Investor Insight: Aubree Arias, Orlando, FL
What makes a company in the cannabis sector investable? Given the rapid growth of the cannabis industry, many entrepreneurs and investors are asking that exact question, which is precisely why we tracked down Aubree Aries, CEO and Co-Founder of Greenleaf Joint Ventures. Aubree comes from a cannabis pedigree that few others can match in the industry and he offers a fresh take to investing in this emerging space. While many were getting college degrees, Aubree was working on White House, Joint Chief of Staff, satellite, and missile warning communication systems, as well as maintaining systems within the Pentagon and Washington D.C. area. He is experienced with start-up investments and operations, having done consulting for Medical Marijuana, Inc. and Hemp, Inc. over the last 6 years, working with his father, industry bigwig Bruce Perlowin, in the emerging cannabis industry. Aubree, the visionary and goal oriented architect behind Greenleaf Joint Ventures, recently took some time out to fill us, and you, in on what exactly Greenleaf is looking for in an investment.
How did your entrepreneurial journey begin?
I have always wanted to create catalysts for socially responsible, conscious, and passionate entrepreneurs. To create an ecosystem of businesses and leaders that would positively impact the world. I saw the cannabis industry as the keystone and first stage rocket to investing and building businesses in the health and sustainability movements. My father, Bruce Perlowin, created the first publicly traded company in the cannabis sector about 6 years ago; and we began having long conversations about the sector and businesses therein. I created various business models over that time, seen hundreds more, and invested in a precious few. The opportunity the cannabis sector presents to make positive, impactful change for society from a social and economic paradigm has rarely presented itself in our history.
What was the motivating factor for you to invest in the cannabis industry?
The immense opportunity for what will become a new industrial revolution – a green revolution. An opportunity that could change the world for the better. Once CNBC created Marijuana, Inc., their most successful documentary to date and all the conversations I had with my father over the opportunities for both business and the benefits to the world that cannabis presented – it became my passion. I know that education and stigma removal are the biggest keys to unlocking this industry. To invest in, and work with, the most ethical leaders and companies entering the sector, who are all working to create a responsible, passionate, and compassionate ecosystem, is a once in a lifetime opportunity. The potential and responsibility that goes along with the emerging cannabis sector must be done with the interests of the greater good in mind. So I saw my opportunity to create the aforementioned catalysts by investing in and working with the best entrepreneurs, investors, and companies I could find in the sector.
The opportunity the cannabis sector presents to make positive, impactful change for society from a social and economic paradigm has rarely presented itself in our history.
One thing many first-time entrepreneurs struggle with is raising money. How would you suggest they overcome this problem?
I wrote a blog about this recently from an investor’s perspective. You can find that link right here.
As an entrepreneur if you understand your investor’s needs, desires and challenges, you should have a much higher likelihood of raising capital. One item I would add to this list is to get involved! Get involved with the business and investor oriented groups out there – network! This industry is evolving too fast to go it alone – the more leaders you connect to and collaborate with the better chances you have to raise capital and thrive.
What is your best advice to cannabis entrepreneurs when they pitch their project to you?
Know your market, because this market moves at breakneck speeds! Understand that investors see many business ideas, so appreciate yours may not be unique. Be flexible on terms and open to constructive criticism (you’ll get a LOT – some of which may not be very constructive, but valuable nonetheless). Know your competition because we may already know them (do a SWOT on every one of them). Convince me/them that we are going to be making a solid investment and storyboard the path to success that your project provides for me. After all, we are investors looking to make returns.
How do you identify a company as a great opportunity?
Much of my thinking is dependent upon on my personal goals and strategy as an investor. Last year, we invested in primarily tech plays with a longer time horizon exit strategy (crowdfunding PaaS, 3D printing PaaS, business accelerator/incubator, and a few smaller tech plays). We ask ourselves, ‘Do we, as investors, mesh well with the entrepreneurs’ personalities and are convinced of their vision as they have it laid out?’ Sometimes its as simple as a great deal, like a PPM at $1 that leads to a 4X return opportunity in under a year.
This industry is evolving too fast to go it alone – the more leaders you connect to and collaborate with the better chances you have to raise capital and thrive.
Additionally, what stage company you are investing in impacts your opportunities and exit strategy tremendously. Fundamentals become very important as a company matures and they play a significant role in determining future success. A company with strong fundamentals has the ability to provide significant clarity to an investor, which in turn increases the comfort of the investor.
