Michael Gruber Participating at Agri Investor Forum Oct 11th in Chicago

Michael Gruber, Managing Partner of Salveo Capital, will share insights into the cannabis industry landscape and opportunities for investment.

Salveo Capital Managing Partner Michael Gruber will participate in the Insight into Cannabis Investing panel at the Agri Investor Forum to be held in Chicago on October 11th.

With an ever acceleration of legalization both domestically in the United States on a state-by-state basis, as well as internationally, increased focused is being placed on cannabis, clearly one of the world's highest valued cash crops.

Michael Gruber will help lead a discussion surrounding the cannabis eco-system, and the investment opportunities that are available to investors, including family offices and institutional investors.

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Feds Hands Tied From Cannabis Enforcement Until December

Temporary reprieve for cannabis businesses.  

A key federal law protecting the medical marijuana industry from interference by the U.S. Department of Justice has been extended until Dec. 8 under the provisions of an  approved Friday by Congress, 

The Rohrabacher-Blumenauer Amendment will now remain in place for at least several more months. The amendment prohibits the U.S. Department of Justice from using federal funds to interfere with state medical marijuana programs, or from prosecuting MMJ businesses compliant with state law.

By John Schroyer

A key federal law protecting the medical marijuana industry from interference by the U.S. Department of Justice has been extended until Dec. 8 under the provisions of an emergency aid package approved Friday by Congress, Marijuana Business Daily has learned.

The Rohrabacher-Blumenauer Amendment – which has had to be renewed annually by Congress and was formerly known as Rohrabacher-Farr – was set to expire Sept. 30.

However, it will now remain in place for at least several more months. The amendment prohibits the U.S. Department of Justice from using federal funds to interfere with state medical marijuana programs, or from prosecuting MMJ businesses compliant with state law.

“That’s right … extended through Dec. 8,” a spokeswoman for U.S. Rep. Earl Blumenauer, one of the sponsors of the amendment, wrote to Marijuana Business Daily in an email.

The amendment’s future was thrown into doubt this week when the House Rules Committee blocked the Rohrabacher-Blumenauer Amendment – along with several other cannabis amendments – from receiving floor votes.

But an emergency aid package for victims of Hurricane Harvey also extended the current federal budget, meaning that the Rohrabacher-Blumenauer Amendment has received at least a stay of execution.

President Donald Trump signed the package into law Friday.

Amendment’s third reprieve

This is the third time the amendment has remained in place by default because Congress has kicked the can down the road on the federal budget: It survived two previous expiration dates in April and May, also without being voted on apart from the entire federal budget.

That, however, means the amendment’s future is still in doubt, said Massachusetts-based cannabis attorney Bob Carp.

“I do think it’s a coin flip. It’s only a three-month extension,” Carp said. “It makes me a bit uneasy.”

In the face of such federal uncertainty, and with a U.S. attorney general who is openly anti-marijuana, the marijuana industry must “start circling the wagons,” Carp added.

Time to ‘join forces’

“We need, really, to join forces. There are too many disparate groups,” he continued. “If we pooled the money, lobbied and did what tobacco and some of the other successful vice interests have done, I think marijuana would have a far better chance.

“Right now, we’re fractured, with people representing their own interests. And it’s dangerous to the entire industry.”

Bill Piper, senior director of national affairs for the Drug Policy Alliance, wrote in an email to Marijuana Business Daily that “this is good news, but we have to win the fight in December.

“We also need real reform – an actual change in federal law, so we don’t have to have this fight every few months.”

Marijuana Policy Project’s executive director, Rob Kampia, added via email that “If any allies out there are celebrating, they shouldn’t be.”

Kampia said the fate of the Rohrabacher-Blumenauer Amendment is now going to be in the hands of a joint House-Senate conference committee charged with reconciling differences between the two chambers’ federal budget bills. So the amendment is still very much in danger.

“Now we must pray that one of the four good guys on that conference committee will promote our marijuana amendment,” Kampia said, and called the situation “the nightmare scenario we’ve been scrambling to avoid since May.”

In a joint statement issued Monday, Reps. Dana Rohrabacher and Blumenauer said, “While this action provides a measure of certainty for the millions of medical marijuana patients and the clinics and business that support them, much more needs to be done… Ultimately, we need permanent protections for state-legal medical marijuana programs, as well as adult-use. Prohibition is a failed policy.”

John Schroyer can be reached at johns@mjbizdaily.com

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Supply & Demand - Cannabis Pricing Pressures

The legalized cannabis industry is incredibly exciting, and is the fastest growing segment of economy.  That being said, incredible amounts of supply capacity are coming online which will put further pressure on marijuana wholesale pricing.  There is not a week where I don't hear about  10-12 groups wanting to either start a new production site, or increase the capacity of an existing operation.

We have seen this across the country personally over the last two years, especially in WA, OR, and CO states, and the WSJ in its article further talks to this issue about the strong pressure on pricing, and this has clearly impacted profitability for many of these operators.  For some, the "Green Rush" of profits have never come for the growers, and many are looking to sell and move on with their lives to something else.

For us, there will be a select few cultivators that will win, and which will include those with unique genetics, those that are vertically integrated, those that have developed strong brands, and of course, those growers who can most efficiently cultivate quality product at a highly competitive cost.    Most operators coming into market will either be too small to grow and produce at scale or will ultimately be under-capitalized and lack the talent to produce efficiently when they companies compete not only within their states but across the country, and ultimately with international players as barriers and restrictions come down.

