Matthew Nordgren, Founder and C.E.O. at ARCADIAN Fund
Matthew Nordgren is an ambitious executive, dedicated philanthropist, and accomplished athlete who brings a unique passion to creating strategic alliances. He brings breadth and depth of experience in finance, corporate development, and capital sourcing, as well as in building highly motivated teams of skilled professionals.
Mr. Nordgren is currently CEO and Founder of ARCADIAN Fund and ARCADIAN Capital management, a venture fund focused on the ancillary service providing companies in and around the cannabis and hemp industries. More specifically, on Series A type opportunities where proven businesses are looking for growth equity to attack and win new markets. He was recently named one of the “Top 100 Most Influential People in the Cannabis Industry” by High Times Magazine. Additionally, he is the founder of NORDCO Consulting LLC, a private equity firm dedicated to buying and selling middle market companies with forward-thinking vision. To date, Mr. Nordgren has personally managed over $7 billion in transactions and maintains a portfolio of approximately 25 companies.
Inspired by his belief that education and athletics can open doors for at-risk youth, Mr. Nordgren founded The Leadership Foundation—an organization committed to giving back to non-profits whose purpose is to empower youth through sports and education. He feels strongly that young people, regardless of their personal circumstances, should have the opportunity for a bright future and the chance to make a positive impact. Furthermore, he is involved with and contributes to numerous philanthropic causes and remains dedicated to giving back and making a difference.
EPISODE TRANSCRIPT
[00:00:01] You're listening to Thinking Outside The Bud where we speak with entrepreneurs investors thought leaders researchers advocates and policy makers who are finding new and exciting ways for cannabis to positively impact business society and culture. And now here is your host business coach Bruce Eckfeldt.
[00:00:31] Welcome everyone this is thinking outside the bud. I'm Bruce Eckfeldt. I'm your host today's guest as Matthew Norgren Matt is founder and CEO of Arcadium fun and Arcadian Capital Management. We're going to hear a little bit about that as well as his background as a business person as a philanthropist as athletic both participant and manager. So we're going to hear a little bit about that background.
[00:00:52] Matt welcome to the program. Thank you. Glad to be here. Burs appreciate you having me.
[00:00:56] So let's start with just a little bit on your personal background so tell us a little bit about you know from a professional point of view. What have you been doing in your professional career. And then how kind of cannabis came into that. I always like to hear the stories of how people get interested or exposed to the cannabis business.
[00:01:11] Yeah good question. Ran a real estate fund that 2089 everybody had to rethink the world a little bit.
[00:01:19] And it was a large fund and we had hundreds and hundreds of pieces of real estate that were either just land or an early development phase and because it was a hard money fund we got into a position with people that were borrowers where they had to either pay us and then figure out how to pay everyone else next to keep their land or if they didn't think the land was worthwhile they just gave us the keys and walked away and that happened with a lot of pieces of dirt. And you can imagine the ones that gave us the keys didn't really think there was much upside on the land.
[00:01:54] While we did neither.
[00:01:56] And all of a sudden in 2010 11 12 each year that went by we started to get more and more calls for cannabis businesses. And the reason is because these pieces of land or dirt that were otherwise undesirable all of a sudden they had an option to try to have cannabis businesses for tax purposes right.
[00:02:16] Undesirable pieces of land were probably in cities and state parts of municipalities that needed money to candidates businesses. So for four or five years really learn the industry.
[00:02:27] Did my ten thousand hours become an expert on stuff right through through getting rid of legacy real estate assets about 2015 16 started to look for deals more specifically we have been operating out of a family office environment really as a private equity strategy investor while running funds there as well. And so really look for a private equity like deal a bigger deal a growth equity deal leveraged buyout type deal. That's when we found High Times looked at the high times acquisition with a friend in 2015. It was about 125 million valuation the time we ended up passing for several reasons.
[00:03:07] But a year later at 16 it came back to me through another close friend had a 70 million valuation at which point we we jumped on it. Yeah. So that's really how we got it and I spent five years doing real estate learning it spent a year looking for a deal executed. The High Times transaction with a friend and then after that it was sort of off to the races. Yeah Lonestar Kadiatou fund that's where we launched Orcadian.
