Rafael Gonçalves 00:54

Good morning, everybody. Good afternoon. Good evening. We never know where everybody’s listening to us from, is watching us from but we are live on YouTube, on Facebook, and on LinkedIn live. One of my fabulous hobbies. I’m the Communications Coordinator at KoreConX. And today I have a very, very special co-host with me for our KoreTalkX. We are talking with Jeffrey Finkel, he is the CEO of the ArcView Group. Jeffrey, I’m very happy to have you here. I’m thrilled. I’m sure this is going to be a great opportunity to get to know a little bit more about your work and about you and why you do what you do. So please, the stage is yours. Introduce yourself. Tell us a little bit about you. Welcome.

 

Jeffrey Finkle 01:42

Thank you. Thank you, Raphael. Happy to be here. Thank you for the opportunity to be on your stage. Yep, so I’m Jeff Finkle, CEO of the ArcView Group. Perhaps it’s best for me to kind of walk you through what the ArcView Group is and sort of how we’ve evolved over the years. The ArcView Group is an investment and event producer for the cannabis industry. ArcView was founded in 2010 by two gentlemen who were very early advocates of the cannabis industry, gentlemen named Troy Dayton and Steve DeAngelo. Steve DeAngelo is a very well-known figure in the cannabis industry is really thought to be the father of the legal movement. And Troy and Steve in 2010, really through the lens of advocacy, and a desire to free the plant of illegal restriction started the ArcView Group. But I think quickly he realized that in order to move the industry along, they had to nurture the economic growth of the industry. So the early instantiation of the business as they set up an investor network, where people with high net worth individuals would pay a fee to come to events in your company’s pitch. And then they would create five, just four or five, depending on the year, investor summits, where companies would pitch in front of those investors with the hope to get investment. And certainly buoyed by a lot of thought leadership, people from the regulatory side of the industry, and successful businesses for a full two-day conference. And they did that really from 2010 to 2019. At which point, a private equity investor came into our view and said, you know, what, great brand great significance in the industry. But we’re not benefiting from all the transactions that we’re creating. I gotta tell you up until that time, I think, or through that period of time, I think, some $350 million. It found its way over 250 companies facilitated our few events. So the idea was to create businesses that could benefit from all that great facilitation that ArcView was doing. So not in a particular order. We created a broker-dealer, an investment bank that does Reg D capital raises, merger and acquisition advisory, and most recently has a crowdfunding offering, which we’re very, very excited about. We have a venture group that does principle investing, we invest out of what’s called a member-managed fund, which is a fund made up of 78 angel investors who have all pooled their capital into a traditional venture capital fund structure. And they, all as a group, decide which companies they invest in. It’s a very unique structure. It’s one that I’ve been doing for 15 years now. So we have capital Ventures we have a consulting company that helps companies obtain licenses, helps brands expand into other states, and help operators with best practices through providing SOPs and more recently, we took our event production business out of ArcView proper and set it into a JV with a private equity funded event producer. So that they can produce those events under license with their great infrastructure at costs and scale that we wouldn’t have been able to do internally. So today, in summary, ArcView is a holding company with significant interests in four business units that sit underneath it, that benefit from each other, essentially.

 

Rafael Gonçalves 05:27

Nice, nice, it’s interesting to see that with time, and growth, you guys made yourselves into an ecosystem itself, right? Because strengthening the economic part of the cannabis sector is extremely important. Right to help the sector grow. That’s, that’s very nice to know. That’s very nice. Thank you for that. But so, tell me, Jeffrey 2022, we are in December, we are on the first day of December the first day of the last month of the year. Was it a good year for the sector? From your perspective? What kind of growth has been experienced? In the area?

 

