“The best part of life happens out of your comfort zone,” says Paul Rosen. The founder and CEO of Tidal Royalty (the leading provider of royalty financing in the legal cannabis industry), Rosen has always been one to take risks on new ventures. Last year the self-described intuitive investor wowed us at Marijuana Business Daily’s Marijuana Business Conference with his insights about cannabis as an industrial force (see our CANNABIS issue for more). This year at MJBizCon, Rosen went even further, taking us not only to the cutting edge of cannabis just after the announcement of nationwide legalization in Canada – he’s based in Toronto – but explaining the secret to success in his hundreds of investments. Read on to find out what entices this green genius!
HONEYSUCKLE: You’ve built your career on being an intuitive investor. What has drawn you so strongly to the cannabis space?
PAUL ROSEN: At the outset, I want to say that it’s important for a lot of us in the cannabis industry who are making a lot of money to speak more openly about our own personal relationship to cannabis. And I feel like when I ask that question, a lot of cannabis entrepreneurs that I know always yell, “It’s not for me, I’m not a patient.” And I always think, “You’re telling the truth, but that concerns me a little bit. You should have some familiarity with the product.” I’ve now made it my mandate to say it’s not only that I’m in cannabis, but cannabis is in me. I guess I’ve been a version of a patient and it’s been really helpful in my life. Really helpful.
I had a kind of ADD growing up, when I was a struggling student… And then when I started consuming cannabis recreationally, because I didn’t have any idea about medical cannabis, it was near my matriculation in high school, my applying to university, and my marks shot up exponentially. [Eventually] I got into the best law school in Canada, University of Toronto. When I was 31 I was the youngest Canadian to successfully litigate a constitutional case in the Supreme Court of Canada.
Cannabis did many things for me. It helped my ADD, which it still does, and it resolves some social anxiety that I would have, and also I had a little bit of OCD. I’m not saying that you should go [and do it if you don’t want to]; all I’m saying is that I had no lexicon with which to describe my cannabis consumption without suffering from injury. When I was a lawyer, if I’d admitted I was a cannabis user, I would have been breaking the law. I would have been breaking my ethical code as a member of the Law Society [of Upper Canada]. I would effectively have been putting my entire livelihood at risk. We have a perception of a cannabis user based upon only the cannabis activists, the same way that we had a perception of a homosexual thirty years ago only because of the activists.
That’s interesting! You mean in terms of accepted stereotypes?
Well, thirty years ago, if I said let’s play word association, and I threw out some words and said, “Gay men,” I’m sure you would come up with something that looked like the Village People and Pride Parade. The activists! And that is part of gay culture, but it was the only part of gay culture that would put up their hand and say, “Yes, we’re here.” The other 98% of gay culture, which was anybody else you could know, waited [for certain stigmas to be broken].
Same thing in cannabis, with the idea of “pothead.” What does that word even mean? Most cannabis users are people of incredible responsibility – doctors, lawyers, lawmakers, teachers – but only the activists are the ones who identify with it.
I run marathons, I work 90 hours a week, I’m a parent, I’m obsessed with wellness and entrepreneurship and ambition and passion, and I am a cannabis user. Not all the time, but more than occasionally. And without it I couldn’t be as effective. I know I couldn’t. That’s for me. Maybe that’s my own endocannabinoid deficiency, but I feel really strongly – especially those of us that have done so well in cannabis, on the back of the activists, who are really the shoulders we all stand on. Let’s start talking more – let’s have a candid conversation about our own use. Let’s put stigmas to the side, and the only way to do that is to do it yourself.
Do you believe cannabis is at the core of humanity’s industrial future?
I think cannabis as an input will be unavoidable. You will not be able to avoid having cannabis in your life. You will have to make a monastic effort to avoid it. [Products] are going to be everywhere. Every beverage manufacturer is going to have a cannabis-infused beverage. They’re going to reschedule CBD when the Farm Bill passes.
You’ve got to look at now and the future. Now 33 states out of 50 have programs with access to cannabis. Inevitably it will be available recreationally and medically on a national level. Today cannabis is the product. In the future cannabis is will be an input into a whole range of consumer packaged goods. So the industry will change dramatically.
