Cannabis, Crypto — Craft Beverages & DOT.Com Observations

[ALSO PUBLISHED ON: LinkedIN, MEDIUM]

I spent a fascinating week learning about two of the hottest investment and business opportunity spaces right now. The block chain, crypto and initial coin offerings (ICOs), and the cannabis industry are literally on fire. Given this, I wanted to get an understanding of what’s really happening. I’ve been following the development of the block chain/coin movement along with the emergence of the legal cannabis business as these both are displaying signs of developments that may cause massive disruption (and therefore potentially big opportunities). Venture capitalist Tim Draper has been an outspoken proponent of the block chain and crypto offerings (see Exclusive: Billionaire investor Draper to participate in blockchain token sale for first time), while Jamie Dimon of JP Morgan Chase has been dismissive (see CNBC).

Constellation Brands (STZ-B) announced recently that it had agreed to take a 9.9% minority stake in the $2 billion Canadian medical marijuana company Canopy Growth. The stake is worth about $191 million, though Constellation will have the option of purchasing additional stakes in the future. This aggressive move marks a significant milestone with the first publicly traded US company making a material investment in the cannabis space. For the industry in which I have spent much of my business career — beverage alcohol (beer, spirits and wine), it’s also a taboo shattering wake up call. The financial community apparently agrees with the financial analysts, giving high marks for Constellation’s vision and the market supported it with a gain of over $1 billion in STZ’s market cap (essentially more than paying for the investment). Visiting Colorado frequently, I’ve seen how quickly the legal use of medical and recreational marijuana has ramped up with the state of CO taking in over $550 million in tax revenue as of July 2017.

To learn more about each of these rapidly developing industries and to test my hypothesis of potential disruption, I attended the StartEngine ICO 2.0 Summitin Santa Monica followed by the MJBizCon in Las Vegas which together gave me an interesting perspective. Here I will share some of my observations.

General Observations

First, I met a number of really smart people pursuing these industries with a wide range of business and investment strategies. I had the good fortune to join up at YPO meeting-in-meetings at both events and, as usual, learned a great deal from these informal gatherings and met some of the people leading the way in both industries. I cannot say enough good things about the YPO network and the ability to quickly get to the movers and shakers in any industry or geography, globally.

The hype around these industries surpasses the craft alcohol craze and matches Dot.com in 1997–2000. I know both of these booms well having participated by investing and starting my own DOT.Com eSkye.com raising over $55 million (Tim Draper’s Dad, Bill Draper, invested see Forbes) and my multiple ventures in the craft beverage space. The bright light inevitably attracts all kinds of people and as in both of these examples, there are a ton of people who have limited or no business skills coupled with business ideas/plans/ventures with little to no chance of scaling to success. The cannabis side has more similarities to craft beverages in that it appears that 95% of businesses currently in or entering the space are really “mom and pop” operations that are more lifestyle businesses than scalable enterprises. However, what is absolutely clear to me is that, this is changing rapidly with the addition of serious investors and business operators.

Block Chain — ICO What is it?

The technology of the block chain is real and big. I’m convinced over time, it will fundamentally change the financial side of all industries. This MIT Sloan article does a pretty good job of discussing the potential. Its potential is hard to overestimate but not without controversy. See John Battelle’s discussion of it here Alien, Dismissible, Dangerous, Greedy, True and the fights going on inside Venture Capital firms here CRYPTOCURRENCY MANIA FUELS HYPE AND FEAR AT VENTURE FIRMS .

For my non-technical friends, I’ll try to define it here in my own way. For my expert friends, let me know what I get wrong as I’m still learning. The best simple explanation I’ve found so far is A Blockchain Explanation Your Parents Could Understand. Essentially, instead of a central party (think a bank) keeping track of everyone’s money and transactions with each other, the record keeping takes place in public (without revealing names) with 1,000s or more independent operators verifying the information and agreeing on its accuracy before securing it. While banking and financial transactions are the first use, there are many other uses being worked on and many more to come.

The ICO “Initial Coin Offering” market is booming with new business ideas for the application of this technology. Over $2.8 billion has been raised using ICOs thus far in 2017. These have been unregulated and range from real businesses to potential frauds. The ICO 2.0 Summit put on by StartEngine was really about bringing the ICO market into the regulated security market in the US. It is clear to me, from the many presentations, that an offering for a coin to fund a venture is an offer for a security, and therefore falls under the SEC. There are many in the crypto world who dislike this and will fight it, but governments are not going to simply sit back and allow investments outside their mandated oversight just because they are called “coins”. Given that, I agree with StartEngine’s CEO Howard Marks that the crowd funding Regulation A and also traditional Regulation D exemptions are the proper way to issue an ICO in the US.

Lou Kerner gave an excellent presentation based on his article, Is Crypto (Like) A Religion? & 6 Other Crypto Thoughts .

He followed this with a very interesting fireside chat with Michael Jones CEO of Science who is serious about the space and currently has an ICO in the works.

We heard from 17 companies planning to do ICOs of some kind. Again, I can’t help but compare this to DOT.Com days as there were clearly real business ideas and teams and others that are simply slapping the ICO label on something that is really not well thought out. What was true back in 1997–2000 in DOT.Com is true today — there are and will be billions of dollars invested in the block chain space, some of it will go into real business ventures and some of it will go into not-so-serious business ventures. Sorting these out will not guarantee your investment is the next Google or Amazon, but is absolutely the key to avoiding almost certain failure.

Cannabis — Marijuana Industry — Where is it now and where is it going?

From a story in Fortune Magazine regarding Constellation’s investment — “The wines and spirits conglomerate has no intention of selling cannabis products in the U.S. until it is legal nationwide. But the company is betting that legalization is just a matter of time, according to the  Journal . However, Constellation may soon sell the marijuana drink product in Canada, where legalization of edible and drinkable cannabis products is expected by 2019.

The move comes amid signs that suggest some consumers are reducing alcohol usage in favor of cannabis . “We believe alcohol could be under pressure for the next decade,” Cowen analysts led by Viven Azer wrote in an April note. “Consumer survey work suggests [about] 80% of consumers reduce their alcohol consumption with cannabis in the mix.”’

Given the above, what is the current state of the legal cannabis industry and where is it going?

The legal industry today is estimated at $5–6 billion and expected to grow to $12–17 billion by 2021. While this is only a fraction of the US alcohol market which stands at $200+ billion today, it could take some of that business (especially in beer in my opinion). So it’s big already and its going to get much bigger quickly. State legalization started with medical use and they are rapidly adding recreational. Cassandra Farrington, CEO and Co-founder of Marijuana Business Daily who put on the conference gave a great presentation on the history of the industry. Basically, the timeline she presented is as follows:

· 1996 California passes first medical marijuana law

· 1998–2008 other states follow

· 2012 Colorado, Washington pass recreational cannabis laws

· 2014 OR, AK add recreational. Canada liberalization takes root.

· 2016 11 legalization ‘wins’ in the US — 4 medical and 4 recreational via ballots and 3 medical via legislative action. Importantly, CA adds recreational in January 2018

Here is a map showing the current state status:

Over ½ the US population lives in states with legal marijuana use — with 30 states + Washington DC allowing legal medical use and 8 states plus Washington DC allowing recreational use. That being said, it is still 100% illegal at the US federal level. This means there are significant risks and hurdles for investors and businesses who enter the space. Banking is very difficult as the national banks cannot conduct business in the space. Anyone contemplating investing in the space needs to be aware of these issues. In spite of these challenges and an uncertain regulatory environment, many investors and business owners are jumping in with both feet.

One of the best presentations I heard was by Patrick Rea, the managing director of Canopy, an early stage fund that has made more than 100 investments in the space. He breaks the business down into four investment buckets:

  1. Public Stocks — these are the Canadian companies like the one Constellation invested in.

2. Real Estate — this is the buildings for dispensaries and the land for farms

3. Touch the Plant — these are the actual growing, processing and selling businesses

4. Ancillary Products & Services — these are all the things around the business from software to equipment to banking to marketing.

Canopy is focused on #4 exclusively but there are certainly opportunities in all of these.

From a branding and stage of industry development perspective this is literally a “green field”. I saw some interesting but nascent offerings given the time businesses have had to think about and try to develop brands. With new entrants, this will of course change, but right now I can’t help but think it is like the days when Sam Bronfman and Lewis Rosenteil were at the cusp of the repeal of Prohibition ready to launch Seagram’s and Shenley’s whiskies into the US respectively.

Where is this headed? It’s hard not to believe there will be continued legalization on a state by state basis. With the overwhelming majority of American’s viewing legal cannabis favorably, and importantly with the amount of tax revenue legal markets are bringing, other states will certainly follow to not get left out. Federally it will likely take longer, but like alcohol and the repeal of Prohibition, it will probably only happen if it is left up to the states to decide how their citizens want to allow cannabis regulation.

What’s clear to me is that there are huge opportunities in both these new industries. What is unclear is who will emerge as the big winners. I know from personal experience what being ahead of the market is like. The next few years will be like settling the wild west and a lot of entrepreneurial ventures will be created to try out different ideas in both cannabis and blockchain. I will come back to these topics as I learn more on both and please share any thoughts you may have. Cheers!

included in this article Howard Marks Tim Draper John Battelle Lou Kerner Patrick Rea StartEngine Constellation Brands Canopy Growth Corporation MJbizwire Jamie Skella WIRED Erin Griffith Phyllis Berman YPO Michael Jones Cassandra Farrington Seagram Fortune Magazine Jamie Dimon

Wine Business Monthly Acquires WITS, The Wine Industry Technology Symposium

Wine Business Monthly Acquires WITS,

The Wine Industry Technology Symposium

11th Annual Wine Industry Technology Symposium Taking Place Today Developed for Wine Business Leaders, Marketers, Innovators in 2005

 

(NAPA, Calif.) – The Wine Communications Group’s Wine Business Monthly announced the acquisition of WITS, the Wine Industry Technology Symposium® today in Napa, CA. WITS® was founded in 2005 and is conducting its 11th Annual symposium today and Friday.

Eric Jorgensen, President of Wine Communications Group, said, “We have always had a strong interest in how the wine industry uses technology. Smoke and Lesley have done a remarkable job over the past decade of bringing the industry together around this important topic. We welcome both of them and everyone involved with WITS to the Wine Communications Group family”

“The Wine Industry Technology Symposium has been responsible for raising the level of dialogue and thinking around technology in the wine industry. I am proud of our efforts at bringing the industry together around these important topics and of playing our small part in improving wine business practices. Most importantly, I’m grateful to the many people who have played a role in making WITS a success over the years. It would never have been possible without Kathy and Waunice at the Wine Symposium Group, our Winery CIOs and Advisory Board and all the great sponsors going back to the beginning. I have many friends as a result of WITS who have enriched my life in so many ways,” said J. Smoke Wallin, founder and co-chairman of WITS.

WITS Promo PHoto

“I have long admired Eric’s team and vision for the Wine Communications Group. WITS will be a perfect fit to their strategic vision, which gives WITS a long-term platform upon which to thrive. This was our most important criteria in a partner for WITS,” said Lesley Berglund, co-chairman of WITS and co-founder and chairman of the Wine Industry Sales Education (WISE) Academy.

The transaction is expected to close in July and terms were not disclosed.

About Wine Communications Group:

120109_CWP_3in1_WBM
Wine Communications Group, Inc. is the leading information and services provider for the global wine industry.
Publishers of winebusiness.com, the leading web site for the trade, and two of the industry’s leading print publications, Wine Business Monthly and Wines & Vines, we are dedicated to meeting the wine industry’s needs for information, analysis, resources and tools. Wine Communications Group, Inc has put together a suite of products that bring to the industry practical information, cutting edge research, recruiting tools, daily news services and a comprehensive directory.

 

About WITS:

wits logo

The Wine Industry Technology Symposium® (WITS) is the focal point for thought leadership in the strategic and tactical use of technology in the global wine industry. WITS was created in 2005 by a group of wine industry and technology professionals to advance innovation and to address the unique information technology and service needs of the wine industry. The 11th annual WITS is June 25 – 26, 2015 in Napa, California. To learn more, join WITS on Youtube, Twitter, Facebook, and LinkedIn

 

For more information, go to www.WineIndustryTechnologySymposium.com

11th Annual Wine Industry Technology Symposium® to Unite Wine, Beer, Spirits Business Leaders, Technology Experts June 25-26, 2015

wits logo

March 31, 2015                                                                                                                              Contact: Lisa Adams Walter lisa@winesymposium.com

 

(NAPA, Calif.) —The 11th Annual Wine Industry Technology Symposium (WITS®), the premier event showcasing the strategic use of information technology and services for the wine industry, has been set for June 25-26, 2015 at the Napa Valley Marriott Hotel. www.wineindustrytechnologysymposium.com

Executives from wineries, breweries, distributors, retailers and restaurants gather annually at WITS, the only annual conference designed exclusively to foster education and debate around technology solutions for the wine and beverage industry. The 2015 WITS program will include:

  • Educational Tracks – Sessions on Technology Leadership, Small Business, Consumer Direct, Trade Sales & Marketing and Vineyard & Winery Operations
  • Speed Dating – WITS created “speed dating” for winery and brewery CIOs and technology companies. This will provide opportunities for quality one-on-one time with key decision makers and thought leaders.
  • Plus Beer, with BITS – WITS has united leaders in the craft brewing industry to add the Beer Industry Technology Symposium (BITS™) track that runs concurrent with WITS.

“The rapid proliferation of craft brands in wine, spirits and beer is creating unique challenges for all industry participants,” said J. Smoke Wallin, WITS Co-Chair. “WITS is the only place where winery, brewery, distillery, retailer and distributor leaders can sit side by side for a day of learning and discussion to tackle these challenges with CIOs and technology leaders from across the industry,” he added.WITS 2008

The WITS Steering Committee, comprised of technology and business leaders across the wine, beverage and technology industries, is currently finalizing panel topics and keynote speakers. Past speakers have included the CEOs, CIOs and other leaders from Amazon, Facebook, Groupon, Gartner Group, garyvaynerchuk.com, FedEx Office, Nielsen and 1800-Flowers, as well as experts from IBM, Oracle, Cornell University, UC Davis, Sonoma State University and many others.

Attendees and sponsors are encouraged to register early, as space is limited and expected to sell out quickly. Registration will open May 1, 2015. For more information visit www.wineindustrytechnologysymposium.com.

About The Wine Industry Technology Symposium (WITS)

The Wine Industry Technology Symposium® (WITS®) is the focal point for thought leadership in the strategic and tactical use of technology in the global wine industry. WITS was created in 2005 by a group of wine industry and technology professionals to advance innovation and to address the unique information technology and services needs of the wine industry. The 11th annual WITS is June 25-26, 2015 in Napa, CA. For the 2nd year, WITS also includes the Beer Industry Technology Symposium™ (BITS™) track. Join WITS on Youtube, Twitter, Facebook, and LinkedIn to learn more.

For more information, contact Lisa Adams Walter of the Wine Industry Symposium Group at 707-666-2525 or lisa@winesymposium.com.

Jackson Browne – Standing In The Breach – Tour Rocks Indy

Well I’ve been meaning to post about Jackson Browne who we had the pleasure of seeing Saturday October 18 at the Murat (Old National Center) in Indianapolis. This is his “Standing In The Breach” tour which combines his classics and his new album. We paid up for the Ticketmaster “Rock for Reading” VIP opportunity. The reception room was kind of lame as the Heartland Film Festival banquet was going on and they took the cool bars. That said, we did get to talk to Jackson’s VIP host for a bit and he explained that the new album included a number of songs Jackson had not quite finished over the years. My feeling was they really sounded a lot like his older stuff, which I love. The seats, Center in the 11th row at the Murat were unbeatable. It is a great venue really in almost every seat, but that close was simply wonderful.

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The band was terrific! Jackson finished the 1st set with Fountain of Sorrow, my 2nd favorite. He finished the encore after the 2nd set with For a Dancer, my favorite song of Jackson’s of all time. What a way to end a remarkable performance!

 

I give the show 5 out of 5 stars! Here is the set list, not in exact order, but I think I got most of the songs…

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The Barricades of Heaven

Looking Into You

The Long Way Around

These Days

Shaky Town

I’m Alive

The Pretender

You Know the Night

I Love My Country (Little Stephen)

Leaving Winslow

Fountain of Sorrow

 

– Intermission –

 

Rock Me On the Water

If I Could Be Anywhere

Which Side?

Standing In the Breach

Looking East

The Birds of St. Marks

In the Shape of A Heart

Before the Deluge

Doctor My Eyes

 

Encore:

 

Running On Empty

Take It Easy

Our Lady of the Well

For A Dancer

 

 

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