Podcast Episode: Inside the Investing Mind

Chris Walsh 

Welcome to Seed to CEO, the podcast about making your way in the cannabis business. I’m Chris Walsh, the CEO of MJBiz. In this episode, I’m chatting with Al Foreman, the co-founder of Tuatara Capital, which is a cannabis-focused private equity firm that’s invested about $400 million in 18 companies.

What was it about those companies that stood out over the 4,500 other businesses Tuatara has looked at over the years? What are the top factors Tuatara considers when deciding whether to put money into a business? And what are the segments of the industry finds most attractive from an investor perspective right now? You’re going to find out next when I talked to Al. But first, a quick word from our partner Headset.

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Chris Walsh

Hi and welcome back to Seed to CEO, the podcast about making your way in the cannabis business.

In this episode I’m joined by Al Foreman, the co-founder, managing partner and chief investment officer of Tuatara Capital, which is a cannabis-focused private equity firm headquartered in New York City. Al worked in leadership positions at Citi Group and JP Morgan before recognizing the massive opportunities in cannabis and launching Tuatara in 2014.

Thank you for joining us.

Al Foreman

Oh hey, Chris, really excited to be here and appreciative that you guys have me on as a guest.

Chris Walsh

We’re appreciative that you’re willing to come on the show. How’s life in NYC as we come out of the pandemic?

Al Foreman

You know, things are starting to take shape and look a little bit more normal in New York City. We’re still not at the same levels of activity and congestion, but you can start to see the city turn a new leaf with respect to restaurant activity and kind of more stores and just a more vibrant environment over the last couple weeks. I think that has a lot to do with the change in weather and really people just wanting to be out and about again. So excited to have things open up more fully as the summer hits us.

Chris Walsh

Well that’s good news. I just need to make sure my favorite pizza place, Lombardi’s, makes it through. I check their website frequently to make sure they haven’t closed down.

Al Foreman

Certain staples will never go away in New York. You’re in good hands.

Chris Walsh

Right. So in this episode, I’d like to get inside the minds of you and your team, Al – that sounds a little creepy, I admit, but what I mean by that is that we really want to give listeners, and specifically entrepreneurs who are listening, an idea of how you evaluate companies to invest in. So can we start just by having you give us a quick rundown of Tuatara and your approach to investing in the space?

Al Foreman

Yeah happy to, Chris. And I guess I’ll start with a little bit of the firm background. So myself and two other partners, Marc Riiska and Mark Zittman, founded Tuatara in early 2014. And in the course of that winter and early spring, we realized that cannabis was, while emerging, was an extremely complex and highly regulated industry. And in 2014, the current industry environment was not necessarily in steady state with respect to the intermediaries that were floating around the industry, the way companies kind of constructed their term sheets, the expectations around valuations – there was a complex kind of mix of variables that needed to be successfully navigated to put money to work in the space to make investments. And with that acknowledgement of the complexity, we realized that if we were going to be successful at investing, we really needed to do this full time.

And it was really that that led to the launch of Tuatara. We felt that if we – sophisticated, experienced on Wall Street executives – were having challenges putting money to work, then we felt that others who might want to allocate capital to the space would face similar challenges. And thus, we believed that there was an opportunity.

Chris Walsh

So, what is your approach to investing? What types of companies do you look at what areas of the industry, are there geographic focuses?

Al Foreman

It’s a great question. I think the overarching statement at Tuatara is really we are thesis driven. We came into the industry in 2014. We spent the better part of 12 months rolling up our sleeves, diving in and trying to really understand what legal cannabis was in 2014. What components of the supply chain would be important? And then, most importantly, which underpins kind of our entire thesis is, how would the industry continue to evolve and emerge over three, five and 10 years.

In 2014, we went through an exercise of segmenting the supply chain, starting from the seed itself, or genetics, carrying that analysis all the way through to consumer consumption or what occurs at the register. Within that process we identified, at the time, what we felt were kind of nine discrete subsectors in the industry supply chain that we felt were representative of where cannabis was at that time.

