In the wake of COVID-19, forced closures are being imposed on businesses deemed non-essential in every part of the country. However, local and state lawmakers alongside public health officials have categorically deemed cannabis an ‘essential’ business and medical marijuana specifically as a basic need that many Americans cannot go without. Once illegal in all 50 states, is now deemed ‘essential’ to the American way of life. As the principal of a family office and venture capital fund that has exposure to the cannabis space, this label can be construed as an indication of things to come for the sector at the federal level.
Cannabis law has been moving across North America, albeit not as quickly as most investors had originally hoped. Those investors making cannabis the focus of their portfolios in the current environment are picking spots for the long-term with the hope that they are getting in at a new bottom. Notwithstanding COVID-19, they are betting that federal endorsement will be achieved (eventually) and those operations will stay licensed and within the realm of legality. In the meantime, pot investors have a real opportunity to mitigate risk and vertically diversify by embracing the rise in CBD product demand.
However, it is key to stress the importance of due diligence. The 2018 Farm Bill ushered in a plethora of new hemp farming production in the US. In 2015, 1,500 acres of hemp were planted in the US. By the end of 2019, around 146,000 acres were planted, according to the USDA. Supply surpluses drove CBD prices down, which in turn put tension on margins. Also, on the cultivating front: hemp is hard to grow and maintain. Over the last 18 months, many hemp-growing newcomers who produced harvests successfully were later challenged with preservation requirements. When the market is in such oversupply, how does one store and preserve all that biomass? Rotting hemp harvests seemed to be a common theme of 2019. As with any new industry, there is a learning curve. My prediction is that as many newly established hemp farming operations in the US fail or choose to pursue other opportunities, we will see substantially less hemp license renewals by 2021.
The silver lining: as the hemp supply-side normalizes, CBD prices will rise again. This will result in a smaller group of solvent hemp producers that will control the domestic market share.
That is of course, until CBD biosynthesis becomes mainstream.
Ryan Brucato – Venture Capitalist Talks Recession, Covid-19 Investment Strategies, and More on Social Media Explorer
Ryan Brucato’s history is mostly entrepreneurial. At the beginning of 2009, he established the management consulting firm, RB Milestone Group LLC, and currently remains on its Advisory Board. He started numerous private ventures throughout his career and has advised numbers of public and private organizations globally. He has a deep-rooted proficiency in international commerce, corporate finance, and M&A. In 2012, Mr. Brucato established what is now EMBR Capital LLC, a single-member family office and venture capital fund in Greenwich, CT, USA. EMBR partners with exceptional originators and executive teams with unique acumens, through all stages of maturity.
Since 2017, Ryan Brucato has closed over 80 EMBR investments in over 50 companies that operate on 6 continents. Mr. Brucato has delivered much of EMBR’s investments into partnerships focused on cannabis; diversified natural resources; healthcare; renewable energy; technology and telecommunications.
Ryan Brucato is also dedicated to funding socially and environmentally impactful businesses worldwide. Throughout his career, he has been noted in many prominent publications, including – Fox Business, Gold & Minerals Gazette, Bloomberg, HazMat Magazine, Resource Investing News, The Financial Review and BusinessWeek.
Ryan Brucato resides in Greenwich, CT with his wife and two sons. He relishes spending time with family, frequently attending local CrossFit classes, and competing in triathlons and skiing.