For Salveo Capital, with this phenomenon which happens with other commodity products, we become very interested in companies and innovative technologies that address the following:

  • increased yield technologies and services
  • novel genetics
  • proprietary formulations for processing flower to meet unique conditions
  • powerful branding with strong value propositions

By 

Jacob Bunge

Aug. 30, 2017 8:00 a.m. ET

208 COMMENTS

After decades of dodging law enforcement and fighting for legalization, U.S. marijuana growers face a new challenge: low prices.

From Washington to Colorado, wholesale cannabis prices have tumbled as dozens of states legalized the drug for recreational and medicinal uses, seeding a boom in marijuana production.

The market is still tiny compared with the U.S. tobacco industry’s $119 billion in annual retail sales, but the nascent cannabis business has grown to more than $6 billion a year at retail, according to data from Euromonitor International Ltd. and Cowen & Co.. 

For marijuana smokers, the price drop is sweet news. Recreational users and those prescribed cannabis for health reasons have seen prices decline as wholesale prices have fallen, though some retailers have pocketed part of the difference, according to New Leaf Data Services LLC, which researches the U.S. cannabis market.

At Hashtag Cannabis, a Seattle-based retailer running two dispensaries, co-owner Jerina Pillert said wholesale price declines show up on the plastic vials holding green-and-tan nuggets of “Super Silver Lemon Haze” marijuana produced by Longview, Wash.-based Bondi Farms. A gram sells for about $10 currently, down by a third from the $15 a gram it fetched in September 2015, she said. 

But for growers—ranging from high-tech warehouse operations to back-country pot farmers gone legit—the price drop has been painful. 

Since peaking in September 2015 at about $2,133 a pound, average U.S. wholesale cannabis prices fell to $1,614 in July, according to New Leaf. That is the sort of market decline that hit Midwestern corn and soybean growers in recent years after a string of record-breaking crops.

“There is an increasing recognition, on the part of the industry and those that grow and dispense, that this market is a commodity,” said Jonathan Rubin, New Leaf’s chief executive. 

 

Marijuana grows in a greenhouse at the Los Suenos Farms facility in Avondale, Colo., last year. PHOTO: MATTHEW STAVER/BLOOMBERG NEWS

In response, some producers are taking a page from the food industry, where farmers and food companies increasingly appeal to health- and environment-conscious consumers. Growth in organic food products for years has outpaced conventional grocery sales, and products made without genetically modified crops, gluten and artificial flavorings can command premium pricing and shelf space.

Stephen Jensen, who secured a state license to grow cannabis in Washington in 2015, has yet to turn a profit. He is promoting what he described as natural growing methods.

“We needed to give people a reason to select us,” said Mr. Jensen. He said his Green Barn Farms eschews synthetic pesticides and relies on natural light over high-powered lamps, which he said helps his cannabis stand out among more than 1,100 other Washington farms.

 

Because cannabis remains illegal under federal law, growers can’t get their crops certified as organic, a label that can only be bestowed by the U.S. Department of Agriculture.

Cannabis farmers instead have turned to alternative labels such as SunGrown Certified, which requires that growers use sunlight and water-conservation practices. They hope such labels will entice smokers and secure shelf space in the 29 states where marijuana is legal in some form.

Another label, Clean Green Certified, is modeled on U.S. organic standards. It bars synthetic pesticides and emphasizes what the program deems fair-labor practices. In May, Washington State passed a law that would set up a state-level organic-certification program, though it may need to use a label that doesn’t use that word.

That push to differentiate is splitting pot farmers into rival camps.

Indoor-grown cannabis, where climate controls and high-powered lights allow several crops per year, typically is of a more consistent quality, industry officials say. Its dense, often bright-green buds catch consumers’ eyes, often fetch a higher price and can be costlier to produce.

Proponents of marijuana grown outdoors and in greenhouses say indoor facilities rely on synthetic fertilizers and heavily consume electricity. They point to a 2012 paper by University of California Senior Scientist Evan Mills, which estimated that indoor cannabis production accounted for 1% of national electricity use, though some growers have been adopting LED lights, which consume less electricity.

Jeremy Moberg, owner of Riverside, Wash.-based CannaSol Farms and head of the Washington Sungrowers Industry Association, says marijuana smokers will come to care about the environmental cost of their high.

“The socially conscious, premium customer is going to want us because we’re sustainable,” he said. “It only takes me 30 seconds to convert somebody wearing Patagonia and driving a Prius that they should never smoke indoor weed again.”

At Hashtag Cannabis in Seattle, Ms. Pillert said customers occasionally ask for pesticide-free or sun-grown varieties. Smokers’ main fixation, she said, is the potency rating for the key active ingredient, tetrahydrocannabinol, or THC: “They want to make sure they are getting the biggest bang for their buck.”

 

A ‘Bud tender’ stocks packaged marijuana in display cases at the grand opening of The Cannabis Corner in North Bonneville, Wash., in 2015. PHOTO: JASON REDMOND/REUTERS

Many in the emergent industry expect marijuana to eventually resemble the beer business, where pricier craft brews have built followings in the shadow of cheaper mass-market beers like Budweiser and Busch.

While high-quality strains and specialty brands may secure premium prices, more low-quality marijuana will be processed into oil used in vaporizer cartridges or adult-oriented baked goods like brownies and cookies, growers and retailers said.

Mr. Jensen, the Seattle cannabis producer, said he hopes that his sun-grown, naturally produced plants over time will yield a 20% to 30% premium over the average market price.

“I always buy organic products at the store and think there is a future for that in the [cannabis] industry,” said Mr. Jensen. But, he said, “it’s a battle getting that awareness out.”

