Jim Cacioppo has experienced being on all sides of the table. Including investing in companies, starting and growing them, and acquiring them. His current venture has gone from launch to hundreds of millions in revenue and is becoming a public company in just a few years. Jushi Holdings has raised financing from top-tier investors like Graticule Asset Management Asia and Rockshield Capital.
In this episode, you will learn:
- Working in an illegal industry
- Jim’s top advice for starting your own company
- The future of the cannabis industry in the US
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About Jim Cacioppo:
Jim is Co-Founder and leader behind Jushi Holdings. Jim is also Managing Partner of One East Partners (US$2.3 billion (peak AUM)). Previously, Jim served as President and Co-Portfolio Manager of Sandell Asset Management (US$5.5 billion (peak AUM)) and Head of Distressed Debt for Halcyon Management, a global investment firm with over US$9 billion in assets.
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Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re going to be talking quite a bit about going from the investing side to the operating side, and you name it, and also pattern recognition when it comes to really placing the bet. So without further ado, I’d like to welcome our guest today, and that is James Cacioppo. Welcome to the show.
Jim Cacioppo: Thank you, Alejandro. Thanks for having me.
Alejandro: Let’s do a little bit of a walk through memory lane, Jim. Originally born in the Bahamas, but a bit of in-between Miami and Bahamas. So tell us about life growing up.
Jim Cacioppo: Yeah, I was born in the Bahamas. I spent nine years there in a small town on the beach. It was fabulous; I loved it. Then my family moved to Miami back before Miami was Miami. It was totally different back then, and it was great. Then I made my way to New York, where I learned the world of finance and investing.
Alejandro: Nice. Let’s talk about going to business school because first, you went to New York where you were for 30 years. But going to business school was really what opened your eyes to what was going on, as well, around the investment side of things. How did you get into the whole hedge fund space?
Jim Cacioppo: I went to Harvard Business School. I was very lucky, and I was able to get into the investment banking world, which gave you all the tools, the valued companies, understanding industries, and you met a lot of people both in business school and investment banking. I was lucky enough to fall into the hedge fund world looking for a job in 1995 before anybody knew what they were. I had a friend who used to make fun of me. “What are you doing in hedge funds? Everybody is in technology and private equity in 1995.” Obviously, the hedge fund world did very, very well. At the peak of the craziness in the industry, which was about 2007, I had a great run. I ended up leaving a very well-known one at the time that I joined and became a billion-four, billion-five in assets called Halcyon. I went to a small one that was $300 million. We built it to $5.5 billion. I was the president, co-[3:31] manager. I ran the whole company, and I ran a portfolio to stress securities, which is very challenging and a super exciting area. Then in 2006, I started my own, where I became the majority owner of a company and the controlling shareholder. We raised almost $2.5 billion in 14 months, which was a fabulous start. It’s a super exciting business to be in, and it gave me a lot of things that I use in the cannabis business right now.
Alejandro: When it comes to the investing side, there are a lot of people that talk about pattern recognition. What are your thoughts on pattern recognition when it comes to placing bets?
Jim Cacioppo: You’re looking to get very good deals. You’re looking to get stress securities. If you think about it, I’m buying things that are out of favor. I’m buying things that people don’t see where the value is and with a plan to turn it around. It’s usually the management team that needs to be changed. The business plan needs to be changed, the strategy, and the communications of the strategy. All of that stuff needs to be changed to create value—noticing situations like that where you’re getting in early or you’re taking something over that you can turn into something else. We’ve done that quite effectively at Jushi in the cannabis segment.
Alejandro: Let’s talk about you getting into the cannabis industry. You moved to Miami, and then as a result of being there and taking a step away from being super full-time on the hedge fund, you thought to yourself, maybe I’ll take a look at this cannabis industry. So what was that process like for you?
Jim Cacioppo: Alejandro, that’s a good point. In New York, it’s so keyed-up. There’s like a group thing going there. You have all your business connections and friends. You’re super-focused on what you’re doing, and it’s hard to get out of that. Talking about pattern recognition, there’s also just getting stuck in what you’re doing and the inertia of what is actually a very good business in the hedge fund world and investing. Taking a breather—not that I stopped working, but I started working half the time that I was working, so I had more ability to think outside the box and get creative. People just talked cannabis to me. It’s a product that I’m familiar with from college and post-college years. I thought it was a very good product. I enjoyed it. I thought, “That could be really interesting.” I didn’t realize half of the things going regal. I didn’t even know. We basically started investing in that area quite actively. We started up in Canada with a few public companies. Then we went with some private companies both in Canada and the U.S., companies that grow the product, companies that supply hardware and hydroponics and all kinds of different things you need to grow the product, technology-based companies that service the industry. We invested in about 25 different companies. It was highly successful. That’s something that got me excited to start a company.
