What The Cryptocurrency Craze Of The Past Can Teach Us About The CBD Craze Of The Present
Venture capitalist and angel investor, Chris Hollod, made a killing off of cryptocurrency. Now in the CBD game, he sees many parralels between the two .
As a young, successful angle investor, Chris Hollod has his Spidey Sense finely tuned to the next big things in the market—often long before us mortals have even heard of them. Case in point: He was an early investor in Uber, Airbnb, and Pinterest and, in 2013, he invested in bitcoin and did quite well before that bubble burst.
Now his focus is on what he describes as "startups who are at the convergence of culture and wellness," which includes many emerging CBD brands.
Hollod sees many similarities—both good and bad—between the current CBD boom and the cryptocurrency boom of yore. Here, he shares his wisdom.
Tell us a little bit about yourself and your career.
I grew up in Atlanta and went to Vanderbilt. I took an investment banking job with Wachovia in Charlotte. Everything was going well until the market crashed in 2008, and my entire team was laid off. But, in hindsight, I now realize that this was one of the best things that happened to me. With my newfound freedom, I spontaneously booked a flight to LA and haven’t looked back since.
When I arrived in LA in 2009, I started working for Ron Burkle [a world-renown billionaire investor]. He asked me to manage A-Grade, which was his new venture capital fund with Ashton Kutcher and Guy Oseary, and I quickly discovered my passion for venture investing. That was a life-changing moment for me. I ended up doing more than 100 deals with Ashton. We were truly at the forefront of the consumer-tech boom and invested in companies likes Uber, Airbnb, Pinterest, Spotify, Houzz, Warby Parker, Nest, and Casper.
While running A-Grade, I also started to handle all of Ron’s personal venture investments and became his Traveling Chief of Staff. We traveled the world together nonstop for six years. We also started another venture fund with our friend DA Wallach, called Inevitable Ventures, where we invested in companies like Thrive Market and Memphis Meats.
But, by the end of 2017, I was craving simplicity and freedom. So I quit my job to focus on my personal hobbies as well as my own angel investing. I launched my own company, Hollod Holdings, and have been investing in consumer start-ups at the convergence of culture and wellness. So far, I’ve invested in a variety of different companies including Recess, Dirty Lemon, Matchabar, Mud/Wtr, Magic Spoon, and JuneShine. At the moment, I’m most excited about CBD and alternative alcohol.
What did your experience investing in cryptocurrency teach you?
Through all of my tech investments with Ashton, we caught wind of bitcoin at a very early stage. I luckily bought bitcoin in January 2013 when it was only $15 a coin. Fast-forward to the end of 2017, and I sold the majority of my position for $15,000 a coin, which was the best return of my career. I could invest for the rest of my life, and I’ll never see another 1,000x return like that. It’s crazy! I also used the returns to start day-trading a bunch of other digital currencies.
Overall, it definitely taught me how to better understand and predict speculative bubbles, because it was the first true bubble that I experienced from start to finish. No matter how much research I did or how much I learned, I realized that both psychological and sociological factors would always transcend fundamentals. I saw so much activity based on either herd mentality or FOMO-based investing, which are two of my least favorite things in the investing world. Before the ultimate price collapse, it seemed like most people were simply investing based on anecdotal evidence. Everyone was so eager to believe all of the hype because they all wanted to make a quick buck. That’s obviously not a sustainable recipe for long-term success.
So why did you turn to CBD investing?
My obsession with CBD started in January 2018, when California officially made recreational cannabis legal. My girlfriend and I started hitting the various dispensaries in our hood so that we could better understand all of the different trends. I was immediately blown away by the endless variety of products, but I never truly found enjoyment in THC. That’s when I was fortuitously introduced to CBD. I became so intrigued by CBD that my girlfriend started slow-cooking cannabis flower with coconut oil in order to make our own homemade oils and balms.
I started learning more and more about the compound through my personal consumption, and I quickly saw the unlimited upside potential from a business perspective. If you think about it, CBD offers a universal value proposition. Namely, a more stress-free and healthy existence. In my ideal investment scenario, my hope is that CBD, as an active ingredient, can potentially become as ubiquitous as caffeine.
I really like how the legal landscape continues to shift in our favor, which ultimately entices more consumers into the space, which in turn attracts more entrepreneurs. It becomes a virtuous cycle of simultaneous supply and demand increase.
I still think it’s early days though. In the last poll I read, 56 percent of adults did not know or were confused about the differences between THC and CBD. There’s still a large educational hurdle, but I think the industry is on the right track.
