Cannabis Investor Spotlight 0064: Tress Capital - Investor

"Cannabis Investor Spotlight" Series shines on Tress Capital co-founder David Hess and his journey from cancer survivor to cannabis venture capitalist.   Tress Capital's thoughtful, ethical approach to matching the correct investors to the correct cannabis entrepreneur sets them apart.   David talks about the type of companies and investors that they like to work with.

Produced By MJBulls Media

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Dan Humiston:
Today's show is brought to you by 3C comprehensive cannabis consulting helps clients design build and optimize their cannabis business from initial assessment and planning through operational and ongoing management. To learn more about how their services are tailored to meet the unique goals and objectives of each of their clients. Go to 3C cannabis dot com and for a limited time 3C is giving all MJ bulls listeners an additional 10 percent off their fees just for mentioning that you heard it on the show go to 3C cannabis dot com.

David Hess:
We really want to understand who that investor is. Is this simply I want to make an investment and stay far away or do I have something as an investor to add as well can I. But that investor on one of our board we really need to understand who the investor is what the purpose of that investment is when they want to see a return.

Dan Humiston:
From Buminit media. It's MJBulls Podcast a show about Raising Cannabis Capital. I'm Dan Humiston but on today's show the cannabis investor spotlight shines on one of the first cannabis venture capital funds and their commitment to correctly matching the right cannabis investor with the right cannabis entrepreneur.

Dan Humiston:
Today we're continue our cannabis investor Spotlight Series and we're joined by David Hass president and co-founder of trust capital. David thanks for being on the MJBulls Podcast.

David Hess:
My pleasure Dan.

Dan Humiston:
Hey before we jump in and start talking about trust capital let's talk about your cannabis journey.

David Hess:
You were a two time cancer survivor when I was diagnosed with cancer in 2000 and then again in 2002. No kidding with cannabis in addition to the various treatments that I was receiving at some Kettering I was introduced to it in the form of Marinol. OK so that was new to me. And I understand it's synthetic THC and I understand that it doesn't work for everyone. However for me I literally went from a patient on his deathbed to someone that within an hour was calling his friends up saying it's Monday let's watch football tonight. Bring the wings and literally telling jokes and becoming my old self. From that point on I really wanted you to understand the end of cannabinoid system. I wanted to really do whatever I could to further legitimacy and the credibility of cannabis as a medicine that's really changed for me. Once I put those patient glasses on for sure yeah it's like I've said this before.

Dan Humiston:
So many people kind of backed into it through some sort of illness. Let's talk about trust capital. You know it was one of the first venture capital firms that dedicated solely to cannabis. And how do you guys get started.

David Hess:
So 2010 when New Jersey passed cannabis laws and in 2011 one of six licenses was awarded to two women that approached me and wanted to help raising the capital and bringing in the operations necessary to get them up and running. So once that happened in 2011 I had a bunch of friends in my social circle that wanted to invest in similar type of deals. And so I immediately went out and started kicking tires. What I realized very quickly was although I had a pretty good understanding of what was necessary on the cannabis side and had some capital to go ahead and allocate towards that I understood that this was just the beginning and that I wanted to build a trusted bridge between the cannabis community and the financial community. I saw very early that there was capital going into the industry that wasn't the best match. There were entrepreneurs that were feeling like they were losing control of what they've worked so hard for. I really wanted to ensure that this industry was headed in the right direction. And part of that is ensuring that the investors and the entrepreneurs are matched up correctly. What I wanted to do was build out an institutional platform like any other on Wall Street and through a mutual friend was introduced to the gentleman who became my partner Asher drove and he did have that background in finance. And 2013 we decided to put the pedal to the metal and really be one of the first to create that institutional platform for capital and wanting to be allocated. Why did you go to the cannabis industry.

Dan Humiston:
That's your early on. I mean you were basically cannabis banking capital is back in 2010. I mean that that is way early in this industry. I think was probably the earliest person I have talked to will tell us a little bit about the types of cannabis companies that you like to invest in infrastructure.

David Hess:
It would be the common denominator between our portfolio investments. So we've made investments to date in headset in a.. Which is as I'm sure many of your listeners know is now tilt that we've made investments in sea labs in media on cannabis now dramatics. We have an LTE in Quebec North farms. And so for us and even North farms it's not simply just another LP. So again everybody that we invest in is really focused on on infrastructure and ensuring that when they do better the cannabis industry does better and vice versa.

Dan Humiston:
Yeah. I know that you've been the lead investor in some of these deals and and sometimes your fallen investor headset would be a good example to us as well.

David Hess:
And yeah we'll get involved early on the amount that we allocate would be smaller than it would be for reserve for growth capital. So typically we're cutting checks to 50 and under 250000 and under for real early stage seed rounds and then we will work with those companies very closely do their follow up rounds either as a lead or find the lead of certainly a major part of those follow on right. And then we'll also invest in companies that we didn't get them on the early stage as well. And those check sizes what type of. Four million plus.

Dan Humiston:
Yeah. And I think a lot of our listeners who haven't been through this may not appreciate the benefit of having multiple investors involved in their deal. Maybe you can shed some light on the advantages to their share.