Alejandro: Tell us about that moment where the whole idea of Jushi came to you? And then how you went about incubating it and bringing it to life.
Jim Cacioppo: It started out that the big boom was in Canada. These companies were going public and getting enormous valuations—a bit out of control and a bit too high. We would invest in these things, and they would grow very quickly and then sell out. We didn’t see the competitive advantage in Canada. Then the other big space that we were involved in was a company that serviced the growth industry. They sell you products. We said, “You know, those are going to follow the success of the growth business. It’s much harder, and you need to get the technology right; you need to figure out what everybody else is doing. For us, it seemed like the slam dunk was in the U.S. because that’s where the big business was to get involved in the grower processors and retail side of the business. In particular, states where they limited licenses. The ideal is in states like Pennsylvania, Virginia, and Illinois. There are a limited number of licenses. They didn’t want too many people doing it. They wanted to be able to control it, and they wanted to allow us, the initial operators, a chance to actually do well. So we would invest what turned out to be hundreds of millions of dollars just for Jushi in the industry. That was the focus of what I thought would be good. When I went out there and looked, I was, “Wow! There aren’t any good companies to invest in. No good management teams.” We founded Jushi on the idea of certain states in the U.S. being the place you want to be, where it was very right to start businesses and be successful. Then you need to have a really good management team. There weren’t any out there that we could invest in. That was the idea. So we incubated in 2017 inside my family office hedge fund. We had a couple of deals. We pulled together the founding group. I pulled together the founding group, and we raised about $35 million. Then we executed on those couple of deals. We just had the fourth anniversary of our company in January; we’re four years old. We had no revenues. We had $35 million in a slide presentation, and we called ourselves Cannabis [9:30]. Fast-forward to today, last year, we did over $200 million in revenue. We hope to grow to about $400 million in revenue this year, and we’re doing great. We have a fantastic license portfolio that’s highly recognized to be in the industry amongst the analysts, other investors, and other people who do this are our competitors to be a really nice group of licenses in the right state.
Alejandro: You were alluding to this earlier, and I guess that goes to the pattern recognition of being able to invest in good companies, which are formed, as you said, by great management teams. You were talking about good management teams. What does a good management team look like?
Jim Cacioppo: I knew what it didn’t look like. I had a position as a grower processor in Florida. We sold it to a company named iAnthus. It didn’t think they were the right management team. Guess what happened? That company went bankrupt, so I knew they weren’t any good. Then there’s another company I invested in that had the big Arizona presence, and they went public, and they ended up merging with iAnthus, so they both went bankrupt. I actually sold at a profit in both situations because I recognize that. There were a lot of people in the industry who were promoters, meaning they were good at telling their story or had a story that may or may not be their story. They’re good at promoting cannabis as an investment. It seems like an easy thing. People love the product. It’s in this illegal market. It’s going from prohibition to a legal market. What a slam dunk. People are throwing money at it and forgetting that you needed that to execute on this. It’s actually a really hard business. You had all these people with no pedigree, not real good experience in a tough, highly-regulated business. So I knew what was out there, to me, was like amateur hour, and I decided that we were going to put together a group of people that had the skills to actually acquire great assets. It started out with my investment skills and a guy named John Berik, who is my president at Jushi who worked for me at One East and was my right-hand man running numbers, looking at contracts, and negotiating deals for me. The strategic thought that that would bring to the table John’s ability to execute that. We brought these deals, and then we brought Eric Mauff, who is a founder, who has gone on from Jushi last year, but he was great at raising money and also putting out good work for the Jushi product with these founders of assets that had wanted to sell. Then we brought in a former CEO, one of the big Canadian companies, with [12:13] who was a founding investor and director when we were private. We had his lineage in cannabis, some of his contacts, and his advice, which was invaluable at the time. That was a core group, and then we went out, and we hired what we needed. At first, we were a business development company, so there were people that would help us analyze and close deals, a legal team, both on the cannabis side, the regulatory side, and also the kind who does M&A and money-raising. Then, we broadened out to human resources. We needed a CFO. We kept building in certain areas. We built the big operations. We hired a COO, and Anheuser Busch, who operates on a huge scale and is the biggest beer company in the world. He was a McKinsey. He was at Anheuser Busch for ten years. He went to Wharton—the real-deal operator. Our head of retail is out of Urban Outfitters. He was top of concepts, retail fashion, and retail concepts in the country. He was there for 17 years. He helped them found their anthropology unit and took them from two stores to 17 stores. He’s running our retail. We brought in a group of people that we thought were really good managers. On top of that, early on, we got a cannabis management team, who have been doing this forever in the cannabis business. They had never operated on the scale that Leo Garcia verticals, our COO from Anheuser Busch. He’s our scale operator who understands the data, techniques, how you do these things, the SOPs in scale, how to manage people on scale. We had our cannabis people who understand the plan. They understand the genetics. They understand the growing conditions you need. They understand how you turn flowers into extracted products into live resin or gummies or whatever it might be that we’re going to sell. We had multiple layers of expertise. We got everybody to work together and play nice together. That’s what it takes. You build that along the way. You don’t do it all at once. You do it when you need it. If you do it all at once, guess what happens? You run out of money. So we scaled it over time.
