#047 - Deploying Capital in Today's Cannabinoid Landscape w/ Heather Molloy of Speedwell Partners

Curious about cannabis investment? Join us as we uncover the dynamic world of cannabinoid capital with Heather Molloy. Our adventure begins with a deep dive into the evolving regulatory landscape and its transformative impact on the industry. 

We then transition to the challenges and triumphs of managing a first-time cannabis-focused investment fund. Initially supported by a single family, Speedwell has successfully invested in promising companies like Garden Society, Terpene Belt Farms, and more. Heather shares her expertise on navigating regulatory changes and leveraging data for success, while also exploring the fascinating interplay between cannabis and crypto markets. Get ready for an in-depth look at the diverse opportunities within the cannabis sector, from data services to brand scalability.

Finally, we tackle the complex world of cannabis investments, emphasizing the importance of high-risk tolerance and a long-term perspective. Discover the critical issues surrounding safe banking, especially for women and minority business owners, and understand the broader implications of the SAFE Banking Act. We also explore the potential within the tobacco, beverage, and multi-state operator sectors, shedding light on strategic moves and the importance of strong management. Tune in to understand how grassroots investment movements can shape the future of the cannabis industry.

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Transcript

Ben Larson: 0:00

Hey everybody, welcome to episode 47 of High Spirits. I'm Ben Larson and, as always, I'm joined today by Anneray Grabstein. It's Thursday, june 13, 2024. And I'm in New York at BevNet. We have an exciting show today. We have Heather Molloy on. We're going to be talking about investing in cannabinoids, that is, hemp, marijuana, cannabis, whatever you want to call it and everything that is going on with regulations and how it's affecting capital deployment. But before we get there, I'm going to check in with my friend on the West Coast. Again, I need to stop traveling. We need to stop doing this, enron. I need to come back home.

AnnaRae Grabstein: 0:42

Exactly.

Ben Larson: 0:43

Bring me home.

AnnaRae Grabstein: 0:46

I keep trying to get you to come over with the family and you're never around to do so. Hopefully, hopefully soon, I'm sure that you're right.

Ben Larson: 0:56

It is summer.

AnnaRae Grabstein: 0:57

That doesn't mean you won't stop traveling, but we'll see right.

Ben Larson: 0:59

No, I promised or I've been, I've been told to promise that I will be grounded for a good portion of summer after this trip. But yeah, it's great to be here. Good weather in New York, I feel it's like when we have good weather in San Francisco. You know, it's just a joy to be out. I am on a rooftop and I'm loving it. I don't want to come home right now, but yeah.

AnnaRae Grabstein: 1:24

Makes sense. Yeah, we both were traveling in Minnesota last week, so I am definitely jet setting around myself, but not quite as much as you. Minnesota, I mean, let's talk about that for a minute. I don't think we've got to debrief it very much last week.

Ben Larson: 1:40

Wow.

AnnaRae Grabstein: 1:42

I don't know what to say except that there were elements of the THC accessibility experience that felt downright utopian to me. We had this lovely dinner at like an upscale Mediterranean restaurant that had like gorgeous craft cocktails and right on the menu was also THC beverages, and there is just this culture around it that just seems so normal. When you get handed a beverage menu at a nice restaurant and there is beer, wine, cocktails and THC, it just feels like holy crap. We've been in this industry working for 10 plus years to make products accessible and here it is right in front of me, so I just really enjoyed getting to experience that firsthand.

Ben Larson: 2:29

It's wild, and even just talking to some of the restaurant owners I think at least two of them I spoke to they said like one in five drinks are THC beverages that are being sold. That's a huge percentage and it kind of really validates some of those early numbers that we've been hearing. I know while we were there, john Halper was from Top 10 Liquors was launching a new location and in the first month THC beverages accounted for 13% of the sales, and so that's real market's real market share and and really, you know, just exciting to see. But yeah, you're right, it's Minnesota's living in the future and I'm and I'm a little bit jealous about it.

AnnaRae Grabstein: 3:11

Sure, and and thing that maybe have been living under a rock or something. Um, minnesota is, uh, has some very progressive and open um laws on the books that have made hemp-derived low-dose products in the non-inhalable category. So beverages edibles highly available in traditional on-premise outlets and in retail stores. And there was some different industry events and conferences there, multiple as well as at the end of the industry conferences.

AnnaRae Grabstein: 3:46

Happening on Saturday was the first ever THC beverage consumer festival that I attended and it was very much fashioned after a craft beer festival. So you pay a certain amount of money to get a ticket, they give you a cup and you get to walk around and taste different things, and it was that that was fun for me to get to see who the consumers are that showed up and it wasn't a big surprise, it was younger people. I mean, I don't think we see the the geriatric crowd going to craft beer festivals either, you know, but a lot of like 25 year olds and tank tops and fanny packs just trying out all this stuff and it was just really cool. So I know that we're in a real complex space when it comes to hemp policy and how it's going to all unwind, but for now for today. In Minnesota, you can see a really unique and exciting environment for people to get to try these things, so I loved it.

Ben Larson: 4:49

Well, and just the significance of CanRail holding their annual external stakeholder conference there, keynoting with the head regulator from Minnesota, talking about the success of the hemp program and how proud they are about what they've done, and so I think it really set the tone for the important conversations that are happening around the farm bill, happening around rescheduling. And you know, just been much different had they been hosting it and say, california or elsewhere. So again, just yeah, totally here for it. Maybe we'll move to Minnesota, we'll see.

AnnaRae Grabstein: 5:24

I'm not moving to Minnesota, but it is a cool town. I and it was so green it's, it's nice. I love places where it rains a lot. You know it's different than.