Jeffrey Finkle 06:12

It’s a really nuanced answer. Because what you’re going to hear in the press a lot is that it was a difficult and it’s true, it was a very difficult year for raising capital in the industry. And I’ll review a lot of reasons why that happened. But let’s sort of back out at a top level of the industry, if so, from 2020, to 21, the industry went from, you know, 20 billion to 27 billion to about 35% growth. Some of that might have been driven by COVID, right, that was in the heat of COVID. People were staying home or they had more time to use cannabis. So that might have been a little bit more than would have been if it wasn’t COVID 2021 to 22. You know, expect to go from 27 billion to 33 billion, I think we’re going to hit that number. That’s 22% growth. So good growth year. And I think next year, we’re kind of looking at another 20% growth in 2023. But I think it’s important that we start to think about what’s in front of us that we still expect this industry to double from this 27 billion to about 52 billion by 2026. Now, with that said, it was a mixed bag over a number of years. So first, let’s talk about the regulatory side. On the ballot in November, five states had ballot initiatives to approve adult use legal programs in those states, only two passed Maryland and Missouri. The other ones did not get enough support to pass. So that was a slight disappointment.  Yet, as some of your listeners may be aware, Joe Biden, who has really not been a perfect friend to the industry, did announce some initiatives, one of which would be, you know, commuting sentences of individuals who were convicted at the federal level for nonviolent possession crimes. So you know, that was a pretty good movement, and also to have the Department of Health and the DOJ sort of review rescheduling and this sort of the cannabis is placed as a schedule one drug and the controlled substance act. So you could argue that there’s been some progress on the regulatory side. I think more importantly, now that the election is over, there’s, you know, the lame duck session of Congress, there’s hope that two bills that have been floating around for quite a while the SAFE Act, and the climb act will get attention and pass in the session, the SAFE Act will create a better scenario for banks to loan to cannabis companies. There is not enough debt capital for some of the mid-tier companies. There’s not enough debt capital from the larger companies, but the banks will be able to provide that if SAFE passes. It’s now there’s a good amount of bipartisan support. I think the industry is ever more confident that that is going to happen. So I would say it’s a mixed bag this year. Some certainly some good things that have core growth, but some difficulties along the way. For sure.

 

Rafael Gonçalves 09:41

Yes, yes. It’s interesting because yes, Joe Biden really took that step right towards decriminalization, apparently, right. It is important to just say that individuals that rights with nonviolent possession don’t have they are not the They don’t have a recruitment record anymore. Right? So you just mentioned that only two states that passed are Maryland and Missouri, right? Yeah, you’re only two states out of five. The year about 2023 is going to be crucial for a tangible consolidation of cannabis as an industry.

 

Jeffrey Finkle 10:25

There’ll be some, there’ll be certainly some consolidation, I think it’d be driven by, again, the capital markets, if capital is constrained, that’s going to drive consolidation. If capital is more freely available, it might not. Mature companies will be able to grow. I think SAFE will like I said, if say, passes, it’s gonna improve access to capital. I think that that’s going to hold back sort of distressed consolidation. So I don’t think so I think there’ll be some consolidation. But I’m a little bit more optimistic than many in the industry. I think this industry has been super resilient, with a lot of, you know, difficulties and hills to climb. And I think it’s going to be, it’s going to thrive, I would say, you know, a lot will also depend on the macro environment, the general economy improves, and store purchases don’t decline too much. I think the industry is going to be fine. So there’ll be some consolidation. But I don’t think there’s going to be sort of that wave of distress consolidation in 2023.

 

Rafael Gonçalves 11:40

Yes, you said you were optimistic about the industry being resilient. And when we look at the numbers, we have to be optimistic because we have growth, we had a growth from 20 to 27 billion to two from 27 to 33 billion. We have more than 50% In two years, right? Because from 20 to 33. Right. So it is experiencing growth, definitely. While it struggles with federal legislation and everything, we can still see growth, it’s tangible, right? It’s not just 1-2%, 1-2 billion, no, you have significant advances in growth. That’s nice. That’s good. That’s good just to seek as obviously there, there’s a market there, just like we have alcohol with tobacco. There’s a market there, and there’s research, but there’s research on medical devices and medical compounds. It’s a huge industry.

 

Jeffrey Finkle 12:47

You know, just to underscore something that you said, which is very important, which is the fact that demand exists, right? So when I think back to when I was an investor. In 99 2000, in the web one o world, we were really laying the pipes for industries that didn’t exist, there was no such thing as digital media. There was no such thing as e-commerce, we were laying the pipes and the infrastructure for industries that we could imagine would thrive on that platform. And not dissimilar to you know, the web to a world in 2008, when just sort of the application layer of the web emerged, you know, social media, Twitter, Facebook, where the web was more of a two-way communication platform. Those social media didn’t exist. And that was harder. But cannabis exists. That’s the difference. So the opportunity is to sort of finance the transition from the illicit market, to the orderly legal market. We don’t have to worry about demand creation. I think I think that number, say, you’ll hear different ones, but it’s around $100 billion, is what, you know, the full sort of amount of cannabis that sold through the legal channel and on the street corner in the United States, we’re talking about 27 billion that’s not been represented. That’s transition and even some of that 27 billion is medical, which isn’t part of this out-in-the-street sales. So maybe we’ve transitioned 15 to 70 billion of eventual 100 billion dollar opportunity. So the opportunity for investors is really to sort of play the transition from illicit to legal. And that’s a dynamic that I have not seen in other industries I’ve been involved in.