Alejandro: What is the process of enrolling someone of the pedigree and the caliber that you’re sharing now with us, the members of the team. How do you do that for a company that doesn’t have that much of a history?
Jim Cacioppo: In the initial group, we were the founders. We were in there. I started the company, got the economics of founders, and we had the energy of founders and all that stuff. The other people that we brought in were typically people who were about to do something big in their position, but they might be a little bit younger, 32, 35, 40 years old, and you’re giving them a shot to do it themselves without a boss, the boss being the CEO. So you’re giving them the opportunity to be the #1 in that area. You also incentivize them with stock options, so they, too, can take part in the upside. Then you allow an environment where it’s high-powered. You’re all working together, you’re being creative, and you’re not wasting any time. It’s not bureaucracy; it’s not IBM. You just go, build, and go. You make decisions, and you collaborate. That was the environment we created, and it’s been very effective. Then after we got bigger and had revenue, it was easier to attract once we had a big balance sheet. We’ve raised over $450 million now. That’s almost half a billion dollars. We built this company that did over $200 million in revenues last year and growing it hopefully to around $400 million. That’s much easier to track. People who are later in their career who have worked for the big entities like Anheuser Busch. That stock has gone nowhere. Beer companies aren’t growing. So they want a big opportunity to do well. Again, you’re attracting them in. You have this great platform with great people, they’re taking less risks, and they get the upside of options. So you have that next stage that may be a little bit more risk-averse and more used to operating in an environment with more support. You convince them through your successes and the people you have to join the team.
Alejandro: Got it. For the people that are listening and watching, so that they get it, what is the business model of Jushi? How do you guys make money?
Jim Cacioppo: We build cannabis plants and retail stores. We get licenses in states that are limited. In Virginia, there are only five licenses to grow and sell cannabis. We have an exclusive right to do it in Northern Virginia, which is a great area. So you build the plant where you grow it and process it into different products like gummies, where you sell just the flower, pre-rolls, or whatever that might be. Then you build a retail establishment where the customer goes in and buys it. It’s a lot of small transactions. You’re servicing people they want. You build a website so they can go buy it on the website and then come in and pick it up. That’s what you’re doing. You’re growing it; you’re packaging it; you’re creating brands, and then you’re selling it to them in your stores, with a license in a state where you’re allowed to do that, and there aren’t too many other people doing it. That’s the formula for making money. Each state, by the way, is like operating in a different country. It has its own laws; it’s illegal federally, so you can’t take something you grow in Virginia and sell it in Maryland, or you can’t sell it in Pennsylvania. It has to be grown and sold in that state.
Alejandro: Something interesting in your background, which is on the hedge fund side. To a certain degree, you developed that muscle of how to be able to be with uncertainty. Now, when you’re building a startup when you’re building a company from nothing, you are dealing with uncertainty at all times. But when you’re building something as well as in the cannabis space, not only do you have the issues of building a company from nothing, but also building a company from nothing and dealing with the regulations that you need to comply with. So how was that process being able to balance all of these different challenges at the same time?
