In Conversation With… Sumit Mehta of MAZAKALI
With one week to go until Prohibition Partners LIVE begins, we are counting down to the flagship event by releasing a series of interviews featuring some of the key speakers and panelists that will take to the virtual event stage.
Opening the series, broadcaster and reporter Lynsey Hooper speaks with Sumit Mehta, Founder and CEO of MAZAKALI, a digital platform for cannabis investing supported by a licensed broker/dealer.
Lynsey Hooper (LH): Hello and welcome back to another interview from Prohibition Partners, and this one will see me speaking to Sumit Mehta from MAZAKALI. We’re going to be hearing about his company, and it’s all in the build-up to Prohibition Partners LIVE, which takes place from the 22nd to the 23rd of June online, and this gives you a taster of what you can expect from the companies and key speakers.
So let’s bring in Sumit now, who joins us all the way from San Francisco. Thank you very much for joining us!
Sumit Mehta (SM): Thanks for having me Lynsey, glad to be here!
LH: Sumit, can you tell us a bit about your company to start with, MAZAKALI?
SM: MAZAKALI is a turn-key digital investment platform for the plant-based medicine complex. We’re a registered investment advisor, and licensed investment advisors build custom portfolios for our investment clients. We’re also licensed investment bankers and offer capital advisory and capital raise services for company clients. Simply put, we help investors place capital and we help companies raise capital in the hemp, non-hemp cannabis, and psychedelics industries.
LH: Are you able as well to share a little bit about your background and how you came to be involved with the cannabis industry?
SM: Yes, I spent twenty years on Wall Street before joining this industry, starting at Merrill Lynch in 1996 and leaving JP Morgan in 2016 to form MAZAKALI. My initial exposure to cannabis was in 2013, when I started getting exposed to the industry from friends back in Chicago, and then started placing capital in the space in 2014, and by 2016 I had realised a couple of things.
One, that this wasn’t just an industry, it was a movement. And two, that it wasn’t just sufficient for me to put my capital into work in the space, I also felt compelled to add my time and effort. So with that epiphany, I left a 20-year career on Wall Street and launched MAZAKALI in 2016 in San Francisco.
LH: You mentioned about recognising this movement, it being an epiphany to you. I mean, just overall, where do you think the biggest impact of this plant will be?
SM: Food, fuel, fibre, paper, medicine, the environment, social justice, civil rights, and cognitive liberty are all impacted by this plant. Cannabis, by its very essence, will help weave the social fabric around us just a little bit tighter as we traverse longer bridges of understanding across deeper chasms in this new virtual world.
LH: Cannabis also went from being illegal to being essential in many US states, how do you see that from an investment point of view, is it good business?
SM: It certainly helps that cannabis is viewed as essential, and time will tell how much impact that has on the medical systems in states that have these laws. It also helps that governments will soon be looking to sure up tax revenues to fill their dwindling coffers, and that cannabis is both politically popular and has meaningful tax implications.
In addition to these, three other forces could have an impact on this market, and these are the broader public markets, the regulatory bodies, and technology.
When you have public equity volatility, you see a relative move toward private equity. We saw this after the ‘08-09 recessionary period, and expect to see it again as public markets perhaps begin to reflect that actual economic underlying conditions around the world. Second, regulations put in place over the past twelve years help further democratise the private equity markets, once primarily the playing grounds of the privileged. And third, technology has advanced tremendously and investors can now do their diligence and place capital in quite a seamless experience on platforms such as ours. Also, more people can consume more cannabis in more ways and more places for more reasons everyday, and that by itself is a massive tailwind for our industry.
LH: Yourself, Sumit, and Stephen Murphy, who runs Prohibition Partners, have worked together globally around cannabis on the stage for some time. Can you tell us about how ProCapital came to be?
SM: Lynsey, raising capital is tough in any industry environment, and certainly has its fair share of challenges today. Three things that companies can do to optimise their capital raises are to have professional offering preparation, have technology that provides a seamless investor experience, and to get that offering in front of as many eyeballs as possible. ProCapital helps provide all three to an industry that will undoubtedly unleash an extended phase of expansion as we move past our current capital constraints.
LH: How do you see cannabis impacting all of us during this period we are in at the moment, from lockdown entering into what is now being called ‘the new normal’?
SM: Well, when you consume cannabis at home, you may stoke creativity and contemplation. However, when you consume cannabis socially you also stoke compassion, collaboration, community, connection, compatibility, and consciousness. We may have learned through this period of isolation that what makes us human is less ourselves and more each other, and this is why we believe in cannabis helping the very social fabric of our collective being.
LH: Could you also share your longer-term investment view on cannabis going forwards?
SM: Well the cannabis complex includes hemp, non-hemp cannabis, real estate, ancillary, and international opportunities for us. The non-hemp cannabis space is quite well advertised, it certainly offers tremendous growth for well-placed capital. Let’s now take a look at the ancillary space. For every dollar spent on cannabis, two dollars are spent around it, with the ancillary space enjoying equally robust growth. This industry includes soil, lighting, fertiliser, legal and financial services, transportation, logistics, and security just to name a few.
Let’s also look at the hemp space. Hemp alone has fifty-thousand uses that include the ability to replace everything from boats to buildings to bricks to blenders. From an investment standpoint, I can’t think of a single industry that will remain untouched by this plant over the years to come. I also expect that cannabis will prove to be the best performing asset class over the next decade.
Now the second part of your question was around how an investor might approach the space. It is important to remember that cannabis is an emerging market, and thus exhibits many of the characteristics common to emerging markets. These include price discovery, rapid regulatory changes, trade barriers, fragmentation, and quite importantly, the ability for an active and informed investment manager to generate portfolio alpha, or outsized risk adjusted returns.
With nearly 35,000 businesses and a 27% annualised growth rate, this industry is poised to double in size every 32 months. It is very difficult for anybody outside of the industry to keep up with its evolution, and we would recommend hiring investment professionals to help with capital placement for anybody looking to participate in this next stage of global growth.
LH: There are clearly some very exciting opportunities here Sumit, thank you very much for your time. You’ve given us a small glimpse into that and we look forward to hearing more from you in June!
You can hear more from Sumit Mehta and MAZAKALI at Prohibition Partners LIVE, from the 22 – 23 June. Additional preview interviews with some of the key speakers and panelists who will be featured at the event are available now, to watch via the Prohibition Partners YouTube channel.
Join Prohibition Partners LIVE on 22 – 23 June to discover the latest developments in the European cannabis sector, learn from our world-renowned speakers, and engage with our network of industry-leading professionals who are pushing boundaries in the cannabis space.