[00:03:31] Got it.
[00:03:32] It's interesting that you came at it from a realistic point of view said These were pieces of land that all of us became strategically valuable for cultivation purposes cultivation right mostly to manufacturing and retail but really you're looking at the Desert Hot Springs for example and you know places and Cathedral City you know there wasn't a ton of development to do. And you got places like that who saw this opportunity we got calls from cities from city officials say hey you've got this land it's got water and power zoned in this and that. Would you mind doing cannabis.
[00:04:05] We didn't even know what that meant for me.
[00:04:08] So what was your take on cannabis at that point. Where were you coming from. I personally liable in terms of understanding cannabis culturally business wise otherwise. Where were you when that started to happen.
[00:04:20] Well I've always been around it being a football player. There was some athletes that I played with that were using it their whole careers and coming out of high school it's not something that was around a lot. To be honest but as soon as I got to college I realized a lot of athletes used it for lots of reasons anxiety sleep pain.
[00:04:40] And this was in early 2000s 2001 2000 so I started to try to see if it would benefit my life and it did in some ways. And so I've been around it my whole life and understood that it does help people. And so it was nothing new for me to see the business side but the numbers certainly make a lot more sense.
[00:05:01] Yes it is surprising when you start counting them in terms of putting together those deals.
[00:05:06] What what was that key for you in terms of making those transactions work from a real estate point of view.
[00:05:12] Well it was just real estate it was a real estate deal someone had a higher and better use for. And that's really what it came down to. I wasn't interested in developing it or being involved in the business it was just a real estate transaction that now had value where we found a lot of synergy was the operating business. Yeah like high times that's where we really got excited because that's where we have our skill set. We've we've been one of the bigger private equity family office groups in the west coast for many many many years. So when I looked out after the High Times transactions now we had not only the expertise from doing five years of real estate we had the industry's most well-known asset base some forty three years of existence. Yeah that's when we really started to think about the industry in terms of what can our skillset bring to the table and being at one of the larger groups in Southern California and being at the right age 30 35 years old and had done 15 years of financing companies and happened to be also in L.A. which is the epicenter of the industry for the world. Yeah and just about every sense of the world except for public markets of course not Canada. Canada has that going. But you figured we were in the right place right time had the right amount of resources and felt like I was the right guy. So formulated a strategy around being able to invest more in operating businesses and that was going to be after sitting with the family office and all my investors who are larger investors. You
[00:06:40] Know we never had a specialty in early stage investing so really knew right away to be involved in you know the seed in angel investing too many things that are needed for those companies and they're great investors that do that. We just weren't one of them.
[00:06:57] We also decided that because of the large assets we were involved with that are both highly regulated and highly publicized assets we couldn't touch the plant didn't want to do anything that was federally illegal which in our estimation is basically described as a business that requires a state license to operate. Today there are no federal licenses to do that business so anything that didn't need federal or state license to operate and we could invest in. So yeah.
[00:07:28] So we decided to look at businesses that were best in breed that were growth equity that was really our strategy we were we had always been good at finding companies that had gotten to a point that were ready for scale. And so we didn't really need to solve any problems it was more about resources to get them to the next level to not do an early stage the scene even aim around.
[00:07:49] I mean what do you actually get involved like what's your task for this is something that we'd actually start to consider versus this is something that's too early for us the other way around is about as we go sometimes.
[00:07:59] Some type of convertible today a round we want to get involved with if we really really like the business we've done that a few times.
[00:08:05] And the reason is because for Canibus I feel like the rounds are around or too early as compared to normal venture private testing because you can have a company that's got 75 percent of the market share that is two years you know month over month positive revenue growth and is generating significant cash raising in a round.
[00:08:29] Yeah I mean that doesn't it doesn't happen in Silicon Valley you know that the whole cannabis market is sort of early or late depending how you look at it where whereas you may if you're generally investing and be around you might go to a round in the cannabis market because they're just more advanced company than then typically what you'd see.
[00:08:47] That's right. There are just several reasons obviously the risk factor.
[00:08:51] And because the industry is emerging and there's a lot of reasons but that's typically about accurate around yeah if you're if you're being around investor you'd look for a rounds in cannabis and beyond that the financials.
