and everything, and then they mark it and do a great job of packaging and so forth. And somehow it works on me even though I saw how the sausage has been made and I'm like, what is this about us that we, you know, we want to walk in a movie theater and, like, Pepsi won't do, it has to be Coke. It's just there's something there where we just had identified it in our mind and, like, only that will do. And that's what you're talking about there is that direct hit of a product market fit. So agreed, brand's going to be huge here. So Codie, looking ahead the next three to five years, what opportunities or even predictions make you most excited?

Codie: Sure. Well, you know, I think one of the biggest prediction that I've predicated my career on and that I've also predicated the investments that I've made is this industry of cannabis becoming completely integrated into the way that we live. And so for me, I call this plant integration, which is essentially the idea that cannabis and all of its derivatives is going to be inside of about every industry that we can think of in the U.S. And now for you and me here on this podcast, that may sound normal and it may sound like something that we already see happening, but outside of our little world, most people do not have eyes to see that cannabis is going to be, you know, inside of beverages, that we're going to have, you know, CBD in every coffee shop as an option. That we're going to have bombs and lotions all derived from maybe hemp, maybe one of the other myriad of strains. That we're going to have THC delivered by, you know, doctors and varying types of prescriptions.

And that to me is really what I'm most excited about because the implications for me in this industry are that we are amidst a generational wealth creation event. That if we do this right, those who invest now will structure the future of this industry. Those companies that are founded now will structure the future of this industry and that it can have a broad based implication on everything from, you know, veterans with PTSD, which is very near and dear to my heart too. You know, my grandma who I mentioned, invests in our fund and who, you know, also loves to go to the country club and play bridge and never would have ever thought she would touch anything to do with cannabis in her 91-year old life. And so that is what I'm most excited about. That, and you know, I'm all about the government being able to tax this industry and all of us being able to benefit as citizens from this formally illicit industry.

Matthew: Codie, I like to ask a few personal development questions to help listeners get a better sense of who you are. With that, is there a book that's had a big impact on your life or way of thinking that you'd like to share?

Codie: Yeah, absolutely. I'm a pretty voracious reader and I, you know, we were talking about this earlier, but I do kind of think that an investor has to have a curious mind. If they don't, I'm not sure how much I trust them. So I'll give you two that are pretty different on polar opposite ends of the scale. The first one is ''Letter to Young Contrarians.'' It's by Christopher Hitchens. And he was essentially this sort of political activist and known for being a sort of a rabble rouser. He really always stood against the norm. And what I love about this book is it really teaches you to question everything and it teaches you that you need to let yourself find the truth, not be told by another. And so I would recommend that book hugely. Especially for those who wanna look in this space, it gets you to open up your mind to ideas that may not be that comfortable to you.

And the second one is, it's pretty contrarian and maybe a little bit dangerous book to recommend these days given its political leaning is ''Atlas Shrugged.''

Matthew: Oh yes, heard that one. Yeah.

Codie: Yeah. And the reason that, you know, I give you this one, well first I'll give you Christopher Hitchens, who's a Communist Socialist kind of, and now I give you, you know, uber-free market conservative woman. So you know, there's cognitive dissonance there, right? You can see there's both sides and no pack mentality. But for me, ''Atlas Shrugged'' fortified the love of work, right? The absolute joy of doing what you are uniquely skilled at doing and not letting anyone stop you for that. And that's why I back companies because I think our economy and our returns are all stimulated by the production of those who love to labor. And, you know, she's got some great quotes in there too. Like how can you not love, what's that quote? It's like the question isn't who is going to let me, it's who's going to stop me? Like that's gotta be on a tee shirt somewhere, right?

Matthew: Yeah. And I rant, you know, it's fun to go on YouTube and see her on the Donahue Show way back when. I don't know if that was the '70s or '80s and just listen to her, you know, talk and there's no one that really was quite like her. She's one of a kind to her response to things and everything, it's very, it's just really worth doing. So I would encourage that too. That's a great suggestion. Great book.