CBD initially began gaining mainstream attention in 2013, but the current hype is absolutely undeniable. The industry is valued at roughly $2 billion right now, but various research reports expect the industry to increase in size to upwards of $20bn by 2025. That’s serious growth! I think the current craze is based on a confluence of four trends, including a changing legal landscape, permeation of broader health and wellness trends, rising anxiety rates, and increased innovation in the sector. The official passing of the Farm Bill at the end of last year was obviously a pivotal moment for CBD. Not only did the bill make hemp production legal, but it also helped remove the general stigma associated with cannabis-based compounds. If you look at our society, anxiety is the most common mental illness, and it’s affecting people of all ages. CBD can help, as long as it’s legal, accessible, and standardized.
When I first moved to LA in 2009, most of the health and wellness trends were confined to the coasts, but you now see these trends quickly permeating the rest of the country. CBD is simply the next step in the health and wellness conversation. Lastly, I think the increased productization is helping fuel the movement. A tincture can admittedly be a bit intimidating to some people, but now you have access to an endless array of products from lotions to gummies to capsules.
How is CBD similar and different from the cryptocurrency trend?
I actually think there are a lot of similarities across the two seemingly disparate trends. First and foremost, because both trends are at the bleeding edge of innovation, they create a dichotomy with the public. The trends are either met with fear or curiosity. The fear is then magnified through all of the unsubstantiated anecdotes and exaggerations, which fuel eye-popping growth in the early days. Remember when people were saying that bitcoin was going to change the world, the internet, and our financial system all at once? That’s such a huge claim that can only be met with extreme skepticism from the average person. Similarly, so many people are saying that CBD is a magic elixir that can cure all of your problems. In both cases, I do not think these heightened hyperboles are beneficial. Because when people refer to CBD as a “cure-all,” the critics will draw parallels from previous miracle cure manias and thus dismiss CBD as “snake oil.”
Also, in both instances, the legal landscape has not caught up to the progressive trends. Both industries are still relatively unregulated, which creates huge barriers for mainstream adoption. There is also a large educational chasm that needs to be addressed. The crypto trend took a hit when uneducated people started experimenting with it. I think the same is true with CBD. Too many people are testing products without fully understanding what they’re putting in their bodies.
It’s also funny that both cryptocurrencies and CBD seemingly offer universal value propositions. Crypto can make you rich (and remove all of your financial problems), and CBD will make you feel amazing (and remove all of your health problems). Overall, there needs to be more specificity, education, and uniformity across both industries.
When it comes to differences, I’d like to think that CBD is way more approachable and accessible than bitcoin. When I bought my first bitcoin, it was ridiculously cumbersome and tedious. And now it’s expensive. But when it comes to CBD, you can spend $5 on a well-made drink like Recess for example. For the sake of simplicity, you can think of CBD like a supplement or vitamin, which at least evokes some level of comfort and is grounded in biology. Whereas the crypto trend was almost impossible to comprehend and only existed virtually. Hell, I traded the stuff for years, and I’m still nowhere close to being an expert.
What can we learn from the cryptocurrency craze of a few years ago that we can apply to the new CBD craze?
I think we can definitely extract a lot of valuable lessons from the recent crypto rollercoaster ride. We quickly learned that when you combine a relatively amorphous legal landscape with limited government regulation and significant consumer anecdotal evidence, you get a recipe for insane volatility. Just as we witnessed the SEC and IRS crack-down on cryptos, I think the FDA and FTC are going to make big waves in the CBD world. And at this point, I welcome their involvement. There definitely needs to be more standardization and transparency in the sector. During the crypto boom, I had so many random unsophisticated friends that were trading very esoteric coins without properly doing their homework. And guess what, most of them got burned. I think that activity is now analogous to all of the baristas and bartenders that are sporadically dosing coffees and cocktails with CBD. All of these products need to be better regulated, because a few bad experiences can potentially taint the entire market.
We also saw a ton of crypto trading platforms shut down because of bad behavior. When it comes to CBD, I think the trading platforms are analogous to the cannabis dispensaries. Some of the dispensaries are amazing, but there are others that are clearly sketchy and not operating at the appropriate standard. So, if a customer buys sub-par CBD product, their image of CBD could be forever polluted.
The cryptocurrency trend benefited significantly from high-profile brand ambassadors, whether celebrities were talking about it or C-level finance executives. So my hope is that more brand ambassadors infiltrate the CBD world to further bolster the positive image of the compound. Brand ambassadors are great at both educating the general public and also helping to remove stigmas.
It was also helpful when reputable banks and companies started accepting cryptocurrencies as a legitimized form of payment. So, in terms of CBD, I think it will be hugely beneficial to the overall industry once more doctors get involved and there are more clinical studies.