In that segmentation process, we were able to make a pretty big observation that has really helped to underscore our strategy over these last seven years and that observation was, while legal cannabis in 2014 had a recognizable supply chain, what we really were observing was the continued evolution and emergence of the industry into what we identified as kind of four distinct commercial end markets. And we really believed that legal cannabis was more than just adult-use or social consumption. I mean that is one of the markets and likely the kind of the easiest part of the pieces to identify with. This is the 21 or older, kind of brand driven, really evidenced by the 18 states in the U.S. and the two, soon to be four, country markets that are formed with similar programs.

But, above and beyond the identification of adult use in 2014, we felt that the plant which, by definition, is the most biodiverse plant on the planet, 120-plus chemical compounds, 450-plus flavor and taste molecules and has demonstrated medical efficacy across a wide range of ailments and conditions over the last several thousand years.

And so, with that we felt that, beyond social consumption, it was reasonable to see the emergence of both a cannabinoid pharmaceutical end market as well as a cannabinoid health and wellness or nutraceutical a market. There are similarities and also differences in those two end markets. The similarities being both in pharma and health and wellness, we believed that you would have a commonality on the ailments and conditions that the plant was seeking to address. And these ailments and conditions – pain, inflammation, anxiety, appetite and sleep – are the five most common ailments and conditions that both pharmaceuticals and also nutraceuticals are trying to solve for today.

And so we believed that cannabis would have an impact on both categories, and we would argue that those two end markets really started to form over the course of 2018 with the approval of Epidiolex on the cannabinoid pharma side and then ultimately the ratification of the hemp improvement bill, which provided the legal framework for the non-intoxicating cannabinoids. So both cannabinoid health and wellness and pharma are well on their way.

And then the final end market that we identified in developing our thesis was really industrial hemp as a raw material. And this really kind of points to the myriad of industrial uses for hemp, beyond the chemical compounds and the cannabinoids that are being used for the health and wellness channel.

Chris Walsh

Great and we can hear some sirens in the background, so it feels like we’re there with you.

And so, with those four end markets, you’ve said, and your company says that you look for trailblazing innovators led by exceptional management teams. I want to break this down into two pieces: First, how do you define a trailblazing innovator?

Al Foreman

We would really label that as the entrepreneurs and the management teams who had the ability to identify the opportunity up front, the gumption to roll up their sleeves, pull together a team, a strategy and, in most situations, prior to us arriving, they’ve also had capital and have the ability to successfully execute to the point of building a platform that would then be investable by Tuatara. And the reason that I say things that precede us is, we are not early-stage or startup investors. So we tend to focus and support companies that have a couple years of operational history before we get to them.

But the overall mindset around innovation and being a trailblazer I think really points to the people that spotted the opportunity in 2014, 2015, 2016, and then took all the right steps to get ahead of the opportunity and to really build the right business platforms that are suitable for success within cannabis.

Chris Walsh

Well, when we talk about trailblazing innovators, are you looking for truly disruptive products or services or is it a kind of a broader sense?

Al Foreman

It’s a mix of both, and I can tell you, you know, within the funds that we manage – so we have two flagship funds, we manage a little under $400 million committed capital across those two funds, and we have made 18 investments across those two funds – and within the portfolios, we have a blend of both more mature assets that would be operated and led by individuals that you define as trailblazers. And then within the portfolio, we have companies that are very focused on a niche category within the industry, such as alternative production of cannabinoids using synthetic biology. And the application of synthetic biology to the production of cannabinoids in practice, in and of itself, would be innovation.

So really you know, two different lenses when you think about focus on innovation, both people and also the technologies.

Chris Walsh

Okay well let’s shift to that people side, you know exceptional management teams. How do you define that? What mix of skills and experiences are you looking for? How important is personality or charisma?

Al Foreman

Yeah I mean, I think it’s best to describe it as there’s no one size fits all. We believe that the best teams are combinations of professionals that have already achieved professional success in other adjacent industries, have a desire and have demonstrated a willingness to come into cannabis, a new high-growth industry, and really meld with both legacy operators and the overall cannabis culture. I think you need all three to support successful and truly entrepreneurial management teams.

Chris Walsh

What about experience in the cannabis industry itself?

Al Foreman

I think it cuts both ways. So in some scenarios, like if you were in the cultivation function of your organization and you have had prior cannabis cultivation experience – and we know that is, it is a very kind of nuanced plant to grow – I believe that there is directly applicable experience from cannabis that can be replicated as a person goes on to a new platform or helps to build a new company.