Codie: Interesting. Yeah. Well, I will have to do that. Yeah. She was definitely a contrarian too, so I think that's what we're looking for. There's too much herd mentality these days in politics and probably against cannabis too. So I always like to listen to those who will make me think outside of the box a little bit. It's how you make money.

Matthew: I always noticed too, when people come from communist countries, they're not, like, communism is great, let's try it here. They're always like, we gotta make sure we don't do this, like, where I came from. Okay. Is there a tool you or your team use that you consider vital to productivity?

Codie: Absolutely. I'm a total productivity nerd. So I think we could do a whole podcast on tech stacks I love. But the normal ones, like, you know, like everybody says is Sauna, FTT, Xoom, Evernote, but I think some of my favorite quirky ones are...well, one that's kind of funny is ScreenToGif. Essentially, what this does is it turns anything into a GIF, which sounds maybe useless except I use it to record processes for our team and assistants and even portfolio companies. So you can use it when you're screen sharing, instead of screen sharing or video recording your screen, it can essentially create a GIF of a step by step process. And so when I'm explaining...

Matthew: I like it. Yes.

Codie: ...yeah, it's really nice and there's no extra time wasted. It's just screen, screen, screen, screen, screen, screen and you can forward it to the next person for them to follow. So I really like that.

And then the other one would be eCommerceFuel. This is a group. And essentially what it is, is it's a group of founders who have revenue post one or five million, something like that. And they all do things in ecommerce and it's infinitely searchable for all the things that small businesses and startups need to know by other highly-screened companies. And you can engage with these experts one-on-one. So it's a little bit of like a human tool, right? But yeah, I think it's the Library of Alexandria for companies that are doing things online and I think eventually that will happen to cannabis. So it could be interesting.

Matthew: Great suggestions. Haven't heard either of those before. I'm gonna ask you a Peter Thiel question now. What important truth do very few people agree with you on?

Codie: Oh, I mean, besides cannabis being a generational wealth creation event, I think I would probably go back and quote Hitchens again, which is that I think you should seek out argument for their own sake. And I believe he said, "The grave will supply plenty of time for silence," something like that. And so I believe that you should be very cautious if you find all around you are agreeing with you and find instead those who challenge your opinions and be very cautious if the arguing gets you emotional because emotions have no place in rationality for me. You wanna argue to understand others, not argue to sway them to your opinion. And so I'm very careful with isms and ists and all manner of classification and focus on thoughts and my disagreement with those thoughts and not people and my disagreement with them.

And so in investing, I think this is super critical because if you were a yes person all the time and investing, you're gonna get in a lot of trouble. And so instead with our team, one of the reasons I love, you know, my co-partners is we challenge each other mercilessly. And so every thought is sort of taken out that has nothing to do with the fact that we're all friends, but we can remove the thoughts from the person and say, "Do I really agree with this? Why not? What could be the absolute downside of this and why could I disagree with this idea intensely." And so I suppose my difference is there's so much time for silence in the grave. Make sure that you argue rationally now.

Matthew: Great points, great way to tease out the truth.

Codie: I agree.

Matthew: So Codie, as we close, what's the best way for listeners to find you online and for accredited investors to reach out to you?

Codie: Sure. So our website is and that's where investors would go. We are closing out our second fund and we'll be raising a third. We're, you know, relatively selective in that standpoint, but happy to talk with anybody even if we're not the right fit. So, you know, happy to have anybody reach out there. I'm also on Instagram @codiesanchez, C-O-D-I-E S-A-N-C-H-E-Z. And for anybody that wants my email, it's just If anybody's out there pushing forward, you know, sort of the right ideals and ethics and cannabis and companies moving forward the needle in that van too, I wanna know you.

Matthew: Great. Well, Codie, thanks so much for coming on the show today and educating us. We wish you the best in 2019 and beyond and keep us updated.

Codie: I absolutely will, and I'll keep listening to your podcast. I so enjoy it, Matthew, so thank you for having me.

Matthew: Thanks, Codie.

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