Trends Watch: Cannabis
January 30, 2020
By Elana Margulies-Snyderman
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Vikas Desai, Partner, WelCan Capital.
What is your outlook for cannabis?
Cannabis is one of the biggest growth opportunities of our generation. We continue to remain excited by the fundamental growth drivers – popular support, medical research implications and recreational usage. We believe three main segments of cannabis will emerge: recreational, health and wellness, and pharmaceutical. While there have been short-term fluctuations in the market (especially in the publics), we think the long-term outlook on the industry continues to remain strong. There will always be short-term fluctuations with any nascent industry, so in our opinion, times like these make for interesting investment opportunities.
Which areas are most interesting and why?
We’re focused on early stage businesses – mainly seed and Series A – that are building the foundations and infrastructure for the industry. We believe this thesis has been reinforced as capital has shifted towards businesses that provide longevity and the rails for growth. Ultimately, while capital will always flow towards pure plant touching enterprises, we feel that ancillary sectors will continue to come into more favor as investors look for unique ways to get exposure to this space and move away from quick short term gains to long-term sustainability.
What are the biggest challenges you see in the space?
Ultimately, the pace of regulatory change is going to drive how quickly this industry grows. While adoption and support for legalization is strong, regulatory shifts, which are out of investor’s control, are required to enable industry growth. With regulatory change, the capital markets will open up substantially, driving growth and removing key obstacles that currently create friction in the space. Until that point, business will have to deal with challenges that traditional sector take for granted.
What keeps you up at night?
There aren’t many things that keep me up. We’re very confident with the regulatory pathway that the industry is on. The industry is always subject to change and volatility, so the unknown and what new developments are around the corner always forces us to focus on being agile and thoughtful as we deploy capital – both in how those businesses can deal with unforeseen challenges and developments in the industry. We’re fortunate to partner with great entrepreneurs who we feel confident in navigating these terrains.