[00:09:04] What are you looking for in the business and so the need a state license you know kind of stuff aside you know staying away from the actual product. What else are you looking for in terms of the investments. What are your current yardsticks for deciding where to put your money and where not to.
[00:09:17] Yeah good question Bruce we we really do look for experienced operators and typically because our companies are ancillary they don't necessarily need someone who's had a lot of years and cannabis in our minds it's a consumer product.
[00:09:34] It's a medical product it's an over-the-counter it's a lot of products that consumers can utilize. But I would think that someone who's had 30 years at big data company that sees cannabis as an amazing opportunity and then can go run a business just like he's run before and data has a better opportunity than someone who's been in cannabis for 30 years who feels like data as an opportunity for cannabis. So we typically try to find guys and gals that have succeeded in that capacity.
[00:10:06] I think every CEO that has been in that position or similar position at a company just like it got in the cannabis sector.
[00:10:15] So it's not their first rodeo. In most cases what do you see in terms of just kind of the business sophistication in terms of the market. Are you seeing that business folks experience.
[00:10:26] Senior business folks from other sectors are open and willing to get involved in cannabis based businesses across the board.
[00:10:33] Do you see hesitation as changing over time in what's going on in terms of the professional executive management of businesses in the cannabis space. Where are these people coming from.
[00:10:42] Yeah it's certainly changing as expected right. I mean John Boehner is a good example joining the acreage board. You know we just had Vicent Fox join our board. High Times last week and so what you're starting to see is similar to the end of prohibition for alcohol right. The counties are joining the tea. I mean it just makes sense. So
[00:11:00] It was expected but even last year what you saw was you might have a guy who's or a girl sorry. We're all in this industry but you have people that were potentially maybe its sales force for example and they've been there for six years in sales forces Nedal of a company and they're sitting there you know five levels down from Mark Andriessen or something.
[00:11:27] And it resorts are 30 Derickson Horwitz for example we had a couple people that left that firm. We had a couple of laughs. So who was the head south for us I forget his name but if you got it up there.
[00:11:38] Yeah yeah.
[00:11:40] So you have anyway you have executives at major companies and in a few levels down and those guys are and gals are making really good money and have great stock options in this and that but then you have somebody who's been there five six seven eight years ten years.
[00:11:52] Look at the people above them and they say I may never get there right.
[00:11:55] They just might not get there. But I know exactly what those people do and I know exactly what I do for this business. I mean I know the ins and outs and so what you started to see was last year in the year before that really you started to see those types of people who were like one step removed from really really being in the big box say I'm going to leave and go build this exact company to a tee and then I'm just going to sell it back to these guys. And funny enough what we've found that our companies end up talking quite a bit to their former associates at those big companies and they know that they can't address the problem that cannabis businesses need.
[00:12:35] Cannabis businesses need payroll they need software they need data they need compliance they need. They know the big companies know they can address them and so they end up actually supporting their old colleague who laughs because they would rather buy a company from a friend and know that the company actually fits in is going to work for them right out of by a company in the next day. Realize it has all these kinks and is is going to cost a lot of money and time to figure out how to make it fit. They'd rather give information to their old colleagues to make sure it works and then pay a premium for it. So it's actually turning out to be a heck of a move by some of these executives who did leave early on to go build these businesses.
[00:13:17] And then I think it's interesting one I a lot of folks are building up leadership teams in their space and it's that strategy of finding finding the executive that you need that's in the non cannabis space who is willing to come over.
[00:13:29] It's a great way to find good senior talent. And oftentimes you're finding people who as you said had those connections that I can actually grow the business and the way you need to grow it.
[00:13:40] It's fascinating what you're bringing up which is the idea that sort of the federal legality situation that we're in and ends up creating this business model or kind of you know company growth model which is you essentially support a business in the cannabis space that you can't touch for all sorts of legal reasons. But waiting for the business to kind of grow are waiting for regulations to work itself out. So you've got a good acquisition target once that happens.
[00:14:04] That's exactly right.
[00:14:05] And as Marc Benioff It's so stupid.