David Hess:
So angel investors are fantastic especially early on and they help institutional investors really get comfortable and understand that there's traction and that others are willing to put some money behind it. But as time goes on especially in our space it's very advantageous to have maybe three or four of the quote unquote cannabis institutional investors that are on your cap table because that will really speed up the process especially when it comes to portfolio companies working with one another a lot of times whether it run at X had said Baker. Those are just three to name a few of ours that we share with groups like Fido and aside and others and we are often in communication with the groups I mentioned and many others in this space and whether we're allocating or not it's it's oftentimes not so much about capital. It's about the other areas of support that the investors bring. When we partner up with those in our network the sun is often much greater.

David Hess:
I often say you know one plus one in this industry oftentimes equals 10.

Dan Humiston:
I want to take a minute to tell everyone about an exciting free opportunity. One of our former guests good harvest company is offering retail operators and cannabis brand managers in the adult use market. Good Harvest Company is preparing to launch a platform which uses customers buying and shopping behaviors to help brands effectively reach their customers and for a limited time good harvest company will offer participating companies free access to their data in return for their feedback. To learn more. Good a good harvest. CO.

Dan Humiston:
I see on your website that if a cannabis company is raising capital and you want to talk to you about investing you have a tab. The deal submission tab they just click that. Any advice to these companies when they submit so to get to the top of your list.

David Hess:
Best advice I can give is for the entrepreneur to really take a look at the investments that a particular investor has made and then determine if their particular opportunity is a good suit for that investor and why and you may want to point out the different verticals or the different portfolios within our companies that your product or service may add value to or vice versa. Because that's cliche as it is to invest some dollars into a company that's not the hard part. That's not where it gets tricky. It's really understanding the value outside of the capital that your investor brings you. And one of the tests I often recommend to the entrepreneur is ask yourself Would I want that investor sitting on my board regardless of whether or not the investment comes with a board theater or an advisor seat. Let's put that aside. Do I want. He or she on my board. And if the answer is no I would stay clear of accepting investment dollars from that person. The answer is yes I would do whatever I could to cozy up to that person and really help them understand why there's value and why the value goes both ways. That's the best advice I could get.

Dan Humiston:
Yeah I think that's great advice. Sort of the underlying theme to that though is companies are looking for investment they need to do a little bit of homework before they do a mass email learn a little bit about the companies that you may want to work with and that may help the whole process. Let's talk a little bit about your investors. I know you work with high net worth individuals and family offices and institutional investors and they know they must be accredited investors. It's one of our listeners right now wants to work with you. What do they need to do.

David Hess:
So an investor could go ahead and the same way an entrepreneur would go to our website and follow the links saving for an investor will ask questions right off the bat if there are any particular types of investments any specific sectors that that investor wants to make allocations towards and why. And that goes for us as well. We really want to understand who that investor is. Is this simply I want to make an investment and stay far away or do I have something as an investor to add as well. Can I put that investor on one of our board. We really need to understand who the investor is what the purpose of that investment is when they want to see a return of what type of size of a return they'd be happy with. But they would deem as being successful in this space. Are they here for a year two years three years. Do they want to allocate money through a fund and be diversified. Do they prefer an asset may really sort of be a fund of one. So we really get to understand who the investor is and why and they can go ahead. And as I mentioned they can follow links on our site. They can email me or anyone else actress directly my email is D has HIMSS at Trust's capital dot com can find me out Lincoln really could find me at any number at any of these expos.

David Hess:
You know just tap me on the shoulder and I'd be happy to have a cup of coffee and talk before we went on you talked to me a little bit about how investors are really taking more of a role in the industry than just here's my money. Bring me back a big return maybe you can just repeat what you told me earlier because I think that's very insightful.

David Hess:
And Dan part of what you're doing with your show is so important. It's education right now. The dollars being allocated into the cannabis industry are having a very direct effect on the shape of this industry. And if the investors in their early years are going to sort of invest their money haphazardly that doesn't carry the same weight that the exact same dollar carries should purposely purposefully allocated. And I tell the investor all the time that their role today is just as important as the entrepreneur's role and really ensuring that credibility and the legitimacy of cannabis advances and overall cannabis normalization that we are sure that it's really on us as investors to make sure we get this right and not squander this opportunity.

Dan Humiston:
Well that's really well said and coming from somebody that two times cancer survivor I think it carries a lot of weight. Well we've been speaking with David Haas from trust capital in all of David's information and trust is information will be on the MJBulls Web site.

Dan Humiston:
David thanks for being on the show.

David Hess:
My pleasure. Dan thanks so much for having me. And again thank you for what you do for the cannabis community and the financial community.

Dan Humiston:
Let me take a second to think Trevett Hill. Sponsoring today's show cannabis investors expect big returns from the companies that they invest in. Unfortunately not all cannabis investments succeed. Trevett Hill management team works with investors to help turnaround or in some cases purchased their underperforming portfolio companies to learn more go to Trevett Hill dot com.

Dan Humiston:
Thanks for listening to the MJBulls Podcast. To learn more about today's gas vote to become a gas. Visit our website at MJBulls Podcast. Today's show is produced by Buminit media with original music composed by Jamie Humiston Dan Humiston.

Dan Humiston:
You've been listening to the MJBulls Podcast.

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