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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Medical Cannabis Sees Overwhelming Support in Key Swing States

Support for legalizing medical cannabis in the bellwether states of Florida, Ohio, and Pennsylvania is at or near 90%, according to a Quinnipiac poll released on October 8.

Support for legalizing medical cannabis in the bellwether states of Florida, Ohio, and Pennsylvania is at or near 90%, according to a Quinnipiac poll released on October 8. With 87% of Florida voters, and 90% of voters in Ohio and Pennsylvania approving of medical cannabis it is easy to see why most industry experts predict that both Florida and Pennsylvania will have medical cannabis laws on the books by the end of 2016 - indeed the Pennsylvania legislature may pass a bill before the end of this year.


Though support for medical cannabis is incredibly high in Ohio the state is not predicted to pass a medical cannabis law soon because the ballot initiatives projected for 2015 and 2016 are for fully regulated personal use for all adults over 21. The Quinnipiac poll also offered some numbers for each state regarding legalization of personal use.

Florida

Florida voters are narrowly in favor of legalizing personal use of cannabis at a rate of 51% in favor to 45% against. Men were more likely to be in favor (57%) than women (49%). It's unsurprising that the 18-34 age demographic showed the highest support (66%), though it is a bit surprising that the 50-64 age group showed higher support (55%) than the 35-49 range (52%). Voters 65 and over remain the only demographic still opposed to the legalization of the personal use of cannabis for adults at 56% against.

Ohio

Ohio voters support legalization of the personal use of cannabis at a rate of 53% in favor to 44% against. Men are more likely to support full legalization (59%) than women (47%). The age breakdowns, when compared to the 53% approval rate, reveal the greying of the state. 70% of the 18-34 age group in Ohio supports the full legalization of cannabis along with 59% of voters aged 35-49. Only 50% of voters aged 50-64 would vote for personal use, and again voters over the age of 65 are the only age group opposed to legalization with 64% against. 

Pennsylvania

In Pennsylvania voters are still narrowly opposed to full legalization with 49% of voters against and only 47% in favor. Once again, men are more likely to support legalization (52%) than women (43%). Voters 18-34 are the most in favor (66%) followed by the 35-49 demographic (51%). The 50-64 age bracket in Pennsylvania is largely undecided about the legalization of the  personal use of cannabis with 48% in favor and 47% against, and the 64% of voters 65 and over are opposed.

It's important to note in all of these cases that even though the numbers are very close in all three states, 65% of respondents reported that if cannabis were legalized for personal use they would not personally consume it. This means that a significant percentage of voters that are in favor of legal cannabis don't even have an interest in consuming the product. Whether it be because of the social justice aspect, the extra tax revenue legal cannabis brings, the monetary savings from not prosecuting and incarcerating non-violent consumers, or the efficacy of medical cannabis, voters in swing states are beginning to favor legalization even if they have no direct personal stake in the matter.

Political pundits often look to polling in these three states to try and predict the outcome of national elections and to spot national trends. This isn't necessarily because these states are policy leaders, but rather that the opinions and moods of these states represent the median of the country - populations that are equal parts conservative and liberal. With approval ratings like these from the American middle the next few years should be very exciting for legal cannabis.

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Benefits of an Investment Fund in the Cannabis Industry

It’s certainly possible for savvy individuals to navigate this avalanche of information with a lot of time and work. For others, though, an investment vehicle such as a diversified investment fund could be the key to mitigating the risks of cannabis investment.

There are tremendous opportunities to be had in the legal cannabis industry. If you’re reading this then you’ve probably seen the numbers: $2.7 billion market value in 2015 behind 74% growth in 2014 with an ancillary market that could be three times the size of the market of the plant itself. These enormous positives obviously come with some challenges, and while all investments involve some degree of risk cannabis investment definitely has some unique hurdles. How can a new investor make sense of the variance in state and local regulations (or lack thereof), 280e, and the trials of an emerging market? It’s certainly possible for savvy individuals to navigate this avalanche of information with a lot of time and work. For others, though, an investment vehicle such as a diversified investment fund could be the key to mitigating the risks of cannabis investment.

 

Benefits of a Fund:

Diversification

A diverse investment portfolio is important with any kind of investment. With the uncertainties and exploding competition in the cannabis industry, diversification is a necessity. Companies now are generally looking for minimum commitments anywhere between $50,000 to $200,000 so someone looking to invest $200,000, for example, will not be able to participate in enough investments to achieve real diversification. Spreading the risk among 8-12 companies would be ideal, and pooling money together in a larger funding vehicle allows for that without individually having to put up a million dollars or more.

Term Sheet Negotiation

Investors aren’t the only ones that see the opportunity in cannabis. The individual companies see the coming years as more lucrative than anyone else, and they have put in the sweat equity to prove it. Consequently their valuations often reflect a lot of potential value that can be much higher than actual current value. Individual investors – again around that $50,000 to $200,000 point – might not have the negotiating power to secure a better valuation which means their dollars would purchase less equity and/or lower return. Once again, pooling money into a larger fund creates advantages, this time in leverage. A single entity controlling a large investment amount will have more negotiating power than several smaller individuals.

