“Business of Cannabis Conference” explores industry trajectory

Ryerson event presents industry leaders’ assessment of current trends

“Business of Cannabis Conference” explores industry trajectory

The Ryerson Commerce and Government Association (RCGA) hosted a conference on November 17 highlighting business leaders in the cannabis industry. The speakers represented many aspects of the burgeoning cannabis industry, including licensed producers, venture capitalists, and marketing consultation executives.

Presenters included representatives from the venture capital fund and business accelerator Leaf Forward, investment firm and licensed producer INDIVA, the Ted Rogers School of Management, and marketing consultants Elite Digital Team.

In an interview with The Varsity, Eesha Arshad, President of the RCGA, said, “I think that the more students know about [recreational consumption], it will be beneficial to them… The uses are so wide, and I think it is so important for us to accept it with open arms.” Arshad added that a greater understanding of cannabis’ uses, in addition to the process of destigmatizing its use, were key reasons in deciding to host the conference.

The conference’s keynote speaker, Alex Blumenstein, is the CEO of Leaf Forward, a launch pad for entrepreneurs in the cannabis industry. In its first year of operation, Leaf Forward has raised $1.2 million and invests $50,000 for every startup in its accelerator program.

Other speakers included Indiva President and CEO Niel Marotta and Ryerson instructor Brad Poulos, who is the academic coordinator of CZEN 420: The Business of Cannabis.

The all-day event was informative for those interested — or invested — in the progression of the cannabis industry in Canada. In terms of investment and employment opportunities, the main takeaway from the event was that it may be too late for ‘wannabe’ cultivators to enter an already highly competitive market.

Furthermore, Ontario is on the brink of a boom in processed cannabis products. The speakers predicted a major international shift in the cannabis market away from flower cultivation and toward processed products such as distillates and CBD-infused edibles.

The current state and trajectory of the recreational market was thoroughly examined by speakers and panelists. However, there was a noticeable lack of information regarding the future of the pharmaceutical cannabis industry in Canada.

In an email to The Varsity, Tiffany Lauren, CEO of cannabis education group Canbis, wrote, “I was disappointed there wasn’t any panel or speaker addressing the huge therapeutic potential of medical cannabis… [and how it] can help counter the opioid crisis in Canada.”

U of T alumni poised for new wave of sector growth with first cannabis business accelerator

Brett Chang, Taylor Scollon raised $1.2 million for Leaf Forward so far

U of T alumni poised for new wave of sector growth with first cannabis business accelerator

In 2013, the Canadian government created the first conditions for a commercial medical cannabis industry — and Brett Chang and Taylor Scollon were finishing up their degrees at U of T. Over five years later, the country finds itself on the precipice of legalizing the drug for recreational use, and the pair find themselves embedded deep in the world of Canadian cannabis startups.

Leaf Forward touts itself as “Canada’s first and leading cannabis business accelerator.” The company has raised $1.2 million in investment capital so far and will pour its first $250,000 into five early-stage cannabis startups next month, hoping to ride the second wave of major growth in the sector.

Leaf Forward is part venture capital fund and part business accelerator, founded in 2017 by Chang, Scollon, and Alex Blumenstein. Eager to get involved in the cannabis industry around the time of Justin Trudeau’s election, Leaf Forward began by hosting monthly meetups that brought the likes of Aphria (TSE:APH) CEO Vic Neufield together with people interested in getting more involved in the evolving world of Canadian cannabis. “We built a community around that,” Chang said, “and through that we got to know entrepreneurs in the space and industry leaders in the space, and we just connected the dots.”

Alongside hosting meetups — there have been 21 so far across five Canadian cities — Leaf Forward also offers four-day intensive ‘bootcamps’ marketed to equip entrepreneurs with skills to propel their cannabis startups. Forty-five cannabis companies have completed the bootcamp program, but the main thrust of Leaf Forward is its highly competitive business accelerator driven by venture capital.

The accelerator program involves both a big boost of seed funding as well as participation in an intensive, three-month program. Companies in the accelerator have access to Leaf Forward’s wide industry network, including outlets for future funding rounds and licensed spaces for research and development. The accelerator program also grants access to Leaf Forward’s industry partners, which include law and accounting firms on hand to help startups solidify their plans for expansion and ensure stable long-term growth.

