Power Players

Power Players: T3 Ventures’ Tahira Rehmatullah

By Alex Halperin Apr 6, 2020
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Alex Halperin is the founder, editor and publisher of WeedWeek. Before he started covering marijuana legalization in 2014 he reported on topics such as fracking, health care, technology a...
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Alex Halperin is the founder, editor and publisher of WeedWeek. Before he started covering marijuana legalization in 2014 he reported on topics such as fracking, health care, technology and finance. His work has appeared in The Guardian, Slate, Fast Company, Quartz, the Washington Post, Mother Jones, The New Yorker and many other publications. His first book, The Cannabis Dictionary, was published in March. He lives in Los Angeles.
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For an investor and consultant, Tahira Rehmatullah has a lot of hands on experience. After joining the investment firm Privateer Holdings, she launched Marley Natural, among the industry’s first high profile brands. Later she helped take the cannabis tech company Akerna, formerly known as MJFreeway, public on the NASDAQ.

In this Power Players interview, we talked about the coronavirus, the next big cannabinoid and what she looks for in a brand.

This interview has been edited for length and clarity.

Editor’s Note

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WeedWeek:

How would you describe the investing climate before the coronavirus hit?

Tahira Rehmatullah:

Cannabis and hemp had been in a bit of a capital crunch. A lot of that reflects the unfortunate occurrences of 2019: The vape crisis as well as public companies that were not achieving the numbers that they had originally set forth.

And because that information is public, it takes a toll not only on those businesses but on the entire industry. There’s this conception that all businesses are operating generally in the same way.

The reality is that a lot of it was inflated. Projections were inflated, growth was inflated. Businesses that weren’t necessarily capital efficient were able to raise a decent amount of capital. They deployed a lot of that capital and needed to go out and raise again and now they can’t.

WW:

How has the coronavirus changed things?

TR:

Like every other industry, we’ve had lots of layoffs. But we saw that happening in cannabis pre-pandemic. The virus has  compounded it. Businesses are trying to cut their balance sheets as much as possible just to just stay afloat. Some are trying to streamline what they do. In some regards that’s not terrible. So many businesses had been trying to do too much.

The pandemic has probably slowed the growth of the cannabis industry broadly. In states where there was the possibility of cannabis becoming legal, that has probably been delayed, like New York. [On Saturday, New York Gov. Andrew Cuomo acknowledged his push to legalize REC this year is “effectively over.”]

We’ve also seen this massive shift to delivery. A lot of dispensaries were not doing that, but it’s become the way people can still purchase cannabis.

WW:

Does the pandemic change the overall forecast for the industry?

TR:

If anything, it has validated the industry. The fact that most states have allowed adult use stores to stay open shows that at the state level those businesses are viewed as essential.

I think is a win for the industry. It’s how the people within the industry, people who are active patients or consumers view the product. But we’ve never had such broad-based validation around it. We’re still in a federally illegal environment. That side of it bodes well for the industry, full steam ahead. But all of the different businesses have to think about how do you remain viable during this period. It could be three months, it could be 12 months. We have no idea.

The pandemic might accelerate some businesses going under, which is unfortunate, but it’s also a normal part of an emerging market and rapid growth.

WW:

Can you give an example, you don’t have to name it, of a business you think is addressing this crisis in a smart way?

TR:

I think dispensaries are addressing it in a smart way by creating tools for customers to be able to access the product safely. They’re thinking in a way that will probably shift how businesses do it in the future.

WW:

Any others?

TR:

There are some technology platforms and technology service providers that are making data more available. It’s helping bigger populations understand what’s happening in the market.

I think that that’s been very smart. People will come to rely on their information and eventually I think that will lead to more customers down the road. It has been a smart way companies have shown not only what they do and how they can do it, but also its value to the public. There are also new opportunities for companies to collaborate

WW:

To the extent that you’re looking for new investments, what are you looking for now?

TR:

My view on investments hasn’t really shifted because of the pandemic. Last year I started to look a lot more at businesses that were already in market or truly solving a unique problem that other businesses are not. I’m interested in earlier stage companies that are generating revenue and have some kind of unique positioning: Their brand highly resonates with a group of people or targets an audience that has not been targeted.

TR:

I’m interested in businesses that have more efficient technology bills and less assets that they want to divest. We’re seeing a lot of that right now. The benefit of being an older company is dwindling at times because there’s so many assets that they would like to get rid of to become more efficient.

TR:

I’m also thinking about novel or much more impactful form factors of product: various forms of nano-technology and formats that can perhaps be absorbed faster and in a way that isn’t necessarily targeting the recreational consumer. Instead they’re for populations that want something more like a daily supplement or  a true wellness replacement for over the counter or prescription medications. So what do those formats look like and how do we continue to evolve those?

WW:

How do you tell? So many companies tout their bioavailability and stuff like that. How do you identify the ones with breakout potential?

TR:

It’s a combination of truly trying to understand both the scientific differentiation and the product itself. [After understanding the science] you ask how to translate that into a consumer facing product people will care about? So it’s a multi-step process. I think it’s about the way that you talk about it and the channels you pursue to push it out there.

TR:

Some companies that work on the more advanced solutions are going out more as contract manufacturers or ingredient providers as opposed to a brand themselves. I think that’s the right way to do it because then you can put that into a variety of products that maybe are in brands that already resonate with people and it just improves their experience.

TR:

So it’s not necessarily this person produced this product and that’s what ends up in the hands of the consumer. I think you have to really evaluate what’s the appropriate channel. Many people take a capsule and think that they’re getting the full effect of that capsule. In fact really only 10 to 15% of it is actually getting into your system. The challenge compounds and people don’t really understand how much they need and what format. IWho cares about that besides the scientists? I think people will start to care more the better that the transparency and the education of the market gets.

WW:

We’ve been hearing for a long time about new cannabinoids and what they do. But there still seems to be markets for only two at this point. Do you see any with breakout potential?

TR:

I think the two we’ll see more of in the near future are CBN and CBG. Both of those have been linked with the ability to help people fall asleep and stay asleep. I think those really will be the next wave: cannabinoids with more specific uses. [But between extraction and production issues and introducing them to the public, a large scale rollout] is not necessarily feasible at this point.

By contrast CBD has been much more broad-based as being the non-psychoactive compound. CBD has really taken off, so businesses want to focus on it because there’s a market. If you start introducing more acronyms, people might just throw their hands up and say, “Okay, I don’t know what any of these are, is this all snake oil?”

So I think we’ll see a bit of a measured approach on how [CBG and CBN] are used, maybe in conjunction with CBD and THC. We know there are dozens of other cannabinoids that will be relevant. But I still think we’re pretty early in the discovery and understanding of those.

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Alex Halperin
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