Interview: Picks and Shovels

Carol Ortega, CEO, Co-Founder Muisca Capital Group

Muisca Capital Group (MCG) is a Los Angeles based investment management firm focused on opportunities in ancillary services within the Colombian medicinal cannabis industry. Combining acquisitions, business incubation and venture capital, they have already invested in several initiatives, including Qhana Pharma, Colombia’s first independent cannabis testing lab.

CCI: Why did you decide to invest in the ancillary services?
CO: Nobody else is doing it. At the moment, the legal Colombian medicinal cannabis sector is facing a picks-and-shovels deficit. If you take an X-ray of the legal Colombian cannabis industry, you’ll find out most firms are mainly focused on cultivation, growth, and processing. No one is investing in the key companies and services needed to supply cultivation and production firms. In the US and Canada, for example, you’ll find that the ancillary market (i.e. Fintech, HR firms, equipment providers, transportation, etc.) is even bigger than the cultivation and produciton segment. This is where the real opportunities exist.

CCI: Why does Colombia need an independent analytical laboratory?
CO: It’s our goal to help patients in Colombia make sure the cannabis products are free of contaminants, fungi, pesticides and any kind of chemicals. In a market with 5,8 million potential patients and a population exposed to a 50-year- long war with severe cases of PTSD, you need unbiased and ethical testing services to ensure quality. There are around 152 licenses and 39 producing companies, they need an independent analytical lab to test their products. In addition, these tests are required in more mature markets - such as the U.S., Australia, Germany and Canada – where there is a huge export potential for Colombia. An independent testing lab is not only an ethical responsibility, it is the way the whole industry will ensure reliability worldwide. As a result of our investment strategy in the ancillary sector in Colombia, MCG won’t have another significant investment or control in a cultivation or processing company, it would be a clear conflict of interest. We will follow the best practices established in more mature markets, such as California, where companies are obligated by law to own up to 20% of total shares in cultivation and extraction ventures if they have the control (51% or more of total shares) over lab testing activities.

CCI: What challenges do producing companies face when sourcing financing?
CO: It’s very hard for entrepreneurs to access capital. Most financial institutions have simply stayed out of the legal Cannabis industry. They can’t access loans and many other services with Colombian banks. While the government often offers grants for small businesses, because it is the cannabis market and it’s still an emerging sector, these are also hard to acquire. At the Federal level in the US, cannabis is still illegal and is considered a Schedule 1 narcotic. This is why the financial industry sees it as a huge risk. They probably don’t want to be associated to an illegal Federal activity. This specific legal issue in the U.S. makes it very hard for entrepreneurs in the whole world to access financing.

It’s very hard for entrepreneurs to access capital. Most financial institutions have simply stayed out of the legal Cannabis industry.

CCI: What other initiatives or projects does the Colombia cannabis industry need?
CO: Education is the most important thing we need. I spent some time in Colombia talking to investors, entrepreneurs, etc., and I noticed the need for education on many levels. There’s a lot of misinformation, stigmas and fear regarding cannabis, and the Academia’s efforts are not enough. The government has made significant efforts too, but we need more initiatives to change people’s image of cannabis. Latin America has a conservatively estimated market of 45 USD bill. a year, and I don’t think Latin Americans are aware of this. Initiatives that help mobilize capital, such as our efforts at MCG, are as important as education programs, in terms of social responsibility, for entrepreneurs, investors, Academia and even governments.