Write to Jacob Bunge at jacob.bunge@wsj.com

Appeared in the August 31, 2017, print edition as 'High Returns Wither for Marijuana Growers.'

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Colorado Officials Respond to Attorney General Sessions on Marijuana Policy

Looks like states rights are coming on strong, and pushing back on AG Sessions.   The overwhelming benefits that are accruing to states with legalization along with strong public support is a force that the Federal government will hopefully start to better understand, and start prioritizing more critical issues to our country.

https://www.marijuanatimes.org/colorado-officials-respond-to-attorney-general-sessions-on-marijuana-policy/

Colorado Officials Respond to Attorney General Sessions on Marijuana Policy

By

 Joe Klare

 - 

  Aug 30, 2017

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Late in July, U.S. Attorney General Jeff Sessions sent letters to officials in the first four states to approve adult use marijuana legalization: Colorado, Washington, Alaska and Oregon. Officials in all four states have responded, the last of which being Colorado, who did so just last week.

Colorado Governor John Hickenlooper (D) and Attorney General Cynthia Coffman (R) took umbrage with several of Sessions’ assertions, saying he relied on outdated and incorrect information while touting the progress made in their state since retail cannabis sales began in January 2014.

“The State of Colorado has worked diligently to implement the will of our citizens and build a comprehensive regulatory and enforcement system that prioritizes public safety and public health,” the letter reads. “When abuses and unintended consequences materialize, the state has acted quickly to address any resulting harms. While our system has proven to be effective, we are constantly evaluating and seeking to strengthen our approach to regulation and enforcement.”

Colorado officials insist that their regulations are effective, citing stats that show youth marijuana use in the state declining by 12% between 2013 and 2016. The state has also seen over $500 million in tax revenue and a drop in marijuana DUIs.

Considering Colorado’s governor was an opponent of Amendment 64 when it was being battled over in 2012, it is a little odd to see him now defending legalization to Attorney General Sessions. That, perhaps more than any other single fact, is a testament to how well legalization is working in Colorado. 

I have opined in writing here and elsewhere that it would seem that Jeff Sessions has enough to worry about without bothering with a legal marijuana crackdown that no one is clamoring for. I don’t see anyone marching in the streets against cannabis legalization. It is not an especially divisive issue, with clear majorities supporting legalization in every poll taken on the subject. 

It has been theorized that Sessions is using this time to feel out how receptive citizens and officials would be to a crackdown; if he doesn’t see the answer to that by now, he never will. Most people and officials in legal marijuana states want Sessions to go away and spend his time on other subjects.

In fact, the message officials in Colorado sent to Sessions tracks pretty close to the message the other 3 states sent him as well. None are calling for federal interference in their affairs; they are calling for quite the opposite.

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Salveo Entire Portfolio Selected as Marijuana Trailblazers by CB Insights

Salveo portfolio companies: Wurk, Front Range Biosciences, and Headset

In a report just released by CB Insights named, Trailblazers 2017: Innovators in the Marijuana Industry, all 3 existing portfolio companies were selected as Trailblazers across 3 separate categories.

Salveo companies listed as trailablazers included: Wurk (Compliance), Front Range Biosciences (Next Gen Cultivation), and Headset (Business Intelligence).   

 

 

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CO Governor Hickenlooper Interview on Cannabis Legalization

CO Governor on Cannabis Legalization

CO Governor John Hickenlooper provides more detail in an interview with his thoughts on cannabis legalization in his state, and how he hasn't seen anything negative regarding an increase in "kid usage" which was one of his greatest worries.

As the Governor explains, people to his surprise have reacted in a much more responsible fashion than he had originally envisioned.

Each of the states need to continue to watch the effects of usage after legalization.   For legal professional operations, it is incumbent upon everyone to make sure the product is safe, and that there are the necessary protections against under-age access, and that there is not illegal diversion of product.

As described, the population continues to overwhelming support legalization and decriminalization, and only upon such success we the proper research be able to be conducted on where and how cannabis is medicinally beneficial.

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What the White House doesn’t know about marijuana policy

During today’s White House briefing, Press Secretary Sean Spicer was asked about the Trump administration’s position on marijuana enforcement. This issue has left marijuana advocates, business owners, investors, patients, and consumers wondering what the president’s true intentions are. As 28 states and DC have legalized medical marijuana and eight states and DC have legalized recreational marijuana, the administration’s position is one that will affect many Americans.

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During today’s White House briefing, Press Secretary Sean Spicer was asked about the Trump administration’s position on marijuana enforcement. This issue has left marijuana advocates, business owners, investors, patients, and consumers wondering what the president’s true intentions are. As 28 states and DC have legalized medical marijuana and eight states and DC have legalized recreational marijuana, the administration’s position is one that will affect many Americans.

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As Pot Prices Plunge, Growers Scramble to Cut Their Costs

As Pot Prices Plunge, Growers Scramble to Cut Their Costs
by Jack Kaskey - Bloomberg
Scotts and other agricultural-tech companies tap new market; Harvesting 1,700 pounds of Dirty Girl and Cinderella's Dream
The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge -- and an opportunity for companies that can help cut production costs.

by Jack Kaskey - Bloomberg Scotts and other agricultural-tech companies tap new market; Harvesting 1,700 pounds of Dirty Girl and Cinderella's Dream.

The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge -- and an opportunity for companies that can help cut production costs.

Prices are tumbling as formerly illicit cultivators emerge from the shadows to invest millions of dollars in massive pot factories. In Colorado, the average price sought by wholesalers has fallen 48 percent to about $1,300 a pound since legal sales to all adults started in January 2014, according to Cannabase, operator of the state’s largest market. Supply is surging as growers expand and install the latest agricultural technology.

