Need Advice - SF In-House Offers (VC GC v. High Growth Cannabis Co. GC) - 4th YR Forum

[Anonymous User]

I'm a 4th year currently in-house (M&A Counsel) at a large, well-known SF-based cannabis company (left biglaw as a 2.5 year) and have been recruited by (a) a sizeable early-stage SV VC fund for a head of legal position, and (b) a high-growth, privately-held cannabis company (~100 employees) with a single dominant product for a general counsel position. Cannabis company is under a $50M run rate (close to profitability) and has a nine digit valuation. Background is CCN / PE M&A in V10 firms. Each of these positions approached me as a result of my regular networking efforts.

I was hoping the brain trust here could give me some insight as I make decisions. I'm holding offers from both places.

Data Points
- Current role is M&A and commercial transactions, but, being in a start-up, I handle everything from regulatory compliance to cannabis licensing as well.
- The VC is clearly the safer choice but I feel that my skill set will narrow as I'll only be doing venture financing (and project mgmt of law firms related thereto) and the odd commercial transaction. The fund is less than 40 people and the variety of work will be limited. However, the fund is prestigious and well-connected (high profile early stage investments). I assume that in a few years I'll be able to exit to a portfolio company or I might just end my career at the fund. As a back-office role, I doubt there will be any carry unless I stay there for 10+ years. I'm a little afraid I'll become nothing more than a term sheet doc monkey.
- The cannabis company will be an absolute shit show, but a fun experience as I'll be negotiating deals at a higher level in addition to building processes and hiring a legal department. As the legal industry for cannabis is young, my current experience makes me an "expert" (if you can say that considering that no one knows anything), and staying in the industry will cement that position over time. Risk is clearly significant.
- The salary is going to be roughly the same ($180K-$250K) but the cannabis company will be giving me significant equity.
- The cannabis company is a prime target for either an IPO or an acquisition given their current market position and product pipeline. Negotiation of the employment agreement will be key as I don't want a liquidation event to occur in the near term (6-12 mo) without significant upside potential.
- I've been jumping around a lot and another short stint could be fairly damning.

Key Assumptions
- Generally don't mind staying in the cannabis industry
- Long-term goal is to be COO of a high-growth company
- Desire to participate in business decisions
- Very fearful of being bored
- Might be an unpopular opinion but I'm fairly certain federal legalization is around the corner (12-18 mo), which will open up significant VC funding
- Equity markets are hot right now and will cool off. In the near term, this could present a lot of risk to cannabis start-ups
- Cannabis company just went through a significant fundraise and has burn for another year

Main Concerns
- Risk-adjusted returns of the cannabis company for my career
- Career progression generally given long term goals of being a COO
- Potential unforeseen risk factors for each position
- Longevity of continued earnings

Would love to hear any opinions. Thanks in advance for your help!

[LBJ's Hair]

Feel like it's a little odd to be worrying about reputational/similar career risk associated with cannabis at this point, given you're already in the industry? The damage is done at this point

[crgoss]

If you like the cannabis industry and want to exit to business eventually, this seems easy: stay where you are or jump to the other cannabis company and keep building industry expertise. How likely that you could return to your current position if other cannabis company flames out? Would you be willing to move if current cannabis company won’t take you back and you need to move to stay in industry? Likelihood of advancement at your current gig?

[Anonymous User]

Feel like it's a little odd to be worrying about reputational/similar career risk associated with cannabis at this point, given you're already in the industry? The damage is done at this point

OP Here. Not worried about reputational risk at all. I've been getting unsolicited interview offers from many different industries (including biglaw for new cannabis practices). Risk-adjusted return is in reference to near term upside potential from a liquidation event vs. the long-term viability of the company, and how that compares to the relative stability / lower near term upside potential of the VC position.

[Anonymous User]

If you like the cannabis industry and want to exit to business eventually, this seems easy: stay where you are or jump to the other cannabis company and keep building industry expertise. How likely that you could return to your current position if other cannabis company flames out? Would you be willing to move if current cannabis company won’t take you back and you need to move to stay in industry? Likelihood of advancement at your current gig?

OP Here. Not likely I get elevated past four leadership roles to the GC position at my current company. We have a number of former biglaw attorneys (Counsel @ V10s) above me. However, I have a lot of mobility in the industry as I am in one of the biggest players and there are very few attorneys in this space with a tier 1 biglaw background and 1+ years of cannabis experience. My stock is as high as it will ever be due to a limited supply of competent attorneys in this space today. I do not think it would be hard to move around cannabis companies.

