When Ankur Rungta sought skills to fulfill his ambition of breaking into the cannabis industry, he didn’t study cultivation or extraction. Instead, Rungta joined a top tier corporate law firm — and later a Wall Street investment boutique — where he sharpened his legal, finance and M&A chops.
That gave him the expertise to launch Michigan-based C3 Industries, a vertically integrated cannabis company that he has taken into four states and going for more.
How did Rungta survive the challenges that finance and law couldn’t prepare him for in the cannabis industry?
- Surrounded himself with top talent, including the former chief cultivator of Green Thumb Industries.
- Made quick decisions rather than dawdling when new opportunities arose.
- Focused on premium brands and found they did well even in saturated markets.
- Eschewed imposing a national approach on local markets, but respected local cannabis cultures.
Ankur Rungta is a legal and financial professional having worked at Sullivan & Cromwell and then Moellis & Company, as well as a cannabis enthusiast on the personal level. He twined those two worlds two launch C3 Industries, a Michigan-based cannabis company with vertical operations in four states, and growing. In addition, Rungta is co-founder Nickel City Pictures, a motion picture company, and is vice chair of the board of directors of the Detroit Opera.
Welcome to Seed to CEO, the podcast about making your way in the cannabis business.
I’m Omar Sacirbey, veteran reporter with MJBiz. This week on Seed to CEO we’re joined by Ankur Rungta, CEO and co-founder of C3 Industries, a vertically integrated cannabis company operating in four states and hungry for more.
Rungta and his brother, both of them financial industry professionals, recruited the former chief cultivator from The Green Solution, creating a team that paired legacy know-how with business expertise. They started in Oregon, but relocated headquarters to Michigan, one of the hottest cannabis markets in the country. Since then, they expanded elsewhere. But the journey has involved learning some hard lessons, including not underestimating the challenges of new markets. But they weathered those early challenges and are now looking to grow some more.
If you have similar ambitions or your company is at a similar stage, then you’ll definitely want to hear our conversation with Rungta and our host, Chris Walsh. But first a quick word from our sponsor DCM.
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All right, and welcome back to Seed to CEO. I’d now like to welcome Ankur Rungta, CEO and co-founder of C3 Industries to the show. Ankur welcome.
Thank you so much, Chris, appreciate you having me.
Hey, we’re recording this on the last Friday of April. Aside from recording this podcast today, give us some color on what your day looks like. What have you been up to so far? And what do you got on tap?
Most of my days are filled endlessly with calls and meetings. So I think it’s similar to most days in that regard. I do have this evening, I’m my my son is eight, we’re going to his school charity auction. So that’ll be on tap for this evening. And then and then he has a soccer tournament all day tomorrow that I’ll be taking him to so we all try to transition into you know, being good fathers and spending time with our kids on the weekend.
Mine is the same — I have a daughter who just turned nine, and Friday nights and weekends are full of other kids’ birthdays and theater and chorale and choir. Y
Well, why don’t you give listeners an overview of C3? What’s your mission and strategic play? And where do you have operations?
C3 Industries was formed in early 2017. By my myself, my brother and a our third co-founder. Based in Ann Arbor, Michigan, we’re active today in four markets: Michigan, Massachusetts, Missouri and Oregon. We’re vertical in all four of those states. So we do cultivation, processing and retail. We have about 450 employees and are a private company; we’re hoping to expand into some more states beyond those for this year as we continue to grow.
Great. So you have a background as an investment banker and as a corporate attorney, what led you into cannabis?
You know, I think before I was ever an investment banker and a corporate attorney, I was always very passionate about cannabis. And, you know, I had the good fortune of going to undergrad and law school and in Ann Arbor, Michigan at the University of Michigan. And it was a really interesting environment, you know, where I think it’s really had been a hub for the industry and for the legalization movement for a long time. And so I’ve always been very personally passionate about cannabis. I’ve been around the industry kind of in its different iterations over time and then built a career in the corporate finance world but but really wanted to always make a play in this industry and, and was sort of awaiting the right opportunity and wanted to spend some years building the right skills first and in the corporate world before doing it.
I love that you touched on that because you know, we see a lot of people from mainstream professional backgrounds that have built careers elsewhere that then try to use those skills and transition to cannabis. So you mentioned you actually wanted to purposefully build a skill set that you could then use in cannabis. What were the skills that you developed?