AnnaRae Grabstein: 5:32

California. But, um, let's, let's take a pivot and start having um, start queuing up this conversation that we're going to have with Heather. Um, you know, investing in cannabis was an early podcast that you and I both listened to. Brandon was the host and it was a great one. It was one of the first, the first consistent, regular podcast that was talking about growth and opportunity in cannabis, and I learned a lot from from that content. Do you remember listening to it?

Ben Larson: 6:02

Oh man, yeah, Huge shout out to Brandon David. We kind of built our companies alongside each other. I was launching Gateway, he was doing investing in cannabis. He did a whole series actually where he interviewed each founder. Each founder in our first cohort got their own episode. And so, yeah, I just spent a lot of time with Brandon and really missed that podcast. And in fact, when we were launching High Spirits it was kind of like right as he was winding that down and it was kind of like a big inspiration for us. And you know, I know Heather would be at the top of his list, especially over the last year because Speedwell was deploying, when there's a lot of other people that frankly didn't even have capital to deploy. So super excited to have her on.

AnnaRae Grabstein: 6:45

Yeah, I think that we thought we would be talking about investment a lot more than we have when we started this podcast, and part of that has been the capital environment and the challenges around capital. o There hasn't been a lot of capital to talk about getting deployed, so we haven't had the opportunity. But whether it's being deployed or just being considered, heather Molloy is someone that I always turn to to talk to about this space, so let's bring her on and I'll queue her up and introduce her. Heather is someone who I consider a good friend, but is someone who I met through the industry and she is the managing partner and founder of Speedwell Partners, which is an investment group and advisory partner to the cannabis industry. She has a super rich background in corporate development and deal-making, formerly as chief strategy officer at Terrasend, where she led a number of different significant acquisitions and investments, and before cannabis she had a really successful career in asset management and she just has a very unique and experienced and smart perspective on market forces. So I'm really excited to welcome my friend, heather Mouy, to the podcast today.

Ben Larson: 7:59

And she has great taste in music. I can attest to.

Heather Molloy: 8:04

That might be questionable but if you ask my kids, definitely questionable. But I think Ben and I have some mutual interests, so it's good to see you guys. Thanks for having me on Heather.

AnnaRae Grabstein: 8:16

We've known each other for a few years now and I have told Ben about you in the past and you guys hadn't met. But then more recently, the two of you have been spending a ton of time together and I haven't seen you in person for a while and that's because you tend to. You tend to show up in DC and work on policy and hit the halls.

Ben Larson: 8:37

We're besties now.

Heather Molloy: 8:41

Yeah, it was really fun to see and meet Ben and I was lucky that we were in the same group. Um, he was I guess you were the veteran and, uh, ncaa member there that was, uh, helping orient all of us. But uh, I thought it was like a super fascinating process. I loved being a part of it and I felt like we were really actually pretty impactful in a couple of the meetings that we had where it seemed like they were definitely there was like really good followup and that seriously impressed me that the offices were like so keen to kind of jump in and help.

Ben Larson: 9:11

Yeah, it was. I mean, we had an all-star team. I had the easiest job in the world. So we had Heather, we had Pamela Epstein, who a lot of us know she's a former guest of the show, and then we had Roy Bingham from BDSA and then oh shoot, her name is slipping my mind from CanAdvisors and Summer, oh Summer.

Ben Larson: 9:33

Yeah, and we just just so many interesting perspectives. I learned it was one of those things where I'm like I've been in the industry for almost 10 years now. I know almost everything. I think that's factually incorrect because I was sitting on a couch and just knowledge bombs were being dropped and I'm like taking a master class on an industry that I thought I knew really well.

Heather Molloy: 9:56

Yeah, it was cool and I didn't realize. We had two people, two of the members in our group. They had taken out loans under the PPP program and they were facing issues with the Department of Justice and the offices were, I would say, flabbergasted Like what are you talking about? Federal resources are being used to go after companies that have taken these loans. You kept people, I think, between the two of them. They had kept people in a couple hundred, it was like a hundred jobs between the two of them. And it was fascinating because they were like wait a second. And so we said like can you write a letter to the DOJ? And like two of the offices were like yes, we'll work on this together. So that was fantastic. And then I thought the other thing that was fascinating is that they had like a sincere awareness of what was going on in the markets and they were definitely aware of the movement right now.

Heather Molloy: 10:48

And I think that this is such an interesting time for me as an investor, probably one of the hardest times that I've experienced in the space. So I got in about 10 years ago and at that point it was like very clearly a state by state market developing and so the investment opportunity. You kind of could look at it based on that ring fence state market. And then we had, like the emergence of the MSOs and so you kind of saw capital forming with those like larger groups that were looking to scale in whatever way, shape or form that they could, and the most successful groups I think like well, this is questionable, but in the U S I think, uh, people that were effectively in raising capital I think in the U S I don't be curious to kind of look at like the quality of uh capital deployment. Um, cause I think what's happening right now is pretty interesting with respect to like the MSOs have built these businesses that have shown resilience in a really difficult operating and tax environment, that have shown resilience in a really difficult operating and tax environment.

Heather Molloy: 11:51

And now I feel like the Canadians are sitting north of the border and you can see them all starting to stockpile money. So like looking at Tilray saying that they want to do a $250 million at the money raise, and then Canopy, I think, is doing the same thing. And now you have this strategy with ring fencing the US assets, it feels like there's a lot of capital starting to mount just north of the border. And then when you look at the numbers on the US exchanges, there's so little liquidity and there's so few trades pushing around these stocks that I remember saying to people like just look away. And now I really feel like it's just like, just look away, like you have to just kind of believe that you're directionally correct. But the regulatory environment right now I think until September is like I feel like a little bit, a little bit stuck right now thinking about the regulatory environment.