[Anonymous User]

OP, would you mind PM'ing me? Have some questions on your trajectory.

[misterjames]

I think, barring very few exceptions, any company willing to hire a 4th year attorney as a GC is either out of their mind, out of their depth, or looking for a fall guy if/when shit hits the fan. And I say this as a 4th year attorney myself.

[LBJ's Hair]

Feel like it's a little odd to be worrying about reputational/similar career risk associated with cannabis at this point, given you're already in the industry? The damage is done at this point

OP Here. Not worried about reputational risk at all. I've been getting unsolicited interview offers from many different industries (including biglaw for new cannabis practices). Risk-adjusted return is in reference to near term upside potential from a liquidation event vs. the long-term viability of the company, and how that compares to the relative stability / lower near term upside potential of the VC position.

Ah ok. You're in the industry, so I'm sure you've thought about this, but I'm skeptical of the viability of small cannabis players long-term. Think it's ultimate about scale + cost; the major tobacco/other ag players have been planning/waiting for federal legalization for probably 5+ years. If you're at/considering bouncing to a company with some sort of proprietary delivery mechanism like a JUUL that can't be easily replicated and is starting to get mass-appeal, maybe a different story. Maybe Eaze falls into this category, IDK their #s. But if the company is basically just an ag company with a retail footprint and a website, not seeing the upside. There's no moat.

So feel like the VC gig is lower-risk with better general marketability. If you want to do Silicon Valley work, better to be at a Silicon Valley company. I was in a tech-adjacent role before law school, have friends there still both at startups and in funds. Maybe things have changed since ~2016, but at that point, if someone told me they wanted to be a COO/executive role at a high growth company, a VC-gig would have been a no-brainer. You have a broader view of the industry, connections to your portfolio co's, better brand, etc.

But I'm not sure how valuable my perspective on this is. I would never take a job at a company whose business model is predicated on violating federal drug laws. We clearly weigh risk differently.

EDIT: I also agree with the above; there are no 8th years or of-counsels at WSGR that wanted this job? Little odd.

[albanach]

OP, would you mind PM'ing me? Have some questions on your trajectory.

You do realize that you posted this anonymously?

[Anonymous User]

I think, barring very few exceptions, any company willing to hire a 4th year attorney as a GC is either out of their mind, out of their depth, or looking for a fall guy if/when shit hits the fan. And I say this as a 4th year attorney myself.

OP Here. Definitely the first two as they started a cannabis company (I hope not the third ). However, fact of the matter is that there are no lawyers with expertise in this field. Additionally, as GC you're leveraging outside counsel a lot for complex commercial transactions and not doing a lot of work yourself. Years of practice don't necessarily translate here. We've x'd several attorneys with 8-20 years of practice experience because they have a hard time transitioning into high growth, can't handle the level of uncertainty/risk and have very narrow expertise from biglaw (e.g. cap markets, debt finance, vc financing, etc.).

[Anonymous User]

Feel like it's a little odd to be worrying about reputational/similar career risk associated with cannabis at this point, given you're already in the industry? The damage is done at this point

OP Here. Not worried about reputational risk at all. I've been getting unsolicited interview offers from many different industries (including biglaw for new cannabis practices). Risk-adjusted return is in reference to near term upside potential from a liquidation event vs. the long-term viability of the company, and how that compares to the relative stability / lower near term upside potential of the VC position.

Ah ok. You're in the industry, so I'm sure you've thought about this, but I'm skeptical of the viability of small cannabis players long-term. Think it's ultimate about scale + cost; the major tobacco/other ag players have been planning/waiting for federal legalization for probably 5+ years. If you're at/considering bouncing to a company with some sort of proprietary delivery mechanism like a JUUL that can't be easily replicated and is starting to get mass-appeal, maybe a different story. Maybe Eaze falls into this category, IDK their #s. But if the company is basically just an ag company with a retail footprint and a website, not seeing the upside. There's no moat.

So feel like the VC gig is lower-risk with better general marketability. If you want to do Silicon Valley work, better to be at a Silicon Valley company. I was in a tech-adjacent role before law school, have friends there still both at startups and in funds. Maybe things have changed since ~2016, but at that point, if someone told me they wanted to be a COO/executive role at a high growth company, a VC-gig would have been a no-brainer. You have a broader view of the industry, connections to your portfolio co's, better brand, etc.

