Karan Wadhera Casa Verde

Karan Wadhera — Casa Verde

Wednesday, September 28, 2022
Cannabis is still a schedule 1 narcotic (cocaine is a less serious schedule 2).  
 
Cannabis plants have RFIDs on them and are tracked from seed to sale.
 
Casa Verde’s Karan Wadhera tells us why he sees this and other regulations as an opportunity and why he and Snoop set up Casa Verde to invest from $1M to $15M in cannabis startups.

Karan Wadhera is the managing director at Casa Verde, a cannabis focused fund that he set up with Snoop.  They’ve made investments in many of the defining companies of the cannabis industry, including Dutchie, Eaze, Metric and many others.  

Prior to Casa Verde, Karan was a senior executive at Goldman Sachs and Nomura. And, prior to that, he worked with celebrities like John Legend to build their digital presence. 

How did you get going?   How did you end up working with people like John Legend, Snoop so early in your career?

So I was always I’ve always been a musician always wanted to be star and from a music standpoint; be a performer. And so I played music my whole life and entering into college maybe just becoming like a pragmatist and a realist to say like I still want to be around music I dunno if it’s going to be performing. 

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So this is like you know around 99 2001 of the things was becoming obvious was that People needed to have a digital presence and they didn’t And so I started you know learning how to code and make basic websites This is pre social media and through that really like rabbit hole got connected to record labels and would get these sort of consulting assignments in college to help out um with different artists And that’s actually how I met Snoop how I met John We did work with Kanye ludicrous a lot of different artists And at that time I mean again what we did was It was so ridiculous Like for Snoop for example didn’t have ownership of his domains Right And you were actually uh you know that’s your right Um just someone else owns Snoop dog with one G Snoop dog with two GS and all these other things And that was our little business and I did it while I was in college And that’s how I got to know LA and a lot of the uh industry here

That is so cool.

I feel like so many people would love that. I mean That’s an amazing way to get.

to know those iconic

artists Yeah,

but then it was also really important I think for me because I know myself and sort of how obsessed was with culture and music I got a lot of you know call it some of that vanity out of my system really early on right Like oh man I want to go on tour I want to like go to these award shows I want to do all these things You know as a child like that’s everything and you do them You’re like oh cool Get it It’s great And then like no longer was that something like clawing at me like oh I need to get back and so it no longer was like this you know appeal of just trying to be Close to influence and things like that

Right

And then you went to college and went to Goldman Sachs,

right? The obvious transition Yeah

Um

So tell me a little bit more about that part of your career and how you ended up in India and running the sales and trading desk for Numera in Asia

 My parents my mother in particular in 2003 moved back to India to start operations for fidelity investments over there So it was the first time I was getting to visit Indiana very different way I’m Indian you know was visiting my whole life visiting grandparents and things like that But is the first time going there and seeing Like the actual opportunity in front of you right There were positioned in Bangalore Every time I came there was new buildings up Like it was you actually seeing economic growth in front of your eyes And I was I was like I gotta be here I need to figure out how to do it So the minute I got to Goldman I started navigating that system And I got hired in Hong Kong And then when they were about to start the India office I was first in line like let’s you know send him down I was you know my early twenties

and did Goldman not have an India office?

no they had like a joint venture with another business there

That’s sort of surprising to me given,

I guess where India is

now. where it is now Yeah But at at the time it wasn’t that crazy So in 2006 I moved from Hong Kong to India to set up our first office there and I was kind of the conduit to all the foreign clients who wanted to do work there and As terrible as it sounds like someone with my accent made it a lot more uh you know they trusted me felt like I you know came from a similar background and grew up in the us And so trading at that time emerging markets was scary You always thought you were gonna get Face ripped off someone who’s going to cheat you And there’s something else happening locally behind that you didn’t know about as like foreigner you know sitting in New York at night trying to navigate Indian markets so I think that allowed me to build a lot of great relationships and at the time India was getting super hot and then of course you know oh eight happened and everything became kind of Out of favor especially emerging markets

Where are we now what’s going on. I mean Like,

everything’s

crazy right now

Everything is crazy right now. I would say same thing is starting to happen emerging markets get crushed pretty badly in risk-off environments The only thing I’ll say that’s different this time than last time Last time everyone did really pick up their ball and go home and it took again three four years for people to come back That’s not the case this time around can only speak for India specifically Like people have put real resources on the ground there where before you may have been tourists kind of flying in and out

So did you go from running sales and trading

for Asia

for numerous?