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Chill Out!

Take me out to the ball game,

Take me out with the crowd;

Buy me some peanuts and Cracker Jack,

I don’t care if I never get back.

Let me root, root, root for the Cubbies,

If they don’t win, it’s a shame.

For it’s one, two, three strikes, you’re out,

At the old ball game.

Take me out to the ball game,

Take me out with the crowd;

Buy me some peanuts and Cracker Jack,

I don’t care if I never get back.

Let me root, root, root for the Cubbies,

If they don’t win, it’s a shame.

For it’s one, two, three strikes, you’re out,

At the old ball game.

The Chorus song at all Cubs (#Cubs) games during the 7th inning stretch. Bill Murray did a nice rendition as Daffy Duck on Friday night, and with Chicago-native Vince Vaughn singing for us on Saturday.

As you may have heard, the Chicago Cubs are in the World Series for the first time since 1945. There is plenty of blame to go around, but if you spend enough time listening to people, you usually hear about that darn Billy Goat, the Durham error, or the Bartman catch. The story gets worse as you have to go back to 1908 for the last time that the Cubs won a World Series Championship –the longest active championship drought faced by a major U.S. sports franchise

It’s 3-1 in favor of the Cleveland Indians in this 2016 World Series, and the Cubs, and their tortured fans around the world are clearly worried. The Cubs are in a hole, a very deep one in fact, but teams have come back from this type of deficit before and won, with last one being the Kansas City Royals in 1985.

I hear the pain. I see the misery. But, you gotta have faith! (#flythew) No need to get all bent out of shape. Just chill out, or in today’s modern world, the hippest thing to do would be to take a hit, toke, dab, infused candy, or whatever your preferred method of delivery of marijuana.

More than half of the United States - 25 states plus the District of Columbia (D.C.) – have some form of legalization of marijuana (#marijuana). Four states (Colorado, Alaska, Oregon and Washington) plus D.C. allow full adult use.

In 9 short days, on Nov 8, 5 states (California, Nevada, Arizona, Maine, and Massachusetts) will vote with on full adult use, and 4 additional ones will vote on medicinal use, with Florida being the one of highest promise and focus.

With close to 70 years of federal prohibition of the plant, there has been little to no research done. Surprisingly, Israel is often the country that is mentioned as being the most advanced in its research. Research has indicated that there are over 400 chemical compounds, including over 100 cannabinoids, including the often mentioned THC (psychoactive element) and CBD. That being said, there are thousands of years of documented cannabis use, and the calming and relaxing effects from use.

Based on the long-term illegality of marijuana, potential users were at the whim of the black market to provide them with product. You had little to no choice, you took what you were given: strain? where it was grown? THC%?, and even more worrisome, what if any pesticides were used? Things have changed.

Legalization is wonderful!

  1. Selection

Your choice as a consumer is mesmerizing. You can easily find over 100 choices, amongst flower, concentrates, and edibles. For flower, you can chose amongst sativa, indica, and even hybrid strains. I am sure terms such as shatter, wax, and resin are even less familiar. It can be information overflow, but luckily the bud tenders (essentially your individual sales person at the legalized dispensary) will help find a solution that fits your needs and preferences.

  1. Strength

This ain’t your father’s marijuana. Today’s product is considerably stronger, with a significant amount of this through advanced strain genetics and breeding programs. THC % can easily be found above 20% in flower, and there are a good number of concentrate products which have THC % above 70%.

  1. Safety

Every legalized cultivation facility needs to comply with its state specific rules relating to testing and certification. This testing is often done by requiring the submission of sample materials from harvests that test for a variety of things, including but not limited to: microbiological contaminants and mycotoxins, heavy metals, residual solvents, pesticides, THC, and CBD.

Oh, how lucky we are… and things only get better once other states adopt laws supporting legalization, and ultimately when the federal government wakes up and ends federal prohibition.

So, back to the good old Cubbies who are in a difficult pressure spot.

Illinois is one of the states that has already legalized medicinal use of cannabis the Compassionate Use of Medical Cannabis Pilot Program Act with program that started January 1, 2014, and was to sunset in 2018, but which recently had its program extended through July 1, 2020. To gain access to the medicine, patients need to apply for a medical card, and some of the requirements include: getting a physician to verify that you have a qualified debilitating medical condition, be a resident of Illinois, select your dispensary from which you will need to purchase your medicine, and get fingerprinted, while waiting to get approved after submitting your application.

Sound convenient… not really.

For Indians fans, Ohio has legalized it as well earlier this year, but the situation is much worse, and with most of the rules and regulations will not likely be formalized until deep into 2017, and with product not likely to be available until mid 2018. So, if the Cubs do start coming back, you Indians fans have no legal way to chill yet.

If you are one of the approved patients in IL or other legal states, you have the ability to medicate from all of this stress.

For the rest of us, we unfortunately have to find less pleasant ways to chill.

So, relax, have faith, and things will get better.

Go Cubs Go!

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Local and National Implication of Election 2016

November 8 is approaching quickly and many are speculating what the results of the election will mean for cannabis going forward. Now that the DEA has re-examined the scheduling of cannabis and decided not to reschedule, the concern has shifted to what policy changes might occur in 2017.

Local and National Implication of Election 2016

November 8 is approaching quickly and many are speculating what the results of the election will mean for cannabis going forward. Now that the DEA has re-examined the scheduling of cannabis and decided not to reschedule, the concern has shifted to what policy changes might occur in 2017.