My corporate career was, you know, half of it was as a transactional lawyer. I worked at Sullivan and Cromwell in New York. The other half was on the investment banking side also in New York. And so that was a pretty rigorous and intense five or six years. I did a lot of different work, different types of transactions. So that could be debt and equity raises or that could be M&A. I even did some restructuring. That gave me a really broad kind of exposure to different types of transactions to the capital markets world; I made a lot of good relationships during that time. And so in an interesting way, I think it really prepared me well to ultimately lead an MSO in cannabis, because as I often say to people, it’s a very heavy kind of deal making and transactional sort of capital and balance sheet management, heavy environment. And so, you know, a lot of the things that I did more in the kind of one-off transactional context are now what I do every day. Interestingly enough, I see a very linear path from my passions, you know, living in Ann Arbor as an undergrad, or, or law student to, you know, what I did in New York and to kind of come full circle. And, and interestingly, for me, when we started this business, we decided we would headquarter in Ann Arbor. So I came back to an arbor from New York and, and so it’s full circle in more ways than one.
I love that you have this bigger vision and then built up to it. A lot of people that start a cannabis businesses traditionally, if they took a path, like you’re talking about, they would have said, well, I’m gonna learn as much about the plant as I can or about cultivation, or about the product side, it sounds like you were really heavily focused on how do you run a good business? On the finance side and operations and scaling? How did you approach actual the other side of it? Where does that skill set come into play? And how did you develop that?
To be successful in this industry, in particular, within with a vertical MSO strategy, there’s a lot of different skills that are needed. And so in our group of three co founders, my brother and I have similar backgrounds. But our third partner, Joel, he built a career in Colorado, and in Denver, specifically and worked for many years at The Green Solution; his background was really in the kind of commercial cultivation and processing kind of arena. And he was, you know, had a unique skill set of designing and building out and then operating some of the first large facilities in in the Denver market. And so he fit in, in our minds very seamlessly with kind of the part that that we brought, which was more on the the capital markets, the real estate financing, you know, some of the other pieces of the business.
I think we always felt that the three of us brought very complementary skill sets into the business and covered a lot of the key areas, I think, where we didn’t have an expertise in retail, which has now become a very large part of our business. And so that’s somewhere that we brought in some really strong outside people. And really, in all parts of our business, we’ve really tried to bring in more and more specialized people with the right skill sets. In some cases, they’re from cannabis. In some cases, they’re from outside cannabis. And ultimately, like you said, we’re trying to build a long term sustainable enterprise.
And, you know, in this business, especially when you’re doing so many different things, you really need to have all the right folks otherwise, it’s not going to be successful.
Before it was, you know, a lot of people just from the cannabis space that were wary of outsiders or didn’t take the initiative. And then you saw business type people coming in, that didn’t necessarily want cannabis backgrounds, on their leadership team on their founding team because of the stigma. But we found after talking to countless people over the years, you know, this combination is absolutely critical. So I think your founding team, I think it’s rare, where you have all of these skill sets in one to cover all these bases. And I want to come back on the retail side. Tell us then about how what your first steps were? Did you you base this in Ann Arbor?
Our target markets were Michigan and Oregon, the company is actually based in Michigan, where I am, we were really targeting those two markets concurrently. It just happened to be that Michigan had about a year long delay in passing its licensing regime that made Michigan sort of second for us from an operational standpoint. But both of those were our early target markets. And, you know, early on, we had what I would call maybe a little bit of a naive view of how the these markets were unfold. And specifically, you know, we really thought that being a great operator producing the highest quality products would win the day no matter what the market environment was, no matter what the regulatory or licensing framework was in the state. And, you know, I think to some degree, we were proven out and that we were able to build, you know, a wholesale flower business in Oregon, which, you know, we’ve shown that you can be successful in very competitive markets. But I think we’ve also learned that even if you’re the very best at what you do, you know, market forces can become overwhelming sometimes. And so over time, you know, as we’ve expanded into new states, we’re certainly more aware of that. And it affects our planning and our thinking more than it did in the very beginning.
Let’s talk about Oregon because you talked about kind of underestimating some of the difficulties. Let’s talk about Oregon, you had a connection to that market. Was there anything else about it? What convinced you aside from that kind of local understanding or local connections to go into what proved to be a challenging market?
