Marijuana Business Magazine October 2019

Marijuana Business Magazine | October 2019 16 CEO of Mazakali hopes to grow industry through ‘purposeful allocation of capital’ Sumit Mehta S umit Mehta founded Mazakali to counteract the negative consequences of business practices that deplete resources by making investments in sustainable cannabis and hemp. The cannabis investment firm is based in San Francisco, with offices in Denver and Chicago. Mazakali offers capital- placement services to family offices, institutions, financial advisors and high-net-worth individuals. Before joining the cannabis industry, Mehta spent two decades on Wall Street at J.P. Morgan, Merrill Lynch, UBS Investment Bank, Susquehanna International Group and Raymond James Financial in roles that spanned portfolio management, investment planning, capital introduction, strategic consulting, relationship management and business development. What initially attracted you to the cannabis investment space? My initial attraction to this industry in 2013 was the incredible potential it offered from an investment standpoint. As I began to realize the immense social, medical, environmental and cognitive impact that came with it, I also realized that it was imperative I invest my time and effort to help grow the industry in a responsible and ethical manner. This epiphany led to me leaving J.P. Morgan in 2016 to launch Mazakali. Our goal is to transform the health of our plants, our people, our planet and our portfolios via the purposeful allocation of capital into the cannabis complex. What is your investment philosophy? While knowledge, access, patience, relationships, price discipline and luck are all meaningful contributors to investment returns, our investment philosophy includes a focus on scalability, sustainability and sensibility. Scalability: The cannabis industry is growing at incredible speed, and companies that can scale quickly have an inherent advantage in such an environment. Sustainability: Cannabis can help us meet our present needs without negatively impacting the ability for future generations to do the same for themselves. The incred- ible potential for positive impact across a multitude of industries allows us to do good while doing well as we revisit the inherently negative externalities of traditionally extractive capitalism. Companies that align morals and moneymaking remain particularly attractive. Sensibility : The cannabis industry exhibits emerging market characteristics that include information opacity, regulatory restrictions, trade barriers, high fragmentation, rapid product evolution, price volatility and tax uncertainty. This makes for an exciting business environment in which it is important to remain sensible, objective and nimble, and managers who demonstrate these qualities significantly increase their odds of success. Which industry sectors are good to focus on and avoid in terms of investment? As the cannabis industry experiences incredible and perhaps unprecedented growth, it behooves capital placement decision makers to carefully consider cannabis price forecasting and its resultant valuation and sector impact. Consumer brands that enjoy relative price inelasticity will see positive margin impact from cannabinoid cost declines, while those that serve simply as pass-through cannabinoid delivery mechanisms will see both margin compression as well as sales impact as consumers move Money Matters | Nick Thomas Sumit Mehta Courtesy Photo