Securing Investors is a 2-Way Street. Here's How to Be Successful.
The managing partner of Merida Capital Holdings shares his tips for entrepreneurs looking for investors.
It's not every day you meet a private equity investor who bases all of his investment decisions on one question: "Is this person a happy warrior?"
But Mitch Baruchowitz says people who are passionate about the work they do, who can articulate their point of view, who are respectful and self-aware, are the kind of people he wants to invest in. Having spent the majority of his career working in investment banking and law, he entered the cannabis space nine years ago.
While he has focused his time and energy on the state-legal cannabis industry, he is equally passionate about mentorship and education. He told me, "We are 55 portfolio companies and a half-billion dollars under management at this point, but we really are here to mentor people. We have a woman-owned and minority-owned empowerment program called the Inclusive Innovation Program for Cannabis Entrepreneurs. We try to be a beacon of thought leadership and great investment exposure to the cannabis landscape."
Baruchowitz sat down with Jessica Abo to share what he looks for in a portfolio and why securing investors is a two-way street.
Jessica Abo: Will you tell us a little bit about your background?
Mitch Baruchowitz: I was actually an entrepreneur right out of law school. I kind of went the opposite route of most people that come from corporate America into entrepreneurship. I was an entrepreneur in algorithmic day-trading, moved to the legal team at a very large public company called MarketAxess (MKTX), which is now I think at over 15 billion of market cap. I was the general counsel of a large broker dealer. And it was while at a family office that I started to really dig into the cannabis space. I now run what I think is one of the largest cannabis funds in the world.
What made you want to get into this space?
I saw the confluence of a few things that really appealed to me. First and foremost, I think about my legal training, the transactional training and other things I've done in my past as a legal counsel. Solving problems was always going to be keenly important to an industry that was becoming legal out of nowhere and really had no analog or framing.
More importantly, what really attracted me was the change that I thought that cannabis legality could do for society. I'm talking about the criminalization of people who really didn't deserve to be in jail for possession or low-level crimes, and the impact medical cannabis could have on the opioid epidemic. That's really where I started, in the medical side of cannabis.
Where does happiness come into play in your career?
The most important thing for an entrepreneur is to be a happy warrior. When you're an entrepreneur, people will look to you as a function of the business they may be investing in, and they're making a very personal decision to believe in you. And,I think you want to reflect the things that you are inside. You want your company to be in alignment with who you are as a person, because those challenges, that failure, that rejection that comes naturally in building a business, you have to be able to bounce back from it.
I think when your inner core is in alignment with what you're doing entrepreneurially, you're going to bounce back. You're going to find that those challenges are actually natural to the growing process and you're going to be better for it by extracting the needed lessons. And I think for me, I seem to skew glass half-full all the time.
I'd always been told as a young kid, whether it was in sports or anything, that I'm kind of a happy person and I should embrace that. And I just always felt like my mentality is positive by default. For example, one of my biggest rejections as an early entrepreneur in cannabis was someone calling me and my partners amateurs. And then we won this really large license, which really springboarded my career into cannabis, and I kind of laughed at that because I really held it close, but I found happiness in the fact that it just showed me that everyone's going to have a different reaction if you're being authentic.
So happiness is something that's really important. It's kind of woven into the DNA of what I do, how I raise my family and just who I am as a person.
You also touch on something that's really important when it comes to entrepreneurship, which is patience. I think so many of us want to be successful overnight. How have you kept moving forward so that you could reach your goals?
Especially in this space, where it's federally illegal, I think that's a challenge to embrace from day one. I think what you want to do is almost build a raft, where everything that you achieve is another log in that raft. So when challenges come, you can feel that your raft is big enough to handle the waves underneath. The challenges are the water, so the bigger your raft, the more successes you build on, the better you can handle the waves.
But I'd also say be generous with yourself and with your team. Understand that things are going to happen and that you can't take absolutes from everything. If things happen, you don't want to say, "Oh, we're the worst." You don't want to use these superlatives or negatives. You want to say, "We're going to learn from this. We're going to move forward and we're going to be better for it."
And if you have that mentality, you really do tackle the challenges as learning moments. Something we say at Merida is fall forward. Learn from tripping on something, because no one's going to be perfect. So that generosity of spirit towards yourself and towards others really does allow you, I think, to extract more valuable lessons from difficult moments and we try to really think as a team of how we can be better with each other. And so I think it's really important to surround yourself with people who have a mentality that is similar to yours. Not who think the same, but a similar mentality.
It doesn't matter whether it's diversity of opinion, which is really important, but you want people who are ... I want to be surrounded by happy warriors. Warrior poets. People who want to fight, but are articulate in the way they fight. Who are respectful with how they disagree with each other so that we can always get to better answers, because there's nothing better than being able to disagree on how to go forward and then extract the best lessons from each person and then really craft a collaborative view.
So I think for entrepreneurs, really be careful about who you surround yourself with, because it might define your company and the future success of your company.
When it comes to securing investors, I know that you feel strongly that it's a two-way street. Unpack that for us a little bit.
Education is a critical component of trying to get investors for two reasons. First, investors often need to be educated as to what you're doing. I've been pitching investors in cannabis, since that's my business now. But, before that, I worked as a banker. So you're pitching a lot of different businesses. One thing I learned is that you're going to give a lot of pitches. There's going to be rejection. There's going to be failures. There's going to be success.
Definitely let the successes buoy you for a moment, and then get back to work. Never let the successes over-distort the positive and never let the failures and rejections distort the negative. And move forward. Always move forward.
But I think it's also important to educate investors so that they understand better and have better expectations about what you're actually offering. Make sure they know the bet they're making. If they're making a bet on you as a personal genius like an Elon Musk kind of figure, or if they're making a bet on a thematic thing like the growth of cannabis, as it naturally becomes a more normal part of American culture and replaces alcohol. And I think it's been important for us to create a content strategy that really educates investors. Because the two-way street is not just you pitching investors and then trying to make money. It's them evangelizing and helping you build momentum and build a network.
Think of investors like a cell-phone repeater: The more information and transparency that you can give them, the more they can help you build that brand that you're trying to build and that reputation. If you're doing a poor job, then it's not going to work very well for you either way. But, if you're doing a good job, you need that evangelism for investors to really build that network because that's going to remove friction to your future success. And, removing friction is probably the key element that entrepreneurs should be looking for.
So, the other piece of advice to locking in investors is to find an amazing generalist early on, who does the things that you're not great at, and let them be a bridge to those investors. Empower them, support them and together craft a strategy for excellence in managing the investor process. It's the best thing you can do to really open up that two-way street for that investor evangelism that you really need.
What's the number one thing that you look for?
Well, in an entrepreneur, it's probably self-awareness and understanding how to frame the bet I am making when I invest in that company. So, it's someone who has the right temperament because those type of entrepreneurs tend to be able to answer questions more directly and robustly. It's someone who take's instruction, or understands that where there's gaps, it doesn't mean that it's the end of the conversation, it's just somewhere we need to work. We like investments where that entrepreneur really understands that this is the beginning of a journey together.