In this month’s member spotlight, we hear from Paul Rosen, CEO of Tidal Royalty Corporation, a Toronto-based company providing financing for U.S. licensed cannabis operators looking to expand their operations.
Cannabis Industry Sector:
Finance and Investments, Expansion Capital Provider
NCIA Member Since:
Tell me a bit about your background and why you launched your company?
I am a lifelong entrepreneur, having started my career as an attorney with my own firm before founding a number of companies in different industries. Within the cannabis industry, I was the co-founder of The Cronos Group (NASDAQ:CRON, CRON.V), a company that I led as CEO and President for 3 years. I am also a very active investor with over 100 investments in cannabis companies globally, I serve on the Boards of iAnthus Capital Holdings (IAN.C) and Hill Street Beverages (BEER.V), and I am an advisor to numerous companies in the industry.
I see a lot of similarities between U.S. cannabis today and the Canadian markets from 5 years ago, especially around the massive capital investments required to build out an industry of this magnitude. Unlike Canada, however, the lack of access to traditional capital markets makes it much more difficult for licensed U.S. operators to build the scale they will need in order to compete globally. I founded Tidal Royalty Corp. (CSE: RLTY.U) (OTC: TDRYF) to fill this market need and to provide growth-minded entrepreneurs with the resources they need to build sustainable businesses that positively contribute to society.
What unique value does your company offer to the cannabis industry?
Tidal Royalty is a publicly-traded company that provides licensed U.S. cannabis operators with the expansion capital that they need to scale their business. We write institutional-level cheques in the $5MM – $25MM range and have a world-class executive team that can assess and close deals quickly. But what makes us most unique is that we provide financing in exchange for a royalty on future revenue. This is most attractive to entrepreneurs in high-growth industries – like U.S. regulated cannabis – in that they get the benefit of a large capital infusion without dilution, and without the risk associated with debt. We are looking to align ourselves with best-in-class operators that will form the future of this transformative industry: when they do well, Tidal Royalty does well.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
As institutional-level capital providers, Tidal Royalty has a level of responsibility that goes beyond our duty to be prudent stewards of capital for our shareholders. That is, we look to back licensed operators that we feel will positively impact the industry as a whole, in the U.S. and globally. We don’t see these as being mutually-exclusive; the operators that understand their social responsibilities and are willing to accept them are the ones that have the opportunity to make out-sized returns in the long-term. As part of our investment diligence, we not only assess the business case, but also look at how operators interact with their communities and the impact they can have on the segment of the population that they interact with. We think this is important in and of itself, but it’s also simply good business practice.
What kind of challenges do you face in the industry and what solutions would you like to see?
One of the most significant hurdles for many operators is the restrictive banking landscape. The legacy banking environment that discourages many institutions from participating in the regulated cannabis industry poses massive logistical challenges and business risks.
The industry as a whole is working hard to show the level of sophistication and societal benefit that a regulated cannabis market can offer, but the lack of banking infrastructure really creates an environment for criminal activity and black-market operators to flourish. Licensed operators can’t get access to the most basic banking services available to other industries and have to deal with the risks associated with a cash-only economy. I would like to see the states – either on their own or in partnership with private enterprise – really push an agenda to resolve some of these issues. There are a lot of good initiatives proposed that need to get pushed forward to make a difference.
Why did you join NCIA? What’s the best part about being a member?
We joined the NCIA to be part of a like-minded community working to advance the interests of this industry. The level of engagement, innovation, and enthusiasm we’ve experienced from the NCIA organizers and members has been incredible. We’re looking forward to helping contribute in any way that we can.