There may be other areas where someone has grown up in a cannabis company – let’s pick on potentially the accounting function – and maybe because you grew up in the cannabis firm and didn’t necessarily have a platform of the Big 4 or the like, the way in which you have set up your chart of accounts, the closing mechanisms for your monthly or quarterly closing processes may not line up with what you would expect to see in terms of best practices had that person come from outside the industry and bought those best practices to cannabis.

So it could cut both ways, and we have seen in our kind of seven years of navigating the space, we have seen both positives and negatives that emanate from that person’s prior experience within the space.

Chris Walsh

Right, and I think we see that in a lot of ways, not just from an investing approach, but positives and negatives, and how, you know, you can run your business and set strategy. And we’ve seen it kind of all over the board in general.

How do you approach this whole process from how you find potential companies to how you do the due diligence and then how you make kind of a final decision of whether to move forward? So let’s start with that first part, are companies primarily coming to you or you and your team finding them and doing a lot of outreach and research?

Al Foreman

It’s all of the above. We have several different channels that we have been able to successfully leverage to source great opportunities and to continue to keep us kind of in the flow of the new and ongoing developments in the industry. So you’ve identified one that I think is a good primary source of leads, and that is inbound. By definition, I believe at this point Tuatara is the largest cannabis-focused investment firm globally in terms of total (under management), and so because of that position, we do receive a lot of inbound inquiries and companies that are seeking capital. We also, across the two funds, we have several hundred direct investor relationships. Individuals and institutions that have supported us across the two funds. Our investors are a fantastic source of leads and deal flow and have been a strong source of referrals over the last seven years.

I also mentioned – and so those were kind of the first two channels – we have a pretty clear lens on the types of assets and companies and where we would expect them to be operating in the supply chain to really help us kind of meet or address the portfolio diversification and the portfolio strategy that we’re deploying.

We also do a lot of proactive outbound calling through identifying the areas of the supply chain that are important to us and then within those areas, the companies that are operating successfully across the different state markets. And we do a lot of outbound targeting based on our thesis.

And so it’s really a conflux of all of those channels that have really supplied us with a pretty healthy pipeline of attractive opportunities over the last seven-plus years. We’ve made 18 investments across the two funds and we probably have cataloged somewhere close to 4,500-4,600 companies that we have talked to, touched, evaluated in some form for potential investment.

Chris Walsh

So you cast a wide net. When we look at the inbounds that you get, give me an idea of how that works or what’s effective. Are these people just emailing you and saying, “Hey, I’ve got this company, you should check out. We’re looking for money?” Or are they sending you business plans? Or how does that work effectively for you?

Al Foreman

It’s all the above. I can say that in the 18 companies we’ve invested as I now look across the board, I can remember when the inbound came in for one of the companies in Fund I came in on the website, I think in March or April of that year. We ultimately were going out to do our proactive dive on that subsector in August of that year, and they were one of the companies that we ultimately reached out to and ultimately visited on one of our prospecting trips. And that company ultimately ended up as a Tuatara portfolio company.

So that happens and that was a “Here’s a description of the business and the deck.” Now it so happened that that inbound Inquiry had lined up directly with an area of focus that we had identified for thesis development that we wanted to lean into, and it was kind of those two variables coming together at that time that led us to making the investment.

Now that is an extreme example, but a successful one. For the most part, the things that that come in either online or through the website are all pretty well put together. We typically get decks. We have a web-based form on our website that gives people the ability to input additional information. And we review everything that comes in, but as, as mentioned by the numbers, the filter is tight for us.

Because we are investing to a thesis, and so we have a sense of what we’d like to put in the portfolio. So sometimes the inbounds line up with or match with where we’re focused on currently in terms of prospecting. But a lot of times it’s more information gathering than it is, I think, true opportunity analysis, when you have random inbounds.

Chris Walsh

Yeah and I imagine you get a lot of these, and so it’s great that they don’t just go into a black hole, and no one looks at them. That you take time to do at least some initial due diligence.

So whether it’s an inbound or some outbound opportunities that you’ve identified, what are the next steps? What do you start looking at in these companies to determine whether this might be a possibility? I know you’ve mentioned scalability, pathway to exit, you know, obviously their financial history, their performance potential … Can you walk us through some of what you look for and what really stands out that you’re eyeing as you weigh the opportunity?