State Ballot Measures

Though the focus in the media has been largely on Presidential politics, when it comes to cannabis in the U.S., the states have lead the way. Next month, five additional states - California, Arizona, Massachusetts, Maine, and Nevada - will vote on whether or not to join Colorado, Washington, Oregon, and Alaska in fully legalizing the adult use of cannabis. Currently, each state is polling in favor of legalization, however the Washington Post points out that the various polls are showing a wide degree of variance depending on the wording of their questions. It seems, at this point, that California and Nevada are likely "yes" votes along with Maine to a lesser extent, while Massachusetts and Arizona are still close enough to be in the toss-up category.

Though the Florida legislature passed a very limited medical cannabis bill last year, an amendment for a more open medical cannabis program will be on the state's ballot. This is the same bill that failed to pass in 2014, requiring 60% of the vote and only receiving 58%. The latest polls currently show this iteration of the amendment polling above 70% in the state.

Congress

Congress has gone back and forth with regard to cannabis in 2016. It once again passed the Rohrabacher amendment, barring the Department of Justice from using its funds to interfere with state-legal cannabis programs. However, Congress did not pass bills or amendments related to opening medical cannabis to veterans, increasing protections for banks, and allowing the District of Columbia to use its own funding to implement an adult use program that voters have already passed.

At the very least, it seems that Congress will continue to allow states to take the lead on cannabis, since the Rohrabacher amendment has passed in each of the last three years, with increasing margins of passage each time.

President

The Presidential election on one hand is the most difficult to analyze because cannabis is viewed so differently among different voting blocs, and candidates often try to hedge their statements to appeal as broadly as possible. On the other hand, every major candidate in the race at the very least has been at least moderately supportive of legal medical cannabis, and has also at least said they would support the right of states to institute their own cannabis laws. It will be interesting to watch what the FDA and DEA do under a new administration given the success that G.W. Pharmaceuticals has reported with its Phase 3 trials of Epidiolex.

Over all, though many were hoping for more clarity at the national level this year, it seems that might be put off for now. At the state level, however, legalization appears to be on the same pace as recent years, and the federal government seems ready to let the states continue on their course.

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Salveo Capital Announces Launch of Cannabis Fund

Salveo Capital LLC announces the re-launch of Salveo Fund I, LLC (“Fund”) with the addition of Michael Gruber (Managing Partner), Jeffrey Howard (Managing Partner) and Achint Prabhat (Director of Fund Operations) to the existing team of Alex Thiersch (Partner), John Dohm (Partner) and Eric Atienza (Director of Communications). Salveo is a venture capital fund with offices in Chicago, Illinois, that will invest in emerging growth companies within the cannabis sector.

Chicago, Illinois -- Salveo Capital LLC announces the re-launch of Salveo Fund I, LLC (“Fund”) with the addition of Michael Gruber (Managing Partner), Jeffrey Howard (Managing Partner) and Achint Prabhat (Director of Fund Operations) to the existing team of Alex Thiersch (Partner), John Dohm (Partner) and Eric Atienza (Director of Communications). Salveo is a venture capital fund with offices in Chicago, Illinois, that will invest in emerging growth companies within the cannabis sector. 

The addition of the new team members brings valuable investment, fund management, capital markets and due diligence experience to complement the existing team. Michael Gruber has over 20 years of experience working with early stage investments, particularly in the information technology, financial services, energy, and agriculture sectors. Mr. Gruber has founded and run several private investment organizations of high net worth investors and family offices focused on growth stage investments, including Cornerstone Angels and its affiliate Cornerstone Opportunity Partners, LLC.  Collectively, the portfolio companies have raised in excess of $2.5 Billion in capital. Mr. Gruber is a founding Partner of Independence Equity, a committed venture capital fund with key areas of investment interest including: water; energy efficiency; material science; and agriculture.

Jeffrey Howard spent 21 years on Wall Street in roles of increasing responsibility. Mr. Howard’s last role on Wall Street was with the Royal Bank of Scotland (RBS) where he was a Managing Director – Global Head of Prime Services. His responsibilities included running global Futures, OTC Clearing, Interest Rate Prime Brokerage and FX Prime Brokerage.  In that role he managed 90+ people across North America, EMEA & Asia Pacific, was responsible for the growth strategy of $150 million business and managed a $50 million front-to-back budget. Mr. Howard leverages his 20+ years of senior-level capital markets experience to source deals and perform due diligence on emerging cannabis focused companies, while providing financial & operational risk management guidance.

“I am excited to be part of this highly qualified Salveo team that brings together strong investment and cannabis sector expertise” said Michael Gruber. “We continue to have great access to exciting opportunities and quality management.” 

Salveo's primary investment focus will be early stage businesses enabling the cannabis industry, but which are generally ancillary to the production or processing of the plant and not subject to state regulations.  Key areas of interest include: Financial, Payments & Banking; Grow Systems, Agriculture & Operations; Software, Digital & Internet; Chemistry, Science & Genetics; and Business Services.

The Fund will be a committed capital fund and will only be available to accredited investors and qualified purchasers. The Fund’s objective is to achieve long-term capital appreciation by investing in early-stage companies servicing the cannabis industry.  

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Salveo Capital's Michael Gruber Moderates Cannabis Investment Panel at Opal Conference

Salveo Capital Managing Partner Michael Gruber to moderate “Investing in Cannabis” panel at the Opal Family Office & Private Wealth Management Forum in Newport, Rhode Island today, July 19th.

Salveo Capital Managing Partner Michael Gruber to moderate “Investing in Cannabis” panel at the Opal Family Office & Private Wealth Management Forum in Newport, Rhode Island today, July 19th. The panel will discuss cannabis sector marketplace, and explore the various investment options for investors in the sector. More can be found here.