Five companies will start off the first accelerator cohort in November, followed by another eight to 10 businesses in March and 10 to 12 more later in the spring. The goal is to have 20 to 25 companies with a capital base of $3 million — of which $1 million will be used for initial investment and $2 million reserved for follow-on funding.

Funding early-stage startups

The companies in the first cohort include businesses focused on alternative consumption — edible forms of cannabis to be regulated within the next year — as well as a company using a cannabis extract, cannabidiol, in sports beverages, and another startup focused on creating a superior filtration system to minimize odours for licensed producers.

Licensed producers, such as Canopy Growth (TSE:WEED) and Aurora Cannabis (TSE:ACB), enjoyed extremely high growth within the last year that many analysts say will plateau. Whereas cannabis itself will be treated as a commodity post-legalization, the brands and technology that take advantage of it are poised for growth in a new, emerging sector.  Making an analogy to the beer industry, Chang said that “you don’t make money off the hops for beer — you make money off of the brand.”

Leaf Forward uses a ‘2 and 20’ private equity fee structure, whereby two per cent of the capital it raises goes towards its own operational costs — the fund management fee — and it keeps 20 per cent of the carried interest as a performance fee — with a twist. “The fund size that we’re raising is so small that that cannot fund all the different expenses associated with what an accelerator needs,” Chang said. Leaf Forward will invest $50,000 for every startup in its accelerator program, of which $35,000 will go directly to the company as seed funding and $15,000 will be kept as a service fee to offset the cost of the program itself. This model is common amongst business accelerators.

The fund term is 10 years, with a minimum investment of $50,000. The majority of Leaf Forward’s clients are high net worth individuals and family offices in Toronto. The Canadian cannabis venture capital fund, Green Acre Capital, has invested $500,000 in the accelerator. 

As a private equity fund, Leaf Forward generates returns from liquidity events — the acquisition of the startup by another company or an initial public offering. In an industry poised for consolidation, the acquisition of startups by large licensed producers is a very real possibility.

“But that doesn’t mean there is any less opportunity for entrepreneurs,” Chang says. “Trends will appear that weren’t expected by the big players but were taken advantage of by smaller companies and entrepreneurs, and that’s the cycle of the market.”

From U of T to the cannabis industry

Canada’s progress towards cannabis legalization has been slow but marching for years. The path that brought Chang from U of T to Leaf Forward — with stops in politics and tech along the way, including a public affairs gig at Uber he left two months ago — has been more winding. “I think my entire career has been very difficult to predict,” Chang said. “My parents wanted me to go to law school.”

The decision to dive into the industry was a clear one for Chang, who calls the chance to get involved in an emerging market that was previously an illegal one “a once in a lifetime opportunity” akin to being involved in the alcohol industry after Prohibition.

Chang studied history and political science while at U of T, and, along with co-founder Scollon, was heavily involved in student politics.

“We were running campaigns against the UTSU or the administration at that time, and we were always looking for new and innovative ways to get our message out,” Chang said. “When you’re starting a political campaign it’s no different than starting a business in many ways. There were a lot of transferable skills we developed at U of T.”

After university, Chang worked briefly in politics before moving to a sales job in tech. After that, he and Scollon co-founded a digital public affairs firm with a third partner before they launched a private bus service that allowed citizens to serve transit-starved areas of Toronto. The venture, Line Six, got them on The Globe and Mail’s list of “Ten Torontonians who got things done in 2014,” and helped Chang into a job with Uber.

Scollon previously worked in digital marketing for both Justin Trudeau and Kathleen Wynne’s campaigns. Blumenstein, Leaf Forward’s CEO and the third co-founder, worked in regulated industry, including a stint with a licensed cannabis producer, before the move to Leaf Forward. All three of them are full time at the company now.

On the whole, October 17 doesn’t materially mean much to Leaf Forward and its startups, which are focused solely on ancillary products and alternative consumption. Though mere days before legalization, the eager anticipation of what will come for Canadian cannabis is palpable in people like Chang, who thinks that people generally underestimate the macroeconomic impact the industry will have, including “thousands and thousands” of potential jobs.

