Dot Com Bubble Kush
In the wake of the tremendous downturn of the cannabis public stock market I find myself having conversations with people fraught with despair about the state of the industry. It is easy to understand why as well. As a whole the cannabis sector has lost approximately 60% of its value over the last year with the worst cases seeing a loss of over 90%. As somebody who holds a significant position in this emerging market due to my recent exit I can tell you that I feel the pain more than most.
But I see a silver lining.
You see, I’ve seen this before. I graduated college in May of 2000 with my freshly minted Computer Science degree. I recall that the size of my graduating class for that major was just over thirty people. That should give you an idea of how many people were interested in a Computer Science major in 1996 when I started school. By the time I started working for Sapient Corporation in June of 2000 the writing was already on the wall for the emerging dot com industry. Companies like Pets.com and Webvan were being proven to be basically worthless. The “valuations” of these companies were being driven by an irrational exuberance in the investor community that was investing more out of FOMO than anything else. Once people started to look under the covers they realized that these companies had no value outside of the public perception of what kinds of return on investment they may see in the future.
Let us fast forward to the summer of 2018. Cannabis companies are going public at an unprecedented pace largely due to the fact that there is little private capital to be found and nothing compared to what can be found in the public markets. Banks are incentivized to take companies public because of the huge amounts of money that can be made in the process. So the investors, companies, and banks are all aligned and are taking company after company public largely in small Canadian public markets. One year later these companies start to truly understand what it means to be public. Stories of mismanagement and disappointing earning reports come one after another and skittish retail investors start to dump stock like their lives depend on it. The companies do the only thing they can, they blame regulators for restricting the growth potential of the market. It makes little difference to investors and so we find ourselves here.
So where is this silver lining? Well, in the years following the dot com bubble bursting I had a front row seat to the phoenix rising from the ashes.
Unlike most I’m not focussing on the money problems, I’m focussed on the people problems.
In the years that followed the bubble bursting I got to watch a mass exodus of people leaving tech. That may seem like a sad story at first glance but the truth of the matter is that these people didn’t belong in the industry in the first place. Much like the irrationally exuberant investors in the market that fled like rats leaving a sinking ship so did the irrationally exuberant employees. I would say that more than half of the folks that I worked with or near in the tech industry were there for one thing only; the opportunity to make a ton of money in a relatively short period of time. When that didn’t pan out they left in droves. The people that were left were the true believers. These were the people that were in tech because they love tech! I am one of those people. I’ve never wavered from my desire to be a part of the cutting edge in technology. I want to be on the front lines of innovation which is evidenced by the fact that I started a cannabis tech company in 2014 when most of my colleagues thought I was crazy to do so.
So what does this mean for the cannabis industry?
I think we are seeing precisely the same thing happen now. There are far too many people who joined the industry early for all of the wrong reasons. They had visions of the green rush in their heads and were focussed on nothing but the potential riches to come in the near term.
Those rats are now leaving the ship.
Those of us who truly care about seeing this industry through to reaching its full potential will stay. We will realign and create teams much stronger than the ones that came before. Innovation will start up again and the industry will be better off for it. Welcome to Cannabis 2.0, I for one cannot wait to see where it goes!