Al Foreman

Yeah, I mean, so I think the first filter, Chris, is really the team, their relevant experience and recent success. So, as we evaluate decks and get on those first calls, we’re really listening to understand, is this person presenting a case or relaying what has happened? And the latter is always much preferred. We don’t need to be sold, we really want to be explained to as to what you’ve done previously, what the plan is going forward. And, from there and given the team’s prior experience, we’re really making the assessment on the likelihood of success and the ability for them to replicate prior successes in this new opportunity and environment.

Beyond the team – and when I say kind of business model, business plan, it’s all kind of put into the same bucket – we also need to have alignment on where the company goes from the point we make an investment to the potential time of exit. And when I say alignment, it’s really alignment with the thesis of building a business that’s going to scale. We’re focused on profitability. We’re focused on making sure we have the right framework and foundation in place or on accounting systems or on the right vendors and external advisors. That’s a long-winded way of saying we want to make sure that we have alignment on the principles of building a business together.

Because when Tuatara makes an investment, we really view this as an investment partnership with those portfolio companies. The reason that the concept of a partnership is important, one of the most glaring observations that we would make around the cannabis industry, having operated in it for seven-plus years, it’s hard.

And so, in order to succeed, you both need help and successful partnerships, because it’s a hard business to be successful in. So making sure that the portfolio companies also share that understanding and mindset is important.

Chris Walsh

This is the most complicated, difficult and frustrating industry I’ve ever been part of, and we’ve been doing this for 10 years. And I tell outsiders this all the time. I’m in a Vistage CEO group with leaders from companies all over the board, from construction to technology to a guy whose company makes standup desks, and I’m the only one in cannabis in my group.

And I try and emphasize that this industry is so different. It is so different than other industries, and I can’t tell you the amount of pushback I’ve gotten. And they say, “Well every industry is difficult,” and “I’m in tech, and that’s super difficult. How can this be so different or more difficult?”

I can see how this fits into your thesis of basically having people that have been in this for a couple years, versus someone just stepping in that you’re going to invest in, that fully grasps what this industry is about and how difficult it is.

I wanted to come back to this piece that you provide your portfolio companies with strategic and operational support. It’s more of a partnership, as you said. What types of holes do you see in this regard among cannabis companies that they typically need help with that you can bring to the table?

Al Foreman

In our experience, this is really kind of where the successful investment partnerships, where they really take foundation.

We staff across all of our portfolio companies two to four professionals that are now working in teams in support of each of these companies. So the ways that our portfolio companies most often leverage the Tuatara team would really be with things like strategic and capital planning, so strategic planning could be you know state expansions and the method to enter that state, acquisition partnership, joint venture, the like.

We focus a lot on capital planning, because we are working in an environment of high-growth businesses, and high-growth businesses need growth capital financing and understanding timelines, cycles, methods, sources, and coming up with comprehensive capital planning strategies for our portfolio companies over multiyear periods, I think, is an important function that we have served over the last seven years.

We also – and this, you asked the question earlier around teams – so in the investment due diligence process, we are attempting to assess the capabilities and understand kind of the strengths of the existing team. We are also always evaluating with an eye to what needs to be done to augment or enhance the teams that we are supporting, so we play a significant role in talent sourcing.

Across the portfolio, we’ve helped instill close to a dozen CFOs across the portfolio companies, often the portion of the executive function that needs the most support. We’ve been instrumental in assisting and getting heads of sales and implementing sales segmentation strategy. So talent sourcing and let me say talent identification       .

We also are often involved in corporate development or M&A support for our portfolio companies. There still is a line around kind of certain banks and their ability to provide representation to cannabis companies. And so I’m a former financial sponsor banker, heavy M&A component. We have others on the team who have similar kind of backgrounds and experiences, so we’re often asked to assist our portfolio companies with their M&A strategy that we approach the structuring and the like.

We talked about capital raising. It’s an ongoing thing, and you know we’ve done, I think, a very good job of both through our, the Tuatara investor network as well as just kind of, broadly speaking, other groups of industry investors. We have been consistently supportive of our portfolio companies and their efforts for capital raising.

