The Woman Behind the Scenes at Cannabis' Biggest Private Equity Fund
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When Merida Capital Partners Managing Partner, Mitch Baruchowitz, recruited Daisy Mellet to join the team, Merida Capital had team members and Assets Under Management (AUM) of $7 Million. Within 14 months of Mellet’s hiring, Baruchowitz, Mellet, and the Merida team grew the firm to more than $125 million AUM, quadrupled its number of employees.
Merida is now considered to be the largest private equity fund focused on cannabis and is launching a third fund to raise an additional $200 million for investment in the cannabis industry. That huge growth required a highly organized and professional infrastructure.
Mellet’s decades of experience from the highly regulated world of institutional finance brought a professional level of organization and an operational model primed for growth. Mellet's role at Merida has been crucial to the firm’s success but she has remained largely invisible to most, except of course to the investors and companies she helps manage day-to-day.
Like many professionals now working in cannabis, Mellet’s path into the wild west world of cannabis was winding and indirect. After receiving her Master of Arts in Liberal Studies with a thesis on the “Grassroots Anti-Communist Rock Music Movement Behind the Iron Curtain,” Daisy ventured to Europe and then to Asia as a teacher in immersive language programs. Returning to the U.S., she jumped head first into the very conservative world of finance. After several years, Mellet rose to Chief Operating Officer of Seawolf Capital, LLC, a long/short equity fund based in New York City, where she worked side-by-side with her colleague and friend Danny Moses, who was featured in the movie “The Big Short”.
Below, Mellet documents her unconventional journey and shares advice for others looking to achieve success in the sector, along with a few things she has been surprised to learn while navigating the complicated, but exciting world of cannabis investing.
As the Chief Operating Officer of a large Wall Street fund, you reached a high level of success in the traditional world of finance. What made you take such a big leap of faith risk into the cannabis industry?
My good friend and former colleague, Danny Moses, was becoming a serious investor in the cannabis space. Danny was aware I was looking for a new challenge, so he introduced me to Mitch Baruchowitz, Merida Capital Partners founder and Managing Partner. A good conversation with Mitch and a cup of coffee later, I knew so much more about cannabis and its basis for a new and potentially massive industry. Excited by Mitch’s staggering knowledge of the space and the investments he’d already made, and given the contraction of hedge funds and what I came to understand as the immense growth in the hemp and cannabis spaces, the transition felt like an obvious one to me. While some might see it as slightly bold, as the plant is still federally illegal, I knew I had found my next professional challenge and decided to dive in.
What were some of the biggest differences you noticed right away when entering the cannabis industry?
Operationally, the cannabis industry is still much more difficult to navigate than other sectors. For example, there are many banks that won’t open accounts and most brokerage firms won’t trade cannabis stocks. While we’ve been able to work through these challenges over the past year, it’s taken a lot of bandwidth and a tremendous amount of energy -- much more than it would have in most other sectors. Given the limitations surrounding institutional investment in cannabis, the vast majority of our investors are individuals -- most of whom are venturing into this new landscape for the first time and who have legitimate concerns about investing in something that is federally illegal. Working to help raise their comfort levels and navigating the logistical issues they confront has also been a much more hands-on and rewarding approach to investor relations than in any of my previous roles.
Another difference is the sense of excitement and intrigue that surrounds the cannabis space. In short, the word is out and people want to know more. This lends a sense of real fun and excitement to the job. Also, the sector is so entrepreneurial and the amount of brainpower that is being harnessed is incredible. On a daily basis, I’m introduced to new and amazing products and ideas that could help usher in positive changes -- medical and environmental to name two -- in so many other industries that shape our lives. I’m proud to be a part of that.
What were some of the biggest challenges you had to confront on day one?
When I joined Merida, Mitch and the team had already built so much, but the amount of research and due diligence they perform left little time for organization. For the first few weeks I recall feeling like I’d been asked to make sense of a research library that had been hit by a tornado. Getting up to speed on what exactly Merida did, how we did it, what obstacles we confronted and where we wanted to go took no small amount of reading, sorting, pestering and spreadsheet jockeying -- and all of that before I was confronted with a second fund launch, uncooperative banks and brokerage firms or introduced to the crazy world of state licensing applications.
What were you surprised by the most when you first got started in the industry?
I was blown away by the space’s unbridled entrepreneurial spirit and just how big the sector is, particularly the ancillary side of the industry. Merida invests primarily in what some have called the “picks and shovels” of the cannabis industry, but the reality is there are innovations happening in technology and equipment, lab testing, compliance, services or data collection software, production equipment and packaging. These are the backbone and the future of the industry.
I was also surprised to learn how much institutional professionalism was already in the space. In my position, I get to meet and work with some really impressive people who have a wide range of experiences from places like Goldman Sachs, the White House and Fortune 50s -- not to mention those forward thinking individuals who’ve been working with the plant for years.
How would you describe your role as Chief Administrative Officer at Merida Capital Partners?