Again, it went back to our mindset in the beginning, which was different than pretty much all of our competitors where we weren’t thinking let’s go win the most valuable life. Since and write the best application, it was, how do we produce amazing flower and take it out into the market and show consumers, you know, what we’re all about as a brand. And so it’s really the opposite approach to many. And I think having survived that, and really kind of honed our skills and our approach to our business, you know, I think has given us I’d like to think an advantage over time, because we really came out of a different environment than a lot of the other MSOs. And we, as a result, it’s affected how we approach our business, our thinking, our strategy, and I think in a good way, and that we had to figure out how to build a fundamentally strong business in a really competitive environment. And so I don’t know that we really understood what we were getting into in that market, then having to work through that environment really sharpened us and hopefully prepared us for some of the growth and you know, in new markets that we’re seeing now.
If you don’t have that, almost those guardrails around what you’re doing, it’s easy to kind of lose your focus or rest on your laurels.
So it sounds like from day one, you had to be immensely disciplined. And can you give us a takeaway from your experience in Oregon and how you were able to successfully navigate that market? Is there a particular challenge or mistake that you made that you learned from that then set you up for the longer term success?
What we found is that even in that environment, really high quality flower, and really high quality products would still command a significant premium, we would still see regular sell through. And so our takeaway was that we shouldn’t change what we’re trying to do. Fundamentally, we should have a healthier respect for market forces and regulatory frameworks and all that. But if anything, we said, look, we’ve been able to make it here. And in a very difficult market, we were able to survive and build a profitable business still. And so I think it helped reinforce some of our thinking, honestly, but what it did sort of affect is our thinking around what new markets do we want to enter? It’s effected, I’d say less of our fundamental strategy and more of our market selection.
Is there anything that you look back on and say, There’s no way I could have been prepared for that cannabis is so different. So are there things where your skill set really didn’t benefit, what you were trying to do, and you just had to go through the school of hard knocks being in this unique industry?
It’s the level of competitiveness, I think, and the level of interest in the industry is really, I think, something that you know, it’s there, but until you really experience it in a market, like Oregon, or even Michigan now can be a very challenging environment to navigate. Because there’s inherently a gold rush sort of mentality around it, a lot of folks are going to throw their hat in the ring in any given scenario. And so you’re writing these market waves that you have to sort of be mentally prepared for, and then you have to make quick decisions often. So I think it’s a mindset shift. It’s a recognition that it is an incredibly competitive and fluid environment. You know, I was, you know, used to coming out of the more traditional corporate world, but nothing like the pace of what I’ve seen in cannabis. And so, you know, just getting used to that pace, and then, you know, being ready to take risk and make quick decisions, when that’s what’s needed.
Is there an example of an early decision that you all made where you were, you were outside your comfort zone, and how quickly you had to do it, but you did it anyway and it turned out to be the right move?
I think there were some maybe some missed opportunities early on, what I think back to is there were points in time early on where I was, you know, raising capital, you know, primarily to kind of support our organic step by step process of turning on this new asset or this new state. And, you know, I probably could have been more aggressive in raising more capital and attacking some of the newer markets that were opening up. And, you know, hindsight is 2020. But we’ve certainly seen, you know, how some of these limited license states have played out over time and the value creation there. But on the flip side, I also turned down opportunities to take certain capital, you know, there were folks that thought we maybe should think about going public, you know, earlier on and, you know, I think in hindsight, it’s great that we didn’t do those things. And I think we managed to not have a short term perspective imposed on us, you know, by virtue of decisions we’ve made, and so we’re able to still take a long term view, we’ve got great private investors and supporters that are willing to give us the runway to really take this thing out the right way.
We’re seeing over the past four or five years, people who founded the industry came more from the cannabis world now you have people like yourself coming in from corporate finance. Did you did you feel there was that was a challenge? Was there a negative perception? Who are these guys come in, you know, these suits coming in?