“What wine is for France,” Chang said, “cannabis will be for Canada.”

Opinion: How Ontario can overcome its expected weed shortage

Rigid rules, lagging licensing may hinder legal Toronto toking

Opinion: How Ontario can overcome its expected weed shortage

With cannabis legalization set for October 17, Ontarians over the age of 19 will soon be able to purchase cannabis online for recreational use through the Ontario Cannabis Store (OCS). However, you’ll want to submit your order early, because industry leaders and researchers alike are predicting that a product shortage will occur within the first year following legalization. 

Health Canada’s most recent estimations place demand for recreational cannabis at upward of 900,000 kilograms, but according to a recent report co-authored by the University of Waterloo and the CD Howe Institute, supply will only total 210,000 kilograms — 23 per cent of demand. 

Based on the total annual production capacity of the 13 cannabis cultivator companies listed on the Canadian Marijuana Index, that amount is closer to 230,000 kilograms, and that’s assuming each company will yield their maximum estimated outputs. The discrepancy between these output projections is negligible, and, regardless, comes far short of the predicted demand. However, each company has considerable expansion plans that should greatly increase its production capacities over the next couple of years, and the government expects supply to eventually overtake demand. 

To remedy the expected shortage, the average consumer is then expected to continue procuring recreational cannabis on the black market, meaning that the government will have objectively failed its mission of snuffing out illegal producers and distributors with legalization. However, there are a few ways in which the province could curtail the severity of the shortage.

In order to help meet the demand, industry leaders argue that Health Canada should streamline the process of licensing producers. The current application process is complicated and arduous — over half of all applications for medical cannabis licences have been returned as incomplete — and its slow rate of licensing producers has been identified as the main culprit behind the supply shortage. 

Health Canada should also approve the sale and regulation of edibles and cannabis derivatives. The province has heretofore stalled the regulation of these forms of cannabis post-legalization, citing a lack of data regarding how cannabis impacts human health when ingested. Critics including MP Don Davies have said that no more meaningful data is expected to arise in the next year, and it’s commonly understood that edibles likely have less of a negative health impact than cannabis smoke. Expediting the approval of edibles and derivatives would effectively help fill the demand, as they are estimated to account for 50 per cent of the total dollar value of pot sales once legalized. 

Another option is amending the Cannabis Act, which bans the import of cannabis for recreational purposes, but not for medicinal purposes. Theoretically, to circumvent a shortage, the sector could devote all domestic cannabis production to recreational products, while exclusively importing all cannabis products and derivatives that are intended for medicinal purposes. This would require a massive systemic shift that may not be feasible on short notice.

Alternatively, the province could move forward with implementing a private retail model and allow the import of cannabis products that are produced by Canadian companies in other countries. While importing recreational cannabis products is banned under the Cannabis Act, licensed Canadian producers could argue that they are simply outsourcing the production of cannabis, as opposed to engaging in trade with international companies. 

However, this raises the question of how a larger industry trend toward outsourcing may affect the economic integrity of smaller domestic producers, and whether or not it defeats the purpose of the domestic production clause. 

The news of a forthcoming legal cannabis shortage may not be too concerning for the average Torontonian toker, as the prevalence of privately-owned dispensaries has made recreational cannabis relatively accessible. Last month, legislation was tabled to move forward with a private retail model by April 1, 2019, but what will happen to your friendly local dispensary in the meantime? Toronto has a robust community of cannabis dispensaries, most of which presumably intend to continue operating business-as-usual post-legalization, so the average Toronto consumer won’t immediately feel the effects of a legal shortage. 

Legalization definitively signifies the illegality of existing dispensaries, which have thus far arguably operated within a legal grey area. With the Toronto Police Department’s documented vendetta against local cannabis dispensaries, legalization may herald the beginning of a string of police raids, reminiscent of Project Claudia in the wake of Prime Minister Trudeau’s election. 

We won’t know how the market will play out for another year. Until then, consumers shouldn’t concern themselves over a potential pot-pocalypse and can continue to support small cannabis businesses while the government sorts itself out. 