[00:14:09] But yeah no I mean look those guys the sales force is an example and those guys are thinking that same thing right. They do not have the risk appetite being as big as Oracle or sales force is to address Canibus right now. I mean of course they would like to but again you know these huge companies they have a big need for either their shareholders their stockholders their board whoever it is to address growth that grow when you're so big and you've already spent a lot of time you know attacking all the markets that were available to you and your market share leader and all of them you know you try your best to gain a point here or there. But the biggest thing you can do is when there is a new market 2 2 0 0 0 then you have the ability to own it you're going to and you have to or your shareholders and stakeholders are going to be very upset with you. You didn't take that opportunity. So once legislation passes for various verticals to make that move into this space stuff they will and they will pay a premium. Our hedges this we find the best in breed companies because today you still get a discount for that risky even for the market share leaders to some degree. And what we believe is if you're able be a good fund manager to help manage these companies and resource them and do consolidations and roll up strategies and you know mergers and acquisitions along the way. When that time happens for that vertical to sell or have an exit or big companies to come in and make their acquisitions we think they pay a premium because you can't sell scores can't let Oracle know by this whole industry. It's big. Yeah. So they'll have a bidding war and they'll make sure they go by the biggest companies. And so you invested a discount and you trade them for a premium.
[00:15:59] It's a pretty illegal yes. It's a pretty interesting story.
[00:16:04] Are you looking at you place investments and a couple of companies that are in the same kind of micro sector here and kind of diversify or are you picking winners in each area and then really putting all your weight behind each one.
[00:16:19] Like in every emerging industry and every mature industry there usually is two to three major winners in each category. Sometimes more. I mean the old consumer product adage right you never want to have more than five options on the shelf. Too many consumers don't do anything to fear they don't do anything. There's always that happy medium and I think that's going to be the case here. I think that there will be three to five companies that are that do well in each vertical.
[00:16:47] Probably more like 3 right now.
[00:16:49] We've sort of taken the approach to pick a horse and what's happened is all of the funds that invest like we do and there's about 10 we actually are really really close friends.
[00:17:01] And we talk about this stuff all day rising tides lift all ships and we want to make sure that we that we all work together for the benefit of the industry. We don't want you know crazy numbers on valuations causing down rounds and rounds. We really do want these companies to grow smartly and be ready for Nasdaq in Hong Kong and London exchanges not the crazy stuff happening in other markets. And so we look at this in some of the funds or in one company some of us are in another company maybe a couple or in another but ultimately not more than two or three. And then we kind of engineer consolidations as new companies come into the fold or companies that didn't get investments from us start to figure out they aren't 1 2 or 3 and merged them together. I would like to throughout the rest of the year and into next year start investing and compete like similar companies in each other. We have to. It's a delicate situation with the company we're in now. We're going to do that. But I think there are going to be OK with it because everybody knows consolidation is going to happen. Yeah and having a friendly in that position is a helpful thing.
[00:18:12] But right now we're sort of doing it amongst the funds which we all know who's in what companies we talk about the pros and cons of each you know sensitive to our NDA or are as agreements with those companies but enough to know what's happening.
[00:18:26] But yeah we would like to start making moves to be more companies in each vertical right now we sort of picked a horse in each and what are the singular kind of subsectors here that you're focused on. Are you seeing a particularly interesting for him.
[00:18:39] Again anything that doesn't require state license we can we'd like to be in.
[00:18:42] And that's a lot of vertical data multiple kinds of software different kinds of data compliance businesses payroll science bio science technology nanotechnology you know I mean the list goes on media events of course and it's just it's a limitless amount of opportunity right now.
[00:19:03] Yeah I was talking to a staffing company yesterday that's getting into the space just because it's you know the growth is happening in such a way that actually finding people finding people that know how to work in these different sectors. This market is becoming a real issue there they are solving that with staffing solutions. How do I find these people I and apply them in the staff to meet the demand. So yes that's one of the exciting things about the sector is that it is a growing sector has lots of different needs and if you can find those kind of products and services that they need to actually grow that can often be better than the actual handling the product itself.
