See Keynote Address with Dr. Karen Munkacy and Dan Fireman here.
As previously blogged last week, Burns & Levinson hosted its third annual State of the Cannabis Industry Conference on October 23rd, with over 200 attendees present. The conference featured a keynote address by Dr. Karen Munkacy, Founder and CEO of Garden Remedies, Inc., and Dan Fireman, Founder and Managing Partner of Fireman Capital Partners, a private equity firm that invests in the consumer sector.
Dr. Munkacy is a physician, mother, and breast cancer survivor, who began her public health care advocacy with cannabis legalization in June 2011 when she testified in front of the Massachusetts Legislature’s Public Health Committee in favor of cannabis. Since then, she has built the only physician-and woman-led cannabis company in Massachusetts.
Mr. Fireman founded Fireman Capital Partners in 2008 and currently focuses on all aspects of the Fund’s investment strategy execution and portfolio company management. Over the last ten years, Mr. Fireman has been responsible for raising and investing over $250 million across 29 transactions, the total value of which exceeds $1 billion in aggregate today.
This dynamic duo partnered together in May 2019. At the Conference, they shared their insights into how finding the right experienced investor and foresighted cannabis operator was the perfect collaboration to general positive cash flow and effectuated a robust business foundation. Garden Remedies was in search of an investment partner to raise additional capital, and FCP Capital Partners seemed to be the perfect fit. In her keynote address, Dr. Munkacy shared that Mr. Fireman’s experience in the craft beverage and consumer industry provided added value into strategic measures that would assist the company in obtaining liquidity and generating a healthy balance sheet.
While the two had initial plans to start building multi-state operations, the team strategically decided it was best to focus on increasing profit on the locations currently in operations and restore the corporate books. “If you don’t have resilience and you cannot pivot, it’s hard to do well in this industry,” Dr. Munkacy cautioned. In an industry where regulations are constantly changing, being “nimble” is a crucial weapon to have in your commercial arsenal when fighting for success as a cannabis operator. Dr. Mukacy also highlighted the importance of cannabis dispensaries holding a variety of products for customers to choose from and establish a sales team rooted in providing customer-education of products. This came especially critical for Garden Remedies when Massachusetts Governor Charlie Baker effectuated the four month ban on vaping products; as a result of Garden Remedies’ assortment of cannabis products, customers were able to find safe alternatives with similar effects that customers, who previously relied on vaping products, could use, and deterred such customers from turning to the black market.
From the investor perspective, Mr. Fireman shared vital tips and realities that venture capitalists should keep in mind when investing in the cannabis industry. “Investors got to be in it for the long term, not the short term,” advised Mr. Fireman. He signaled that investors need to be aware that there will be cycles, comprised of peaks and low-points. Since the industry is growing, Mr. Fireman warned, “it will take time for the industry to cycle through.” According to Mr. Fireman and Dr. Munkacy, when looking for the right partnership of a cannabis operator and an investor, parties should:
- Find a partner that is well captured.
- Maintain an understanding that liquidity may take time to obtain.
- Both operators and investors need to be realistic of the amount of capital, time and expertise and technical ability to create a successful collaboration and operation.
With respect to future operations, Mr. Fireman discussed the importance of utilizing products that will hold prices even when the industry becomes commoditized and federally legal.
The tools and strategic approaches shared by both Dr. Munkacy and Mr. Fireman highlighted many essential practical points for both operators and investors in the industry. They left the audience with one obvious truism – forethought is a virtue that should not be overlooked when engaging in the ever-changing and rapid-growing cannabis industry.