It’s part of the nature of the industry and the culture around cannabis. And I think I actually don’t completely have a problem with it. Meaning, I think that it is important that people that are in this space have done something to earn their place here, and I don’t, but I do think consumers want to know who they’re dealing with, what their motivations are, what their background is. And so, for us, I think what ends up happening is because we had you know, careers in the corporate world We’re always battling a perception of where we fit into the spectrum of different companies out there. And so it is important for us, you know, I always make a point of telling people about my history and the business, my history with the products, because I do think that we are, you know, there’s a spectrum of, you know, different types of companies out there, you know, and one end of the spectrum is, you know, purely suit driven and capital markets driven, you know, that’s not us. And so I always want to make that very clear to people. And because we are, you know, long term, we’d like to build really authentic, you know, high quality brands in the space. And it’s a very noisy brand environment. So I think it’s a fair sentiment, and we just always have to be smart about how we present ourselves. So people recognize that, you know, we’re not just suits.
So you learned a lot of lessons in Oregon. And meanwhile, you were gearing up for the launch in Michigan, what did it take for you to get going there,
it started different, I think it’s become more like Oregon in recent times, and we can talk about that. But, you know, this is where I live in our home state. And it was, there’s always something special about standing up a business like this in your home market, we’d certainly learned a lot from Oregon. So I think there was some version 2.0 of everything that was better and more thoughtful and more optimized. And so we did end up building a similar facility here, it did have some improvements, it was also ground up. So we were able to, you know, launch our product business here. I think with a lot of success, really that focused on high quality flour, high quality concentrates, we’re not going for massive volume, we’ve tried to bring that same high quality product mentality here, built out a large retail business here, which is, you know, been exciting for us, we’ve got eight stores open here, currently, we’ve got another six that are opening by the summer. So we’ve got a pretty meaningful retail presence here. And, you know, we it was the first time that we really put our full vertical model into play, it’s really kind of the model that we want to take into any new state that we’re going into. And that’s what we’re doing in both Missouri and Massachusetts, where we’ve got, you know, a fair amount of retail as well as production and you want to have a meaningful presence and all the markets that we’re in, we don’t want to just have a shallow presence in any market. And so, you know, Michigan was our first test case of doing that, and it’s gone, you know, pretty well in the way that we’d really hoped. And so, Michigan has really been our proving ground on the retail side as well. And so, in our minds, we built, you know, pretty strong, healthy businesses, with the right people both on the retail and the production side. And so if we can keep doing that, rolling it out to new markets, we think it can be a pretty powerful model.
Let’s talk about the Oregon and Michigan to jus when licenses yourself there, or did you acquire them? Yeah,
that was all organic, and pretty much everything that we’ve done, other than a couple of retail deals. You know, we have 22 retail stores in our portfolio. A couple of those were acquisitions. But everything else in the four states has been largely organic, licensed wins.
Let’s talk about how you moved into the retail side, what steps did you take? What kind of people did you bring on? And what what did you learn about that process, because to your point, this whole vertical integration format, and structure can be really good if you do it, right. But you’re involved in lots of different things, needs lots of different skill sets. And we’ve seen a lot of companies that maybe they’re great at the cultivation side, but they fail on the retail side, or they’re not doing well, or they don’t understand the production side very well. So their strengths aren’t evenly spread out across all parts of the supply chain. So how did you build the retail side? For us,
you know, retail started really with me sort of looking at interesting opportunities around Michigan and Michigan is a state where retail licensing happens at the local level. And so it’s very much a real estate zoning land use type of, of a game and very much about ground game, meaning you have to be aware of what’s going on in these communities, how they’re approaching cannabis licensing, where the right sites are how to get through these processes. And some of these processes can be challenging or contentious, or whatever it may be, it was really about starting to dip my toe into those processes and then begin to participate in them. And, and I think the sort of the folks in Michigan that have built the strongest retail portfolios have been able to, you know, go around and win or obtain these sites and licenses in different communities and then build businesses, you know, on top of that, and so that was really the process that we went through. It was a huge learning experience. For me. I mean, even with my time as a lawyer that was really more in the transactional world that was not, you know, directly