Panelists at a Grown In Cannabis & Capital Summit yesterday. Clockwise from top left: Grown In moderator Mike Fourcher, Michael Lucas of Green Equity Collaborative, Nick Gastevich of V. Gastevich Investments and Mark Cozzi of CentoVentiCinque.

Illinois should expect a wave of cannabis dispensary license sales later this year, concurred three experienced industry investors during a Cannabis & Capital Summit panel convened Wednesday by Grown In. The licenses will likely be put on the market by undercapitalized social equity groups and sold to deep-pocketed multi-state operators who have been waiting for the opportunity, the investors say.

“There will be a sell out,” predicted Michael Lucas of Green Equity Collaborative, an early Illinois cannabis investor active in Illinois, Michigan, and other emerging markets. 

“What’s the going rate?” quipped Mark Cozzi of cannabis investment firm CentoVentiCinque LLC, who agreed with Lucas but also noted that investors are getting, “cold feet in Illinois due to the dysfunction of the licensing program,” and are thus turning their attention to New York State and other emerging markets. 

Nick Gastevich, whose family investment office was an early backer in Chicago-based Green Thumb Industries and more recently made pre-public investments in Verano Holdings and Ascend Wellness Holdings, said multistate operators will court awarded license-holders early and often.

“There are going to be buyers, especially MSOs that do not have the state-capped number of 10 dispensaries,” Gastevich said. “Companies like Jushi and AYR Wellness will look for ways to add to existing footprints.”

While there will be a lot of opportunities for newcomers to make money in an Illinois market that has approximately one hundred dispensaries today selling $1.5 billion per year worth of weed, the panelists were unsure if there is enough capital to fund the low-to-mid seven-figure build outs of the 130-to-205 dispensaries expected to come online over the next year or two. 

“Not everybody will be able to secure the capital,” said Lucas, whose investment group sold their interest in one of the original Illinois medical operators to 4Front Ventures four years ago. 

The investors spent much of the conversation drilling in on their investment philosophies, including emerging markets and industry subsectors in which they are deploying their capital. 

States with limited licensing caps, strong regulations, and supportive elected leaders is where capital is flowing, said the three investors.

Gastevich said investors need to understand, “what the landscape is like today and what it will be like five years from now.” This includes having a granular understanding of the caps on retail, cultivation and processing licenses.

While none of the panelists anticipate banking normalization and a federally-legal interstate industry anytime soon, each one said they expect cannabis to be ultimately priced like a commodity, with growers operating similarly to contract distillers or brewers. Accordingly, they are seeking businesses that understand how to differentiate their brand and get the word out to target customers. 

“On the infuser side we are very interested in building defensible brands,” said Cozzi, who said, “a kind of Rxbar of edibles where you have quality and consistency,” is the preferred consumer play. The dispensary retail experience, he added, “is still very much in the early stages,” where there remains potential to build a national brand. 

Investment horizons for each panelist are also dependent on market and category. Gastevich said there are greater opportunities for faster liquidity in recent years now that Canada allows publicly traded cannabis equities. However, his firm’s investment in a social equity group seeking to become one of Georgia’s first operators, “is going to be a long-term hold.”

A longtime private equity investor, Cozzi said his expectations for cannabis exits may be slightly longer than the average venture capital returns which take about five years. He said the ultimate win would be, “not an exit to another entity, but when the business partner buys us out,” he said. 

Lucas agreed that, “the perfect exit is when your social equity participant and partner take you out,” he said. In the meantime, “You need partners who will be ingenious in their ingenuity. The market is more competitive. You’re betting on the horses. You need people who understand the competition and that the goal is to achieve profitability as quickly as possible.”

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Brad Spirrison is a journalist, serial entrepreneur and media ecologist. He lives in Chicago with his son. Interests include music, meditation and Miles Davis.