We also saw a dramatic proliferation of digital currencies that were riding the coattails of bitcoin. I think the same phenomena will occur with CBD. There are more than 100 cannabinoids in the cannabis plant, so for the sake of my analogy, if CBD is Bitcoin, maybe CBN and CBG could become the next two popular compounds. With that said, I’m really excited to meet with entrepreneurs that are pushing the limits in the industry. But, just like the crypto craze, I’m always wary of the entrepreneurs entering the space to make a quick buck. And there are a lot of them. There were so many horrible Initial Currency Offerings (ICUs) which ultimately contributed to the crypto market crash. I’m now afraid that too many people are incorrectly and selfishly slapping a CBD logo on their products in order to capitalize on the hype.
Lastly, during the crypto craze, the most successful people looked deeper than just the superficial coin and began thinking outside the box. The smart people were focused on learning about and leveraging blockchain, which is the underlying technology that powers bitcoin. Based on that learning, it’s easy to simply market CBD as a superficial de-stress product, but I’m excited about the entrepreneurs who are diving deeper into the biology of the compound and understanding the potential within the pharmaceutical realm. At the end of the day, whether it’s crypto or CBD, I think progress will inevitably prevail.
What are some CBD companies you’re excited about?
The first brand that my girlfriend and I fell in love with was Papa & Barkley. We love their bath soaks and we're very impressed with their authenticity, transparency, and memorable backstory. I’m a huge fan of Recess, which was my first CBD investment. I was lucky to have invested in Recess’s seed round, and now the company is the leading CBD beverage company. Recess’s branding and marketing strategies are unique in that they seek to capture and define a feeling. I think the company has a ton of mainstream potential given its relatively low price point and approachability. I’m currently advising my friend’s company, PearlCBD, which I think is going to set a new standard in the space. PearlCBD will be offering premium Pharma-grade products with total customer transparency spanning from the company’s organic hemp farms to its FDA-registered lab. I think this will be vital in the wake of all the unlicensed and untested products on the market.
I’m always testing new products on a weekly basis, but when it comes to simple recommendations to friends, I really enjoy the product offerings from Life Elements, Plant People, Juna, and Sagely. I like it when entrepreneurs experiment with different CBD-inspired formulations, whether it’s adding adaptogens, honey, or even botanicals. I also think it’s important to define the customer experience, so I respect brands that actively specify the use-case of the product, whether it’s for relief, energy, or sleep. Lastly, I’m really impressed by Mendi, which is Megan Rapinoe’s new brand. Mendi is focused on the high-end market and is educating athletes on the benefits of CBD for recovery and pain management.
How do you vet the companies you want to invest in?
Funny enough, I actually start with Instagram. When I first started investing, I would attend all of the conferences and demo days and take meetings with every single entrepreneur. But now, I think I’ve found a more effective and efficient vetting process. I like how all facets of a company can nicely coalesce within an Instagram page. It’s such a digestible and powerful format. A company’s Instagram page allows me to quickly measure branding, messaging, connectivity, and aesthetic. Since this has become the first step in my vetting process, I’m now able to efficiently review several companies in just a few minutes.
If the company passes my “Instagram test,” then I always want to sample the product so that I can better understand the taste, ingredients, nutrition, and packaging. I’ll never invest in a pre-launch company or a company that I have not yet sampled. I always want my diligence process to be deeply authentic.
Lastly, my final step is to meet with the entrepreneur. At this point in my career, I only want to work with people that I share a connection with, so I take all of my meetings at my house. I really want to get to know each founder and make sure that I can actually help them with their business.
What’s the best advice you ever received as an entrepreneur?
I’ve received a lot of great advice over the course of my career, and I was incredibly lucky to have two amazing mentors in Ron Burkle and Ashton Kutcher. Ron taught me a lot over eight years. I actually kept an active memo pad to record all of his amazing insights and pieces of advice. One of Ron’s quotes, which I think is both timely and transferable to the cannabis entrepreneur is, “I’d rather have to slow you down than speed you up.” Ron told me this many times, and I felt very empowered by it, especially since I came from such a bureaucratic and structured career in investment banking. As an entrepreneur, you’ll always be confronted with your fears and insecurities as well as potential barriers, but you must keep pressing forward. Don’t slow down. Kick down doors. Speed is critical.
Like Ron, Ashton is also extremely insightful. He helped me make the shift from the scarcity paradigm to the abundance paradigm. When I started out in my career, I was super competitive. I’m an expert negotiator and always viewed business intersections as zero-sum games. And I initially brought this “scarcity” mentality into the world of venture capital, which I quickly realized is more predicated on camaraderie. By migrating to the abundance paradigm, I soon realized that I could succeed while also helping others succeed as well. It might sound trite, but at the end of the day, you want to interact with people that you like. I think this is relevant advice for all of the CBD entrepreneurs since the industry is so nascent and there is still a large consumer educational hurdle. As they say, a rising tide raises all boats, so I think it behooves cannabis entrepreneurs to play nicely and cooperate, at least for the time being