Legal backlash, social resistance, and bureaucratic red tape are all risk factors that would normally seem insurmountable to a nascent industry. Except, when it comes to cannabis, those factors are mere hurdles entrepreneurs are jumping over with Olympic focus. But they aren’t doing it alone. They have business elites with an exceptional understanding of the market and the experience to prove it—people like Chuck Rifici to back them.
Who is Chuck Rifici?
Rifici is the founder and CEO of Nesta, a Canada-based private equity firm that provides financial backing and expertise to help businesses build their brands and thrive. The cannabis industry got Rifici’s attention in 2010 when California put recreational cannabis on the ballot. If passed, California Proposition 19 would have made the state the first to legalize recreational cannabis. The ballot failed by a small margin, but it succeeded in convincing Rifici that there was a future for this plant in the business world. In an interview with Wikileaf, Rifici said,
“At that time, I felt I was going to miss the boat on this green rush, so I vowed that I wouldn’t miss that opportunity again. That’s what kind of got me looking at new regulatory changes, and ultimately, I noticed when things were starting to change in Canada. That’s what got me in the industry in late 2012.”
Since then Rifici has been a part of some of Canada’s most successful cannabis businesses, including Canopy Growth Corporation (formerly Tweed Marijuana Inc.), a grow facility that experienced enormous success under his leadership. He is also Chairman of National Access Cannabis, a chain of medicinal cannabis centers streamlining patient access.
Rifici’s personal relationship with cannabis was another incentive to be a part of an industry that provides more than a good time. “What made me more open to medicinal cannabis a number of years back was when I had a back injury and was prescribed opiates—hydromorphone to be precise—which is a pretty addictive substance I found out after the fact. I was only given ten days of it, but even in those ten days, I just got a glimpse of what people with chronic severe pain go through,” he said. In fact, prescribed opiates are responsible for what the CDC has called a prescription drug abuse epidemic. Moreover, despite the misguided perception that cannabis could somehow exacerbate the opioid epidemic, the medicinal flower may help to curtail it. Recent studies show that in states with legalized medical programs, the rate of opioid-related deaths decreased. Rifici continued, “That’s what kind of got me thinking about cannabis as an alternative and I started reading about how cannabis was helping people out. In some ways, that helped push me over the edge—more the reputational risk of getting involved in the cannabis industry when cannabis was still a four-letter word.”
The Challenges of the Cannabis Industry
In some ways, cannabis still retains that stigma. Despite Canada’s far more progressive stance toward cannabis regulation—Prime Minister Justin Trudeau was elected with cannabis legalization as a part of his platform, and the government is expected to legalize cannabis for recreational use by July 2018—Rifici still faces challenges he probably wouldn’t if he worked in another industry. “I still run across issues with banking, but generally it’s still easier in Canada. But because of the businesses, I’m involved with I’ve had trouble opening up personal bank accounts.I was able to get them open, but it’s always been an extra level of hassle. It’s surprising—sometimes you forget that there are still a lot of people with that drug war mentality out there,” he told us. And as in the United States, just because Cannabis is legal doesn’t mean it’s easy. Navigating the regulations is tricky, but not impossible. Rifici has learned to embrace the challenge and allow it to make his brands more competitive. He explained, “In most companies, I’ve been involved with, a lawyer has been an early hire if not the first employee. So it’s choosing to kind of work within the regulations and looking for opportunities there because if regulations are tough, they’re tough for everyone.”
Navigating the Marketplace
Since cannabis remains illegal at the federal level in the United States, entering its state-regulated cannabis industry is even more difficult to accomplish. That’s why partnering with non-plant touching companies is so appealing. These ancillary businesses support the cannabis industry, but because they don’t deal directly with the plant, they face much less legal risk than those that do. Wikileaf, one of Nesta’s properties, is such a business. Launched in 2014 by Dan Nelson, Wikileaf is a Seattle-based company providing a cannabis price comparison tool to users. Nesta acquired Wikileaf in 2016, and Rifici explained why. “We were looking to get involved with businesses that have the ability to have a national or even international footprint. With Wikileaf, we thought it was really exciting that we were able to get involved at an early stage in the company before they launched their IOS and Android applications. They had a great core product and a great team based in Seattle. We looked at that and we thought every industry has a price comparison tool whether its Expedia or Zillow, and there’s no reason why the cannabis industry wouldn’t have one. We felt that Wikileaf was the best bet to go after that market,” he said. Rifici emphasized the importance of branding when explaining what kind of businesses Nesta looks into for partnerships, explaining,
“We look at opportunities that are heavily branded—that have brand differentiation and a consumer-facing brand. As the industry matures and as other larger players and companies get involved in the market, only great brands will survive.”
In terms of building a lasting brand, Rifici recommends keeping the end in mind. “It’s making sure you have a brand that’s going to last through the change into full legalization whenever that comes. A lot of the customers today are more cannabis enthusiasts or early adopters, but I think a large amount of sales and consumption over time are just going to be from rank and file Americans in the US who are beer drinkers or alcohol drinkers that will be shifting their practice to cannabis as it becomes more widely available in a legal fashion. So I think it’s important to stay away from the obvious unique ‘canna’ brands and the overuse of the colors green and ‘canna’ and the obvious clichés because those aren’t really going to last in the long term.”
Right now, Rifici is working on his next big project, Cannabis Wheaton. Cannabis Wheaton is an investment company that provides grow facilities with the financial backing to complete their buildouts, and, in exchange,receives a stream of product. “That’s been a very interesting business,” Rifici told us about Cannabis Wheaton, “especially trying to fund a lot of scale since Canada legalizes next year. Canada has to produce at least ten times—if not twenty times—the amount of legal product that’s currently being produced in the medical market. That’s a huge upswing in product that’s needed. So, lots of construction on the growth side of Canada. We’ve raised $85 million this year in that company, so that’s pretty exciting.” Rifici has invested his career in the cannabis industry, and given that risk assessment is a huge part of his business, that seems like an ironic choice. Social and legal attitudes toward cannabis swing with the pendulum, but Rifici remains confident in the direction the industry is headed. About cannabis in Canada, Rifici said, “Having Trudeau as prime minister getting elected on a platform which included legalization of cannabis has given us a lot of confidence in Canada. And I think [legalization] is definitely happening. People always wondered, ‘would they go through with it,’ and now we have a hard date—July 2018. So we’re less than a year away now from having people buy federally legal cannabis in Canada—that’s pretty exciting.”
Although cannabis legislation in the United States is not so progressive, Rifici doesn’t see things going backward
He said, “For the US—there are so many Americans and Canadians that agree that cannabis should be legalized. I forget the exact stat, but I think it’s 61 percent of Americans agree that cannabis should be legal, and it’s hard to get 61 percent of Americans to agree on anything. So even though elected representatives are much more conservative, I think the train’s left the station on legalization. It’s just a matter of time.”