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Who Is The Typical Cannabis Consumer?

Every day of legal cannabis has seen an expansion of the base of potential consumers. It stands to reason that since there is such a wide array of people purchasing legal cannabis in the U.S. these days that companies will begin to cater to these groups. As the industry develops, branding will become more sophisticated and more targeted, branching out from the simple product-based marketing that dominates today.

Cannabis users are one of the most stereotyped consumer demographics in the country. The archetype is familiar: the typical young, male, couch-locked stoner. With legalization spreading, though, is this actually typical of cannabis buyers today? Obviously hardcore enthusiasts are still a large and appealing set of consumers, and in the early days of any state's legal, adult-use program this will be the largest base. However, the 2015 Marijuana Business Daily Factbook indicated that 30% of all legal cannabis consumers had never purchased on the black market. Additionally we're seeing across the country many people who are purchasing cannabis - first time buyers or not - do not fit the stereotype. Cannabis has been normalizing for a long time, and the modern face of cannabis is incredibly multifaceted. 

First and foremost the legal cannabis market has expanded across the country because of the efficacy of medical cannabis. The face of this market is as counter to the stereotype as one can get. For instance, the most common medical cannabis patient in the state of Illinois is a 50 year-old female with fibromyalgia or cancer according to a report issued by the state. Across the country patients are seeing relief from epilepsy, Crohn’s disease, or multiple sclerosis among many other debilitating conditions. As we see study after study examining how medical cannabis can better the lives of children and veterans it becomes incredibly hard to pigeonhole these patients into the old stoner archetype.

While people under 34 have the highest approval ratings for cannabis legalization older generations are becoming a growing consumer segment in both the medical and adult-use spaces. Medical cannabis dispensaries are reporting increasing numbers of seniors using cannabis as treatment over prescription dugs, and according to a recent Pew poll Baby Boomers approve of the full legalization of cannabis at a rate almost equal to Generation X. The growth of this consumer demographic further muddies what a “typical cannabis buyer” might look like.

Women are an increasing demographic in cannabis as well which is evidenced by a recent CBS News poll indicating that a majority of women now approve of full adult-use legalization. Indeed, last year musician and medical cannabis activist Melissa Etheridge noted, “I think the cannabis revolution is being led by middle-aged women.” 

Every day of legal cannabis has seen an expansion of the base of potential consumers. It stands to reason that since there is such a wide array of people purchasing legal cannabis in the U.S. these days that companies will begin to cater to these groups. As the industry develops, branding will become more sophisticated and more targeted, branching out from the simple product-based marketing that dominates today.

There is nothing stereotypical about cannabis buyers in 2016. They come from a wide range of backgrounds and professions, are of varied ages, and consume different amounts in different ways for different reasons. They are students, yes, but also teachers, nurses, and business professionals. They are younger adults, but they are also mothers and grandfathers. Cannabis is a market that is beginning to cross all demographic boundaries and soon enough the “typical cannabis consumer” will be anyone, and everyone.

 

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What is the Potential Size of the Legal Cannabis Industry?

In news reports about the potential size of the cannabis industry – and indeed in our own posts on this site – figures are often cited like a value of $22 billion dollars by 2020. These projections, provided by excellent sources like the ArcView Group and Marijuana Business Daily, are safe, conservative numbers based on the likelihood of continued legal expansion and available market data. They are also number based solely on sales of cannabis itself. What, though, is the potential size of the entire industry nation-wide and including ancillary markets? How big can the cannabis industry truly grow to be?

In news reports about the potential size of the cannabis industry – and indeed in our own posts on this site – figures are often cited like a value of $22 billion dollars by 2020. These projections, provided by excellent sources like the ArcView Group and Marijuana Business Daily, are safe, conservative numbers based on the likelihood of continued legal expansion and available market data. They are also number based solely on sales of cannabis itself. What, though, is the potential size of the entire industry nation-wide and including ancillary markets? How big can the cannabis industry truly grow to be?

In 2012 the RAND corporation estimated that the total size of the illicit cannabis market in the United States was $40 billion dollars, and we’ve heard a few people say that legal cannabis is simply a matter of moving those illegal sales into legal territory. That, however, is undervaluing the potential size of the market. Black market sales will only ever tell you how many people are willing to purchase cannabis from a drug dealer – it will not tell you how many would potentially purchase it if it were available legally.  According to the Marijuana Business Daily 2015 Factbook up to 30% of cannabis consumers in states with legal cannabis have only purchased the drug legally. As cannabis normalizes the number of mainstream consumers can only be expected to increase. 

The medical cannabis market opens this up even further as every day more studies are scientifically proving the medical efficacy of cannabis for a variety of conditions. Currently 86% of all Americans live in a state that has some form of legal cannabis law according to ArcView (whether CBD-oil only, fully regulated medical, or fully regulated personal use) and in 2014 ArcView estimated that 26 million people were qualified to use medical cannabis under their own states’ laws. As these programs begin to cover more conditions and register more patients, as more physicians become comfortable recommending cannabis as a treatment, and as states like Pennsylvania, Florida, and Ohio pass comprehensive medical cannabis laws the total number of patients will skyrocket. 

While most of the sales data has focused on cannabis sales the ancillary market potentially dwarfs this in size. Mark Twain once wrote, “During the gold rush it’s good to be in the picks and shovels business” and legal cannabis is no different. The long federal prohibition and regional legalization has led to an industry that must not only develop its primary services but must also establish an infrastructure from the ground up. Packaging, shipping, security, consulting, and technology companies, among others, are creating an enormous potential for profit. The MJBD Fact Book estimated that the ancillary market was worth up to three times that of cannabis sales themselves. 