to

cannabis

Kind of but you know yeah But but the um in parallel I was always super active and so I’d say like I always knew that I would want to do something on my own but you know there’s often the kind of golden handcuffs those jobs but no I had known that that was something I would want to do Probably at the kind of peak of that career I realized like either I was going to do something or I wasn’t going to do it at all So I didn’t leave Numora knowing that Casa Verde was sort of my path forward but I knew I had to do something else and so I left that life came to LA but I was going kind of lots of different places to see what was next and what could make sense many ways like the Asia India journey and the cannabis journey are very similar

Oh

No. What I mean is that you know what fascinated me about India and what I saw happening with you had a lot of people were like no thank Like nah I’m not going to India I’m not investing in India you know super corrupt There’s tons of issues I’m like yeah you go like Yeah People ask like oh that’s such like a fortunate opportunity No one was raising your hand to go to India When I went in cannabis was similar I think I saw that dynamic which was you know when you were coming to California and going to Colorado and seeing the impact of legalization seeing this market which clearly had a lot of upside it was very obvious But then you went and spoke to investors and they were like no thank you a there’s enough to do outside of this industry Like too much hair too much complexity too many regulation issues Like yeah we’ll stay away And oftentimes that’s where you know some of the biggest opportunities are

And so what was sort of your thought process when you were leaving

Numora

and

thinking

about what next.

in your career?

I think the thought process was life is really short and like a on one side is like you know the dutiful son doing all the normal kind of

internships

the end of the move?

Yeah no not as not so much they just couldn’t understand it Right And the can they grew up in a different era where immigrants and they’re like how could you leave just this very secure path where you know what’s in front of you for the unknown And it’s still hard for them even today

And so you started Casa Verde with Snoop. Do you call him Snoop

Uh Snoop or dog boss Um

So

I have known Snoop since I was 19 years old And we did a lot of things together over the years Actually when I was in India I put them in a big Bollywood movie in

dude your life is crazy.

It ended up being like a like you know one of the biggest movies that year you know I helped produce the song and the video and brought him to tour there later on So we always stayed close stayed friends and in 2015 uh 14 15 you know they were clear that you know cannabis was moving in this direction of legalization and so they actually started controvert a even before kind of took over and so I took over in 2016 and have been sort of you know running it ever since

Yeah,

No, I mean there’s no one well I said this to my husband last night. I was like, there’s no one more iconic than Snoop.

in the

Cannabis. business he said, Bob Marley maybe

You know it’s one of these weird things right Like obviously like none think anyone uh would would ever deny Bob Marley’s iconic status but you know his duration is probably what’s the most insane for Snoop right I think at the end of this year will be the 30 year anniversary of the chronic

And now, and he’s in Bollywood movies and

he’s in

every Corona commercial go to any stories and a bottle of wine I mean he’s a he’s a force to be reckoned

Yeah And an investor in Robin

hood.

If I remember that’s pre Casa

Yeah. Yeah But lots of incredible companies that he’s involved with from Klarna to beyond to uh Reddit I mean it’s insane and what’s insane is that because he’s so Authentic right he’s not trying to like claim to be something he isn’t he resonates across all these different demographics all these different age groups all these different socioeconomic status It’s pretty incredible And to have a you know, a span of 30 years means that like the kids the teenagers the adults the grandparents everyone has that exposure to him and knows him and so that’s a really powerful position to be in

Yeah. So let’s talk some about the industry opportunities, challenges. I mean, this is not the same as any other like CBG vertical.

so obviously first thing about cannabis that’s unique right Is that especially here in the U S there’s a, there’s a huge dichotomy between where the federal regulations lie and what’s happening at the state level The federal level cannabis is still a schedule one narcotic which means it’s in the same category as heroin right

really right

it’s. Whoa. So

What does that

So for context cocaine is a schedule two exactly

is insanity Like if you ever really dig into it and this conversation could just be about like all the political pressure and the craziness from the Reagan era to the Nixon era to today like it makes no sense So the opportunity lies in certain ways in this kind of arbitrage Right Which is that like a lot of people don’t want to touch the space because it’s federally illegal and then there’s a bunch of people who see the future Eventually there will be real regulation that passes and things will get better And then because of that it basically means that the laws are different in the U S it’s like operating in 50 different countries

And like right now If I buy weed in California it’s grown in California what are the things you can’t advertise on Facebook right now

Can you

there’s a million challenges So banking’s the one of the right Like you can’t touch the federal banking infrastructure for the cannabis you can’t have like a bank of America account so that’s like a huge challenge You can’t do payments right So it’s like a largely a cash economy for the most part There’s like some work arounds things people are doing but like 80 90% of all transactions are happening in cash That also makes it incredibly dangerous Even though it’s illegal economy like dispensary’s are sitting on it Safe deposit boxes full of cash And you know

if I go into a retail store today, I haven’t shopped for weed in a

while,

of date Um How do I pay

most of the time it’s going to be with cash. They may have something, a way to do kind of like an ACH transfer or pin debit. I know it’s super complex, tons of friction.