AnnaRae Grabstein: 12:44

So, within that thing saying you're stuck, I want to hear about what Speedwell has done up into this point and how it's, how it's shifting in terms of the way that you're looking at deals. I know you've been investing in cannabis long before you started Speedwell and personal investments yourself, then came inside Terrasend as an operator, continued to make personal investments, decided to level up and actually start I don't know, do you call it a fund Start the fund with Speedwell and you have deployed and now you're looking at more deals. So talk to us a little bit about that, that journey, and and where Speedwell is today.

Heather Molloy: 13:28

Um, so Speedwell started in February of last year and I have a business partner, uh, brian Moonen, and his background is in capital formation, capital raising, and uh, he and I have known each other for I guess now it's 13 years. Um, he'd been like kind of watching what I was doing in the cannabis space and was pretty he and I have known each other for I guess now it's 13 years. He'd been like kind of watching what I was doing in the cannabis space and was pretty convinced that the time to look at the space was like now in terms of just like when you looked at, valuations were head compressed, liquidity was really low, fundamentals were good, it was a growing sector. There was a misalignment of growth and capital, and so that is definitely interesting and something that we both wanted to work on. We have an amazing family that works with us right now, so we basically are a fund of one. We have a single family that has basically helped us form our fund one, and raising for a fund one as a first-time manager is like most people if you call them, they'll say like I don't do fund ones, so they were, I think, really smart in advising us to like let's do this as a fund structure so that you have a track record. Subsequently, we've decided to open up the fund, so until November we'll be able to take in additional investors if we want. Subsequently, we've decided to open up the fund, so until November we'll be able to take in additional investors if we want and we can take them into our current portfolio. Um, so I do think that that's interesting for some people. Uh, I think it's like great to know, kind of like what the investor's doing before you get in, versus just a blind pool and then hopefully that'll help us down the road.

Heather Molloy: 15:02

But to date, what we've invested in, we've made five investments. To date, we just put out a term sheet for a sixth investment. We had a couple other things that we were really far along on and then with the Miller amendment, we had to kind of go pencils down because it was definitely that was like some regulatory shift I hadn't expected. I kind of anticipated, but I hadn't expected it. But so where we are to date is we've done a multi-state manufacturing play with brand and we think that there's fantastic opportunity for them to grow by virtue of acquiring other brands and then working on a licensing basis to both expand their brands into markets where they don't have manufacturing, as well as to bring other brands that they want to work with into their markets where they own manufacturing. So that's Garden Society.

Heather Molloy: 15:50

That's Erin Gore. She's in California, ohio and New Jersey and we went through, I would say, like a very difficult transition period with her where she was trying to go from one market to three markets, and so right now we're just at the cusp of New Jersey, has launched, and I think that that's fantastic and it was great I was with her last week, I think, for the like ribbon cutting. And then Ohio adult use is coming, and I think the Ohio market is very challenging, and so I would like us to see how things go in adult use in Ohio. But it's definitely like that market has taken a while to develop. So that was our first investment and I had personally invested in Erin a long time ago, somebody that I've watched. I think that she's the type of entrepreneur that I want to see succeed. So that was our first thing. And then subsequently we've invested in terpene belt farms. So the most recent investment we did was with terpene belt.

Heather Molloy: 16:53

I think that that management team is amazing and one of the things that I liked most about the team was that they are so regulatorily cutting edge, and I think that they think very strategically about how to navigate through the uncertainty that exists right now between the hemp world and the cannabis world, and I'm a believer in that team and in their operations and then in their product offering. So I think that for brands to scale nationally or internationally, being able to use hemp-derived terpenes is a fantastic way for brands to really have consistency, reliability and predictability in their consumer experience, and so what they're doing there as a starting point, I think, is great, and they showed rapid growth, and the management team there is awesome, so we worked with them. We're also in Greenlight, which is a Southern state operator, and that group is phenomenal. They have a background in distress. They've built a really interesting, primarily Southern footprint that is complimentary to virtually all of the MSOs, and they're paying dividends, which is amazing. Like I don't know who else in the space is paying dividends right now. We also did a CRB monitor, which is data as a service, so they're providing data that's being used, and I think that this will also be impactful in a what I guess I'm going to call like a post-schedule three opening maybe of safe banking. It helps people understand, so it helps fuel certain engines that do KYC and AML. And then they're also broadening what they're doing into the crypto space and others.

Heather Molloy: 18:35

And I do have an interest in kind of the developments that are happening in crypto. I'm not actively I'm not as actively following it as I probably should be, but there's a lot of stuff I like about where that market's going directionally and I think it could interplay really well with cannabis and I know that there have been multiple people that have tried to start things in the past and maybe it's going to be soon that some of that stuff will work. And then the last one, which is I did a piece of a Terrace and private placement, so I know the footprint there really well. I'm a believer in Jason Wild and I think the team there is Zia and I really really like Zia and I think that he's been fantastic for helping scale and like really helping them step it up to the next level, so I was happy to participate there. And then right now I'm kind of looking at things that I think are going to work in a schedule three environment, which is a bit different, so there's like a bit of a learning curve that I have to go on, because now I'm stepping from thinking about regulated state markets to then thinking about a broader, nationally distributed market that like ties more to pharmaceuticals.

Heather Molloy: 19:47

And then I'm also looking at brand and I think that brand is hopefully a space where, regardless of how the regs work, if they have enough of a foothold in a community and a solid footing that they will be able to enter. If hemp stays open, there's hemp. If cannabis is the path, there's cannabis and there's, like, such high potential for growth. And then I think that some of the things that I'm seeing in the industry, that I think the level of data in the industry is increasingly becoming better, and so, as an investor, it's exciting to be able to look at some of the brand data that now you can see in terms of brand insights, in terms of what products are selling where, and then being able to understand. So, like when a brand used to come in and say, like this is how much we penetrated of in a market, you had no idea what that really really meant.