But I'm not sure how valuable my perspective on this is. I would never take a job at a company whose business model is predicated on violating federal drug laws. We clearly weigh risk differently.

EDIT: I also agree with the above; there are no 8th years or of-counsels at WSGR that wanted this job? Little odd.

OP Here. Thanks for this. It's very helpful.

The lack of product moat is a serious concern for me, but there is a supply chain moat (it is very difficult to maintain a reliable large scale supply chain in the industry right now). Additionally, almost all products in a category have the same sell-through (e.g., doesn't really matter which gummies are on the shelf they generally sell the same); HOWEVER, this is one of the few, few brands where that is not the case and they move a lot of product. I don't know what this will translate to in the long term. My friends in CPG PE mention that brands at this stage have a fairly easy time leveraging brand equity to expand into additional verticals which could create major revenue growth.

With respect to marketability, there is a lot of M&A activity happening in this space right now at obscene multiples (2 or 3, $1B+ exits in the last few months). With this company's current market position, they could likely exit at 2x or 3x current valuation. If I exit with a high seven figure equity payout, marketability doesn't matter. $6M in a 4% or 5% muni bond fund is ~$300K a year in dividend yield (with minimal taxes) for the rest of time. For these reasons, I'm trying to figure out what the risk-adjusted return of being gc at this company would do for me vs. the slow comp growth at a VC fund.

With respect to counsel/8th year attorneys from biglaw, they are only targeting industry insiders and are not looking at biglaw refugees. Our company has a relationship with this brand and we worked across from each other on several deals.

[LBJ's Hair]

Feel like it's a little odd to be worrying about reputational/similar career risk associated with cannabis at this point, given you're already in the industry? The damage is done at this point

OP Here. Not worried about reputational risk at all. I've been getting unsolicited interview offers from many different industries (including biglaw for new cannabis practices). Risk-adjusted return is in reference to near term upside potential from a liquidation event vs. the long-term viability of the company, and how that compares to the relative stability / lower near term upside potential of the VC position.

Ah ok. You're in the industry, so I'm sure you've thought about this, but I'm skeptical of the viability of small cannabis players long-term. Think it's ultimate about scale + cost; the major tobacco/other ag players have been planning/waiting for federal legalization for probably 5+ years. If you're at/considering bouncing to a company with some sort of proprietary delivery mechanism like a JUUL that can't be easily replicated and is starting to get mass-appeal, maybe a different story. Maybe Eaze falls into this category, IDK their #s. But if the company is basically just an ag company with a retail footprint and a website, not seeing the upside. There's no moat.

So feel like the VC gig is lower-risk with better general marketability. If you want to do Silicon Valley work, better to be at a Silicon Valley company. I was in a tech-adjacent role before law school, have friends there still both at startups and in funds. Maybe things have changed since ~2016, but at that point, if someone told me they wanted to be a COO/executive role at a high growth company, a VC-gig would have been a no-brainer. You have a broader view of the industry, connections to your portfolio co's, better brand, etc.

But I'm not sure how valuable my perspective on this is. I would never take a job at a company whose business model is predicated on violating federal drug laws. We clearly weigh risk differently.

EDIT: I also agree with the above; there are no 8th years or of-counsels at WSGR that wanted this job? Little odd.

OP Here. Thanks for this. It's very helpful.

The lack of product moat is a serious concern for me, but there is a supply chain moat (it is very difficult to maintain a reliable large scale supply chain in the industry right now). Additionally, almost all products in a category have the same sell-through (e.g., doesn't really matter which gummies are on the shelf they generally sell the same); HOWEVER, this is one of the few, few brands where that is not the case and they move a lot of product. I don't know what this will translate to in the long term. My friends in CPG PE mention that brands at this stage have a fairly easy time leveraging brand equity to expand into additional verticals which could create major revenue growth.

With respect to marketability, there is a lot of M&A activity happening in this space right now at obscene multiples (2 or 3, $1B+ exits in the last few months). With this company's current market position, they could likely exit at 2x or 3x current valuation. If I exit with a high seven figure equity payout, marketability doesn't matter. $6M in a 4% or 5% muni bond fund is ~$300K a year in dividend yield (with minimal taxes) for the rest of time. For these reasons, I'm trying to figure out what the risk-adjusted return of being gc at this company would do for me vs. the slow comp growth at a VC fund.

With respect to counsel/8th year attorneys from biglaw, they are only targeting industry insiders and are not looking at biglaw refugees. Our company has a relationship with this brand and we worked across from each other on several deals.