Our own projections for the industry are always rooted in the most conservative industry estimates. Expanding our view to see the bigger picture, however, it’s hard to ignore that with regard to the cannabis industry the sky really is the limit.

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What Schedule 1 Means for Cannabis

The conversation about cannabis in political circles has recently been focused around terms like “de-schedule” or “reschedule.” “Schedule 1” or “Schedule 2.” What do these terms mean, though? What, exactly, are the ramifications of the current federal legal status of cannabis?

The conversation about cannabis in political circles has recently been focused around terms like “de-schedule” or “reschedule.” “Schedule 1” or “Schedule 2.” What do these terms mean, though? What, exactly, are the ramifications of the current federal legal status of cannabis?

 

Overview

In 1970 President Nixon signed the Controlled Substances Act regulating drugs in the U.S., partially to comply with international treaties. It authorized the Department of Health and Human Services and the Food and Drug Administration to regulate drugs, tasked the Drug Enforcement Agency to enforce these regulations, and categorized drugs into five tiers, or Schedules.

Schedule 1 is reserved for substances that are so-called “dangerous, with no medical application, and with high potential for abuse.” This includes heroin, MDMA, LSD, and mescaline. Prescriptions cannot be written for anything in Schedule 1.

Schedule 2 is for substances with a high potential for abuse, that may result in high physical dependence, but that have currently accepted medical uses. This includes opium, morphine, oxycodone, methamphetamine, codeine, and cocaine. Prescriptions are required for all drugs in this list.

Schedule 3 substances have a lower potential for abuse than the previous two, have accepted medical uses, and have a low to moderate risk of addiction in cases of abuse. Prescriptions are required for Schedule 3 substances including intermediate-acting barbiturates, anabolic steroids, and ketamine.

Schedule 4 is reserved for substances that have lower potential for abuse than the previous three, that have low risk of dependence, and that have accepted medical uses. Prescriptions are required for these drugs which include benzodiazepines (like Xanax or Klonopin), benzodiazepine-like drugs (like Ambien or Lunesta), and long-acting barbiturates.

Schedule 5 substances have the lowest potential for abuse, low risk of dependence, and accepted medical uses. Prescription medications like cough suppressants containing codeine, and anti-convulsants like Lyrica are in this classification.

 

Consequences for Cannabis

Cannabis, and the individual cannabinoid THC are currently listed in Schedule 1. Many states have decriminalized possession of cannabis in small amounts (making simple possession the equivalent of a traffic ticket), but it is a class 1 federal felony to conduct research not pre-approved by the DEA. With cannabis in particular, all DEA-approved studies must requisition the plant from the National Institute for Drug Abuse facility at the University of Mississippi – a distinction that NIDA itself does not agree with.

Further, doctors cannot prescribe Schedule 1 substances which is why medical cannabis programs across the country – other than Louisiana’s mostly ineffective system – legally require only a doctor’s recommendation or verification of illness. State legal cannabis businesses also face additional tax burdens, and the lack of interstate commerce means that each state market is isolated with separate regulations and redundant business processes. 

 

The Future of Legal Cannabis

Given these legal complications, why is the cannabis industry booming in states across the country?

Over 50% of the country approves of the legalization of cannabis for personal adult use and that number climbs into the high 70s in swing states for medical cannabis legalization. From a voter standpoint it certainly seems like cannabis is here to stay.

Widespread popular approval is one of the reasons. Over half of the U.S. population lives in a state where cannabis is legal in some fashion. Over 50% of the country approves of the legalization of cannabis for personal adult use and that number climbs into the high 70s in swing states for medical cannabis legalization. From a voter standpoint it certainly seems like cannabis is here to stay.

Several signs from the federal government have also given cannabis entrepreneurs and investors some hope. The Justice Department’s Cole Memo gave states and businesses an outline to follow for reduced risk of prosecution, and though this action of the Executive Branch might seem tenuous in the 8th year of a President, each of the remaining candidates has stated that they would, at least, respect the rights of states to set their own cannabis policy. Congress has taken action as well, attaching amendments to the last several spending bills restricting the ability of the DOJ and the DEA to interfere with state-legal cannabis programs – a restriction that has been upheld in federal appeals court.

Additionally, the CARERS Act currently has 18 co-sponsors in the Senate (including several Republicans such as Lindsay Graham), and would reclassify cannabis to Schedule 2. It would also separate CBD from the definition of “marijuana”, it includes several provisions to open up cannabis to banking, it specifically creates more avenues for cannabis research, and it allows Veterans Affairs doctors to recommend cannabis to patients.

Should the bill become law it would essentially legalize medical cannabis at the federal level which is an overdue change. The medical efficacy of cannabis is proven in states across the country every single day (clinically, in the case of the recent G.W. Pharmaceuticals CBD study) as patients are able to drop prescription medications with debilitating side-effects and regain control of their lives.  

As studies of cannabis prove its medical efficacy it seems inevitable that it eventually meets the standard of “accepted medical use” and is rescheduled. In the meantime, though, there are many hurdles that cannabis businesses face, and that patients must deal with, while the plant remains in Schedule 1.

 

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The Cannabis Industry Requires Reinvention, Not Revolution

This idea that cannabis means building an industry entirely from scratch, however, is neither necessarily true nor truly necessary. The building blocks for a successful and sustainable legal cannabis industry exist all around us; we just need to shape them to fit our needs.

