BCBusiness

22 BCBusiness nOVEmBER 2018 A s part of its 2018 cannabis report, Deloitte surveyed current and likely cannabis users across the country. Although the overall sum that Cana- dians shell out for marijuana won't change dramatically after legaliza- tion, how they spend it will, says Jayana Darras, a Vancouver-based partner with the advisory -rm. "It does point to [their buying cannabis] more often, and their willingness to pay a little more to know that they're getting good-quality product and that they're buying it legally." Cannabis stocks have been volatile, to say the least, as October 17 loomed. Take Tilray, a Nanaimo-based licensed producer of medical marijuana that peaked at US$214 in September before sliding to the US$145 range by month's end. The American-owned out-t, whose major- ity investor is a private equity -rm backed by billionaire Peter Thiel, debuted on the Nasdaq Stock Exchange in July at US$17, brie–y becom- ing the world's most valuable pot company. Speaking of Americans, anyone with ties to the Canadian cannabis industry risks being turned away at the U.S. border—or even a life- time ban. The question is how far President Donald Trump's administration will push things, given that marijuana remains a con- trolled substance under U.S. federal law, even though medical and/or recreational use is legal in 31 states and Washington, D.C. Kirk Tousaw (see p.26), a B.C. attorney who has defended the rights of medical-cannabis users, notes that the number of Americans who can buy weed legally now exceeds the popula- tion of Canada. "I expect it'll be a few years o¢, but I certainly hope change is coming on a coun- trywide basis to the U.S. as well," Tousaw says. T H E m E N T O R reiD PArr Co-founder, director and COO, ascent Industries Corp. "there were a number of court cases that led up to the govern- ment creating regulations that allowed companies to produce cannabis on a more commercial scale for medical purposes," Reid parr says when asked why he and his business partner, philip Campbell, got into the can- nabis industry. "Watching that play out over time, we could see the writing on the wall." parr and Campbell founded licensed cannabis producer ascent industries in 2013 but had been planning it since 2010. the two became key figures in establishing the Cannabis trade alliance of Canada, which helped pave the way for recreational legalization. Convinced that marijuana stands to do much more good for society than harm, ascent has taken on a mentorship role with craft cannabis producers. "We agree to help them through the regulatory process in terms of helping them through all the quality assurance, security procedures, documentation and application process," parr says. Of course, maple Ridge– based ascent is still a business, with 125 employees and five facilities (two in pitt meadows and one each in maple Ridge; portland, Oregon; and Las Vegas) to take care of, so any such deal will benefit both sides. "in exchange, we're also willing to do a supply agree- ment with them, which is a win-win," parr explains. "it helps them raise money and have confidence in their ability to sell their product. and for us, it helps secure a diverse array of high-quality products later on, when [legalization] really kicks into gear." –N.C. In 2014, after 30 years with Vancouver's Ventures West Capital, where he focused on cleantech and commu- nications investments, Sam Znaimer founded Locarno Capital, a private equity fund manager that invests in the fast-growing cannabis industry. He once advised clients in Canada and the U.S., but the latter is no longer part of his current activity. What types of canna- bis businesses are you involved with? I've invested in about 15 companies covering several di¢erent sectors: a safety and potency lab testing company, a company developing unique genetic strains, a couple of software companies, a com- pany developing a metered dose vaporizer so patients can control their exact doses of medicine, an organization developing more ener©y- eªcient lighting and, yes, a couple of cultivators. How does investing in cannabis compare to working with startups in other industries? The industry is moving very quickly, [like] other kinds of tech areas. You're working with young, energetic, rel- atively inexperienced teams. There's a huge emphasis on developing the right strate©y and partnerships. There are two areas where it diverges from the typical tech startup world. The -rst is, most tech startups develop in an environment where they have a hunch that someone is going to need their product but there really is no proof. In cannabis, an established grey or illegal market is transition- ing over to a fully regulated legal market. So you don't have the market uncertainty you'd have in other areas. Compared to most soft- ware e-commerce areas, can- nabis is a world that is very heavily regulated, and organi- zations need to be extremely diligent to understand the regulatory environment they're working in. That's very hard because you've got to operate in a world where you've got to get going and you don't know fully what the rules will be for some time. What's changed since you founded Locarno Capital in 2014? Like, everything. When I got going on this, Canada had in place a consultation process where the Harper govern- ment indicated that they wanted to change the then- active medical marijuana program for something that would be more tightly regu- lated and where there'd be a small number of licensees. Today, we have a very active medical program where there are 120 licensees, roughly speaking. —F.S. This interview has been edited T H E v E N T u R E C A p I T A L I s T sAM ZnAiMer founder, locarno Capital

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