Recently, Honeysuckle and Honey Pot had the honor of attending The Arcview Group’s biannual Investors Forum in New York, hosted by the world’s oldest and most prominent cannabis investors organization. In attendance at this groundbreaking event was a community of high-net-worth individuals, institutional investors, leading brands, entrepreneurs, money managers, and a couple of large multi-state cultivation, processing, and dispensary operators. While there, we had a chance to sit down with Randy Maslow, a co-founder and President of iAnthus Capital, the pioneering and publicly-traded cannabis investment and multistate operations firm that has become one of the leading change worthy companies in the industry. Maslow spoke about his experience as a long-time Arcview member and the conference’s evolution to the present.

HONEYSUCKLE: How long have you been coming to Arcview? From the very beginning?

RANDY MASLOW: Pretty close to the beginning. I joined Arcview in maybe 2013 and I think I was a member for maybe three or four years in a row. Given the size of iAnthus and my schedule, it’s a little difficult to make all the conferences now. But Arcview was pretty much my introduction to the regulated cannabis industry. I learned a tremendous amount from the industry pioneers who made up much of the original Arcview membership. Since that time, the group has become much larger and the profile has changed over the years, Today, there are many more what I would term professional investor types, representing other people’s money rather than just angel investors investing their own money. You also see a lot of ancillary professionals now working to generate business and clients, a lot of lawyers, for example.

HS: And a lot of the bigger venture capital firms, too.

RM: Well, the traditional VCs as we know them, or private equity firms that are specializing in the regulated cannabis industry, they are still few and far between, which is part of the problem. The lack of sophisticated institutional money in this industry is what makes it unique from high growth industries I’ve been part of before, particularly the internet and tech businesses where we had access to sophisticated venture capital right from the startup phase. As a result of the lack of startup capital in the cannabis industry, we had to access the public markets in Canada to raise the kind of capital required to expand operations into the eleven states we are in today. We were the first of the multistate operators in the U.S. to go public in Canada. A boatload of operators have since followed suit. So now you have a lot of US cannabis public companies up in Canada, but this is a retail investor-driven market. Individuals and day traders and the like, and not so much in the way of institutional funds. And that’s why I think we get some of these wild swings in the stocks that are not justified, from the irrational exuberance of past years to the irrational pessimism of the current market cycle.

HS: The down cycle in the public markets in Canada has generated a lot of attention here this week.

RM: You frankly just can’t justify some of the low valuations we are seeing out there today, unless you believe that the legal cannabis industry is going away, and I don’t know of too many people who believe that. Don’t get me wrong, some of these public companies are not going to make it, either because they can’t raise capital to get to breakeven or because they can’t compete, or both. For our part, we’ve put together a phenomenal operations team and intend to put our noses to the grindstone and execute our business plan. And the stock price will take care of itself. I don’t think there is any doubt that cannabis is going to be fully legal at the discretion of the individual states before long, and the companies that can compete and grow their businesses prior to that time are going to be wildly successful.

HS: What’s been for you the most impactful change that you’ve seen from Arcview, then to now?

RM: Well, we are for the most part not looking at the companies that the Arcview members are investing in, which are mostly earlier stage ancillary companies. But my guess is that it’s probably a lot harder today to get on that stage and pitch [at Arcview] because the quality of the startups is higher than it was years ago. I think in the early days of cannabis a lot of guys got financed because they were just first in a given market segment. Now you have many more startups piling in, so I think the quality of the applicants is bound to rise. And on the investor side, there are many more “professional” investors managing pools of other people’s money versus the true angel investors. Even Arcview itself has been putting together an internal fund that Jeanne [Sullivan, Managing Director of Arcview] is running. I’ve known Jeanne more than 20 years, from back when she co-founded the VC tech fund Starvest and we organized an angel investing program for tech startups here in New York City in the early days of Silicon Valley. So Arcview is raising its game now as well by creating a fund and bringing on an experienced professional to run it.

HS: From your perspective, being somebody who attended the conference regularly in past years and has such a presence within the cannabis community, what else has changed since the earlier years of Arcview?

RM: Social equity initiatives and criminal justice reform have become an integral part of the discussion in our industry, and that’s how it should be. Social equity has now become a mandatory part of your business plan. As you heard Axel Bernabe from Gov. Cuomo’s office say this morning, the entire U.S. regulated cannabis industry has been created by state regulation, and it differs in every single state with a medical or adult-use program, which is something that new investors to the industry sometimes fail to appreciate. To achieve your business objectives, whether it’s winning a license or, if you have licenses, getting an adult-use, or getting approval to open up in a given municipality, you can’t get anything done without being asked what you are doing to help address the historical disparity and the fundamental unfairness of what happened to communities disproportionately impacted by the War on Drugs.

And it’s a big part of what we’re doing now at iAnthus, as with many of the other multistate operators. We’re now looking for our first social equity director and we are committing significant internal funds to develop these programs both on the economic empowerment side and also on the criminal justice reform side. And you can see how this movement has become a central part of the discussion just by looking around here. Last night at the [Arcview after-party], there were a lot of people present who are involved in the social justice movement and social equity community from New York City and upstate that were there either as members or guests of Arcview. That’s something I don’t remember really seeing five years ago, four years ago. It was pretty impressive actually.

HS: Yesterday your partner [iAnthus Chief Strategy Officer] Beth Stavola was saying that all the MSOs [multi-state operators] want to go where branding is.

RM: Oh, absolutely. This is a consumer packaged goods business, and the battle is to create brands that will have pull-through demand at the retail stores, brands that consumers will ask for by name. Obviously some of us will end up creating successful retail store brands, but for the most part, it’s [creating retail chains] really a means to an end, something you have to do to get your branded products out there into the market. You saw Bloom Farms up on stage here today. Bloom Farms does a great job in California; they have quality products and they get those products on the shelves of many retail stores in California through wholesale arrangements.

In some markets like Florida, however, wholesaling is not allowed—you can only sell the products you make. This is made a little more bearable by the fact that you are allowed to open up so many dispensaries in Florida with a vertically-integrated license. But the more typical regulatory system looks like New York or Massachusetts, where you are limited to opening a small number of retail stores but have the ability to wholesale your products to other retailers and achieve wider distribution in that manner. I mean, how many successful retail cannabis chain stores are there going to be when it’s all legal? It won’t be anything like the vast numbers of dispensaries or adult-use stores out there now. A few large chains maybe and some mom and pops and small chains depending on the state’s regulatory structure for that market. Right? So the game is really is about creating quality branded consumer packaged goods and getting as wide distribution as possible, whether through your own retail outlets or through wholesaling to other retailers.

HS: So would you say that within the Arcview experience, is this still really the place to go if you’re looking seriously to invest in the space?

RM: Yes, Arcview is a great place to start, especially if you’re an angel investor. It seems to me it’s always been a good value proposition for how you get exposure to investing in the cannabis industry and for learning the basics. Arcview is certainly a cost-effective introduction to cannabis investing and provides a valuable screening function for you. For every company you’re seeing present here on stage, there [were] probably a hundred that didn’t make the cut and were screened out by Arcview members who know a lot about the industry already.