The focus of my new investment strategy is more complex now that I have a strong understanding of where the market is going. Although the personal aspect is the same (GREAT teams), the investment strategy is completely different. The best hedge funds are creating around 50% annualized returns for their investors. My personal belief is that my investment strategies can better their returns as it gains momentum over the next several years. It is fairly easy to identify these opportunities in the cannabis, health and sustainable sector.
What are the key ingredients in building a successful startup?
Team, idea, execution. A strong team can handle the majority of challenges that they face and have a network of advisors to guide them. Their idea has to have serious potential, solve a problem, and be competitive in the current regulatory market. Finally, creating realistic, actionable, but aggressive goals and EXECUTING on those goals. If I’m an investor – I’d like to see a team raising the capital they set out to raise in a specific time frame – that is an early stage goal that makes me very happy as an investor. First, you see the team has a business model that other investors also are interested in, and raising capital is generally fairly hard – so that is a first aggressive milestone entrepreneurs can meet.
A company with strong fundamentals has the ability to provide significant clarity to an investor, which in turn increases the comfort of the investor.
How does the role of the founder evolve as a company goes from seed to early growth to later-stage scaling?
Depending on the role of that founder (CEO/CFO/CTO/CIO/COO/CMO/MOO COW??) – either they are chewing their cud, or more likely moving from the vision and fund raising stage, to the execution stage in their given role(s). A CEO is always ensuring the company is well capitalized and executing on the grand vision; delegating tasks to appropriate team members/co-founders. In the early stage, you wear many hats. Perhaps the most important action, as you grow your company, is delegating those hats to individuals or teams that can perform the tasks necessary to meet the demands of their objectives.
Surround yourself and hire people smarter than you, those who have expertise in the roles you need filled. I see BIG mistakes with companies that try to do too much, with too few, or the wrong people doing jobs they are not skilled perform. The founder(s) must utilize tech and contractors to their fullest to help scale! Today’s small start-ups have advantages over those of the past with access to technology startup tools and high quality contractors/freelancers that previous generations did not. These allow small companies to perform and compete like medium sized businesses with years of experience.
Your idea is probably not unique, so focus on the amazing attributes that make it stand out from the crowd.
What is your new knowledge in regards to investing in the cannabis industry?
Cannabis is NOT tech. Even technology within the sector is not the same as outside. There have been very few “exits” seen in the industry via M&A or IPO, and they certainly aren’t at the returns seen by tech for the majority of investors. So what will be the returns we see as the industry matures? I think they will lie in the 4-10X range on average, but over a 3-7 year time horizon. Competition is insane – there are a half dozen start-ups all doing the same thing at the same time. As more money piles into the sector – new start-ups get to learn from all the previous companies doing the same thing, but are now doing it with more money, lessons learned from their competitors and typically with a more mature and experienced executive team (lots of executives from other industries are starting forays into this sector). The current leaders, however have name recognition, a solid understanding of our complex sector, and an obvious head start. The industry is maturing FAST.
As an investor, what are some of the key things you wish cannabis entrepreneurs knew?
Your idea is probably not unique, so focus on the amazing attributes that make it stand out from the crowd. Have a strategy for banking issues – even if you are a technology company (opening 2-4 bank accounts is a good idea). Your valuations need to be realistic and expect massive market swings in the prices and economics of the rapidly evolving cannabis sector as a whole. A single congressional bill could change the entire industry almost overnight. The industry will be similar to alcohol for recreational, aspirin for medicinal, and Walmart (ie EVERYWHERE) for industrial. The emergence of this new cannabis industry was made possible by passionate and compassionate leaders, it’s one of the best reasons to be in this sector.
What needs to happen in order to create a billion-dollar company in the cannabis industry?
Focusing on cannabis as a whole: industrial, medicinal and recreational will give you multiple verticals to achieve revenue streams to get to that billion-dollar valuation.
Obtaining that goal would require creating a strong, responsible and industry leading brand while at the same time exceeding current industry standards, so it is prepared for new laws and regulations. They would need to focus on building an amazing team that actively partners and collaborates with others in the industry, rather than one that boasts a competitive, ‘dog eat dog’ strategy. Focusing on cannabis as a whole: industrial, medicinal and recreational will give you multiple verticals to achieve revenue streams to get to that billion-dollar valuation. It is important to realize that cannabis is but one part of a much larger health and sustainability sector. Integrate yourself into those opportunities. Watch for M&A opportunities, if a company has not reached the billion-dollar mark by the time cannabis goes federally legal – one or more will immediately after.
What questions do you have when it comes to investing in the cannabis industry? What do you think makes a company investable. Join the conversation and comment below!