Heather Molloy: 20:41

And now some of the tools you can see, like how many doors are there in? How many doors are they open? Like, where have they penetrated in a state, where they can they go, and so I'm really excited about being able to look at brand with some of the data with which I think is improving with AI, and so that's kind of like what we've been up. I mean, that's what we've been up to today. I've looked at at, like probably I, it's we we've looked at probably I don't know 125 transactions to date, um. We've also looked at I've looked really extensively at the publics um, and our capital is not necessarily structured to be investing in publics, which I if I'm I'm fun too, I would I probably wanted to structure it a bit differently so that we could, especially now when I think that most of the publics are acting like privates, but maybe worse because they're getting pushed around with all the short selling and by not being on a good exchange.

Ben Larson: 21:39

So so you've been very active and I just I just want to reach back into something that you said earlier on is you're still bringing capital into fund one, and I've heard of, I've heard of, uh, fund managers going out and doing some personal placements and then grandfathering those into a fund as it launches. But this is actually I mean, this is an opportunity right for for these kind of later lps to come in and benefit off of being able to see, like, how, how common is that? Like I actually like I would, I would love that if I was coming in as an LP and being able to like oh, here's your track record, here's all the activities, here's the 125 deals that you looked at, how you look at them, all this kind of stuff. It just doesn't feel like that's a common situation. But correct me if I'm wrong.

Heather Molloy: 22:24

Well, so I think that I mean I think that what you said, like there was a, there were a lot of asset gatherers that were like building pools and then they either became companies or funds.

Heather Molloy: 22:33

So I think there's some precedent, but maybe what's different is that there was an active mark and I think that what we're offering, which I think is I don't think it's like completely uncommon Um, but I think it's great for the investors to be able to take a look at like what we've done and how the portfolio is developing Um and then understanding like what our concentrations might be, uh, over time.

Heather Molloy: 22:56

But we typically are like we're targeting, we would like to see, we'd like to be invested in things where we expect minimally that we're getting our capital back, but we're really targeting like three to five times returns Um, but it a lot of stuff gets cut out for me because we're not looking to do venture. I did venture at the beginning because I've been in this for 10 years and everything was venture and that was that's. It's really hard Like to be venture. You have to be able to take a you know such a broad, shotgun approach and be in everything, basically Cause you're going to get what 80% of your returns from 20% of your portfolio, so you need to be broadly invested. That was hard in cannabis, super hard.

Ben Larson: 23:42

Yeah, a lot of extinction events.

AnnaRae Grabstein: 23:45

I heard people talk about a lot of those pro formas as as financial pornography. You know it was much more fantasy than reality. I curious talking more about the people who are investing in you, the different groups that are coming in, and Ben highlighted the uniqueness of being able to still invest in the fund knowing what you've invested already. How challenging is it to bring money into the fund right now? What is it like to be a fund manager working with investors trying to sell them on the industry when there has been such terrible performance, mostly that they can see in the public markets, which is actually fundamentally different from what's happening in the private side? In many ways, the correlation isn't exact, but how are you managing these conversations and getting people to write you checks?

Heather Molloy: 24:41

So thankfully I have Brian Moonen who does a lot of that heavy lifting, so he's kind of out front and center. I would say that most of the conversations are similar to this one. It's really getting to know people, letting them understand who we are, how we're thinking about things and seeing if they. Uh, I think you have to have like two things to want to invest in cannabis right now. So I think you have to have like a pretty high risk tolerance. Maybe there's more than two things. So you have to have a pretty high risk tolerance and you have to have a long enough time horizon, because I do think we're all directionally correct but I don't know exactly when things are going to play out. But I think you have to have the intention whereby you're putting money into the space, not just because you're looking for an outright return. It has to be because you want to live in a world where cannabis is a consumer product that exists, like in your ecosystem, and for me, like that was a, that's very much like a leading.

Heather Molloy: 25:45

I want people to have choice and access and ability to use safe, predictable, reliable products that work for a multitude of reasons, and I think that it's really a very impactful product product development for women because I think it touches on wellness. Women make consumption decisions for, you know, for their families. I think it's like 85% of discretionary spending they're buying. They're going out and buying for pets, for elder care, for wellness. So, like the categories that cannabis touches and the categories that interplay with where women are shopping and consuming, like I want to see cannabis as a readily available product in women's lives, like personally, and then extend that beyond.

Heather Molloy: 26:31

It's like for families and just broader, like I want to live in a world where people have access to cannabis and so some of the investors that we meet, like the people that are like ready to write checks, like they kind of have to have that belief as well, because otherwise, right now, I think you're really sitting back and waiting to see what happens, especially when there's you know, I would say there's a lot of excitement in crypto, when you kind of think about, like cannabis and crypto have been developing side by side and crypto has recently had, I think, a lot stronger regulatory developments in terms of the development of, you know, etfs being able to pull a lot more retail consumers and institutions into the space, retail consumers and institutions into the space and cannabis needs that same access to higher exchanges, broader retail availability and people being able to invest and hold and custody the shares. Like right now, just actually finding someone to custody your shares can be very, very challenging, and so those like technical concerns need to go away.

AnnaRae Grabstein: 27:36

And so you're able to find that alignment with with investors. It's it's not easy, but they are out there. Is that what you're saying? They're out there.

Ben Larson: 27:44

Well, and then and then. Part of the part of the pitch is probably like you believe in this category, but there's a lot going on right now, so we're not going to deploy immediately, but we need to have the dry powder for when things do become more clear.