If you're being offered equity such that 2.0x current valuation will get you a seven figure payout, these buyouts are in cash/stock in a public market company (i.e., something liquid---this is what worries me; you don't wanna just be trading private company stock for private company stock), and the product is there...that's a very attractive package. Like it's so attractive that I'm baffled they're offering it to you tbh

[Anonymous User]

.

[mickey_mouse]

OP - could you PM me, or perhaps answer this question here:

When you were in biglaw, how did you get experience in this industry that got you in the position you are now? I'm a first-year associate with a similar background as you, but my firm wouldn't touch this type of work, and I don't see them doing so for a long time (unless perhaps fed regs come, as you suggested above). Thanks for any info!

[Anonymous User]

OP - could you PM me, or perhaps answer this question here:

When you were in biglaw, how did you get experience in this industry that got you in the position you are now? I'm a first-year associate with a similar background as you, but my firm wouldn't touch this type of work, and I don't see them doing so for a long time (unless perhaps fed regs come, as you suggested above). Thanks for any info!

OP Here. I think a lot of people fall into the fallacy that you need industry specific experience. You need a base level of general corporate transactional experience (preferably M&A or EGC) and scrappiness.

I got this job literally through cold e-mailing people at companies to meet up (while offering value) without asking for anything. Then, I had them connect me to others who I thought were working at other interesting companies. This is why they didn't give the job to some random 8th year nerdling from WSGR, etc. Cannabis is a tight knit community. There are a lot of "OGs" and you need to be able to shoot the shit with them. This isn't law school or biglaw. Having a nice degree and a fancy V10 doesn't really get you that far -- you need to have the personality to drive it home.

[Anonymous User]

Hey OP - when you say you offered value in pitching to meet up with folks, what exactly do you mean? Really curious to hear how you framed things. Thanks in advance.

[Anonymous User]

OP - could you PM me, or perhaps answer this question here:

When you were in biglaw, how did you get experience in this industry that got you in the position you are now? I'm a first-year associate with a similar background as you, but my firm wouldn't touch this type of work, and I don't see them doing so for a long time (unless perhaps fed regs come, as you suggested above). Thanks for any info!

OP Here. I think a lot of people fall into the fallacy that you need industry specific experience. You need a base level of general corporate transactional experience (preferably M&A or EGC) and scrappiness.

I got this job literally through cold e-mailing people at companies to meet up (while offering value) without asking for anything. Then, I had them connect me to others who I thought were working at other interesting companies. This is why they didn't give the job to some random 8th year nerdling from WSGR, etc. Cannabis is a tight knit community. There are a lot of "OGs" and you need to be able to shoot the shit with them. This isn't law school or biglaw. Having a nice degree and a fancy V10 doesn't really get you that far -- you need to have the personality to drive it home.

Sounds dope, you looking for people? It sounds exactly like the kind of industry I'd like to be a part of at the end of the big law wasteland (I've got 15 years of experience, so if anything I'm an expert).

In all seriousness though, I think if you stand to gain $6M from a 2-3X event, then I would stay put without thinking twice, especially if the company is as much a key player as you say it is. I think federal legalization is starting to gain momentum and I know tobacco companies are starting to create strategies for quickly building out their cannabis businesses, leveraging their supply chain to quickly grow it, which almost always will include M&A of companies like yours.

Additionally, for what your goals are, I would think the experience is better and more well-rounded, especially if you want to be the COO of a high-growth company in the future. I feel like most people that are leaders at fast growing start ups are the kind of people that would find the VC side boring, especially the legal function. Just negotiating NDAs and LOIs and governance documents all day, every day. I also don't think there is any reputational risk in working for a Cannabis start up, especially if the state you work in has legalized recreational use of it.

All this being said, the VC job could be more cushy and less stressful, and the VC firm is probably more well equipped to handle a downturn if that is a concern of yours, and you'd work with a wide array of companies, so you could see what works and what doesn't work (at least at a high level), which could also be good experience for a COO role down the line.

Don't think you can go wrong, but I'd stick with the trees

[Anonymous User]

OP - could you PM me, or perhaps answer this question here:

When you were in biglaw, how did you get experience in this industry that got you in the position you are now? I'm a first-year associate with a similar background as you, but my firm wouldn't touch this type of work, and I don't see them doing so for a long time (unless perhaps fed regs come, as you suggested above). Thanks for any info!

OP Here. I think a lot of people fall into the fallacy that you need industry specific experience. You need a base level of general corporate transactional experience (preferably M&A or EGC) and scrappiness.