Jim Cacioppo: Alejandro, that’s a great point. There’s so much uncertainty. There’s so much risk. You’re operating in a federally illegal business. You’re absolutely right. From my experience, it was key in that. In a hedge fund, every time you buy something, you don’t know if it’s going to go up or down, and you have a track record. It’s a very unforgiving industry. Your investors pay you good fees with a performance fee, but if you don’t perform, they take the money immediately. So there’s this constant pressure, and certainly, are you going to have a business next year? They can pull all of their money out in an instant. Yes, you’re dealing with the pressure, risk, uncertainty, risk management. On the flip side, too, I started two different hedge funds that grew to multi-billion dollars, big businesses with 150 people in one case and 50-60 in the other case. That’s a lot of people and a lot of management to go from zero. So I’ve been through that. It did prepare me for that, but nothing prepares you for cannabis. Cannabis has got to be one of the most difficult industries. Yes, it’s highly regulated, very difficult in each state, and each state’s regulatory body is very different from the other. There are different people, different laws, different politics, and you have to deal with all three of those in each particular state that you’re in, and that’s very difficult. On top of that, it’s federally illegal, so we don’t have access to the regulatory banking system like everybody else does. We’re listed in Canada because we can’t get listed in the U.S. It’s like curveball after curveball, which is why people got excited about cannabis. In 2015, ’16, they jumped in, and there’s been this wild ride; there’s a lot of volatility. The stocks all went up. Since then, they’ve come down; they’ve gone back up. But along the way, with that down and up, there have been some winners, but a lot of losers. There might have been 30 public companies in the U.S. Right now, only ten are meaningful. About ten companies that are restructured both in and out of bankruptcy court, where people lost a lot of money. There are companies that traded multi-billion-dollar valuations, now worth $200-300 million dollars and never going back to multibillion, never going back to a billion. So who the people thought were winners three years ago and who the winners are now are completely different lists.
Alejandro: You were talking about being listed, being a publicly-traded company, and also the fact that you guys raised $450 million for the business. Throughout your career, you’ve raised billions, Jim.
Jim Cacioppo: Yes.
Alejandro: What do you think it takes to really become good at raising money?
Jim Cacioppo: Honestly, it takes a track record. It’s so much easier when you have a track record. The formula in the hedge fund business is you start small. It’s your own money. Maybe you have an uncle, parent, or some friends who have some money, and you put together a small amount of money. That was the formula for years and years. You get a track record, and you keep growing it. If you look at great hedge funds out there, there’s one that’s famous, Dan Loeb, Third Point Partners. This guy is a billionaire many times over and has a hugely successful business. I remember him in 1995. He had no money. He closed his hedge fund down for a month while he went off to India. He just built this track record as he performed year-in, year-out, the money came. Now he’s built this business, a very famous hedge fund manager. It’s a track record. Another way to get it is to go work at Goldman Sachs on the trading desk. You have a track record; you could start a big hedge fund. Then you don’t have to just put together a few million dollars. You could probably start with a few hundred million from different institutions, or a billion like we did. We started out in our hedge fund. We had a billion dollars in six months, but we had the pedigree; we had the track record. There are lots of ways to do it, but the track record is key to raising money. If you look at Jushi, we started with this pedigree track record of doing it in other businesses. That was four years ago. Now, we have a track record of doing it in our business. Our track record of acquisitions is in our slide deck. If you look at our website, Jushi, in our investor [23:16], M&A track record is by far the best track record in the industry. We’re only, right now, in seven states. We still have to do some acquisitions to fill out in some of those states—not all of those states. The soft states were full, but like in Illinois, we can do more deals. Then we have another six states we want to get into. So there’s plenty of M&A, and that track record allows us to raise money. But also, it’s part of the incentive we’re getting involved with Jushi as a shareholder. We keep doing interesting and creative deals. It’s like you’re in a public company that has this great operation. Every time we do a deal, we create more value. We haven’t done any big, bad deals or even small bad deals. That gives us an advantage in attracting shareholders because they want to be with a company that’s growing the fastest, which we are. We have a fast, organic growth rate, but we can add deals on top of it and create value for the shareholders. So it’s all about is it creative for the shareholders? That’s what we’ve been doing, and that’s our track record.
Alejandro: How do you determine what to focus on when it comes to dealmaking?