Heather Molloy: 27:58

Well, I think that there's um, I think that there are opportunities that are investable right now. I think that I'm frustrated personally that I cannot, um, invest in certain categories that I want to right now, specifically Ben. I mean, we're like we're going to talk about this, I'm sure, but specifically beverages, like. I love beverage, I love the beverage space, I want it to like, exist, thrive, be available everywhere, but I don't think that beverages should be coming into market from through a piece of legislation that was intended to develop the farm gate versus an ingredient used in a consumer product, and as an investor, I feel like that the tenuousness of the regulatory framework makes it very hard to invest in. And then the recent movement on the Miller Amendment and then the appropriations bill.

Heather Molloy: 28:57

I don't think I've ever paid as close attention to what's going on in DC as right now.

Heather Molloy: 29:02

We're, like at a very critical juncture because all of this is tied so specifically to rescheduling and the language around rescheduling was so elegantly constructed, where they are able to explicitly tie it to parts of the farm bill, and so you can kind of see how the logic might develop whereby they can either be permissive or exclusive, depending on where the pendulum is swinging in DC at the time that rescheduling comes through with the farm bill and I know a lot of people are saying that they don't think the farm bill will that anything's going to happen this year and I think that that's really detrimental to the hemp space in the long run, because I think that the snowball is building, with resistance to the intoxicating cannabinoid products being broadly available, and I think that the faster that those products move into a better regulatory channel, the better it will be long term for the space. So I think that the farm bill creating clarity sooner than later will actually be better for the hemp space. But maybe that's controversial, I don't know.

Ben Larson: 30:06

Yes, controversial, but also probably the main takeaway from from last week at Canara and, yeah, a lot of people don't want to hear it, a lot of people aren't even acknowledging what you said is like there is a pendulum that is swinging.

Ben Larson: 30:19

It just happens that we're on the first swing of it, so it feels like everything's up and to the right. But it's like if we continue and I say we broadly from like the hemp perspective, if the, if the narratives continue to be like, oh, we want more of the same. I do think that there's a potential for the Miller Amendment to get railroaded through. And so I know a lot of us that were at the conference last week have kind of banded together and started picking apart the Miller Amendment and finding kind of something that acknowledges the intention of the Farm Bill, how far it's supposed to go, and basically trying to use it to define what hemp, industrial hemp and then the hemp cannabinoids are, and then trying to actually push it to states' rights. But we'll talk about that a lot more in the coming weeks. I know our mutual friend Pam Epstein and Neil Wilner and a bunch of very smart lawyers that are very familiar on it are kind of trying to get language that preserves a path forward without ignoring the swinging pendulum.

AnnaRae Grabstein: 31:25

And I want to say, heather, that I totally agree with you that the Farm Bill is not an ideal place to make hemp legal and accessible and that we want laws that we can depend on and certainly, as you're talking about being able to feel confident in a go forward opportunity for an investment that, even if we do get permissibility in this next round of the farm bill, it's still going to be revisited every five years. And it's like do we want to be back at the table fighting for our businesses, our category, our opportunity, every five years? Obviously not, but at the same time, from an investor perspective, isn't that part of what the opportunity is about? Is like taking these bets on things that are not exactly clear and deciphering. If the risk is, is something that you can get behind.

Heather Molloy: 32:22

Uh, I don't. I feel like there were so many business ideas that were pitched initially, like years ago, that hinged completely on regulatory capture and, like I don't want to, I don't have an interest in investing in something that, like, regulatorily, can disappear overnight, like, and that's not what I thought or what I think I'm doing by looking at the cannabis space. I want to be an active participant in long-term growth of the industry. Um, but I think that if you start playing out some of the scenarios with respect to the way that the hemp is working now, I think it's interesting for operating companies to be able to actively deploy in the hemp space as well as the regulated space. I think it's harder as an investor to write a check into something that's in one space versus the other. So I think it's interesting that some of the MSOs are leaning in and I saw Juana launch hemp gummies through happy. I mean I saw it today, I don't know if it happened earlier than today, but so you know. So canopy now, uh, cure relief. I think some of the others also have hemp. They're operating companies and I think some of the operating companies I work with, like you know, I've encouraged them to look at hemp. To the extent that you're able to do it in a cost-effective manner, there's so many benefits to it.

Heather Molloy: 33:50

I would really prefer that cannabis companies had the same access to banking advertising distribution. And I think I mean and now we're going to kind of talk, I'll talk more about regs but, anna Rae, we've talked about this like California cannabis, like part of the biggest problem with California cannabis is that there's not enough distribution outlets, right? So if you're a regulator in California, you should be trying to open up distribution as broadly as possible. And now all cannabis companies are talking about the erosion of sales in their markets due to the proliferation of hemp, because hemp has unlimited distribution points. And so I don't know, ben, if you guys talked about this at Canra.

Heather Molloy: 34:38

But like, regulatorily having regulated products be a broadly distributed like, let's say it's low dose, let's say it's beverage only, whatever you want to call it Like that's great for the industry. But the reason that it falls down, I think, is because we need safe banking. The reason that it falls down, I think, is because we need safe banking. I think that you can't have the Minnesota scenario on a state-by-state cannabis market unless you've solved the payments banking issue. That I think Safer starts to lean into doing.

Ben Larson: 35:21

I mean it does come up, but it wasn't the most critical issue, mainly because it is this there's this perpetual hemp versus cannabis conversation and what hasn't happened to date is that, like coming to the table, mapping out the plan, like how this is mutually beneficial for all the stakeholders.

Ben Larson: 35:34

And you know, there's just been this, a lot of like just firing back and forth across the line stakeholders.

