Interview with Alisia Ratliff and Christopher Ratliff of Victus Capital Ventures
Could you give our readers an overview of your professional background, and what led you to cannabis?
My name is Alisia Ratliff and my professional background is in Chemistry. In the last 14 years working in various industries and traditional laboratories, I have gained an extensive knowledge base in chemical analysis, project management, technical writing and cannabis-specific operations. In 2016, I remember feeling the lull of a mundane, repetitive daily routine and unfulfillment. I set out to achieve one goal: to be impactful in someone’s daily life, whether at work or in my personal life. This was the motivation that fueled me to leave the traditional laboratory grind and jump into the cannabis industry, where I have found my niche. I can affect people in a positive way at work through effective leadership and out in the world, through caring product creation and education.
My name is Christopher Ratliff and my professional background is in Operations and Entrepreneurship. Over the past 16 years, I have gained a broad skill set working in the distribution and aviation industries, managing the operations of a crating and international shipping company, specializing in supply chain management and logistics, as well as managing maintenance operations of the US government’s war fighters. Although I have worked on some interesting projects, I wasn’t as fulfilled as when I owned and operated my own business in commercial and residential restoration. In my personal life, I was always up to speed on cannabis as an alternative medicine, and watching the history evolve from prohibition into the 21st century piqued my interest in the burgeoning industry.
Together, we formed our cannabis consulting firm, Victus Capital Ventures, to address a rapidly growing, ever-changing industry in desperate need of scientific evidence and data, in addition to people with integrity and innovation. We are different from your average consultant, in that we pride ourselves upon building relationships with our partners while offering hands-on experience alongside the guidance we suggest.
The cannabis investment landscape has been through many changes and iterations over the last 5 years, as the industry has matured and developed. How would you best describe this transformation within the US?
In the beginning of the cannabis industry in the United States, investment was a very tricky task to achieve due to prohibition. With cannabis being a Schedule I drug on the Federal list, and possession being a criminal offense, the negative overtone of what was to become was frightening for most investors. In the early days, founders primarily needed to approach individuals with a high net worth or angel investors. There were no institutional or small business loans being given due to the nature of the business.
As we grew out of a pilot industry and more states started to legalize some form of cannabis legislation (medicinal, adult-use or hemp only), investment was being infused in every sector of the plant-touching operations, including many ancillary businesses, such as third-party analytical laboratories, delivery services and more. One of the greatest changes to the investment landscape was the data that served as proof that the industry was growing and moving into a positive light with regulators.
Although it is still a federally illegal endeavor, many states have passed laws allowing cannabis businesses to operate and have decriminalized cannabis possession. When the COVID-19 pandemic hit, it was also noticeably clear that cannabis could weather the storm. Many businesses were deemed essential, allowing jobs to stay afloat and consumers to access needed products.
Investment during 2020 hit a slow down; however, we are now in a time where investor appetite has grown exponentially. The industry has seen diversification amongst investment types as well – from crowdfunding for publicly listed companies, to tax revenue funds offered through grants for startups.
When licenses were first being given out in Canada and within certain states in the USA, we saw the rise of the vertically integrated company in cannabis; however, in recent years, some of the larger operators have been specialising in certain areas and collaborating with industry counterparts in sectors where they have less expertise. What do you think is the winning model for a successful cannabis/hemp operators? What are investors most interest in, and why?
From a supply chain perspective and protecting the inputs of all processes within the company, it is our opinion that a vertically integrated structure is the best option for investment. There can be many areas in which contaminants and risk are introduced into your business model, making continuous production a challenge. Companies that do not carefully and consistently monitor the biomass cultivation, downstream processing and product manufacturing, find rather quickly they are in constant remediation and break down.
As an alternative, we also believe in the small batch – more artisanal – approach and believe this niche sector is very attractive to investors. Although it may be the best option to operate vertically, this may not be feasible for certain startups, due to the high initial capital investment needed, as well as having to manage multiple moving parts. Focusing on what you do best, whether that be cultivation of award-winning flower, craft extraction or a boutique retail experience, will help investors get comfortable with a solid business plan that is less prone to continuous risk.
For young organisations putting together their business plans, could you take us through what you deem as best practice for creating compelling material for investors?
We live in an age where visual stimulation is key in any presentation. Displaying the same old slide decks and pitches to investors is getting boring. You want to show from the beginning that you are a brand to be recognized, and display your unique differences from everyone else in a saturated market.
Some tips would be to produce a well-thought-out video that markets your product, processes and people. Investors are aware of the obvious metrics such as sales, revenue potentials and high-level operations: thanks Google! What they are not aware of is who YOU are, what YOUR company is all about and how YOU plan to make a difference. Focus on those elements because investors are seeking to invest in YOU more than the company.
Once an organisation has gained a production license in their prospective market, could you give our readers some technical insight on how best to execute their business plan?
Planning, planning and even more planning! It is so important to not become the hare in the race, but to slowly and methodically approach the execution of these next steps after gaining a license in your market. Your business plan that you used to achieve the license needs to be concrete. Having a fluid model and making frequent modifications and additions does nothing but keep you running on a hamster wheel.
Facility design and infrastructure considerations will dictate process flows and municipal compliance. The facility also houses all of the prospective equipment, so you need to make sure it can handle the energy requirements, energy outputs and much more. Make sure you have all of your equipment identified and use the specifications to map out the facility’s needs with your architectural team. Usually you want to engage architects, engineers, contractors, consultants, finance and owners at this stage, so that everyone is on the same page.
During the planning phase, you want to ensure a proper risk assessment is done to identify any points of failure within any phase of construction or long-term operations. Executing a build-out and launch of operations becomes simple when you have a solid foundation. Not carefully planning will cost you time and money in the long run, if you’re constantly backtracking to fix problems.
What are common mistakes that companies make when creating and executing their business plans? How can these be avoided? Can you share some war stories?
One huge problem is the ambiguity in most business plans. When you have not been involved in the industry or lack experience in running a cannabis operation, it can be overwhelming to contemplate trying to hit the bull’s eye on a daily moving target. There are so many technical considerations, that you need the input of departmental SMEs to help guide your business.
Common mistakes that we’ve come across have been copy/paste business models, under-funded endeavors and over-inflated egos. We’re not saying there’s anything wrong with benchmarking and understanding functioning operations, just make sure you analyze their failures and bottlenecks to correct in the model for yourself. When you copy the bad habits of another company to hit the ground running faster, the problems you encounter will set you back further than where you started.
Funding is a huge problem where people assume they can get something done cheaper or cut some corners to save cash. We always recommend overestimating the financial needs by a couple of percent and adding in a healthy budget reserve to tap into in the event there are unforeseen issues.
Lastly, KNOW WHAT YOU DON’T KNOW! Do not overestimate the knowledge base and skills you bring to the company. No one knows it all, especially in an evolving industry with more and more scientific breakthroughs happening every day. Now that this industry has become global, research coming out of universities and private laboratories across the planet dictate the shifts in equipment, optimized processes and quality standards. Wholeheartedly admit who you need at the decision table, and HIRE THEM!
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Alisia and Christopher were both thought leaders at June’s GCI Virtual Summit.