Interview with David Traylor (Golden Eagle Partners)
On February 21st, David Traylor of Golden Eagle Partners, will speak at Kahner Global's Cannabis Private Investment Summit in Fort Lauderdale, FL. This event gathers industry leaders and investors for a day of collaboration and networking
David Traylor is Senior Managing Director at Golden Eagle Partners, a firm he founded in 2012 to advise life science companies. After advising on various transactions in the life science sector, he took an interest in the cannabis sector and joined Surna, Inc. (OTC:SRNA) as Chief Business Officer in 2014. After close to a year stint at Surna, David re-founded Golden Eagle Partners to provide his knowledge to companies across the cannabis sector.
Before Golden Eagle Partners, David led the Life Science group at Headwaters MB, a leading boutique investment bank. Before Headwaters, David served as a Senior Vice President at Caris & Company where he was focused on biopharmaceuticals. He also previously worked at Pacific Growth Equities, which later became Wedbush. During his banking tenures he has advised private and public biotechnology and medical device companies in various transactions including IPOs, public offerings, private offerings, mergers and acquisitions totaling close to $500 million in value.
Tell me about a day in your life?
Most of what we are working on currently are financings, although that will most likely change quickly to more M&A. I have a lot of really great clients that need capital. We are trying to get all of the deals working. The challenge is finding really good capital with lower interest rates. Capital needs to be cheaper, especially with the cost of 280E.
What would you tell someone looking at investing in cannabis for the first time?
It is an interesting industry, and it moves fast. Groups that hadn’t invested in cannabis before were spooked by Sessions recent actions. But most of those that had a history of investment carried on business as usual. There is so much opportunity. New investors should know that it is a buyers/investors market – smart capital is in short supply for the cannabis industry. Growth is expensive, so capital is needed in large amounts resulting in cannabis being currently undercapitalized in the U.S.
Why were you drawn to the cannabis sector?
One of the main reasons was the risk profile. I used to race downhill skiing, so I am not a risk averse personality. My friends thought I was kidding when I first jumped in. There are a lot of good people on the outside looking in who are worried about the effect on their resume if they join the sector. As a result, there’s still a huge need for all types of people from HR to Marketing.
Also it is similar to biotech, where I worked in operations for 15 years. Biotech and cannabis are both bio based supply chains. They are also highly regulated. Plus, I have an advantage in being registered with FINRA and SEC.
What is the biggest problem in the industry?
A lot of people think it is the banks, but it is the IRS tax code. 280E is the issue. If your business is involved with a Schedule 1 drug, your company can’t take standard deductions. This creates cash flow issues and will be a key driver of M&A because that tax policy makes economies of scale incredibly important. This makes it tough for Mom and Pop companies that don’t have the benefits of scale. With 280E and the product becoming more and more commoditized, especially recreational, economies of scale and larger operations may be necessary for success.
What advice do you find yourself giving clients repeatedly over the last year?
Get smart about capital. There are huge needs for capital compounded with the fact that most CEOs don’t understand finance. They ink terrible deals for their companies, which many times has resulted in them going bankrupt.
The second thing is focus. I worked in Silicon Valley during the genomics revolution, which meant there were new science tools and lots to discover with a blank slate of opportunity. The same is going now with cannabis. Since there aren’t any predecessors, many companies are actively trying to stake out their claim(s) to a particular market. As a result, they are doing too much and losing focus on what they do best. Instead of excelling one or two of their core competencies, they are doing many things and doing them very poorly.
Lastly, don’t screw with the regulators. During my time in biotech, some companies would try to shortcut the FDA, or not be completely transparent. Rarely did that tact result in a positive outcome. The same holds true for the state regulators of cannabis. Trying to skirt around the regulations can lead to a terrible result.
What is the best way for an investor to analyze whether growth projections are realistic (especially without proven revenue)?
Come to Golden Eagle Partners!! Growth projections in cannabis are very hard to validate due to the newness of the industry. Also, it is a new sector and a lot of investors don’t understand it. A science background with operations experience in biotech and cannabis provides us an advantage in understanding the operational issues confronting cannabis operators, both touching and not touching the plant. That allows us to be a value added investment banker to our ever-expanding pool of investors. Also, we end up working with the best companies. You want to look at the robustness of the supply chain, management efficiency, the stoutness of operating procedures and many more.
The Cannabis Private Investment Summit brings together the best and brightest cannabis entrepreneurs and ultra high net worth investors & family offices. It is the premiere summit for institutional investors, family offices, and ultra high net worth investors. For additional information, please visit www.cannabrunch.net or email us at info@kahnerglobal.com.
