Volatility in the cannabis sector has opened opportunities for willing investors

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(This is an abridged version of a story that appears in the February issue of Marijuana Business Magazine.)

New York-based investment firm Navy Capital is bullish on the cannabis industry.

Since 2016, the company has invested about $200 million in roughly 40 different cannabis companies.

About 90% of those investments are in U.S. cannabis businesses, and over half of those are in the plant-touching space. The rest of Navy Capital’s cannabis investments are in Canadian, European and Israeli companies.

Because of the investment firm’s long-term ties to the cannabis industry, Navy Capital executive Jeff Schultz has seen the evolution of the space.

“The industry looks completely different from when Navy began investing in the industry,” Schultz, a partner and general counsel, said in a wide-ranging interview with Marijuana Business Magazine.

“We’ve seen the less-than-perfect rollout of the Canadian legal market, a one-way trend toward legalization of both medical and adult-use cannabis in dozens of states, the initial attempts at both building brand identity and the creation of the multistate operator in the United States.”

As an investor, Schultz has taken note of the impact that vertical integration has had on the American cannabis market – and on Navy Capital’s investment thesis.

“From a business-model standpoint,” he said, “the irony of the market today is that vertical integration in the U.S. commands a premium because of the lack of capital and bumpy implementation of freshly legalized markets.”

He also noted that “capital flooded into Canada to support capacity build-outs and created massive oversupply (and) the inverse dynamic exists in the U.S. today.”

Schultz also talked with Marijuana Business Magazine about: