Greetings, Welcome back! As a recap, we last reviewed in our previous post “myth vs reality” in cannabis (our take: mostly myth). Today, we’ll drill down on the subject of industry growth, or more specifically, what inning we’re in. Some people have suggested to us that the industry has already reached peak growth with a well-entrenched set of participants. When it comes to investing prospects, they say, we are late to the game with the best deals long gone. Well…we see things quite differently. It all starts with regulation where cannabis policy is too rapidly evolving for any equilibrium to exist. For example, the DOJ is continuing its anti-cannabis rhetoric, recently asking Congress to drop its ban on using Federal funds against medical cannabis. However, this ban has strong support in Congress, having been part of the Federal budget since 2014. Meanwhile, states are continuing their aggressive legalization push, with the PA governor threatening the DOJ with legal action should it disrupt PA’s cannabis program and WV becoming the 29th state to legalize medical cannabis. Given this dynamic, we believe investment opportunities are stronger than ever. Let’s take California as an example. The laws for recreational legalization in 2018 have been updated to allow businesses to hold multiple license types, which effectively permits vertical integration. Previously prohibited by state law, there will now be entirely new business models that develop and need investment. But regulation is only part of the story. We also believe there’s “tunnel vision” amongst investors, especially as it relates to dispensaries and cultivators. While these certainly can be attractive investments, the cannabis story is much deeper, especially as R&D on cannabis accelerates and companies start to specialize. To date, such R&D has been miniscule as researchers struggle to even access adequate, legal supply. However, as the legal hurdles lessen and companies adopt learnings both from abroad (where research is more advanced) and from synthetic cannabis studies (which are legal), we believe that innovation will flourish and new investment opportunities will emerge. One example is Houndlabs, a Bay area company, which has developed a breathalyzer for rapid, accurate cannabis detection. Based on patent-pending technology, the device could be of critical importance in addressing one of the key risks of cannabis legalization – impaired driving. The company recently raised $8M in growth capital, underscoring the need for additional, sizable investment dedicated to this nascent industry. So what does all this mean? Well, if we return to the baseball metaphor, we’d say that we are at batting practice waiting for the 1st inning to begin. With rapidly evolving regulations and an accelerating pace of innovation and discovery, we believe that the investment window in cannabis is wide open, not closing. This is why we created Presidio View Capital – one of the first investment managers focused exclusively on cannabis. To date, we’ve made three private investments and one in a publicly-traded stock, and we are currently setting up our first private equity fund for which we’ll announce fundraising plans shortly. We look forward to providing you with more industry and business updates over the ensuing months. Stay tuned! Cheers, Mike and Kip Co-Managers, Presidio View Capital P.S. By virtue of receiving this you're already on our list but if you know anyone that might be interested in learning more, please pass the email along and have them subscribe using the link below.