Ben Larson: 35:36

And you know there's just been this, a lot of like just firing back and forth across the line.

Ben Larson: 35:38

And we're finally getting to the point where people are starting to realize not everyone, but like a lot of people are starting to realize we need to come to the table, we need to map this out, show, like you know, tax parity for states like California, where there's an established marketplace, where the retailers and the operators on the on the Rayleigh cannabis side, they want to participate in hemp, they don't want to give up everything that they've built. And so it's like how do we, you know, create a structure for hemp to enter the conversation to? I hate to say it but, like you know, pay the same tax that cannabis is, but then have a roadmap to reduce the tax across the board for everyone, because the goal for the regulators shouldn't be to have an outsized win by incorporating hemp, but to actually make cannabis viable by reducing the tax. And so it's like this level of detail that I just think the collective industry hasn't gotten to yet, but it is what's necessary.

Heather Molloy: 36:32

And then, yeah, safe banking would be great, but we haven't even created the playing field to have have that be a a known need yeah, I mean, I think that's that like safe banking is top of mind now for uh, for me, and it's definitely something that I've said to a couple people within last week that if I can help in any way on safe banking, like I, I, I I kind of believe that it could be handled this session or like before the presidential election. It's passed what like eight times or something.

Ben Larson: 37:08

Yeah.

AnnaRae Grabstein: 37:08

Bringing up safe banking. Do you think safe banking does enough Things like you talked about credit card processing that hemp businesses have that cannabis don't say safer, I guess is is not going to unlock those that channel. Is it good enough in your mind?

Heather Molloy: 37:28

So I would like to see potentially changes that do open up, I guess, cannabis and hemp businesses to working with financial institutions versus just depository institutions, and there's probably other changes that I kind of need to be better made aware of or kind of understand better. But I do think Jason Wild used to always say don't let the perfect be the enemy of the good. So and I think that when you like I'm furious with what happened last go around in terms of social equity being effectively used as a talking point for not having safe banking go through because they didn't think that there was enough being done for minorities, and I actually actively lobbied around this topic because I was flabbergasted. So if, like, women raise I don't know if it's like two or 3% of uh venture dollars in regular way industries, I think if you did a study in the cannabis industry, it's probably far, far less and I can't imagine that the minority investment is any better. I would think it's like significantly weaker.

Heather Molloy: 38:35

And when you look at the value of a lot of the licenses that are given in the social equity construct to um, to minorities and impacted communities, I think it's all pandering, it doesn't move the needle and it's like very, very low percentages in terms of like.

Heather Molloy: 38:50

If you think about a total addressable market and the amount of the impact you're having like 0.00003% of impacted populations holding up the development of the broader market I don't think that that's equitable or fair or or really like a win for the industry or for those communities.

Heather Molloy: 39:09

Um, and I don't think that having a license should necessarily be the goal, like I think being an investor and being in the position of capital like owners win, and this is something Scott Galloway always talks about thinking about things as capital versus labor, and so I think that that's been a really interesting lens to think about. So I think that safer banking would have unlocked a lot for women and minority business people that were looking to access depository institutions, small business loans and just the ability to bank and raise money. They're not in the same communities and the same pockets of capital formation, and at least they would have access to depository institutions and banking. And so I thought that it was a humongous disservice to the population that they were claiming to try to be protecting that they, that they stood in the way of it getting through.

Ben Larson: 40:08

Yeah, I think that's 100% correct, and what we heard while we were on the Hill is that anything beyond the banking itself is largely a non starter with the GOP and, based on those elements, that people are pretty much determined to get into the bill is why we're probably not actually going to see it before the presidential election, because there was, you know, we have Mitch McConnell, who's, just like you know, a wall for this topic. He's coming to the end of his term as as minority leader, so the best we're going to get this year is likely the lame duck session. We'll see, I don't know. It's uh, it's an interesting conversation, but I I 100 agree with you. I I think safe banking largely benefits the, you know, the, the, the minority groups. Um, because the large groups already have access to banks like. That's not, it's not an issue for them.

AnnaRae Grabstein: 41:02

Well, speaking about some of those bigger, larger groups, the public companies. Most of our American public cannabis companies are listed in Canada, but there are ETFs that are listed in the US and you were talking about the crypto ETFs, which has definitely been bolstering crypto performance over the last couple months, and in conversations you have been an advocate for people who are looking to make investments in cannabis to look at cannabis ETFs, and I'd love to hear your perspective on that and how people should think about the public market, cannabis markets and and the businesses that that are playing in that space right now.

Heather Molloy: 41:46

Um, so I think that, uh, I think that there are a lot of us that have worked in the industry for like so long and we I talked about this with you guys the other day in terms of I was at a conference and looking at the community there and it was I don't know 100 people that were looking at starting businesses in the space and they were looking at mortgaging their homes and going all in on a single license in Maryland or DC, and I just asked in the audience, like how many of the people in the room were invested in the space? And it was virtually no one. And so I think that there, I think that there's like different communities, but I broadly would love to see, uh, I would, I would love to see, like every time I hear about like what's going on in GameStop, I'm like why can't like there be a GameStop community of stoners that like roll into MSOS in terms of like just the community? So you have, and you have like 17,000 people that have commented on rescheduling right now, like if all of those people would, you know, become new investors in MSOS. Or I think Aaron Edelheit's working on a new ETF and I think there have been some ETFs that have shut down because there just hasn't been enough support. But so I guess, over time I think it's really difficult to beat the market.

