By Omar Sacirbey
In 14 years on Wall Street, Hadley Ford was involved in more than 150 deals worth billions of dollars. He later co-founded and scaled a cancer treatment facility to more than 300 employees and $100 million in annual revenue.
In 2014 he moved to the cannabis sector by founding iAnthus Capital.
Ford – a co-founder and managing partner – works out of iAnthus’ New York office, where the company raises American capital to finance cannabis companies.
“The model we put together was to create a Canadian public company and a U.S. operating company,” Ford explained. “The Canadian public company raises money in Canada at one cost to capital. Then we flow it across the border and put it to work in support of the cannabis entrepreneurs here in the U.S. at a higher rate of return.”
Marijuana Business Daily spoke with Ford about the cannabis investment climate, why he’s bullish on it and how the U.S. and Canadian markets compare.
How would you gauge the present investment climate for cannabis?
The perspective from the financing world is that there is no institutional capital, so when we compete for a project, it’s typically against other operators, or we compete with rich family offices. You just never see an investment bank, a venture capital firm, a private equity shop anywhere near the industry.
This reduces the supply of capital and raises the cost (of capital) significantly. And it gives us a different way to position ourselves because we approach it from a professional perspective – with real term sheets and real documents.
There’s capital available for entrepreneurs. It’s not a deep market, it’s not a flexible market. But it’s somewhat available and we’re trying to change that through the nature of our investments.
How has the Trump administration affected the investment climate for cannabis?
We remain very bullish. A lot of fear of the Trump administration has kept competitors from entering the market, so that’s good for us from a business perspective. It’s not particularly good for the industry, but it creates a pretty good environment for us.
Could you tell us about the decision to go public in Canada?
Canadian public markets are the only capital markets, public or private, anywhere in the world that have shown a ready willingness to allow capital to be raised.
The availability of private capital in the United States is a little more dire, it’s going to be a little more expensive. It’s not a particularly deep market, and it’s hard to access. You can’t count on it if you’re an entrepreneur.
Why is access hard?
There’s no readily available private placements being done on a regular basis. There’s no public market offering. There’re no bond offerings or debt offerings or senior secured loans.
The only capital – outside our public capital – that’s available for cannabis in the U.S. is private and generally tends to be through rich individuals or through family offices. But if you get into a vein like that in the U.S., it gives you a competitive advantage because you have access to capital.
What types of companies do you look for?
It depends on the state and their rules, and there are a lot of other factors.
Every grower I talk to is convinced they’ve got the best method – you have to be smart about that. Then there’s the finance piece and how you are going to source the capital. Then there is the real estate piece, which is amazingly important in cannabis. Then there’s size: Some of these guys only need $5 million or $10 million to work. That makes for a highly complex diligence and investment work.
If you’re an individual investor who’s going to put in only $5 million or $10 million, you have to perform due diligence on the state, the regulators, the real estate, the operator, the growing piece. That’s an incredible amount of diligence and information that you need access to – to make a decision on a fairly small investment – which is why you don’t see a lot of (people) stepping forward with checks.
A lot of the information isn’t available. You can’t just go online and find great research on the regulatory ins and outs of (a state). It’s very hard for the family office or rich individual to understand all those dynamics and make good investment decisions.
The average investor in the cannabis world has a daunting task ahead of them, given the patchwork nature of the industry and the complexities around it.
Will we see more investments, say, a year from now?
Long term, about five years, the market is going to look a lot more open. There will be a lot more sources of capital. Cannabis may have been de-scheduled by then, and you’ll have a lot more comfort on the private investment side.
Over the next 12 months, I would think capital is still going to be pretty tight.
The U.S. markets are three years behind the Canadian from capital formation. Canada, you can go raise public money successfully. I would expect in the next three years for the U.S. market to look more like the Canadian market. But the next year will be more of the same.
This interview has been edited for length and clarity.
Omar Sacirbey can be reached at [email protected]