It’s been 20 years since medical cannabis was first legalized in California, but due to the recent unprecedented growth geographically and monetarily the phenomenon of legalization still seems brand new. In a lot of ways the industry IS brand new compared to those early days on the West Coast. Today, according to the 2016 ArcView Report, over half of the U.S. population lives in a state that provides access to some form of legal cannabis, be it personal adult-use, medical-use, or CBD oil. The plant is heavily regulated in many places across the country, including in Colorado, Washington State, Oregon, and Alaska which have all legalized cannabis for consumption by adults over 21, and in 2016 a number of states on both coasts are set to follow suit. Because the re-introduction of cannabis as a commodity has come so quickly in recent years, and because the plant impacts so many different markets, many have been tempted to call this a revolution. The overturning of an old system to build something completely new. This idea that cannabis means building an industry entirely from scratch, however, is neither necessarily true nor truly necessary. The building blocks for a successful and sustainable legal cannabis industry exist all around us; we just need to shape them to fit our needs.

Technology is changing the world and rather than having to modernize old systems the cannabis industry has the opportunity to build its infrastructure around cutting edge ideas.

This isn’t to say we shouldn't innovate or that pure creation isn’t needed – both of these things are essential. Technology is changing the world and rather than having to modernize old systems the cannabis industry has the opportunity to build its infrastructure around cutting edge ideas.  Our workflows will grow up around seed-to-sale software like BioTrack THC or MJ Freeway, and our database of information is already being shared and codified on websites like Leafly, Project CBD, and CannaRegs, or through apps like Growbuddy. Additionally, the industry faces unique legal challenges that it will need to overcome, such as the tax burdens associated with 280e, the limited access to banking that forces business to be handled in cash, or advertising limitations in print, broadcast, and on social media that other legal businesses do not have to deal with. It will take real ingenuity to fill these needs and overcome these obstacles, but with focused imagination the solutions to these problems will become the foundation of the industry.

The majority of operations in a cannabis business, though, are not a matter of pure invention. They are a matter of harnessing decades of experience accumulated in other industries and applying it to the cannabis space. The skills and institutional knowledge involved in running a retail business – including staffing, controlling inventory, tracking sales, and logistics – apply to any product and differences between markets can be compensated for through standard research. We're finally beginning to get consumer data on cannabis sales courtesy of firms like New Frontier Financials but raw data is meaningless without the skill to turn it into actionable goals. This also holds true in fields like design and marketing where underlying skills and best practices have been honed over time by countless professionals and only require educated tweaking to apply to cannabis. Business development, strategic planning, and brand development in cannabis don’t require a seismic shift from the standard approach; they only require a marriage of experience with the specialized knowledge of this market.

Though in a lot of ways legal cannabis is every bit as fresh and new as reports are stating, there are a lot of lessons we can learn by tapping the right experienced partners and doing research into existing solutions. The ground floor has yet to be built in this industry, but we don’t need to create a new hammer to build it.

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What Colorado's Near Billion Dollar Cannabis Year Means For the Industry

Where are all of these new sales coming from? Are they simply a recapturing of portions of the estimated $30 billion value of the illegal American cannabis marketplace, or is there more at play?

Cannabis is big business in Colorado, to the tune of $996 million in sales in 2015. In August of last year, after steadily increasing month-over-month sales, the state surpassed $100 million in monthly sales for the first time. This sales total in Colorado was a 42% increase over 2014, and in the industry as a whole 2014 was a 74% increase over 2013. This, despite the constantly dropping price per ounce in Colorado and Washington State. Where are all of these new sales coming from? Are they simply a recapturing of portions of the estimated $30 billion value of the illegal American cannabis marketplace, or is there more at play?

It seems unlikely that this constantly expanding consumer base is coming completely from black market buyers shifting to legal purchases. In fact, according to the Marijuana Business Daily Fact Book, states with medical or adult use dispensaries only 36% of cannabis consumers have moved completely from the black market to legal purchases. The report adds that 31% of consumers in these states have never purchased from the black market while the balance either purchase solely from the black market (17%) or purchase both legally and illegally (16%.) It stands to reason that as cannabis normalizes in states where it is legal customers unwilling to participate in the illegal market are coming to cannabis for the first time.

It’s generally true in consumer industries that casual, mainstream consumers contain vastly more revenue potential than hardcore consumers. 

It’s generally true in consumer industries that casual, mainstream consumers contain vastly more revenue potential than hardcore consumers. For example, despite the fervor of craft beer lovers macro-breweries still dwarf micro-breweries in total sales. Much to the chagrin of die-hard sports fans it’s often so-called “bandwagoners” that result in sold out games and increased merchandise sales. It’s becoming obvious that this is becoming true in cannabis as well. Even now, according to the Marijuana Business Daily report, 40% of non-medical cannabis consumers are not daily users.

The cannabis demographic is expanding, and it’s inevitable that we’ll see increased interest from professionals to homemakers. It’s up to industry professionals to create a marketplace that is appealing to these consumers. 

We know that the market is increasingly appealing to older consumers, and that more and more women are participating in cannabis. The cannabis demographic is expanding, and it’s inevitable that we’ll see increased interest from professionals to homemakers. It’s up to industry professionals to create a marketplace that is appealing to these consumers. The cannabis culture market will certainly continue to be vibrant and lucrative, but the true potential of the legal market can only be tapped through increased participation. 

This means increased thoughtfulness in image rehabilitation and branding, and it means taking an active role in establishing industry regulation. It means leveraging traditional business experience when it comes to retail, logistics, and strategic planning. It means building a forward-looking industry based on professionalism, reliability, and established best-practices. By developing a consumer base that includes every demographic in the country converting the $30 billion illicit cannabis market to legal sales will just be the beginning.

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