 

Rafael Gonçalves 14:41

Yes, that’s, that’s interesting. And correct me if I’m wrong, but every time I talk about cannabis, I honestly see it as high-end technology just like two years ago, companies were researching the way out of COVID and medicines and I mean, It’s a natural compound, right? It grows in nature. And we can and we can study that for medical purposes. I see this technology purely if you exclude adult recreational use, I see it as technology. It’s just research just like we would research any other compounds or any other medicine. Right. So that’s why it’s important to to make it grow.

 

Jeffrey Finkle 15:24

You know, the plant is made up of over 125 cannabinoids. Those are the different molecules that have either medicinal or sort of psychoactive euphoria or euphoric effects on people. Probably six or seven of them are in use THC, which we all know about THC Delta nine, which is what gets you high is the psychoactive one CBD, which is indicated for pain. The CBN, which is indicated for sleep, and then there’s a lot in between, but there’s still well over 100 that haven’t really been studied yet. Because it’s been so difficult to research. So I think you’re right, about the sort of medicinal plausibility of this plan. In health and wellness, we just haven’t explored it enough yet. We’re really in the very early stages of that.

 

Rafael Gonçalves 16:20

While yes, when when we look at it that way, is it. Wow. There’s room to grow? Definitely. So how do you feel about the political aspects? In some states? Do you believe that the federal legislation will face resistance due to these political aspects? Or do you think that both sides are now more they are accepting of the idea of legalizing cannabis?

 

Jeffrey Finkle 16:46

So there’s clearly bipartisan support. There’s more support than ever. But I’d say that there’s resistance on both moral grounds and economic grounds. Right. So for moral grounds, it’s been many years of brainwashing around cannabis and how bad drugs are for you, you know, you remember in the 70s, Nancy Reagan’s campaign, this is your brain on drugs, just say no. So there’s a lot of sort of brainwashing and sort of this moral sort of notion that drugs are bad, and cannabis is bad, and cannabis has no medicinal value. So that’s, I think, something to overcome, but also on economic grounds, because, you know, states realize that they’re gonna have to accommodate federal tax structure, in addition to the state taxes, which are already high. Right? So there’s, it’s a physics question, right, there can only be so many taxes, before, you’re just not going to buy it in the legal market. And a case in point, California right now, to buy illicit weed, or buy legal weed is 50% more expensive than illicit weed, because they don’t have to go through all the compliance. They don’t have to have it tested. So they don’t have, you know, big infrastructure for distribution. So at what point, you know, that’s why the illicit market in California is still three times bigger than the legal market. So once you start to add another layer of tax on top of that, something’s got to give. So states I think, feel pressured, that they’re gonna have to reduce taxes at the state level, to accommodate a federal tax. And they’re not all that anxious to do that. Right. Quite frankly, operators are not all that excited about doing that either. Because, you know, if you’re a single state, if you’re a licensee in Massachusetts, and you’re single state operator, and you’ve got a cultivation facility and distribution in two or three stores, you don’t want the opportunity for a grower in Southern California to export to Massachusetts, right. You want to your cultivator you’re never going to grow at the price they’re gonna grow. So this tension around legalization, certainly would be good for capital markets, the better companies will certainly expand but there are a lot of operators that are not that anxious for it.

 

Rafael Gonçalves 19:10

Yeah, it’s it’s definitely complex. It’s definitely there are economical and social aspects. There’s a puzzle there that has to be solved. Right. Yeah. That’s yeah, that’s why federal decriminalization is important. Right? Yeah. And we have the cannabis banking reform, right? You just mentioned about the SAFE Act, right? Yep. Safe Act. What meaningful actions other than the SAFE Act, we’re all here in order to let’s say this schedule or reschedule of marijuana?