Cannabis dispensaries weigh financial pros, cons of legalization

As legalization looms, Toronto’s black market vendors receive ultimatum

Cannabis dispensaries weigh financial pros, cons of legalization

Ontario’s dispensaries were given an ultimatum of sorts when the provincial government announced cannabis legalization. The provincial government announced that its policy measures regarding private selling and distribution of cannabis would allow private businesses to operate legally beginning on April 1 — on the condition that they shut down all operations by the October 17 legalization date.

Vic Fedeli, Ontario’s Finance Minister, has reiterated a zero-tolerance policy regarding dispensaries that continue to operate illegally past the legalization date. Many dispensaries and shops familiar to Toronto residents face the existential question of shutting down and losing almost six months of business, or continuing to operate illegally — presumably under increased police scrutiny — and jeopardizing their future earnings and prospects as legal entities. 

Sea of Green and High Society, two notable Toronto dispensaries, have opted for the former, with the objective of reopening legally in April. While they may lament lost business — some dispensaries make almost $40,000 a day in sales — many dispensary owners are wary of continuing to operate illegally. The legalization transition has been a long-awaited process and legal privatization has many businesses taking the path of least resistance and accepting all of the impending policy changes. 

The more burning question that has come in light of the recent closure of dispensaries is how these changes will affect the market and culture. Will the growing supply saturate earnings? Will its ubiquity rob stoner culture of its exclusivity and stigma? 

From a policy perspective, the closure of dispensaries seems to be a move to gauge demand by funnelling sales to the government’s Ontario Cannabis Store, which will be the only legal source of recreational cannabis until April. 

While there is optimism in the stock of large marijuana producers, such as Canopy Growth Corporation (TSE:WEED) and Aurora Cannabis (TSE:ACB), uncertainty is still evident in price fluctuations. As eager as investors are to bet big on cannabis, small setbacks have seen stocks tumble more than 30 per cent, as was the case with Aurora in August, only to recover and supersede previous peaks in a matter of days. Perhaps the provincial government will use the consolidated demand it generates from its online retailer to project the cannabis market’s cap and the tax earnings they can expect to collect from this newly created legal market.

From a cultural perspective, the largest shift seems to be the transformation of cannabis from drug to commodity. While this may just be a government catching up to a culture that has long been normalized in Toronto, privatization on a larger provincial scale has serious implications for communities. Anticipating this shift, the provincial government has given cities until January the right to opt out of allowing private retailers from operating.  

The shift from drug to commodity has also seen a shift in the language being used to frame the issue. Some note that cannabis is being viewed increasingly in monetary terms and as a potential entrepreneurial venture. April is set to be hectic, as existing and new dispensaries begin capitalizing on the new market, but some insiders believe that they will overcorrect and stabilize soon after. 

That’s not to say we shouldn’t anticipate exciting developments. A larger market opens the door for innovation in the alternative consumption sphere. Dispensaries such as CAFÉ already distribute edibles, such as cannabis-infused chocolates and gummies. Constellation Brands (NYSE:STZ), an international beer, wine, and spirits producer, recently invested in Canopy Growth and Second Cup (TSE:SCU) has shown interest in pursuing a distribution licence. Cannabis-infused beverages, pastries, or even cosmetics represent merely the tip of the iceberg.

In any case, it remains to be seen whether privatization will result in a suitable structure for adequate distribution. The Ontario government has bought itself time and drawn a line in the sand for dispensaries wishing to operate legally. 

Should weed be legal for athletes too?

Athletes using cannabis is no longer taboo

Should weed be legal for athletes too?

There’s a societal stigma that surrounds marijuana usage, one that doesn’t stop beyond the locker rooms of various professional sports teams.

A considerable number of professional athletes have or currently use marijuana to assist with their athletic craft and alleviate pain after strenuous exercises and competitions. In the past, when professional athletes dabbled with the drug, the associated stigma and the punishments enforced against them resulted in ruined careers.

Even after October 17, professional athletes playing in Canada will still be unable to use the drug, as the global anti-doping community and various collective bargaining agreements have maintained cannabis on the prohibited list.

Many professional athletes have shared that they’ve used marijuana during their careers, citing pain management, anxiety, and insomnia.

According to The Huffington Post, “former NBA players Jay Williams and Cliff Robinson have been outspoken advocates for cannabis in the NBA with Williams estimating that 80% of NBA players are already self-medicating with the plant.”