Um And then some places may take credit card. probably breaking the law.

But yeah there’s so many challenges Yeah The advertising thing you mentioned another huge issue Facebook Google like all closed off to you So the way What people use for 90% of their digital marketing spend like is cut off to the cannabis industry So you have to be creative It’s probably why I billboards you know but what challenges come tons of opportunities So you know one of the things a lot of our businesses have done is you know provide technology infrastructure to ease some of these issues Right and so That’s where we focused a lot of our attention early on was to help simplify all the complex regulations that you have to deal with

I heard you say something like, it’s also like a blink sleet industry in some like it’s brand What is like an example of where that’s a big opportunity. Traditional industries just, haven’t almost caught up with the cannabis

Yeah totally So you know best example is so when I when I worked at Goldman right in Maura like we all use Bloomberg center If you ever worked with like a Bloomberg terminal Yeah. And you’re like what is this Like it is literally a terminal you’re like punching and commands and it’s you know 2010 And you’re like why are we still doing this Because it’s so ingrained everyone uses it It’s so hard to kind of rip out and by the way I’m sure Bloomberg’s gotten better and whatever So no judgment Um but it’s so difficult to if you wanted to create you know a service that was even free and try to replace Bloomberg would be so difficult because they’re so entrenched Now imagine in cannabis You’re starting from scratchA great example in one of our first investments was in this business called leaf which is the largest wholesale marketplace for cannabis And what’s happened now is they’ve just become ubiquitous in many states and what that means is you know every dispensary uses leaf link to manage their brands And every brand has to be on there to market there And you close the transactions on there and that’s how you reorder and do everything else And you just become part of the fabric you talk to like the alcohol industry you’re like oh is there like one like wholesale Like hell no it is a nightmare There’s so many issues And that’s what To do and try to build that Now you have to disrupt what’s happening here You’re actually just creating itAnd so the other thing that people don’t realize is that at the state level we have to report so much back to the government Daily basis into a system in California it’s called metric and in many other states that’s very difficult And so what we started creating were you know the point of sale isn’t just your kind of typical toaster square point of sale But on the backend it automates all the reporting back into the government Cannabis is actually one of the most compliant transparent industries around force We have to be Um you know all the way from what we call seed to sale

Like trees, no, they’re not trees, bushes. What are they?

So their their plant and their track with RFID tags Um and from the minute it’s in the ground till the minute you purchase something every step of that is tracked So what that means is a from a health and safety perspective think about like you know you have an Ecolab breakout in normal grocery stores What do you do Like there’s months of panic and recalls and this and that If there was some issue with a product you purchased in a dispensary immediately you can cut off that entire supply chain And then you think about it like health and wellness from one standpoint um being able to track it health and safety but then look at it from a tax

Yeah,

we know everything that’s going on So as the government I actually know what I’m owed exactly from who wholesale retail it’s pretty incredible

how big a deal is taxing. Like, I keep hearing like it’s it’s, motivation for municipalities to legalize in states and cities, but I just don’t have a good concept of does it actually move the needle?

money

Absolutely So right now in many states and this is a both positive and a negative Cannabis tax uh outpaces the tax receipt from alcohol And

that’s because they charge a ton of tax It’s not necessarily because there’s more alcohol being purchased in cannabis necessarily It’s because they’re taxing us like crazy

On the cannabis

Okay States are, and cities are

Absolutely Like cannabis companies have an effective tax rate of like 80% Yeah It’s absurd but at the same time right Like what is the incentive for legalization For many of these municipalities is for revenue So we get it and obviously like we should be taxed and there should be some good income there but there’s a balance that makes sense And right now it is completely out of whack in certain markets especially in California

Wow.

Okay.

So I’m certainly not like ,

anti weed.

That would ironic.

but um But I, how well understood is the CBD, like

sometimes

the rubbing the stuff on my skin.

like um How well do we understand the industry?

right now?

I’d say it’s average in that you know a lot of that, the, the research That’s happening is not federally funded and that’s where you can get most insight Again being a schedule one narcotic limits the ability for us to kind of study the plant especially here in the U S So that also is a is a huge push for why we need resources Moving from schedule one down to hopefully um of the full schedules but you know for example first drug that has been approved by the FDA is a drug called Epidiolex And that is being used for childhood epilepsy So again to think about that right Like the first use case is literally for children suffering from epilepsy and there’s many other use cases that make sense They just haven’t gone through all the kind of clinical trials

So This is

where I have a lot of questions as well.

but

I’m going to go back to investing but just like.

a couple of here,

I’ve heard like sleep

anxiety. of those

are

big ones

And CBD, I feel like I now see in everything.

Do you have any guidance on like what’s what’s real? Like What.

It’s hard again it you know there’s lots of theories here but I’d say you know what’s important to understand and read is like making sure you are actually consuming CBD Um a lot of people are putting just like hemp oil and it’s not the same thing you know CBD can be extracted from hemp CBD can be extracted from cannabis as a whole like marijuana So you have to understand again What you’re actually consuming it also generically needs a fairly high dose to have real impact so like you know if there’s five 10 milligrams in like of average it’s probably not doing anything for you It’s likely to be a placebo You perhaps have a lot of them to do it that’s why the most popular CBD products the one that sell the most and consistently or actually tinctures where you’re getting you know anywhere from 30, 40, 50 to a hundred milligrams like in a few Sort of under the tongue absorbing it sublingually

And most of your investing though most of your to clarify is the

technology

Exactly So let’s like Duchy is a good example. I feel um Dodgy has raised hundreds

of millions of dollars to this

point

It’s a huge company. When did you invest? Uh Super early

the first investor

That’s really impressive That was fun

one.

now,

you’re in fund two.

Um

Dutch has gotta

be one of your biggest

ones,

that’s certainly that one of the biggest outcomes

and.

 all of your investing at the seed stage? You know What are you guys mostly looking for in doing

so ideally we are investing as early as possible in the best companies in cannabis we however are not uh like we’re staging Gnostic and so basically underwrite everything to super aggressive Orrs but We’d like to be early if we can be So for Dutchy you know super interesting at the time we made the investment I don’t think it was super obvious Ross Lipson the founder had been two time founder before and he’d built two food delivery businesses and so Right away We were just super excited about the entrepreneur building this business and he you know bootstrapped stood it up on his own in Oregon had 40 50 stores on the platform when we met and then you know they continue to grow We’ve been involved in every round since and now like the largest you know point of sale and e-commerce business in the industry

Um How what’s your ideal check size?

How big is the fund?

we uh right as small as a million dollars and can write like up to 15 are really active from a co-invest perspective so we can kind of upsize supersize things and yeah we’ve been collectively raised close to $300 million this point across our vehicles and continue to be super active

It’s so cool And it’s you does Snoop get involved as he, you know he’s got

tens of millions of followers.

And does he tweet about these things?

You know early early on made it a point to ensure that like this was not going to be our crutch Right We knew it was super valuable We knew whatever we did people and press would include his name Um and that would help us But we knew that we needed him in every meeting or on a call or to do this or if he was going to like a critical reason for why we’re going to get an LP check that this wasn’t going to work because We wanted to build something much larger than justice brand but for sure like he’s a valuable resource we can use him as needed and he has incentive and he wants to see his company succeed Uh and you know I talked to him weekly and you know we’re we’re

[Mic bleed]

we’re we’re He’s exactly as you would expect He’s calm He’s fun He’s happy smokes a lot of weed Right Surprise surprise Um and so no but he’s great And he’s also incredibly insightful I mean think about a person who’s been famous longer than he hasn’t been famous and has had his kind of pulse on culture for so long Understands trends gets involved in Snoop was like the first real Instagram celebrity on Instagram and I think may even still be the most active you know like he does pick up on those things and gets involved gets excited And yeah he’s just a pretty amazing creative person And so when you do get time with him or you’re able to kind of pick his brain and utilize uh his wealth of knowledge it’s exciting

Yeah.

Um, about you? How do I like to ask how to friends describe you?

Describe me Um I think I’m a positive person I get really excited I like to like dream right And I think that’s what helps me being an investor like my first instinct in every conversation is to like Close my eyes to any of the negative thoughts and just kind of get involved in like if every scenario went right in this discussion Um so I feel like I’m an optimistic positive person and I love people And so that’s why like I think I’ve loved this job because it’s given me the opportunity to meet so many amazing entrepreneurs so many amazing operators so many amazing investors as you can imagine What we do isn’t the you know gravitate to your typical kind of like institutional LPs So I’ve met all these incredible investors and families from all over the world Who’ve invested in our funds and our deals so yeah I’d say I’m generally happy positive person I would hope that’s how people describe me

that’s Great.

