Q&A with the co-founder and managing partner of Poseidon Asset Management
By Omar Sacirby
Emily Paxhia got to know what makes a company great while serving as a brand consultant for 10 years. She worked with household names like American Express, PepsiCo, Time Warner and McKinsey. In 2013, Paxhia brought her business smarts to the cannabis industry, teaming with her brother, Morgan, to launch Poseidon Asset Management. The San Francisco hedge fund invests in marijuana companies. Poseidon has about $25 million under management and has deployed about $20 million. It has invested in some 30-plus companies – and netted a string of industry awards for its performance.
What is the best cannabis investment you’ve made?
We have made quite a few investments of which we are extremely proud. We love the technology platforms that support the industry. Companies include Würk, Headset, Baker, Flowhub, Meadow, etc. We are also proud to work with some of the strongest in California, such as Flow Kana and Sparc.
What is the biggest cannabis investment mistake you’ve made, and how did you correct it?
The only regret I have is not speaking up sooner when I thought something was not going well in a company. This has happened a couple of times, and only once was it too late to make the changes necessary to keep the company on the right track. It is a good lesson in investing to continue to work closely with companies, focus in on the corporate governance and stay on track of their updates and key performance indicators.
What is the best investing tip you can share?
Investing is about timing, sizing and discipline. I see a lot of investors who think that this is all like “Shark Tank” – they are stunned that after the capital is deployed the companies can face issues. Business is not easy, and startups fail. This is the reality of investing. We focus on making sure the size of the investment matches the risk in terms of company stage, exit options, industry verticals, etc. Headset would be a good example of this, with our analysis on timing, sizing and discipline. We started investing in data when the industry seemed to be prepared and open to work with companies to understand consumer trends and preferences. We invested initially a smaller amount with the team when they were very early stage and have invested more as they have grown and have demonstrated traction.
What sector, product, state or trend most excites you?
We continue to be excited by SaaS (software-as-a-service) companies. They have opportunities to scale and support the business infrastructure of this industry. Furthermore, we see there is the potential for some very interesting exits in these companies. We are very excited to see California open to adult use and are also watching carefully, as we know this will not be a frictionless event. There are some incredible teams in California, and this market stands to be very interesting. The Northeast is getting increasingly interesting with the activity in New Jersey and the potential for legislative action to unlock states such as Vermont or Connecticut.
What is your top goal for the coming year?
To continue to deploy capital to the best companies in the industry. We are raising our second fund for cannabis investing, so we are excited to get that capital committed and start investing in that vehicle as well. Our target is to raise $100 million, and we are aiming for our first close of $25 million in January 2018. We will be deploying capital from the new fund after our first close in Q1 2018.