Heather Molloy: 43:09

And so if you have a public way as a retail consumer where you can access the market, specifically when you're going to go all in on a single point, a single risk investment, I don't know why you wouldn't also be hedging your personal exposure. If you believe in the market to go all in on one thing, then you should also have market exposure, because over time it's very difficult to beat the market. So I think that MSOS or another ETF is a good proxy for being invested in the market, and right now the valuations are very low and the liquidity is pretty low, but you can access that through most brokerage accounts. So I think that, not letting the perfect be the enemy of the good, I think that people should. If you have an interest in supporting the space, if you want to see cannabis in the world that you live in, then I think you should be coming into the space as an investor.

Heather Molloy: 44:08

So if you're a consumer, you should invest.

Heather Molloy: 44:10

If you're trying to open a license, you should invest, and if you, if this is the type of world that you want to live in, then you should invest, because getting capital into businesses that are serving the purposes you know they say buy what you know, right.

Heather Molloy: 44:23

Like when my kids opened their stock accounts, I think my daughter bought like Lululemon and my son bought Apple right. So I'm buying MSOS, and it's astonishing to me the number of people that are out raising money, talking about how hard it is to raise money, but they're also not really making a bet on the industry themselves. So I think that I would like to see a lot more people kind of put their money where their mouth is and go into the space and be supportive, because it's amazing when you look at some of these other stocks and how they move and just how little interest or volume there is. That's a vehicle that you can get in on a major exchange and it's easier to have access through more of the trading platforms, and so I would love to see more people in that space because, ultimately, the money that goes into there moves into the underlying companies.

Ben Larson: 45:17

Yeah, this is tricky. A couple of things. I remember I was talking to my financial advisor a couple of years ago. I was thinking about putting some money in the public stocks and he's like aren't you a little over-indexed to cannabis already? And I'm like good point, I'm like 98% in on cannabis at this point.

Ben Larson: 45:39

But you're all in on one thing, like 98% in on cannabis at this point, but you're all in on one thing this is true. Also, though, when I was first getting into space, I'm like I didn't like the whole limited license thing. I didn't think it was a long-term play. So I do wonder if our and we're starting to see it like the Cureleafs GTIs, like we've been talking about are starting to diversify and change their strategy to potentially adapt to whatever the future is, so maybe it'll hold some water. Now I'm thinking about this tech platform where they're democratizing access to tier one kind of venture deals. If someone could syndicate a series of those privates or I could get behind the concept of some of these like higher growth opportunities I would like that. That's what I would invest in. I hear you. I hear what you're saying from a signaling perspective.

AnnaRae Grabstein: 46:28

Are you saying Ben? Because if you're a clean energy ETF, there's thousands of clean energy companies that might get chosen to be into that ETF. There's like a much broader spectrum of potential diversity, whereas there's not that many public cannabis companies, and so the ETF is really just it's not actually representative of the whole market, it's just representative of this very specific slice of the market.

Ben Larson: 46:54

I mean talking about knowing the space right. It's like, yeah, I might go into GTI and Care Relief no offense to everyone else, but like right, but but don't you think so here?

Heather Molloy: 47:04

So so I think that the MSO model isn't great either long-term, but I think that it's almost like Microsoft or Google, whereby they've gotten big enough now and they're the closest to being able to uplist once some of the catalysts occur.

Heather Molloy: 47:20

And so, similar to what you're seeing with the Canadian companies that are going to go, do these like very large at the money raises, will they?

Heather Molloy: 47:27

This is a question, this is something I think about and I think the answer is probably likely yes, but will they have access to more capital faster to be able to make more mistakes, to pivot? So as the market develops and like the world starts to change shape, based on regulatory movement, those groups have developed like competency, scale and they're large, like they're big businesses and they're about to become much more interesting with an improvement in their tax position. And if you're an institutional investor coming into the space that wants access, those are the most obvious places to go, because they have the most room to fail in terms of making decisions and being able to weather the storms. And so, even though I do think that the model is going to move, I think that they're going to have a head start on institutional capital flowing in and that they will be dominant, even though in 10 years they might look completely different than they look right now.

AnnaRae Grabstein: 48:35

And then it's a good point cannabis. We're starting to see big companies that aren't technically in cannabis yet, be them tobacco companies or beverage companies or CPG companies, that are starting to get more serious about doing R&D and innovation exploration in cannabis, the ones that have been public about doing that type of work. Do you think that those are also good places for people to be investing, because those are companies that are showing the wherewithal to enter the space at the perfect opportune moment?

Heather Molloy: 49:08

Yeah, I've been thinking about this a lot too, in terms of whether or not some of the tobacco companies are, whether or not some of the tobacco companies are good entry points, whether or not some of the beverage companies are good entry points, and I don't know. I'm not as informed Like I know and I'm going to Aaron Edelheid, I think like he has like a very definitive view. I've been thinking about the same thing but I don't necessarily have a view because I don't know how relatively expensive I would find all of those positions versus going into the underlying so like, right now it's very difficult to not make the argument that all of the MSOs are cheap, like just from a valuation perspective. And I don't know, when you look at a lot of the tobacco companies, like combustion is down, smoking, smoking is down, and now those companies are pivoting into vape and oral products, right, like the Zinn um mouth pouches. What have you so like?

Heather Molloy: 50:13

What those companies are doing is changing right now and there's a lot of legacy, uh, in terms of like, where there's decreasing market share, whereas MSOs have relatively high growth, pretty clear consumer base, lots of room to move into drinks, pharmaceuticals and other industries, less liabilities, I think, and it's like an easier growth story at a much lower valuation entry point. So what you are giving up is liquidity, whereas if you have time and conviction, then maybe you don't care. So I just don't know the tobacco space as well, and so maybe in six months I've done more work and I've completely changed my mind. But right now I don't have to do a lot of work to understand that the MSOs are relatively inexpensive, whereas I just I don't have that same conviction on the tobacco side, or the pharma side, or the, or on the beverage side, where you're seeing alcohols decreasing right, so you're seeing what Tilray is buying beers, beer, beer brands buying beers, beer, beer brands, constellation made the bet into Canopy.