Would hemp seeds be in that category?
Yes. That is the sleeping giant of the cannabis industry. Not so much sleeping as waking up, getting up, stomping all over the place. Obviously this is a whole plant. Flower, stalk, and seeds. You can see how it’s going to become a dominant industry because it’s a threat to the paper industry, a threat to textiles, a threat to other durable materials, and the founding fathers grew this stuff!
I’m involved with hemp businesses in Virginia. It’s such a natural place to grow hemp, where George Washington lived. The agronomy is really, really good. So I see hemp and cannabis as twin pillars, wrapping their benevolent tentacles around the world.
We’ve been doing a lot of hemp research since we saw you last. The vast range of uses for the plant is extraordinary, for farmers and manufacturers and across many different fields.
I know guys in Tennessee, Kentucky and other places where they’re banding together indigent farmers that don’t have a cash crop anymore and they’re going to teach them to become hemp farmers and then put a giant processing facility in the middle of it. Some I financed myself. But these will become an economic driver for their communities and produce a better sustainable material and also produce full-spectrum CBD. So it could be the battery or fuel to power your car, your shirt, plastics, the cosmetics or other material you put on your face, the beverage you might drink as your replacement to wine or other alcohol.
So cannabis will soon be in all of us.
In the near future it will be very hard to avoid consuming cannabinoids. Once we separate what is the psychoactive from the non-psychoactive, therapeutic cannabinoids… I’m not saying it’ll be impossible, but I think we’ll find out in a casual way how it saturates the market.
I think it’ll be CBD especially. When you’re an insider, you always think the trend has reached its peak. It’s not. It hasn’t even started yet. You’ll see what CBD is like in seven years. It will be ubiquitous. CBD is going to be everywhere.
You know, there are about 120 cannabinoids and we don’t even know the benefits for all of them. CBN has many applications for sleep compared to other cannabinoids. So what I see is a series of discoveries that each, either in entourage with other cannabinoids or as an isolate, are going to be targeted as specific therapeutic or medical applications, and we’re really going to finesse them. We’re just getting over there. Right now we’re still obsessed with THC, CBD, and terpenes. There’s a whole emerging class of cannabinoids that haven’t even been to market yet but are going to replicate the CBD experience, which is anonymity to ubiquity in eight or nine years.
What about Canadian legalization?
It’s all kind of predictable. Everyone knew that we were going to launch with a supply shortage. There is just not sufficient capacity yet for the size of the market. Everything is a matter of public record. All the licensed producers have to report their inventory through their seed-to-sale tracking software which is monitored by the government. So we had all the numbers. We had a good idea that demand was going to be robust, and not surprisingly, demand exceeded supply. And that’s not a bad thing. That means that people are embracing the market, they’re coming in. They’re actually showing an openness to transition from the black market to the regulated legal market, and that’s great. That’s exactly what we want, and if there’s a supply shortage, this too shall pass. So it was a tremendous day for the global cannabis industry. And you’ve got to separate what’s happening from the day-to-day machinations of the stock market. If you look at the stock market, you’ll think legalization was a giant disaster. In no way was it. The fact that we were sold out of product isn’t a disaster at all. It means there’s a demand for our product, and it is a long term bullish indication as to how lucrative the legal market will be.
We’re going to massively expand our production and meet all that demand and it’s going to be a great success. It’s going to help inform those looking in from outside the bubble, wondering what legalized cannabis looks like at such a national level, and it’ll show it looks good. It’s the only way.
They just recently released a study about Colorado six years later and it was like 240 pages. It meticulously went through impact on teenage youths, automobile accidents, opiate addictions, on everything. And it ultimately proved that all the fearmongering about the decay of a civil society was just that, fearmongering. There was really no decay. And teenage use was not up, which was the most important thing in my opinion. Once you show that teenage use is not up, there goes that.
So that’s what Canada will show. You will not have any disturbance of our peace, order, and good government.
As an investor, what are your thoughts about wealth disparity in cannabis going forward?