The final thing I would add, is just overall corporate partnerships. Because of where we sit in the industry as an investment firm and the kind of process that we go through of meeting with and evaluating a whole host of companies, we’ve been able to develop good relationships within the industry and with operators in the industry. And so the ability to help our portfolio companies with you know joint ventures and other corporate partnerships, both within the Tuatara family but also with other cannabis companies outside of our direct investment network, and I think we’ve been successful with that as well for our portfolio.

Chris Walsh

So you had talked about that you have to get on the same page with the management team and the executives, from where they’re at and where they’re going all the way to exit. Now, we’ve found in the past, many cannabis founders traditionally haven’t even thought of an exit when starting.

In fact, out of the dozens of, you know, hundreds of conversations I’ve had, especially in the early days of this industry, this wasn’t even on the radar of most of the executives and entrepreneurs out there. Do you expect them to have this all fleshed out, this exit strategy? Or is this often where you’re coming in and helping them figure out what that looks like?

Al Foreman

It’s part of the value add that we provide. For Tuatara and our underwriting strategy and our portfolio strategy, when we enter an investment, prior to closing that investment, we have already developed a perspective on exit. It’s part of our underwriting because we are in the business of investing, helping companies grow, and, at the end of our hold period because we are a fund manager, we also have to monetize that investment for the benefit of our investors. And so part of our practice is coming up with that plan for the company, that strategic plan as to what we are going to try to accomplish over the horizon to help both build and grow the company to meet or address the specific milestones that we set out for ourselves as investors and then how we coordinate kind of broadly across the company and investor to meet those objectives.

So part of that, from our perspective, is our thoughts timeline and method on exit.

And when we are meeting with companies, founders, management teams and anyone who’s heard this question from me will probably smile right now, because they understand what really underlies it: So how do you define success?

You’re coming to us for capital. At the end of this relationship, there needs to be some mark or some method of defining whether our time together was successful.

Some people have answers that really stem from business milestones and getting the business to a certain place. Some people have personal milestones of wanting to be able to achieve things professionally. And others are financially motivated and so there’s a number. But within that conversation, we’re able to really unearth what the objectives, motivations and expectations are. And I think, from an investor standpoint, that’s mission critical because that is really the foundation of making sure that you have alignment. Because if our horizon is two years and the founder’s horizon is five years, we’re talking past each other.

So if you don’t have that that sort of discovery process and aren’t able to discern kind of those motives and intentions up front, you’re likely going to have a more challenging investment partnership.

Chris Walsh

And I mentioned what I had personally seen, especially five-six years ago with entrepreneurs not really thinking through what an exit strategy might look like. What are you seeing these days in all the companies that you’re talking to? Are today’s company leaders thinking about this, planning this, or are they still, is that still kind of off their radar?

Al Foreman

It’s a mixed bag. I mean, I think it, part of it is going to really be dependent on the stage of the company and how much they’ve done thus far, and as a result, how much is really ahead of them with respect to milestones and desired objectives. So I think phase of the company is also …  I mean if you’re a brand new startup three months ago, your thought process on exit is probably a little different than if you’re a single-state operator and you’ve gone through one full cycle in your initial production facility and you are now building out kind of your expansion phase.

When you get to that expansion phase and you’ve now had 3, 4, 5, 6 years of running that single-state operation, I believe that entrepreneur is much, much more likely to be thinking about his or her pathway to exit.

Chris Walsh

Yeah makes sense. Well there’s a saying in investing, and we’ve applied this to our own M&A due diligence when we’ve looked at opportunities, that you need to get to the “no” quickly. Basically, that means figuring out the deal breakers as soon as possible and then moving on so you don’t waste everyone’s time and spin your wheels. If you can’t get to the “no” quickly, then it might be a good investment and worth taking additional steps. What are some of the things that get you to a “no” quickly?

Al Foreman

I mean, I would start with lack of alignment with the thesis. In order, I believe, for Tuatara to have a successful investment partnership with a portfolio company, the company and Tuatara both need to see eye to eye or have similar views on the way the industry is expected or going to evolve. If we are investing in an operator who believes that the walls are coming down tomorrow and therefore you’ll be able to have interstate commerce and ship things across state borders, the philosophy and mindset of that operator in terms of how they’re trying to build and expand, what sort of infrastructure they’re going to put in place, is very different than the operator who believes that there might be federal policy put in place, but that federal policy is not likely to allow for immediacy in interstate commerce and as a result are planning on infrastructure and the like (that) needs to address that this is likely to be a step function.