 

Jeffrey Finkle 19:46

Well, SAFE won’t do that. Right. SAFE  just sort of makes it more comfortable to provide banking services to the industry. As I said, I think the effect of that will go a long way. A to sort of facilitating economic growth and creating more debt capital. You know, the review of federal rescheduling and this new Biden initiative as I think he’s tasking it to the Food and Drug Administration, which is supposed to conduct scientific and medical studies to determine really what the medicinal use is and what the potential for abuses. And then they’ve got to make a recommendation to the DEA, and then the controlled substance act will authorize the DEA to move the drug to either a lower schedule or remove it entirely. That’s gonna take some time. You know, you know, that’s not going to happen quickly, even with an administrative rescheduling review, you know, it could move to schedule to that, it’s just not going to happen quickly. Congress could choose to enact legislation I guess amending the CSA to remove it for schedule one, but we don’t see a lot of evidence that that’s going to happen. If you’re asking me what I think and, you know, everyone in this industry has made predictions and every one of us has been wrong repeatedly. You know,

 

Rafael Gonçalves 21:14

That’s part of the game. That’s part of the game.

 

Jeffrey Finkle 21:16

Yeah, you know, I think we’re two or three years away, I do think SAFE gets passed in the lame duck. But I do think for all the scheduling, we’re two or three years away.

 

Rafael Gonçalves 21:27

Right? Yeah, making wrong predictions is part of the game. Yeah, we all know, it’s gonna happen. It’s just like, when you read something about the economy, you can have an economist say one thing, a good thing, or a bad thing about the same fact. So it can be good or bad.

 

Jeffrey Finkle 21:46

A politician certainly is very skilled at doing that.

 

Rafael Gonçalves 21:51

But yeah, I’m a journalist. So immediate, the same exact same fact can be good or bad, depending on the side you’re looking from? So that’s right. So yeah, but it’s still gotta gotta we are advancing. Definitely. We’re definitely advancing. But there’s an opportunity in the private capital markets. But there’s still a long way to go. Talking about the banking reform. Of course, we have to talk at KoreConX. We’re all about education and empowering people to the private capital markets. And we have to say there’s a summit and Investment summit right ArcView Ventures Cannabis Investment Summit, in from December 7 to December 9 in Miami for Coral Gables, right? For operators, investors, entrepreneurs or just curious people, the summit is the place to hear from industry experts learn from workshops, and network with compelling companies shaping the cannabis industry. So So tell us a little about this event. Jeff? Is this an event for any participant in the industry? For Beginners for advanced for bigger enterpreneurs? What are your expectations for those who are going to be there? Tell us about it.

 

Jeffrey Finkle 23:10

Yeah. So we were a very active conference producer SSF from 2010 to COVID Essentially, I think the last one we did pre-COVID was in March of 2020. We just came back to produce in-person events. We did our first one in New York in October, it was hugely successful. We have close to 400 people. And we’re, you know, we’re hoping to duplicate that in Miami next week. So to answer your question, Who is it for? You know, it is absolutely for investors, entrepreneurs, and operators, both big and small. And the kind of curious, curious, are people that are like, hey, this whole industry is happening? Should I? How’s it going? What affects my business? I might be an insurance broker. Is this a line of business that you know is useful to me as I grow my business in 2023 and 2024 Or just people that might say, I might want to work in this industry and get a job, but I need to understand what it’s all about. So investors, entrepreneurs, and operators, and the Canna curious can all benefit to coming to our events. We tell people when you come focus on making two friends and adding five people to your active network. And if you can do that, this will be a big success for you. If you’re an entrepreneur, we have we’re doing sort of three kinds of cool things around investment. We have a reverse pitch. We’re going to have 12 institutional venture capital funds, come on stage and pitch their fund to the audience and they say pitch they’re going to describe their fund. This is who we are. These are the sectors we focus on. And this is what’s important to us in terms of entrepreneurs, we’d like to back. Here’s our average check size, such that entrepreneurs get to understand the way in which these investors think the second session is an Ask Me Anything session, where we’re going to have VC. And I’m trying to make this very casual, to have VCs, angel investors, and entrepreneurs sitting in an open audience with a stellar moderator. That’s going to surface questions from the crowd and ask the VCs to answer them. It’s a safe space, to learn what you don’t learn and to help demystify the fundraising process. The third part is a pitch competition, we’re going to have companies pitch in front of these investors, and we’re going to score and we’re going to award a winner. And that’s good for entrepreneurs. One, it’s just good for the pitching companies to be in front of VCs and get the questions in the feedback. It’s also good for aspiring entrepreneurs, to watch the Q&A, to see what again is important to investors when they’re actually listening to accompany and vetting the current deal. So that part’s really interesting. We’re also going to hear from two of the largest operators in the southeast, Kim rivers from True Leaf is going to be on our stage and they’re making a push to open up operations in the southeast states. And we’re going to hear about her plans. We have Koy Hutchinson, who’s the CEO of the Marijuana Policy Project, she’s going to talk about all the legal initiatives that are happening. We’ve got a lot of other speakers and a lot of other surprises planned. So it’s going to be a great event. It’s really for anybody. And I think anybody that’s interested in the regulatory or the business side of cannabis will benefit from coming.