I think it’s like any industry that’s receiving tremendous global attention. Early on, you’re going to have some companies and individuals who are really able to advance strategies to significantly improve their wealth-earning abilities and others are going to not have those skill sets. You know, capitalism is not always unfair, but it can be rather brutal in its efficiency. As long as it’s a meritocracy, you have to accept a few basic rules of our free-market society. I do. There’s times in my life where I haven’t been on the winning side, but that’s okay. Those are the rules.
But we need to make sure the people who did the real hard work of participating in this industry before it was this phenomenon, before it was legal, that are trying to get in. We need to let them in.
We have to, we need to, share the bounty a little bit. If I’m the CEO of a company and my responsibility is to my shareholders, I need to hire the best people. And if they’re super-fresh Ivy League kids with the best educations, and then there are people who’ve spent ten or twenty years putting their life on the line and they’re not the best person for the job, unfortunately my shareholders don’t care about that [sacrifice]. They want me to hire the best people to increase everyone’s share. That is what my job is.
Ultimately I view it that there is a social consciousness to our industry; there are a lot of people that are passed over, but it’s capitalism. Subtitle winners and losers. That’s how it works.
Last year you said how rewarding it was for you, as an intuitive investor, to counsel Millennials and Gen Z entrepreneurs. What are you seeing now?
Oh, it’s so rewarding. The people I see every day are idealistic, passionate people coming out of the rafters. It’s not so much targeting a specific age group, it’s that that’s where the good ideas are coming out of, and I’m a person who gets behind ideas that can build organizations.
But generally my metrics have not changed. The only thing that’s changed since I last spoke to you is that I’ve made another 70 investments in cannabis-related companies, and it’s always the same thing. I meet an entrepreneur, I get to know them, and before I look at their financial state – I can’t explain it, but I get a feeling, an almost irrepressible feeling, that you’re going to be successful. It’s almost like precognition. That’s happened to me so many times and I’ve almost never been wrong. My success rate in identifying great early stage companies, and the return that I have been able to earn on my own capital as a consequence, has been pretty seismic.
That intuition comes from years of running my own businesses, of taking an advisory role in other businesses, and really understanding what separates a winning idea from a – I don’t want to say not winning, because everybody has different standards of esteem – but you start to see some patterns among really successful people, the Highly Effective Habits or whatever.
I could probably codify it into a process where an investment banker would say to me, “Let’s try to unpack what you do because it can’t be luck. But we don’t fully understand your process. How do you know?” I don’t know; I just know. It’s not in the financials. It’s the industry, it’s the people, some upward momentum on their revenue and their penetration. It’s really that the entrepreneur has that look, that zeal, that almost evangelical spirit, that live-breathe-eat-sleep, that failure just cannot happen. So I say that entrepreneurs are like artists. They’re very similar. They’re really the two constituencies that I think that I can relate to.
I’ve seen artists that are stubborn, fixable, idealistic, obsessive, all these things, and creative. We’re creative people. My one métier, if you will, is make businesses, which I do very creatively. Once it comes to operation, that’s when I replace myself. Because that’s something I could do but I don’t have any passion for. I like to start things and build them; I like to find other companies and help them build.
My favorite journey is from idea to the first couple of years. That’s when it’s great. Tidal Royalty is just over a year old. 16 months ago we had no committed capital, and no staff. Today we have raised over $40 million, have seven amazing full-time staff, are publicly traded on the Canadian Securities Exchange (CSE), and all that was borne from an idea. From that little spark comes all this economic activity. People have jobs. Economic activity is being created. A tremendous pipeline of opportunity has been developed, and we are intelligently deploying our capital to promising companies that will create additional social and economic benefits.
So that’s the thing I’m obsessed with, that spark. When I see the spark, I’m in.
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Stay tuned for the latest updates on the cannabis and hemp communities, plus planetary wellness and holistic thinking, from Team Honeysuckle! Our issue ONE is now available in Barnes & Noble locations nationwide! Find the store nearest to you through our Locator, purchase copies on our site here, through our app for iTunes here, or our Zinio digital storefront here.