[00:19:39] I think long term it's a massively bigger and better. You know what we have here Bruce is a really interesting opportunity to not only create generational wealth for people that do it right but to other things that are really important. A I think it's a great thing for humanity. You know obviously the things we all talk about opioids and alcohol tobacco are. This is a better solution for all those things and countless other medical benefits but the other thing that we don't spend enough time on is what this industry has the opportunity to do which are many other industries are now trying to reverse engineer. We have a chance to do it from the ground up which is sustainability. Right which is environmental impact which is female empowerment. I mean every industry is trying to figure get out now well we're being born now and we have to start it right from the beginning. Thank you. This is the mother plant that gets cloned it's a nurturing plant. It's mother nature like that needs to be a big issue for us and I think we're doing a good job of it. But those types of initiatives and you know African-Americans in jail and in jail and persecution and stigma and all this stuff. I mean we just we really had the opportunity to build this industry wide and which is another really fun stat that we get to engineer.
[00:20:57] Is it as exciting as just as a sector thinking beyond the business opportunities. It has huge social cultural impact as people's perception and relationship with the planned changes. It's going to have a lot of changes in who we are and how we how we interact and how we think about these things.
[00:21:15] So where do you see some of these things going as we look out the next 12 24 months.
[00:21:20] What are the big things you're watching. What are the things you're anticipating. What are the what are the things you're questioning or that you're not sure are going to happen.
[00:21:29] Well I would be concerned 12 to 24 months if I was retail cultivation manufacturing because you know these businesses started out trading in public markets at 75 to 100 times ravening which if you're an ag business a brick and mortar retail business or a manufacturing business there's no market on planet earth in any sector that trades anywhere near that right.
[00:21:51] Yes I think what you're seeing is a little bit of that. I mean it's like everything that gets exciting when it hits the public market is dotcom and internet and all this stuff right. I mean they're trading now at 40 times earnings are 40 times revenue. And so they're down considerably from them from the multiple that they were trading to start the year yet the companies are getting bigger because of the volume and acquisitions. So they look like they're growing but actually there are multiple per program it is becoming more realistic and I think ultimately those businesses get down to five to 10 times Max. So there's a lot of fall out to happen. Now the bigger companies are going to diversify their investments and you know be on the forefront of brands could have shelf space in this and that but you know they'll diversify and the bigger companies will do really well but it's going to unfortunately have a lot of casualties along the way I think 75 percent of the people that are in those categories are going to be severely blown out. And so I think we have to watch for that over the next 12 24 months. The good news is all that means is that for the consumer the prices of cannabis become more realistic. It's like anything computers cars like cell phones I mean they all start out unrealistic and nobody can afford them. And then as prices fall the bottom falls out and becomes more realistic the companies that we've invested in I think grow right because that means more product from more people means more transactions more data more volume more this more that. And so I think that I think that you've got to look for the ancillary stuff to grow and then ultimately the longer term stuff the brand's distribution delivery the IP coming out of laboratories that are going to really be the basis of all the new products.
[00:23:39] I think so. I think 12 24 months you've got to look at the industry like this and I think a lot of people don't. You have to think about the plan is not the plan. I'm a whole planet advocate.
[00:23:49] Personally I'm a whole plant guy but it's very clear to see the trends and every maturing market. People do not come into candidates for flower farms always been available to everybody just because it's cheaper and in legal down the street doesn't mean you're going to convince anybody new to be a flower user.
[00:24:07] So this plant you have to look at it almost as if you can deconstruct the plant right. There's about 120 140 final cannabinoids in cannabis or hit plant.
[00:24:18] People say 40 year. You know there's a bunch to play with here.
[00:24:22] You can isolate them all individually and look at them as 100 shoes 40 140 buckets of isolated molecules. What does that molecule do in different doses and different delivery methods in combination or conjunction with other molecules other herpes. You know beachwear abasa who knows fried fish. But anything else and you have to do that with.
[00:24:45] You can play it with all of these things when you isolate him or combine it with other cannabinoids stuff.