However, the medical uses of cannabis are different from its recreational use, and it should not be considered in the same vein as taking other performance-enhancing drugs.

Playing fair must remain central to sports. Marijuana can have different effects on different people; some feel more relaxed, while others may feel more anxious, afraid, or panicked.

When it comes to marijuana usage for professional athletes, there might not be a potential fair use of weed beyond the medical purpose. While societal perspectives surrounding weed have shifted, when it comes to sports, there are some traditions of rules that still need to be enforced.

How I managed to play flag football while high

Defense isn’t so easy when you’re stoned

How I managed to play flag football while high

Weed is more than just a drug. It can be a gateway to achieving levels of happiness and serenity — at least for me, anyway. I’ve been an avid smoker since my first year at U of T. Three years have passed and now I am sober — for the most part. Ironically, weed is going to be legalized on October 17 but I probably couldn’t care less.

There are two main types of weed: indica and sativa. Indica strains are more relaxing, while sativas provide a more uplifting and energizing experience. I’ve used sativa with friends because it’s way more exciting. Indica has helped me sleep, to say the least, but it has had some other interesting effects on me.

Two years ago, I was, unfortunately, high during one of the most important moments of my life.

Back in second year, I was on the UTSC men’s intramural flag football team for the 2016–2017 season. Our team was on a hot streak. We made it to the final round, playing against UTM.

I remember smoking a joint right before getting on the team bus. Normally, a joint wouldn’t hit me that hard. As we warmed up, I remember feeling slightly lightheaded as I was running routes. I thought I was fine, but then the game began, and things took a different turn.

Our coach had me starting on defense to begin the game. I will always remember the first play of the game. UTM had a passing play. I remember looking at the player I was defending, struggling to follow him around on man-coverage. I felt a lot slower.

My reflexes were down and my judgments impaired because of the indica strain I had smoked. I think I have pretty good endurance and stamina, yet I felt more tired than usual during the game.

When we had the ball, it was also terrible for me. I remember at one point, I was just losing focus on everything going on around me. I couldn’t stay alert. Paying attention was nearly impossible.

One of my teammates, Dave, always shouted, “Look alive guys,” to keep us in check. I really needed to hear that, because I started feeling sleepy.

One of my most memorable moments in the game was when we were in the huddle. Our quarterback was going over the play that we were going to run.

I remembered exactly what route I was assigned. Then, as we left the huddle and lined up on the line of scrimmage, I forgot the route. I remember one of my older teammates yelling at me to get on the other side of the field.

The game eventually ended and we beat UTM. Playing in an important game while high was definitely an interesting experience, and on the bus ride home, I simply passed out.

I probably wouldn’t do it again.

The Breakdown: Travelling to the US after cannabis legalization

Tensions expected to rise amid cross-border stance on cannabis

The Breakdown: Travelling to the US after cannabis legalization

The impending legalization of cannabis in Canada has posed significant limitations in terms of U.S.-Canadian travel, and the overall legality of the substance on American soil.

The U.S. has an ambiguous relationship with cannabis use across its states. Despite 30 states legalizing medical use of the drug and nine states legalizing recreational use, the federal government still views cannabis as a controlled substance and Customs and Border Patrol is against those travelling with cannabis or in affiliation with the pot industry.

Even when travelling to states where cannabis is legal — such as Maine — travellers suspected of carrying copious amounts or those who are caught under the influence will be turned away.

Medical cannabis users are also not allowed entry even with a prescription. Marijuana-related paraphernalia, such as rolling papers and bongs, are also not permitted.

Travelling to the United States

According to an updated October 9 statement on the U.S. Customs and Border Patrol website, travellers entering the U.S. are expected to adhere to U.S. laws and regulations regarding cannabis. Respective policies will not change in accordance to legalization.

“Requirements for international travelers wishing to enter the United States are governed by and conducted in accordance with U.S. Federal Law, which supersedes state laws,” reads the statement.

“Although medical and recreational marijuana may be legal in some U.S. States and Canada, the sale, possession, production, and distribution of marijuana or the facilitation of the aforementioned remain illegal under U.S. Federal Law.”

The agency also added that violating these laws may result in “denied admission, seizure, fines, and apprehension.”