Uh

 So yeah, you said you’ve built out this great network I think you’ve done a fund investing to.

Is that true? Yeah Um What do you think about there? Like sort of what are the lessons learned? Like you’ve looked at different friends, you’ve been building this fund and crafting this fund.

How do you think about building Casa Verde and like where venture is and where you sit and how you want the future of Casa Verde to look.

Yeah it’s, it’s really different for us just because we’ve chosen to be fairly focused on a particular industry You know my view is that Over the life of the business you know we will do other kinds of asset classes just because we understand this industry so well and there’ll be times and it’s maturation where debt and credit and distressed and later stage opportunities will make sense Um we’re still very early on but as an industry matures I think all these opportunities come to fruition as well So I hope In time we’ll do more of that We’ve had some experience in that you know we helped incubate build a business in bespoke financial which is one of our companies here in LA which has quickly become one of largest lenders in the space And I think because we’ve been Hyper-focused this particular industry we become even more valuable to our companies and we’ve done a good job in continuing to build out that ecosystem

Yeah is the cannabis industry. like is the culture different than other industries. I mean I’m sure every industry is kind of different.

for sure Yes It is different Um it’s like there is you know in your mind like you know we sometimes like joke around like that there needs to be like Silicon valley sort of equivalent TV show about the cannabis industry there there are all these like really interesting characters right There’s people Been in the illegal black market industry transitioning into the legal industry There’s like the very very corporate people with dollar signs in their eyes Who’ve come here and try to structure every deal like a distress deal as opposed to you know um and then there’s like people in the middle who love the culture but also Just like any other technology company you’d ever meet and want to build something here but have a passion for cannabis Um but yeah it absolutely has its own culture There all sorts of characters should take you to a conference sometime you can experience it for yourself super fun yeah Dispensary too

to go in more.

but now what you’ll see you know how long it’s been are really emerging Now that’s another area where we’re super bullish you know you’re starting to see real brands be developed have their real aesthetic a real story is real character Right But you also got to remember it takes time to build a brand

do you have a favorite brand?

Um yeah I have a few favorite brands here in California is a brand called loon Um we were early investors there too personally not through the fund and so she’s built this really incredible brand That’s really you know foundationally based on flavor profiles as opposed to like strains right So it’s not about You know purple this or oh gee that but much more around like the flavor profiles and it goes across pre-rolls and vapes and edibles loon L E U N E Um I love wild gummies if you know that

I’m too many children.

lots of lots of interesting great brands out there but yeah

And you don’t get into LSD or anything outside of canvas.

you’re cannabis.

So we’re starting to explore some of those areas We made our first investment in psychedelics, in a in a business called Delex E L I X uh out of Boston and you know their approach is much more looking at how can you create the therapeutic benefits from taking some of these compounds without going on the trip right Because the reason people are excited about psychedelics is help it can have for PTSD and depression and anxiety and there’s you know sure But but but the reality is everything that’s being developed now is from the medical pharmaceutical perspective Now when and if bright there’s the adult use side of it of like oh you can also enjoy Right Like then it actually kind of falls more into our space we would do more there It makes perfect sense because we’ve built the infrastructure for it Right Like how do you take you know a previously illegal product bring it in here track it trace it make sure all the compliance is there

Um

I was on a panel.

side note.

I was on a panel and um

The question was what do you want to do when you were getting I was like, ah,

I think LSD and it’s like am

Um Anything else that we should really be covering? I’ve think we’ve covered a

ton.

 I don’t know if people know we’re doing Los Angeles is the kind of like center of our world Right So where it may be like oh tech investing in LA is not the same as like in cannabis like yeah we’re in, you’re in the Oh yeah absolutely Because we’re such an important cannabis market and so yeah there’s funds in San Francisco in New York everywhere but you know LA really Has become an emergency like one of the center points both culturally and from a brand perspective and for investing in cannabis what’s kind of cool Yeah.

 Oh, that’s great. Well thank you so much. Congratulations on what you’ve

built.

Thank you so much I really appreciate it

It’s a big deal. Um Really impressive entrepreneurial

Awesome Well it was so fun to tell you about all of it Um and we can talk again soon

Great.