in real estate and land use the way that you have to be in these processes. And so there was a learning curve, but but I also found again, that my background, my skill sets were pretty, pretty well suited to for it. And so we’ve, you know, operating these stores has its own set of challenges. And it’s not a market where you can just open a store and there’ll be a line around the block because there’s no competition. It’s really the opposite of that. And so, for us it’s been dialing in every piece of it. So operations at the store level customer service merch indicting an inventory, we’re very focused on managing that correctly, the marketing side of it is incredibly important. So having your full playbook of digital out of home, whatever it may be, whatever your strategies are, we’ve really built up, you know, a team around, you know, each of these areas and really tried to, you know, again, create that full playbook for retail, a lot of what we see is that people open a lot of these retail businesses maybe don’t have their full playbook. So once again, it’s forced us to build all these teams skill sets, resources to hone our, our kind of retail craft, if you will, in a really competitive market. And then, you know, now we’re hoping, you know, as we’ve done that here, you know, we’re in markets like Missouri, where it’s more of a fixed license environment, and, and not quite as competitive. And hopefully, we can, you know, see a lot of success in places like that,
in terms of location, what’s your approach there? What are the key ingredients? Whether it’s a specific town or city, or a specific building or block? What are you really looking for when you’re saying, Okay, this is where we want to be,
you know, it’s interesting, again, in Michigan, site selection for cannabis is very different than in a traditional industry, because of how tight the zoning is because of how it’s, you know, can be regulated different ways, from community to community. And so, so you’re, you’re kind of picking the sites that you can get. And so there’s a mix of traditional thinking, and then, you know, more cannabis, sort of, you know, zoning and regulatory type of thinking involved. And now with that said, I will say that in the larger rec markets, the larger markets generally, you know, parking is hugely important in our experience, consumer, the ease of access, and sort of, you know, kind of general consumer experience is really important. And so, we do see, you know, times when dispensaries are put into very unusual locations or unusual buildings, and that’s back to the zoning. If your location doesn’t provide those, you know, standard convenience factors, then you might might see that it’s tougher to, you know, to do good business, so. So it’s a really, it’s a mixed bag. It’s a very complicated environment from a siting standpoint, and it’s a very unique exercise in cannabis relative to other retail,
you mentioned experiential has become very important, what have you done on that end to kind of set you apart?
What we do experimental experientially is we’re really focused on at the retail level, we’re really focused on a lot of vendor involvement. So we bring in a lot of brands on site. And I think that’s something that resonates really well with consumers, because that typically involves some consumer education, but also promotions and giveaways and things like that. So we’ve got really tight kind of relationships with our key vendors and like to bring them on site. We do do you know, things like food trucks, and DJs, and stuff like that on on days, like for 20 are particular holidays, where we’re also looking to kind of step it up now is on the brand side of things. There are opportunities now in states like Michigan to do consumption events or you know, brand kind of product launch events and things like that. And so we’re, you know, we’re interested in trying to do more on the brand side, I think there’s really some interesting opportunities there to introduce more people to the brand. And ideally, you’re doing it in environments where they can actually see the product sample it and you know, kind of have had that type of really kind of direct experience with it.
And did you see much of a difference in the patient and consumer base in Oregon versus Michigan? And how does that play into your strategy?
I think we see that every state really varies when it comes to that. Because now as we’re in Massachusetts, in Missouri, operating there, there’s also differences. So the short answer is yes. And I think you see that in different ways. And you see it across sort of how the categories break down, meaning, you know, what percentage of the market is flower or pre rolls, edibles, concentrates, etc. And so that can vary a lot, market by market, you also see different preferences in terms of value buyers versus, you know, folks looking for higher end or premium products. And so that can vary by market. And so yeah, it’s a very market specific analysis. And I think, to your point earlier in the show, there’s, you can have a broader vision, but you have to tailor it to the market, because you can’t impose your, you know, your will, as a company on to the markets preferences. And so it’s, it is a very unique environment that way, because there’s no in my opinion, there’s really no way to have a national product or sales strategy or a national marketing strategy. You can have elements of that, but then everything beyond that has to be very localized.
We’ll talk about how you chose your next two states, Massachusetts and Missouri to expand into and some dynamics of your launches and both of those.
