John Poss is a self-described rough-water sailor who has made a career of righting the ship for sinking companies.
With three decades of experience consulting for companies undergoing major upheavals, he decided three years ago to dive into the cannabis industry.
Since then, as CEO of Las Vegas-based cannabis company GB Sciences, Poss has partnered with universities in the United States and abroad and recently purchased NevadaPure’s Las Vegas operation.
“With NevadaPure, I give us another opportunity to expand into what I think is the best market,” he said. “I think Las Vegas is the best market in the United States.”
Poss gained $16 million in annualized revenue in that purchase.
“I saw an opportunity to create a cash-flow story in cannabis,” he said. “Cash flows from operating licenses – cultivation and extraction – and developing brands.”
That’s part one of his strategy. Part two is his so-called moon shot, which involves securing patents for medical marijuana.
Marijuana Business Daily spoke with Poss about the NevadaPure deal, commoditization, the Las Vegas market and why university partnerships make business sense.
What was attractive about the NevadaPure deal?
First of all, they had about 350 lights and a dispensary license, a production license and a cultivation license in a 72,000-square-foot building, of which they were using about half the space and they had annualized run-rate revenues of $16 million.
I saw an opportunity to buy it at two times revenue, when I’m trading at 10 times revenue, so that math worked for me. I saw an opportunity to get a dispensary license, which is very important to us.
Why is getting a dispensary license so important?
Margins. I sell my Tier 1 weed for $3,000 a pound, and the dispensary sells it for $6,000 a pound. So why not get some of that?
How were you able to raise the money to purchase NevadaPure?
All our money to date has been raised by Network 1 Financial Securities, out of New York.
To get from the heap of ashes that I found here to where we’re at today has taken about $20 million. They raised all that money for us.
What do you see as the business opportunities there?
(Las Vegas city leaders) know how to regulate an industry, especially one like cannabis, because of their experience in gaming. They’re going to manage this so the cannabis industry does not fail and mess up their reputation, their brand.
We have smart regulators who are going to watch the supply side very closely so this market is not flooded with cannabis.
Even though cannabis prices are going to generally drift lower, this will remain one of the most stable markets because of their experience regulating this thing.
We get 44 million visitors a year from all over the planet. If you’re going to build a brand, what better place to do it than Las Vegas?
Major brands from all over the world create stores here just for the visibility. They don’t care if they make money. It’s a great market for building brands.
The facility you bought from NevadaPure will have the capacity to produce 12,000 pounds of cannabis a year. Is the demand in Nevada strong enough for that much production?
Not now, but it will be.
Right now, Vegas isn’t really promoting cannabis. They don’t want to start advertising it until it’s stable and they know that it’ll succeed.
We did a man-on-the-street tourist survey, interviewing 20-30 people. Eight out of every 10 visitors to Vegas don’t even know cannabis is legal here. We’re just seeing the tip of the iceberg.
What are you doing as a business owner to guard against commoditization of cannabis?
If you look at the growth in the industry, most of the new consumers in the industry do not go to flower. They go to extracted products and infused products. That’s the fastest-growing segment.
So flower will decline and that’s what’s going to be commoditized. Flower is raw material for extraction and infusion.
If the raw material price goes down, that means you have more favorable economics for the extraction and infusion where you add value through the processes and the brands.
As long as you’re not overcommitted to flower and overcommitted to expensive indoor grows, you’re going to be fine. If you’re stuck in cultivation, you’re (hosed).
What do the business opportunities look like with your university partnerships?
We have partnerships with Chaminade University (in Hawaii), Michigan State, Louisiana State University and two universities in Spain.
Each of these universities have been added, not just because they’re universities, but because they have a specific skill set that’s complementary to our long-term goal.
If you’re going to be successful in an industry, whether it’s computers or cannabis, what you need is a strong intellectual property portfolio.
So at LSU, we’re developing genetics because we think there’s going to be a huge future for seed in hemp, either GMO or specialized strains that are drought resistant or pest resistant or whatever.
At Chaminade, we’re focusing on drug discovery.
At Michigan State, researchers are studying HIV and the entourage effect. We’ve discovered some pretty weird things about that we haven’t published yet.
How does that make you money?
The dirty secret about university affiliations is that they don’t cost very much.
For a couple of hundred thousand dollars or less a year, you can get a lot of research done. It’s cheaper to use a university than it is to use a commercial company.
We’ve accomplished great things in our drug discovery and research for not a lot of money.
All I have to do is maintain and build the cash-flow story while we cook along with the biotech piece.
And if even one of the seven targets that we’re filing patents for hits, then we’re a multibillion-dollar company.
This interview has been edited for length and clarity.
Bart Schaneman can be reached at [email protected]