My Cannabis Career is a series of interviews featuring people in the cannabis industry. These stories illuminate diverse cannabis career paths, share learnings from strategic actions taken along the way, and provide insights into a green future.
Emily Paxhia is the co-founder and Managing Partner at Poseidon, one of the longest running investment funds dedicated to the cannabis industry.
Emily has been investing in cannabis businesses with her brother/co-founder since 2013. She is a true trailblazer, both in cannabis and venture capital.
Read on for Emily’s career story and her take on the state of funding in cannabis.
What sparked your interest in cannabis?
I had a negative initial perception of cannabis throughout my childhood. I grew up square in the middle of the Nancy Reagan "War on Drugs" era. I was a member of the D.A.R.E. program and I had been sufficiently scared into thinking cannabis was a gateway drug.
At the same time, my parents were progressive people. We were composting in the '80s. Nobody was doing that.
I also knew my dad was a fan of cannabis. He was in the movie Woodstock and my mother told me he grew cannabis in the closet — though I never saw or smelled it.
This left some cognitive dissonance around what I was hearing in school versus what I knew to be true about my parents who were good, successful people. My thoughts on the plant began to shift. I knew cannabis couldn’t be as bad as people made it out to be.
Fast forward to 1995 when my dad was very sick with cancer. I distinctly remember his hospice nurse mentioning cannabis to ease his symptoms. I wondered how a nurse could recommend this plant when so many people were saying it was dangerous. The dissonance grew.
When I moved to college and officially tried cannabis, I would categorize the experience as a negative one. This was illicit market cannabis. It was really strong, I didn’t know what it was, and I felt paranoid and anxious after consuming it.
So I hit pause on cannabis through college and my early twenties.
It wasn’t until 2011, when I moved to California, that I came back to and formed a lasting relationship with the plant. The contrast between the legal medical market in California and the illicit market I saw in college was glaring.
I was able to meet with a medical professional to discuss my needs, even though the meeting took place in a record store. Just the brief interaction with an expert paired with a consumer experience at a store like SPARC or Apothecarium was enough. I gained a deep appreciation for cannabis during that time.
I’ve since dialed in my cannabis consumption with different products associated with various outcomes, such as wellness, anti-anxiety, sleeping, fun, lifestyle, etc. I’m glad to say that now I have a very consistent relationship with cannabis.
How did you start Poseidon?
The work I did after college was centered around consulting for consumer products, brands, and media properties. I helped them identify opportunity spaces to grow their market share or launch new products and services.
When I moved to California and started looking at cannabis, it was so clear that there was a product-market fit.
People were lining up outside of brick-and-mortar retail locations for really bizarre consumer experiences. You would walk in and get a brownie in a Ziploc bag stapled with a business card and be happy about it. All I saw was white space around cannabis. I called my brother, Morgan, and said this was the opportunity of our generation.
Morgan has a traditional finance background and I studied psychology so we decided to take a varied approach to investing in the space.
I’ve found that a good portion of investing is tied to psychology. From a private investing perspective, you need to understand the motivations and team dynamics of the companies you're investing in. We also see public markets being very emotional and moving not with reason, but sentiment.
Once we got started, I took steps to train myself and evolve to meet this new challenge. I took and passed the Series 65 exam and spent a lot of time learning from mentors in the space, including my brother who is my primary mentor (even though he’s younger than me).
Has investing in cannabis has been worth the risk?
We're investors, but we're also entrepreneurs. Fear is a shapeshifter when it comes to entrepreneurship. The things that scare me one day are no longer as fear-driving the next day. Then something else you didn't necessarily plan on comes along. But in the early days, the biggest fear was that it was really hard to raise capital into our fund.
We were extremely contrarian and had actually been laughed at in rooms when talking about running a cannabis fund. I don’t think being a female co-founder served us well.
It’s a data point that women raise fewer rounds and less dollars than their male counterparts. I saw other firms that I did not consider to be as savvy or have the acumen that we did still manage to raise more money than us.
There was also fear because we were one of the first VCs in the cannabis space. If you read our legal documents back then, you would start sweating. There were a lot of untested moments in seeing how the federal government would react to a financial services firm that is investing in plant-touching and ancillary cannabis companies at that time.
Even earlier this year, we watched the markets sell off on a macro level and trickle down to cannabis. The pressure around that was extraordinary. With each of these new challenges, we continue to see fear as a shapeshifter. Who knows what it will transform into next.
What’s your take on the state of female inclusion in cannabis and venture capital right now?
I would say cannabis is more inclusive of women than most industries, especially in upper-level management and board positions. That being said, we have a lot of room for improvement.
Diverse boards and management teams tend to lead to more successful organizations. Even if you don't emotionally care about inclusion (which you should), you can rationally care about it in terms of gaining the best return on your investment. Personally, I am very focused on not just talking about being a female in business, but being in the room and showing up every day.
By the way, be sure to show up and bring something to the table. Try to add value wherever you can.
I know there is a culture of women in business that are very sharp-elbowed. This makes sense because it’s very common to only have one seat available for women and if you get that spot, you have to defend it. But that's not the way it has to be.
There's plenty of room at the table for more female leadership. My male counterparts (who I call my allies) are interested in providing more access on that side. The best thing we can do is keep showing up and proving that we are truly valuable individuals. Obviously, that sounds crazy, but you can either sit and complain about it, or you can just keep showing up and doing the work — I choose the latter.
Is cannabis recession-proof?
I would say that cannabis, like other sin industries, tends to do better during downturns. We know this from other sectors and other periods in time. So I think it's going to be up to us as an industry to help the consumer get their money through the month and be able to keep including cannabis in their normal expenses.
To stay competitive, cannabis companies need to adjust their value offerings in the face of a recession. For example, during downturns, Pepsi and Coke sell smaller cans. It all relates back to psychology and understanding that consumers are tightening their belts, but still want to purchase products they love.
How is venture capital in cannabis faring in the face of the current economic downturn?
The IPO calendar has been incredibly light. Right now, the IPO drought stands at 109 days which is longer than the 2008 financial crisis. So that says everything you need to know about venture capital right now because IPOs are driven by the ability to raise money.
As capital has slowed, a lot of the private venture capital firms spent May and June working with founders to make sure their companies either had enough capital to get through the next 12 to 24 months or had a compelling reason to raise more capital.
For cannabis specifically, capital has never been a commodity, especially on the venture capital side. We’ve always been more focused on metrics of growth and prudence than the general venture community.
Lately, I've never heard VCs mention EBITDA so much. That's always been a metric we've focused on in cannabis and now I'm starting to hear that more out of the traditional venture community. Don’t get me wrong though, there’s still a lot of money in the venture capital wells, but the strategy of deploying that capital is going to change.
- Know your business better than anyone else. You need to be able to show that your business is both sustainable and showing signs of growth. The more you understand your strengths and weaknesses, the more clearly you can provide that information.
- Something I hear from traditional firms is that the total addressable market of cannabis is not big enough. When you’re met with that kind of pushback, be very clear about how massive the opportunity of cannabis really is. This year alone the economic impact of cannabis is somewhere around a hundred billion dollars in the United States.
- In cannabis, we’ve got to stand up with confidence to keep breaking down barriers and stigmas. Your business isn’t just going to make money, it’s going to change the world.
Emily, it was a pleasure to speak with you! You are an inspiration to so many in the industry and have always been a force for good. Thank you for all that you do.