 

Rafael Gonçalves 26:42

Yeah, that’s, that’s interesting. I like what you said about the Canna curious. Because yeah, you have insurance brokers, you have people that might want to work the industry. Wow, how can my services, marketing services, right? You never know, you have to understand where the industry is at in order to be able to work with it. That’s, that’s interesting. That’s an interesting way to say it. And we, of course, have Oscar Jofre, our CEO is going to be there. As on the raise capital, better keynote. And if you if you haven’t had a chance to watch Oscar on stage, please do because it’s great to hear him speak and to hear how he’s going. Yeah, he’s, he’s, he’s very good for inspiring people and he has a lot of experience. And he, he’s great on stage. So I believe everybody would love that. So what highlight would you give to a company that has just started in this business? I’ve just started a cannabis business. What highlights would you give for a company coming to the ArcView access cannabis Investment Summit?

 

Jeffrey Finkle 27:56

Well, if you’re just starting a business as I said, those three investor sessions are hugely valuable, hugely valuable. Because you can read a lot about the regulatory side, you can read a lot about, you know, what’s happening in each state on the web. But you can’t watch investors vetting companies in an open forum. You can’t meet 12 VCs, you can’t hear or participate in an Ask Me Anything session where you’re going to get answers from the experts, you know, in real-time. So.

 

Rafael Gonçalves 28:30

Does the ask me anything opportunity. I think I think this is one of the best, right? Because asked me anything, literally anything right?

 

Jeffrey Finkle 28:39

Now, they might not answer everything. But you can ask them everything.

 

Rafael Gonçalves 28:42

Yeah, if there’s an unanswered question, maybe it’s even better, because there’s an opportunity for you, right? That’s right.

 

Jeffrey Finkle 28:51

Yeah, no exceptions. We, you know, we didn’t New York, and it was just really successful people got a lot of value out of it.

 

Rafael Gonçalves 29:01

Yes, that’s, that’s very nice. That’s very nice to know. We’re very excited to have Oscar there. We’re very excited to be partnering with ArcView. And definitely, we have a lot of work to do. We still have a long way to go in the cannabis sector. And we’ll be together and just grow. Jeff, I really think we have reached our half-hour limit here. We don’t want to, I believe we could go on for at least an hour. But I don’t want to take more time into your agenda. Thank you. Thanks so much for coming. So if you want to say our final goodbyes link, invite people to follow your LinkedIn page or profiles. Please feel free the stage is yours.

 

Jeffrey Finkle 29:44

Yeah, website ArcView group.com. Just put ArcView Group in your Instagram search screen or LinkedIn and follow us. If you follow back you’re going to see a great compilation video from our New York event you can get us a sense of the feel of that what you know. One of the things we’re very proud of, of the New York event, was the diversity that we had in the room. You know, cannabis is a little bit more than just an economic opportunity. It’s really a social mission. And many states in their programs, particularly in New York, are really trying to embrace legacy operators, people of color, and women who can have prominent roles in the industry. And I think our event went a long way in sort of facilitating and showcasing and, and making available the diversity of the industry. And I think you’ll see that in the video. That’ll give you a good flavor of what the event is about. And, yeah, please follow us on social we’re pretty active posters, and we have some good content up there.

 

Rafael Gonçalves 30:47

Okay, that was great. Thank you, Jeffrey. And thank you, everybody, for watching us and for listening to us. Please follow the KoreConX pages on Instagram, Facebook, on LinkedIn, and our channel on YouTube. We’re here on a bi-weekly basis talking with people from the capital market with big companies for partners. Thank you all for watching and see you next week. Maybe the other week. Thank you, Jeff. Hope to see you in Miami. See you.

 

Jeffrey Finkle 31:16

Thank you, Rafael.