Yeah, so Massachusetts was something we’ve been working on really for over three years now. We originally have us had tied up a site there and began developing it for cultivation and processing, kind of in late 80s and early 19. And so always thought it’d be exciting to get into a northeast rec market like Massachusetts, we do view our kind of business as we move forward to be pretty Midwest and Northeast focused as we think about things regionally. And so getting into the Massachusetts market was a way for us to bring our brand into the Northeast into the first rec market, you know, at the time, it was the first rec market up there. And then beyond that, we also had some really exciting opportunities to put retail into the city of Boston. And so we thought that that combination of bringing cloud cover on the product side into Massachusetts, into the northeast, as well as having, you know, three retail locations in the city of Boston in a major market, you know, it’d be pretty exciting would be good exposure for us. And, and ultimately, you know, we’ve developed out that platform, you know, our cultivation and processing processing has been online since late last year, our first Boston store opened a couple of months ago, and the other two are going to open sometime this summer. And so we’re excited about that, that market is getting more competitive, but it’s it’s something that we kind of expected. And so we’re not afraid of the competition. But you know, I think Massachusetts generally is kind of somewhere in the middle in terms of the scale of competitiveness, even though it’s not limited license, technically, there are other, you know, barriers to entry that have have kept the market from getting too saturated, at least up to this point.
You had an interesting social equity partnership there as well, I think was in Boston, in particular.
Yeah, that’s right. It’s, we’ve done a deal with a gentleman named Brian Chavez there. He’s a resident of Dorchester, his family’s been there for a long time, he operates local businesses, you can get licenses on your own, but there’s a strong preference, both from the city and local communities, that that local people be involved in these businesses. And I think that’s, you know, the same dynamic in a lot of places. And so, you know, for us, we felt like, yes, there’s, you know, maybe an economic trade off to having a partner that I mean, but it was just an exciting way for us to bring three stores into this key market to work with someone like Brian who’s very locally respected and, and really, hopefully, you know, to help show the industry that there are some good models for how social equity applicants and licensees can work with MSOs, and a kind of a win win way. And really, I think the way that these programs are intended to work. And so we’re really excited, we’ve gotten a lot of great feedback on the first door and Dorchester and we’re excited to get the next to open and, and really, we’re looking to potentially do more things like this, because we know there are going to be states or communities going forward that have, you know, similar policy issues that they’re working through similar preferences. And, and we think there are again, there, there are good and bad ways for these partnerships to happen. And we think what we’ve done with Brian and Boston is, is really a model of how to do it the right way.
Can you highlight what that model is just quickly, because social equity licensing and partnering even with locals to get into markets is is a strategy many companies are using, but it’s also controversial. So I’m sure you know, and some people say, you know, people are doing it for the wrong reasons, or it’s against the spirit of why certain licenses or laws were created. So how do you do it right and respect the intent of these of these regulations. And these rules,
I think we’re where it goes wrong is when people enter into deals that are against the spirit of the rules. And so in Boston, for example, what they require is a 51% ownership by the social equity partner. And they also require, you know, commensurate level of control and governance. And so that is exactly how our deal is set up. There are no side agreements or other financial structuring that’s been used to try to change that or make it into something that is not intended to be and so, you know, for us, we effectively just follow the city’s guidelines without any games, and, and so there was meaningful economic dilution for us, but But we, you know, in our minds, it was worthwhile, like I said, to partner with Brian, to be able to come into a market like Boston and and to do it, you know, with incredibly strong community support, I think we got, I want to say roughly 1000 letters of written support for the three sites. And that was really because the community felt like, look, this is, this is what we want, we want the trusted local partner that we know and that we believe in. And then we want also folks that have experienced to come to the table and capital. So I think in my mind, that is the right way to do it. That is the spirit of these programs, because it’s very hard for these social equity entrepreneurs to do it without some support. And it’s, it’s easy to, you know, not easy, but it’s, you know, giving a license out on a social equity basis is okay, but if you’re not going to provide the funding and the other support for that business to take life, it’s kind of meaningless. And so, you know, we do share decision making in control, we do share the economics and there are no structuring games that have been played and the city has vetted our documents and our structures and all that stuff and been comfortable with it. And so I think we’re it’s the wrong way is when it’s done, you know, purely to meet a requirement and in reality, there’s so much There’s structure behind the scenes that’s changing the economics. I think that’s where it violates the spirit or the intent of those programs.