Jim Cacioppo: You want to focus on certain states to start. Who has the better regulatory structure that allows you to start a business and go in and risk $50-100 million in cap. That’s what it takes to get going in a scaled business. Is it a good state? Maybe we were lucky or a combination of lucky and good, or maybe we were just great. I don’t know. I have a feeling that we were good, and we were also lucky. We happened to pick our first three big states for home runs: Virginia is going to go in 2024. It’s been the fastest-changing medical market. It went from a sleeping medical market to a solid medical market in a very quick time, as fast as we’ve seen it. [25:04] on January 1, 2024. It’s getting pulled forward, we think to maybe ’23 or earlier. That’s a really significant regulatory change. That’s a recipe for doing well. In Pennsylvania, we bought 18 dispensaries for $80 million. You have companies right now spending $80-120 million on just three dispensaries. So we picked the state that really has been historically the best medical state period. Florida has been good; Pennsylvania has been better. So we got involved in that. We also bought a grower processor during COVID. The first summer of COVID, it was a company completely out of money. They were running on fumes. They were on I95, and they had to get to the gas station, and if they didn’t get to the gas station, they would be stuck on the highway with 18-wheelers going by, and you didn’t want to be them. We basically took their best asset at the best time. That was hard, by the way. That gave us a vertical business in Pennsylvania. Again, these are two great states. It’s hard to go wrong in those two states. Then the third one is Illinois, which has been the best adult-use market. We have four fantastic dispensaries there, four dispensaries with up to $80 million in sales. It’s fantastic. That, to me, is the key. It’s identifying the best states to be in, investing in those states, not getting distracted from other ** where you’re wasting your people/human resources, which are in very limited supply in this business, or your national resources, given that’s federally illegal, also very limited in supply. It’s the focus in the right space and then executing upon that operationally, which we’ve also done.
Alejandro: Imagine, Jim, that you go to sleep tonight, and you have a tremendous snooze, and you wake up in a world five years later where the vision of Jushi is fully realized. What does that world look like?
Jim Cacioppo: I think we’re a national company. It’s probably legal everywhere, almost, except maybe for Alabama and maybe Mississippi or Arkansas. I don’t mean to pick on the deep south, but they move a little slower for a product that’s as progressive as cannabis. In five years, it’s probably not scheduled completely illegal in every way federally, but there have probably been laws passed like the banking act. Or they won’t go after states, and you’re listed in the U.S. You can bank it, a bank that you would know the name of. It’s some combination like that. Almost all the progressive states, every progressive state, and every state that’s a swing state has gone with adult-use. There are some conservative states that are as conservative as you think, like South Carolina and Georgia have very robust medical programs and are threatening to go with adult-use based upon what the politicians want to do or what the electorate wants to do. So it looks like that. Jushi is right in the middle of it. We are the top five companies. We passed every other of the Tier 2 companies. We’re in Tier 1. Some of the companies have gotten taken out, but beer or tobacco companies. Some of the largest companies were bought by them. The Canadian companies have tried to buy in the U.S., but nobody wants to sell to them. Nobody wants their stock. They continue to do poorly. That’s my projection in five years.
Alejandro: That’s amazing. There’s one question that I typically ask the guests that come on the show, and that is, imagine I put you into a time machine, Jim, and I take you back in time perhaps to the moment where you were coming out of business school, then you were getting into corporate, and starting to do your own thing, maybe like running the hedge funds, but essentially thinking about running your own show. If you could go back in time and have a chat with that younger Jim and give that younger Jim one piece of advice before starting a company, what would that be and why, given what you know now?
Jim Cacioppo: This is not going to be very illuminating for the Gen Zs or Millennials because they are, for the most part, doing it. But for that Gen, I would say go for it earlier. I spent a lot of time going to the right schools and training at the right places. I was an auditor before—I went to Harvard Business School. I went into investment banking for six years, and then I trained in a great-great hedge fund for five years. So I took it slower and got all these great skills, and then did my own thing. I would just say go for it sooner. Get some good training, and if you find that business you want to start, find that area you want to be in, find that new thing over there, or whatever, go for it. Just keep trying to do that. I’m very proud of what I’ve done, but I think there would have been a couple of more interesting things I might have done and that I would have been known for if I had gone for it earlier. What’s the Nike thing? Just do it! Just do it! Just go for it.
Alejandro: I love it. Jim, for the people that are listening, what is the best way for them to reach out and say hi?
Jim Cacioppo: To investors, you want to go to our investor relation team. They will get you up to speed. If you want to contact me, the best way to do it is to go through my system. I just can’t get my email out to everybody. I’m also on LinkedIn. I’m on social media. You can also message me on LinkedIn. That’s a really good way. I have a Twitter account. Obviously, with Twitter, you’ve got to be careful. It’s very public. On LinkedIn, you have a more private message board, so we’ve got that going too.
Alejandro: Amazing. Jim, thank you so much for being on the DealMakers show today.
Jim Cacioppo: Great. Thanks for having me, Alejandro.
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