So those are two very different perspectives on how the industry could evolve, and the operational steps that one to take with one philosophy versus the other is also very different.

Chris Walsh

Does it matter if the founders show up in in shorts and sandals and a backwards hat? How does their appearance, their presentation, all of that factor in?

Al Foreman

It depends. It depends on the operator and it depends on the business. I mean we have a come as you are policy at Tuatara for our own employees.

And you know we’re of the belief that your external appearance doesn’t necessarily drive professional or personal success. And so I don’t, we don’t require people to show up in a suit, but at the same time, you know, I think for target portfolio companies, there’s no frame or box that the entrepreneur has to fit into. I mean there are kind of basic components that need to be in place …

Chris Walsh

Like showering …

Al Foreman

Like shower. And honesty, integrity, the demonstration and willingness to put in the hours, the hard work. These are qualities that we that we want within our portfolio company leadership teams. But how they look? That’s a lesser important, so long as they’re professional, they’re proficient and they’re good partners.

Chris Walsh

Yeah well, can you drill down a little bit more – earlier you talked about your four focus areas in your thesis. What are you most excited by now? What areas of the industry, is there certain states or markets or going deeper in certain segments that are really sexy to you right now?

Al Foreman

So I am really excited about the continued progression of the industry to those four end markets that I described. And I think the other real important perspective to have on the Tuatara thesis is that the expected emergence of each of these end markets are on completely different timelines.

So social consumption is still going state by state. There are murmurs of federal policy and pressure for it, but for the time being, it will still continue to be state by state, maybe for the next 18 months and the potential for a new perspective, driven by the midterm election.

The cannabinoid pharma and cannabinoid health and wellness pharma – to get a traditional pharmaceutical approved is a seven to 15 year pathway of tox studies, bioavailability, clinical trials and the like. So we have Epidiolex, we have Sativex from GW. There are 90 plus other drugs in the forward pharma pipeline that are in various stages of development, so pharma is not a matter of if, it’s just when. And we’d expect that market to really continue to take foundation over the next, call it, you know five to seven years, five to 10 years.

Health and wellness, which was the Farm Bill, we would have expected to accelerate and we would still expect that framework to accelerate once the FDA puts their regs out. The growth of the non-regulated cannabinoids has really been stunted by the lack of regulatory clarity that we all expected you know 18 months ago, two years now.

And then you know the industrial hemp category, in that it emerged with the Farm Bill, but requires a new category of processing equipment and other industrial equipment to get to the other uses of hemp, also now extending a little further out on the timeline.

Really the art here is when you’re building and balancing a portfolio, when you start thinking along the timeline through which each of these end markets will kind of get to scale, that then provides a little bit of a different lens on the blend of assets that might fall into social consumption versus health and wellness versus pharma.

But no, no, I wouldn’t put one specific category as a favorite it because I think that was the original question.

Chris Walsh

Yeah and it’s hard to identify a favorite. There seem to be opportunities everywhere we look these days.

We’re going to wrap up and I just wanted to ask you one last question. What are the biggest challenges that you’re seeing facing cannabis companies these days, the hurdles they’re running into from your perspective? And what advice would you give the industry and companies in general, as we move forward?

Al Foreman

The first comment I would make, and this, this is a comment to the industry on a whole. We all need to be prepared for significant and swift change that comes with regulation. And these are changes like standards, things like good manufacturing practices standards, good agricultural practice standards. There are certain operators who have taken steps, but categorically I think the industry is behind on some of the standardization that you would expect to see in an industry that produces ingestibles and other products that impact humans. And so I think with regs that everyone’s calling for is also going to come standards.

The industry needs to be prepared for that and I don’t think we are currently.

Chris Walsh:

I think that’s a great answer. That kind of encapsulates everything, because, as we look towards the future, there is going to be massive change in any type of federal shifts. And I don’t know if the industry is ready for it either, and I think we all have to prepare for that. And we don’t know what its going to look like.