I want to touch really quickly on Missouri. What’s your why was that market attractive? And what’s your game
plan there? Yeah. So Missouri, we think is really exciting. There’s a very competitive, you know, merit based Limited License process there. It was really the first time we had gone into a truly Limited License state and applied and, you know, for us, we were not hiring consultants and all that we wrote those applications ourself, and I was heavily involved in that. And so we applied, we won, you know, full suite of licenses there. It’s currently a medical market. But there is a ballot initiative process ongoing, that’s, you know, kind of crystallizing now in terms of signature collection, and it’s pulling very well. So we do, we do think that this market is going to go recreational towards the end of the year, and we’ve got a great, you know, existing presence there as it as it hopefully converts over and, you know, it’s one of those places where it’s competitive. It’s not, you know, a tiny number of licenses, but it’s not, but there is a cap at the state level. And I think, you know, as I learn more about this industry, and even our own business, I think, from a from an ongoing planning and capital raising and underwriting standpoint, you know, it’s okay for the market to be fluid. But if it’s too fluid and too disruptive, then I think it just makes, you know, makes the industry it makes it really hard for the industry to develop. And so I find Missouri to be that right balance of competitiveness, so that consumers are getting good prices and good variety and high quality products, but not so competitive and wide open that, that, you know, there’s not a good way to plan and build your business the right way. And so really excited, you know, hoping it goes rack and wanting to have an even more meaningful presence there over time.
All right. So when we look forward, I know you’re gonna continue growing organically. But you’re also going down the road of m&a where you’ll be making acquisitions. And tell us a little bit about how you’re preparing for that.
Absolutely. Yeah. So I think the goal, you know, the plan is to absolutely continue both organically, like we have in the past, but now to really ramp up the m&a efforts. And so we did just recently bring in a new CFO, his name is Felice Shaw. He’s actually someone that I’ve got deep history with, as does my brother. My brother and him were first year analysts together at moelis and company in 2008. So they’ve got a lot of history together. And Valais went on to spend 12 years at Apollo after after leaving moelis and ultimately became a partner there. And so he’s he just brings a whole nother level of m&a and capital markets experience, you know, even though Michelle and I have some of that it’s not anywhere close to what he brings. And so the thinking there was really, that we wanted to, you know, kind of make our m&a efforts more aggressive, more ongoing, and really start to think about the right deals, and he’s going to shepherd that effort. And you know, it’s just a fascinating time. It just seems like even in the last month or two, the level of activity of, of licenses trading of businesses being you know, brought to market is really accelerating. And so we’re excited. We think it’s the right time, and we’ve got great support from some of our investors and capital supporters and Valais hopefully will help us take that strategy forward and get some deals done.
We’ll see what’s next for you. I’ve got one last question. But first, a word from MJ biz.
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Okay, encore. Thank you again for joining us. I’ve got one last question for you. If you can distill this, as best you can, what’s the biggest challenge you faced in in cannabis so far building this business? And how did you overcome it?
Well, I think the biggest challenge, you know, at the moment that we’re seeing is really kind of the tax treatment and capital markets environment that we’re in with cannabis. And, you know, what I’m seeing is that, you know, for a lot of businesses like ours, like others, I think we’re very strong fundamentally, we’re generating strong positive EBIT, strong operating cash flow, but where we’re facing challenges is really in 280 e and what that, you know, the kind of impact that that has on our businesses, and then what compounds that is, is the cost of capital and, and sort of, you know, how we need to finance our businesses and so, I think it’s, it’s, it’s worrying to me a little bit because I think that you know, while we’re waiting, you know, for this to get figured out, it’s Some level in the US federally, there are going to be good strong businesses that that really struggle or maybe don’t make it. And so, you know, it’s just a business where you have to be incredibly lean, always thinking about not just your profitability in a traditional sense, but you know, what is your cash flow look like on a post tax and post, you know, financing cost basis? And, and really, how do you, you know, how do you sort of continue growing, but also building something that’s sustainable? And so it’s a real challenge. I wish I could say there was a solution, you know, and you know, right now, I don’t think there is but, but for a lot of us, we have to manage to navigate until we until we see some movement in the US.
Those that do navigate, it will be in great position when something finally changes. That’s the hope that’s their businesses will be in good shape, and the floodgates open. Well, thank you again for being on the show. I appreciate it. And looking forward to see your next moves.
Thank you, Chris. Really appreciate you having me.
That’s a really fascinating answer and a fascinating interview all together delivering some super sound business advice. If you want to succeed in cannabis, you have to move fast, and that means making fast decisions, but without being reckless. Next week, we’ll be talking to the CEO leading the company who makes sure cannabis workers get paid Scott Kenyon of work, perhaps the cannabis industry’s Premier, payroll and human resources company. He’ll share how he helped work deal with its operational issues and turn it into an industry HR powerhouse. See you then