The statement is ambiguous in terms of smoking and consuming cannabis on the Canadian border and does not specify whether travellers will face consequences for legal use of the drug.

However, Canadians are not permitted to purchase cannabis and related paraphernalia from legalized states, as doing so will result in criminal penalties both at home and abroad.

Workers in the cannabis industry

Canadians involved in the cannabis industry may also be barred from entering if they are travelling for work-related purposes.

This is a major issue for investors and business owners hoping to expand the cannabis market into legal states.

The extent of these work-related travels also remains a major grey area. Companies will have to be cautious in making sure that employees are not barred from travel for suspected illegal drug trafficking. Workers will still be able to visit the U.S. for leisure travel.

Those travelling with a Nexus card will also be held accountable and are not exempt from US laws and regulations on cannabis. The card will be confiscated if its user violates substance laws.

If you are denied entry for cannabis use and trafficking, a border patrol officer will seize the cannabis on hand and deem you inadmissible for entry to the United States.

Canadians may face hefty fines and possible jail time as well, though determinations on criminal enforcement is up to the trained border patrol officer based on the situation and information at hand.

The Breakdown: What will cannabis legalization even look like at U of T?

University officials say cannabis is an “evolving issue”

The Breakdown: What will cannabis legalization even look like at U of T?

With cannabis legalization coming up on October 17, the university plans to treat cannabis in the same way that it treats tobacco. This means that, among other things, students will be banned from smoking in residence and from receiving deliveries for online orders.

In an interview with The Varsity, Senior Director for Student Success Heather Kelly said that, like other institutions, U of T would “largely rely on existing policies to respond to the changes for smoking cannabis in residence.”

For instance, residences currently have a zero-tolerance policy for smoking cigarettes indoors.

“The smoking of cannabis will not be any different,” said Kelly. “Students will not be allowed to smoke cannabis in dorms.”

For medical users, Kelly assured that they will continue to make necessary accommodations.

“We’ve always accommodated for medical marijuana. Academic accommodations or any accommodations are individualized in nature. So it really depends on the nature of the request and the residents’ environment, but we have and will continue to make exceptions for students who require marijuana for medical purposes.”

However, the issues will continue to evolve, even after the legalization of cannabis. For smoking outdoors, students are expected to obey federal and provincial legislation, which will allow people to smoke in public places such as parks and sidewalks, but not in indoor common areas.

Outdoor smoking rules would also be very difficult to enforce. In an interview with The Varsity, Sociology Professor Patricia Erickson said that there are “very difficult enforcement issues.”

“It’s probably easier to tie it into tobacco, then try to sort out which drug is being used where.”

Erickson, whose main area of expertise is the cultural and legal normalization of cannabis, also spoke about how legalization could affect campus culture. She said that despite common belief, legalization will not change much in terms of the normalization of cannabis, especially among younger people.

“The law, I think, is now coinciding more with the normalization process rather than the normalization process driving the legal change,” she said. “I would also say be careful, I think, about assuming that use will go up… It depends on age, and sex, and your kind of cultural setting, and so on.”

“I really thought legalization was coming,” said Erickson, speaking about the beginning of her career in the ’70s. “And instead, we’ve gone through decades of very modest proposals about decriminalizing possession and reducing the penalties. There was never a serious proposal put forward.”

Edibles will not be available for legal purchase in Canada as of October 17, so the university is taking more time to come up with an appropriate policy relating to this issue.

“Once there is more information with respect to edibles, we’ll review it, and we will also take a look at our existing policy. However, currently, because the new law does not cover edibles, again, we expect students to obey the law, and so we are only addressing the smoking of cannabis at this time,” noted Kelly.

The university is also planning to educate students on responsible marijuana usage. “Starting with orientation and continuing with our health promotions programming throughout the year, what we are doing is talking to students about safety, understanding their limits, making sure they’re aware of their rights, but also their responsibilities… and I think most importantly where to seek help,” said Kelly.

Particular importance will also be placed on helping students understand how to recognize and respond to situations in which they or someone else is in distress, and how to seek assistance if they believe that cannabis is negatively impacting their or someone else’s academic or personal life.

“Our focus is really about helping students learn about resources available to them.”

— With files from Andy Takagi