Al Foreman

Now the other thing I would add, and this is a little bit of, just meant to further underscore. So we also, the industry, needs to be prepared that the competitive dynamics that we’ve all grown accustomed to are also likely to change because, with regulation and with kind of more broad-based comfort, we’re also going to have a lot more competition from non-endemic companies who now want to kind of make the claim or stake their claim in cannabis.

For some that’ll provide opportunity in that they’ll get acquired and that will be their quote-unquote exit pathway, but for others, I mean that competitive wall could be the wall that certain cannabis companies hit if they are not prepared to compete with well-financed, well-managed and professional consumer companies, alcohol companies, tobacco companies, all of whom are kind of preparing their SWAT teams for entry.

Chris Walsh

In cases already, they’re already here.

Alright well thank you very much for joining us, Al, I appreciate your time and insights and I think this will be very valuable for listeners who are building companies to know how you view the investment process and how you look at due diligence and find opportunities out there. Thank you for sharing all this and I wish you the best of luck going forward.

Al Foreman

Chris, thank you very much for having me as a guest. This has been fun, hopefully, it was helpful and look forward to seeing you in person, when we get out of all this later this year.

Chris Walsh

We’re rolling for MJBizCon in October! I hope you’ll make it. We’re hearing the buzz: People just want to get back together.

Al Foreman

I want to be there, fingers crossed that I can be there, I definitely want to be there. I miss miss miss the camaraderie and really just kind of really missing the industry all gathered in one place. So kudos and look forward to it.

Chris Walsh

We’re ready to come roaring back and I think that’ll be a good reflection of where the industry is at and where we’re going – and hopefully it’ll be a big celebration. I will try to meet up with you there. And again, appreciate having you on the show.

Al Foreman

Take care, Chris. Have a great day.

Chris Walsh

You too.

Music break

Chris Walsh

And that’s a wrap for my discussion with Al Foreman of Tuatara Capital. We gleaned some valuable insights that I hope you can apply to your fundraising strategy either now or in the future.

Al identified the nine subsectors across the supply chain that Tuatara focuses on, from research and genetics to cultivation and retail. These are tied to four major end markets: pharma, health and wellness, industrial hemp, and social consumption/ adult use. Tuatara views these as the most promising areas of the industry.

As Al said, Tuatara focuses on companies that have a few years of success behind them. Honestly, though, his insights really apply to anyone raising money no matter what stage you’re in. He highlighted some areas are important to many investors.

One of the biggest, which we hear time and again, is the management team. You can have the greatest product out there, but for many investors, the team that’s running the company is just as important. For Tuatara, the best teams have leaders that have had previous professional success in other adjacent industries. They’ve shown they can identify promising opportunities in cannabis, roll up their sleeves and execute to drive the business forward. And they’ve proven they can successfully meld with the cannabis culture.

What about prior experience the cannabis industry itself? It really depends. It can certainly be a big benefit, but it can also be a drawback from an investor perspective, if the team doesn’t really understand some common best practices from the corporate world.

Another big factor for Tuatara is alignment, particularly when it comes to where the company and the industry as a whole are headed, and the principles of building a business. This also encompasses getting on the same page about what success ultimately looks like, all the way through to the exit.

Additionally Tuatara looks for opportunities where it can provide crucial support, particularly in areas such as strategic and capital planning, expansion, M&A, finding vendors and partners and strengthening the overall management team with needed skill sets.

Finally, Al offered some advice for everyone in the industry. We all need to start preparing for the immense rapid change that federal regulations eventually are going to trigger. We’ll need to adapt to new standards and best practices. And the competitive landscape will look dramatically different. It’s going to be much more challenging down the road. So we all need to start gearing up for these changes.

Thank you for listening, feel free to share this with others and post a review on whichever platform you use to listen to podcasts. You can also follow us on Twitter. Our handle is @MJBizDaily.

Next week I’ll be speaking with Kristi Kelly of Sozo Companies, which is a vertically integrated cannabis business based in Michigan. We’re going to dive into an often-overlooked ingredient for success in the cannabis industry. That’s how you can build a deeper relationship in the communities you operate in, including with regulators and the general public, not just your customers.

Until then, make sure to check out mjbizdaily.com for the latest news and analysis and data on the cannabis industry – and sign up for our newsletter while you’re there. See you next time.