AnnaRae Grabstein: 51:26

I hear what you're saying. You're saying that you know if you, from an investor perspective, if you were to be going after companies that are exploring cannabis, you're also getting the rest of what they do, which which you have less conviction on the future of it. And maybe they're looking at cannabis because there are other categories are in decline. At the same time, you're saying that the MSOs are undervalued, but I also know that you're looking at their balance sheets. You know about the debt. You know about the complicated cash positions, the lack of net income that these companies are having. Uh, there's of of the top five public companies, I think GTI is the only one that that is not operating at a loss. Like how? How do you have confidence that they are going to keep incrementally solving the short-term financial obstacles that are right in front of them? It seems to keep happening, but we all keep thinking that, oh my gosh, there's no way it's possible. And then it is somehow.

Ben Larson: 52:31

And the federal debt is not going to go away that was another takeaway from last week is like the retroactive look at 280ies. It's like a pipe dream. Sorry to burst anyone's bubbles.

Heather Molloy: 52:44

Well, I think that some of what you've been seeing is that and I don't know if this will happen universally, but you have seen a number of lenders or a number of groups that are like a number of lenders, have converted to equity Right, and so there's like there's and I sat inside of a public company and I think that, like like all, like all of these businesses, at the end of the day they come down to, like people and management teams, and like their relationships with the people that are involved in their equity and their debt, like it's it's all about, like the relationships that exist amongst these people, and like what their target return is and, effectively, then, what their target return is on capital. So I don't think lenders are going to act in ways that are irrational in terms of their recovery, and so a lot of these businesses, fundamentally, when you lift the tax piece, like there are really healthy cash flows that will emerge and there are ways that these businesses become profitable. Like most of what you hear, virtually every company now has gone through scale, invested in infrastructure, is seeing markets open up that they've been waiting for. So we're at this like tipping point where people are getting to break even or profitable, and then you take the 280E piece out and they're there. So lenders are going to look for maximal recoveries. Are they going to get the maximal recoveries collapsing on those businesses? Are they going to get maximal recoveries working with those businesses?

Heather Molloy: 54:07

I don't think a lot of lenders are really in the place of wanting to go in and run those businesses. So I think that I guess I have like a bit of a leap of faith where I do think that, at the scale that we're talking, many of these companies will successfully navigate their way through. That said, I do think it's interesting what Sundial's approach has been to go in as a lender and then I think they have optionality whereby they could become a very large MSO because they put those loan positions on. So there it's a matter of really understanding the motivation of the capital that you're working with at the time that you borrow.

Ben Larson: 54:44

Yeah, sundial is a monster. That'll be an interesting one to watch.

Heather Molloy: 54:47

Yeah, I mean smart, smart guys.

AnnaRae Grabstein: 54:50

Well, heather, thank you so much. I think that everyone just got a peek inside of your brain and got and I love it.

Ben Larson: 55:01

I always do.

AnnaRae Grabstein: 55:02

It's so great to talk with you and you're such a great resource. I appreciate how thoughtful you are in the way that you are approaching investment, and I'm sure that your investors are are appreciative of that as well. So it's the end of the hour and really we want to turn the microphone back to you and give you an opportunity to make a last call for our audience before we wrap.

Heather Molloy: 55:26

I think I told you this was the thing that was stressing me out most is like having to make a last call. But I think that I think my last call is I'm going to enjoy my summer and I'm going to try to sit back and watch all of this like a movie to enjoy my summer, and I'm going to try to sit back and watch all of this like a movie, because I don't know what's going to happen come September, but I think we're going to know a lot more, uh, on Labor Day than we know right now, and um, and then the elections are. You know, it's coming up on us soon. So I think that my last call is to try to like relax and enjoy the summer and like watch the movie and then, uh, be using the time I don't know constructively to kind of have a plan going into, like if, if no, if November goes this way or that way. Oh, we didn't talk about.

AnnaRae Grabstein: 56:18

November.

Ben Larson: 56:25

It's too far away.

Heather Molloy: 56:26

Can we just save that for, like, october? Well, no, let's like let's wait for the debate and then let's talk about it, because I think that that's going to be informative, huge, huge potential shift in in vibes.

AnnaRae Grabstein: 56:38

Um, cool, well, thank you so much. I think that we're going to want to have you back and talk about more stuff. So you, you just let us know when you've got something good cooking and we'd love to talk about it. So, thank you so much.

Heather Molloy: 56:50

All right, well, I love hanging out with you guys, so anytime, anytime would use a good time. Awesome Bye yeah.

Ben Larson: 57:01

It was great to see you. I hope I see you soon. All right, folks, thank you so much for commenting. Aaron Smith, leah Hesse, you guys yeah, everyone is amazing. Just keep you have Heather's attention, ask her the question. She's a wealth of knowledge, thank you, thank you. Thank you for supporting us and being a part of the show. There's so much that we have ahead of us. It's getting crazy. What a crazy year to be in this industry, but new and exciting opportunities and challenges. Don't forget to share, like, subscribe, do all the things get it out there. Our viewership, our downloads are growing every week and it's thanks to you. So, thank you, thank you to our teams, for Tosa Wolfmeyer Couldn't do it without you guys, especially as Anna Rae and I gallivant around the country. A lot of work to be done. I got to get home, I got to get to work. All right, folks, remember, stay curious, stay informed and, most importantly, keep your spirits high Until next time. That's the show.