In one word? Multifaceted. We are in the process of birthing an industry and watching it grow rapidly, so my job has the feel of working at a startup. I work with all of our portfolio company executives, our legal and compliance teams, administrator, accountant, broker and bank as well as reporting to and assisting more than 150 investors and working with our public relations team to help coordinate Merida’s events. Essentially, I am on the frontline at Merida and the point of contact for almost everyone and everything that moves in and out of the firm. I also serve as the project manager for one-off projects, including for de novo licensing applications. So while the word “administrative” is in my title -- it is far from an admin gig.
Do you have any examples of Wall Street operational practices you’ve instituted at Merida?
Part of why I came on board was to bring a Wall Street-level of sophistication to our firm and to implement sound best practices and set procedures. Since I joined Merida, I on-boarded a third party administrator, created a customer-relationship management system for existing and potential investors, targeted a broker to hold and trade shares and created a system to document and track foundational things like investor documents, purchase contracts and share certificates. I worked to develop a process to review all of our editorial content, marketing and communications materials, and found out that I have a real eye for that and I enjoy it too. We also formalized a process to ensure that we can quickly and professionally respond to all incoming queries that come into the firm -- from anyone, about anything. We made a commitment at Merida that no matter how busy we may be, there will always a voice on the other end of the line to answer your questions. Since Merida has implemented these and other best practices, we’ve seen a clear boost in productivity and results, so it is worth the time to get these things in place.
Have you had to adopt a lot of the traditional operational practices to fit the pretty non-traditional cannabis industry?
What I would say more is that we’ve applied what’s needed for each circumstance and are prepared to add on additional levels of institutionalism as the fund grows and the industry matures, so it’s not so much adapting traditional operational practices, as much as deciding what is needed where and when.
What have been some of Merida’ biggest successes stories so far?
Merida itself is a success story. The fact that our firm is thriving is something that would have been impossible a decade ago. Our success story is our incredible team and having a strong leader at the helm in our Managing Partner, Mitch Baruchowitz. Our two funds have been overwhelming successful due to these folks. We are also thoroughly examining what our next big move will be, but in the meantime, we really couldn’t be happier with our success and our investment choices in companies like KushCo Holdings, which sells all kinds of packaging and products for the cannabis industry, science, equipment and information supplier Emerald Scientific, GrowGeneration, which does commercial equipment sales, ultra-premium cannabis company Canndescent and about two dozen others.
Do you have an example of a deal that got away, that you wished Merida had invested in?
There isn't one specific example of a deal that got away since we often try and stay very engaged with the high-quality companies that for one reason or another we don't invest in because things change and then all of a sudden there is an opportunity. There are so many incredible companies that missing out on great opportunities is a reality in our industry.
What trends have you noticed in the types of pitches Merida is seeing?
Overall, we are seeing more quantitative analysis, quantifiable knowledge and tailor-made solutions in pitches. For example, on the plant-touching side of the industry, it’s no longer about inconsistencies in flower or strains. Rather, it’s about personalization and honing in on what exactly people want and need from cannabis. For example, one of our portfolio companies, Ionization Labs, is allowing the consumer to measure what’s inherent in each vape inhalation to find the right CBD/THC ratios and balance . We expect to only see more data and personalization to take off in the space.
You’ve mentioned that women were even more underrepresented in finance than they are in cannabis, but even in the cannabis industry, you find that you are often the only woman in the room? How you seen any shift in the last year, either way?
I still often find myself the only woman in the room, but I see more women out there these days, especially in the media. I’d also note that a good portion of our investors are women. My hope is that we see more and more women joining the space and that more of the caregivers and patients become more vocal as the industry moves forward.
Do you have any expectations that this is changing (specifically the % of women starting companies and leading companies in cannabis)?
Given that women dominate consumer market share I can’t fathom that more women won’t endeavor to tap into what they gain from the legalization or even destigmatization of cannabis and to find a way to sell it. One of our portfolio companies has presented some ideas to us that a man could never come up with because it’s so unique to the female experience. I don’t want to share what that is yet because it hasn’t hit the market, but when you think about it, it’s so obvious — it’s genius.
Do you have advice specifically for female on how to successfully pitch their cannabis startup to investors?
Do your research, make sure your modeling is sound and your valuations are realistic, keep your ears open, read a ton, speak up and use your woman's intuition -- it’s an advantage.
Are there any mistakes you tend to see women make often than their male counterparts?
Women often opt out of what I think is an important aspect of business and relationships, namely, going out after work, especially spontaneously. This is a limitation, not a mistake, and still a function of the fact that even full time professional women are more often than not the primary caregivers at home.
What’s next for Merida?
We will be launching our third fund; Merida Capital Partners III, LP soon, and from there – just keep on grinding and growing.
What next on the roadmap for Daisy Mellet?
I’ve got a lot of sweat invested at Merida and would love to grow alongside the firm and my colleagues here. I want to continue to help grow and institutionalize Merida into a highly efficient machine and free myself up to have a more outward facing role.
I am deeply inspired by the (often micro-financed) female-run cooperatives that offer financial independence to women in third world countries. Eventually, I would love to see what women are doing globally in terms of hemp or THC cultivation down the road, assist in the development of a female-owned and operated cultivation, and get involved with hemp-based textiles.