[00:24:50] There is a limitless amount of combinations to play with and when you think about it like that now you have potential products that you can infuse these isolated molecules into that pretty much is anything in the grocery store so people don't understand is that every person on planet Earth is likely to be a consumer of cannabinoids much like they are mushrooms right now. Them about everything in the grocery store. When you break it down and its molecular level people don't know it but you know it's a basic element of planet Earth. Just like this plant potentially as it's deconstructed so I think long term even long term 12 24 months you see a lot of new products driven by isolated molecules with patented formulas and delivery methods and that's that's where I think we're all hoping this industry goes because that's when you have put it this way about 12 to 17 percent of any major market is currently some form of flower user.
[00:25:49] Bourne has access to flower or so participates with cannabis far yeah. So if you if you broke down to a room of 100 people you could take 12 15 people say OK you guys are kind of already consumers in some way are going to be let's get you out of the room let's focus on the other 85 people there.
[00:26:06] If you want is it hey cannabis is legal here's some flour they're going to say OK I like the flour like life thing and things like smoking things are trendy before doesn't work for me.
[00:26:19] Everyone's chemical makeup is different and people's habits and desires are different so now we have to target those other 85 people say how can we benefit your life. Well there's Pabo maybe there's one child in there with epilepsy and all of a sudden we have FDA approved I'll from GW Pharma. Now we have a product for that one person. OK now we're down to 84 people. How do we turn 84 into to consumers now. I don't know. I had a we see a lot of products I saw one come in the other day that was a tampon with CBD formula on it. So when the woman uses it it's supposed to relieve menstrual pain in the ass and stuff so I don't know maybe we could sell 10 other people in there that Telenet and hey you buy this product great. Now we've got 75 more people to sell.
[00:27:04] You know I mean this is a good idea. It's kind of this incoming heyday of product innovation and product development around.
[00:27:13] Given this kind of palette of different molecules different things we have to work with finding new creative innovative effective uses for them and different cameras.
[00:27:23] I mean look CDV right appetite suppressant molecule by itself. Now I can sell 10 more people in there maybe a CV infused product because there maybe overweight and have a desire to lose weight or suppress their appetites. That's what the whole industry is about it ain't about servicing the 15 people in there who you already have as a consumer in fact of those 15 people that are already a consumer and they're they're probably more likely to go away from the plant as these other products become available and use them more. Case in point Willie Nelson doesn't even smoke flower anymore.
[00:27:55] Yeah yeah right.
[00:27:57] I mean so my point is it's very hard and people can argue all day and night the entourage effect from the whole plan and I don't disagree with it but I think you're going to have a hard time convincing America that they should be lining up the plan versus just taking the molecules they need for some specific desired fact.
[00:28:17] Now I think that's good. I think that's a good insight. And so what do you think you're going to be focused on in the next coming months whereas your time and energy being spent time and energy is going to be spent continuing to speak at events around the world.
[00:28:33] Want to share a similar story that we're talking about today in more depth what this plant can do what this industry can do and then using that platform to talk about are companies that are solving those problems. We we want to continue to manage our companies and put them in the forefront as leaders in their vertical. So for me you know I work for my and my job is to it is to make sure that the bets we've placed are good ones. But the fun part of that is that I get to do it and feel good about the work. So more of the same Bearse just continuing to preach and try to continue to grow our businesses the best we can.
[00:29:11] That's great. And if people want to find out more about you and about any and all the work you're doing what's the best way to get that.
[00:29:19] We've got a great team. So I think the best way to do is just email us info at Arcadium fund dot com RCA TIAA and Funcom. I don't have to social media.
[00:29:30] You know I think this plain old school on Imo's. So you know I think this plan is going to hopefully help society and humanity reconnect with itself. I think we're very disconnected distracted society today which social media is a big part of. I know some people need it for business and I think we even may have some for the business. But you know anyways I think I think the best way is just hit us on an e-mail and some will be available right now.
[00:29:58] Make sure that that information in the show notes for folks so they get all of that. There has been a pleasure. Thank you so much for taking the time and I look forward to hearing how things go in the work that you're doing over the coming months. Thank you.
[00:30:11] You've been listening to thinking outside the board with Business Coach Bruce Eckfeldt to find a full list of podcast episodes. Download the tools and worksheets and access other great content. Visit the Web site at thinkingoutsidethbud.com and don't forget to sign up for the free newsletter at thinkingoutsidethebud.com/newsletter.