Expertise/Resources

One of the things that makes the cannabis industry so potentially lucrative is that it touches so many other industries: software development, technology, agriculture, retail sales, research, etc etc. It would be very difficult for an individual to amass expertise in all of these fields along with having the financial experience to evaluate the business side of each company. Additionally laws across the nation are constantly shifting. Researching and vetting companies and keeping up with the industry is a full-time commitment, and vehicles whose principal occupation is investing in this sector exist to handle this work.

Deal Flow

There are good companies in the cannabis industry, but finding them can be like looking for a needle in a haystack. You often have to sift through hundreds of companies to find ones with the idea, the team, the experience, and the plan to make investment worthwhile. Research, going to conferences, making connections, and being a public enough face that good deals search for you is yet another enormous commitment of time and money.

 

Considerations of Investing in a Fund:

Management Fee

Expertise, travel, accountant fees, and legal fees are necessary expenses and with investment vehicles these costs are paid by the investors, usually in the form of either a budgeted fee or 2% of committed capital.

Decision Making Authority

In addition to the management fee, the benefits listed above come at the cost of some authority as to which companies will be selected. Individuals obviously have 100% of the decision making power with their dollars, but once money is committed to a fund some of that is ceded to the firm. This may not be a negative, however, as the investor is able to rely on the firm’s industry knowledge and expertise.

Illiquidity

Committed funds are not liquid investments. Once the capital is called it is often working – and inaccessible – for a period of three, five, eight or more years. Investors should understand this before putting money into a fund.

 

As mentioned earlier, individual investment is absolutely possible, and groups like the ArcView Investor Network take care of a lot of the research and deal flow legwork – for a cost. Folks with the time to commit, a large amount of money, and a larger appetite for risk are certainly able to have an impact in funding in the cannabis space. For those with interest and capital but without the time and the expertise there are already several options to help you participate in the industry without sacrificing your piece of mind.

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Salveo Capital Hosts Two Lunch Seminars on Cannabis Investment

Marijuana-focused investment firm Salveo Capital is hosting two lunch seminars for people interested in learning about the current state of the legal cannabis industry. The events will take place in Chicago on September 2 and September 16 from 11am - 1pm. Stop by for a primer on the challenges and great opportunities available in legal marijuana.

Marijuana-focused investment firm Salveo Capital is hosting two lunch seminars for people interested in learning about the current state of the legal cannabis industry. The events will take place in Chicago on September 2 and September 16 from 11am - 1pm. Stop by for a primer on the challenges and great opportunities available in legal marijuana.

R.S.V.P. today as space is limited. 

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Recapping the First Salveo Capital Investment Summit

Salveo Capital hosted its first Marijuana Investment Summit last Wednesday in Chicago. A packed room of curious individuals spent the day learning about the potential opportunities and potential pitfalls of investing in the legal cannabis industry.

Salveo Capital hosted its first Marijuana Investment Summit last Wednesday in Chicago. A packed room of curious individuals spent the day learning about the potential opportunities and potential pitfalls of investing in the legal cannabis industry.

In the opening address managing principal Alex Thiersch spoke on the enormously bright future for those who get into the industry now, before the ground floor has even been built. His talk ranged from the fledgling nature of business infrastructure, to the very recent influx of individuals with past successes in non-marijuana industries, to the changing demographics of the cannabis consumer. 

Though the industry experienced 74% growth in 2014 and legal cannabis sales represented a $2.7 billion market last year, Alex said that these numbers were only the tip of the iceberg. This "green rush" could be an amalgam of the gold rush, the oil boom, and the end of alcohol prohibition all in one.

Scott Miller, Salveo Capital's Chief Financial Officer, then presented on the state of the legal marijuana market. He outlined the history of the marijuana business in the United States from the Marihuana Tax Act of 1937 to the Controlled Substances Act, all the way up through the Colorado medical and adult use markets of today. He described how these laws shaped the market today, and how the transition to legality has played out so far.

Scott spoke both as a member of the Salveo Capital team and as someone who has personally been researching investment in the cannabis industry, and gave an investor's look at the qualities of the companies and the types of deals available right now.

 

Director of Communications Eric Atienza spent the next session walking through the current federal and state legal landscape, and briefly projected how that landscape might change over the next few years. He spent time going over the implications of the Cole Memo and the FinCEN guidelines before touching on the Rohrabacher Amendment to the House spending bill, and bills currently in committee in Congress.

He then went into a quick breakdown of the current states with medical and adult use laws, and which states were the most likely to adopt new legalization laws through 2016.

 

The final presentation of the morning featured managing principal John Dohm explaining the benefits and considerations of investment as an individual versus as part of a larger investment vehicle. From liquidity to diversification to negotiating strength, John described the differences between various ways of investing in marijuana.

He also touched on a few of the other firms in the space, and the pros and cons of those models versus those of a committed fund.

 

The afternoon session opened with an introduction to the Salveo Capital team and a breakdown of its particulars. Alex and fund attorney Gary Jungels went over the history of Salveo, its accomplishments, and its legal structure. Three of the best up-and-coming companies in cannabis finished the day, showcasing the increasing sophistication of the cannabis space and the sort of savvy, professional, successful individuals that are now entering the marketplace.

The goal of the Salveo Capital Marijuana Investment Summit was to answer questions about investment in the burgeoning marijuana industry. At a time when there's so much change happening at the state and federal levels, and when there's such a dearth of information available to potential investors seminars like this can do much to allay fears and build the financial base of the legal cannabis industry.

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