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Cannabis Hedge Fund Managers On The Two Biggest Problems Marijuana Businesses Face

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Cannabis Hedge Fund Managers On The Two Biggest Problems Marijuana Businesses Face

A few weeks ago, Benzinga had the chance to visit the offices of Poseidon Asset Management, a San Francisco-based cannabis-focused long/short hedge fund with more than $40 million in assets under management. Co-founder and managing partner Emily Paxhia mentioned and her brother and partner Morgan Paxhia have helped turn around multiple companies.

We asked the Paxhias about the most common problems faced by marijuana companies. 

Management

The biggest issues often revolve around management, Morgan said. “This is not against any early stage founders, but many times the people who created and scaled a business are not the same ones who will be able to take it to the next level. And making that self-assessment is really difficult.”

Cannabis is a fast-growing industry, a real need exists for smart people to spot and recruit the best managers, he said. Convincing people to leave a cushy job and migrate to the cannabis industry in order to do something more fulfilling but at the same time a lot riskier isn't easy. 

Related Link: Marijuana In College: Why Universities Are Offering Cannabis-Focused Classes (And Where You Can Find Them)

"The industry is moving so fast and faces so many hurdles that it is often under-resourced, both from a human capital perspective and from an actual capital perspective — especially in the U.S.”

We've often heard that recruiting for middle management positions is particularly hard — and we asked if Poseidon’s managers feel the same way.

“For me, the hardest, across the board, are financial controllers,” Emily answered. “CFOs, controllers, people who actually know how to do financials for businesse s… those are the hardest to find in my experience.”

In the tech startup world, businesses can afford higher salaries, making talent attraction at a startup easier. “But in the cannabis industry, the salaries aren’t there just yet.”

This means execs have to undertake a personal and reputational risk plus a salary cut.

Many companies offer equity compensation. "How good is that if you don’t know if the company you’re working for will even be around in two or three years?” Emily said. 

Operations positions such as COO are also difficult hires, she said.

“Someone who knows how to really build an organization that is rapidly growing and scaling … that’s a hard position to hire because you want someone with some experience, but who is also still willing to take on multiple role [and] get his or her hands dirty, so to speak.”

Sales

The other big challenge cannabis businesses face is tieed to sales and the limited availability of good sales people to build a team, the Paxhias told Benzinga. 

“I think companies cannot find enough sales people. Also, there’s a lot of turnover in sales teams,” Emily told Benzinga.

Morgan said: “Many products are new or sophisticated too. So, sales people have to spend a lot of time educating clients, versus closing deals. So that’s another thing; it’s a heavier lift.”

Related Link: AxisWire: The Birth Of A Cannabis Industry Media Standard

Picture by Javier Hasse.

Posted-In: Cannabis Long Ideas News Emerging Markets Hedge Funds Markets Trading Ideas Interview Best of Benzinga

 

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