2024 © Poseidon Investment Management, LLC.
Disclaimer
Many have already heard our origin story of losing both our parents to cancer within 5 years’ time and how that led us to believing in cannabis and investing in the industry.
What we haven’t shared as much, is our point of view in life and business because of these unfortunate losses.
To begin with, we were young when our parents died. Our father died in 1996 and our mother in 2001, this left us to make serious decisions early in life. It also left us with an undeniable determination to honor their memories and succeed in our way.
Life is full of choices, whether it be our relationships, careers, or how we respond to the hard things. When faced with adversity, many fall out…crumbling under the pressure, others experience disillusionment and surrender. However, we feel very fortunate for the grit that was drilled into us by our entrepreneurial father and our dedicated mother. The Paxhia kids did not get gold stars for trying. We earned every reward or accolade only through the execution and completion of our goals. You can’t win if you do not finish the race!
When laughed out of a room of angel investors in 2015, we only grew more determined and leaned in further with our thesis on this space. As contrarian investors, we find the opportunity more interesting when the consensus is against us. When family friends cried because they worried about our participation in a federally illegal industry, we dug into the policy and studied further to be sure we had bolstered our position. Our vision for shaping and growing the industry through an institutional and actively managed investment approach was only sharpened and honed through these challengers.
As we founded our first fund and the firm, we simply could not shake the potential of what this industry represents for the US and the world. Job creation, tax generation, narrowing the social inequality, unlocking whole new categories of health, wellness, pharmaceutical and lifestyle products. Developing a supply chain that can impact and disrupt traditional industries. Technology that can drive this industry into a transparent, user-friendly and efficient sector. The potential for growth is still immense with the category driving over 25% growth in the US year over year. The pace of adoption and change globally is happening faster than we even anticipated.
In recent years, the thesis of investing in cannabis seemed like an easy endeavor, and our contrarian point of view was called on to help us to avoid the hype and focus on strong fundamental businesses. Due to this focus, we avoided the inevitable washouts that many funds and investors have suffered through in the past 25 months and counting.
However, only those who have been embedded in the cannabis industry for multiple years have seen the twists and turns we have. We have a saying at Poseidon — ‘we are very comfortable being incredibly uncomfortable’ or ‘nauseous-ly optimistic.’
This industry does not serve complacency or assumptions, it will challenge again and again, and the source of those challenges is a shape shifter…But this uncertainty and friction is our zone. Times like this are our zone of opportunity and execution.
To be sure, our brand is crisis — we have it built into our ethos to not just survive in a crisis, but to thrive. The world is going through a confluence of hysteria right now, but this does not change the potential for this industry and those who are dedicated to building real businesses like those in our portfolios.
That which can be learned from navigating challenges is irreplaceable. MBA programs can teach case studies on these experiences, but nothing will inform and aid the navigation in business like living through every moment of it. The amount of information and experience garnered from over six years in cannabis cannot be rivaled, especially the work that has been done in the past few years.
During a time like this, would you rather your capital is exposed to emotional and irrational reactions of markets moving in tandem? Or tended by seasoned hands that can weather the storm?
Would you rather your capital in the hands of the dysfunctional high frequency trading and quants gone awry that have caused air pockets in the market over the past few weeks? Or with battle-tested navigators who have known nothing else other than unpredictable patterns of uncertainty?
Other periods of crisis in history have separated the strong from the weak. The Darwin Cycles of the past provide inspiration to us now. It is not uncommon for new industries to experience extreme gyrations as these new economies and businesses take shape. Human behavior does not change, there will be hot money chasing, fraudsters exploiting quick money-making schemes, and those that remain committed as they see the big picture and its significant opportunity.
Right before a downturn, the greed and fraud accelerates to unprecedented levels. We have seen this exposed in the past several months, both in Cannabis and in Tech (CannTrust and WeWork), etc.
We can’t help but think of this quote from The Big Short:
“During the 1930s the housing market collapsed, nationwide…half of all mortgage debt was in default and there were very specific identifiers, extremely recognizable. For instance, one of the hallmarks of mania is the rapid rise and complexity and the rates of fraud…and did you know, they’re going up?”
Since we launched, we have seen markets open at unprecedented rates and have participated in the creation of laws and regulations both locally and globally. Also remember, before we launched the first fund, ‘CBD’ was not even on the radar of the American public as a whole.
As emerging managers who had to build this all from the beginning, our most precious currency is our reputation. We have worked tirelessly to maintain a firm with integrity and transparency, even when countless others cut corners. The receding tides of the bull market are exposing the much cheaper approach in others.
We are so proud to have built a team that reflects this integrity and carries the torch in unison. We put our investors above all else and we know that our work to build companies will yield the strongest and most sustainable outcome for our investors in the end. We all win by companies succeeding and in turn build a lasting industry.
We will work tirelessly to see this industry to the next phase of dramatic growth and will align ourselves with founders who will be sure to harness that wave as it inevitably swells again.