I got this job literally through cold e-mailing people at companies to meet up (while offering value) without asking for anything. Then, I had them connect me to others who I thought were working at other interesting companies. This is why they didn't give the job to some random 8th year nerdling from WSGR, etc. Cannabis is a tight knit community. There are a lot of "OGs" and you need to be able to shoot the shit with them. This isn't law school or biglaw. Having a nice degree and a fancy V10 doesn't really get you that far -- you need to have the personality to drive it home.

Sounds dope, you looking for people? It sounds exactly like the kind of industry I'd like to be a part of at the end of the big law wasteland (I've got 15 years of experience, so if anything I'm an expert).

In all seriousness though, I think if you stand to gain $6M from a 2-3X event, then I would stay put without thinking twice, especially if the company is as much a key player as you say it is. I think federal legalization is starting to gain momentum and I know tobacco companies are starting to create strategies for quickly building out their cannabis businesses, leveraging their supply chain to quickly grow it, which almost always will include M&A of companies like yours.

Additionally, for what your goals are, I would think the experience is better and more well-rounded, especially if you want to be the COO of a high-growth company in the future. I feel like most people that are leaders at fast growing start ups are the kind of people that would find the VC side boring, especially the legal function. Just negotiating NDAs and LOIs and governance documents all day, every day. I also don't think there is any reputational risk in working for a Cannabis start up, especially if the state you work in has legalized recreational use of it.

All this being said, the VC job could be more cushy and less stressful, and the VC firm is probably more well equipped to handle a downturn if that is a concern of yours, and you'd work with a wide array of companies, so you could see what works and what doesn't work (at least at a high level), which could also be good experience for a COO role down the line.

Don't think you can go wrong, but I'd stick with the trees

OP Here. I'm actually looking for a replacement for my M&A role at my current cannabis company. Send me an email at [Removed].

[Anonymous User]

Hey OP - when you say you offered value in pitching to meet up with folks, what exactly do you mean? Really curious to hear how you framed things. Thanks in advance.

OP Here. I had a few ex-colleagues at my previous V10 gig that started repping investors looking to get into cannabis. I set up meetings without asking for anything and used those connections to start the conversation.

[johndhi]

Very interesting thread, thanks for posting. You sound like a smart guy who has a lot of insight into the industry.

My experience (admittedly not as extensive as yours, but decent) tells me, as you acknowledge, that being a GC at a cannabis company can be a difficult thing. Take platform companies' response to the bureau of cannabis control telling them to stop advertising for unlicensed businesses. That's an area where I, personally, would be a bit nervous being part of a team thumbing my nose at the state. That said, I also think this industry is a long-term good investment.

It sounds like one of the keys will be talking to the VC fund about how they picture your career trajectory, and what you would work on. The decision also depends on how much of a cowboy you feel like being -- from this post, I'm guessing you want to be a cowboy and are looking for reasons not to. Here's a list of reasons why you'd want to take the VC position -- not that I think they are necessarily compelling or apply to you -- but worth considering:
-being a GC of a small company sort of locks you into being a GC, as far as finding a next legal position.
-building legal process at a small company isn't particularly fun and most people won't appreciate the work you do -- they'll be annoyed by it
-you're sticking your neck out a bit more at the small company. if regulators come knocking, you'll be one of the people they want to talk to

If you want to talk directly and more openly about it, feel free to PM.

[Anonymous User]

Very interesting thread, thanks for posting. You sound like a smart guy who has a lot of insight into the industry.

My experience (admittedly not as extensive as yours, but decent) tells me, as you acknowledge, that being a GC at a cannabis company can be a difficult thing. Take platform companies' response to the bureau of cannabis control telling them to stop advertising for unlicensed businesses. That's an area where I, personally, would be a bit nervous being part of a team thumbing my nose at the state. That said, I also think this industry is a long-term good investment.

It sounds like one of the keys will be talking to the VC fund about how they picture your career trajectory, and what you would work on. The decision also depends on how much of a cowboy you feel like being -- from this post, I'm guessing you want to be a cowboy and are looking for reasons not to. Here's a list of reasons why you'd want to take the VC position -- not that I think they are necessarily compelling or apply to you -- but worth considering:
-being a GC of a small company sort of locks you into being a GC, as far as finding a next legal position.
-building legal process at a small company isn't particularly fun and most people won't appreciate the work you do -- they'll be annoyed by it
-you're sticking your neck out a bit more at the small company. if regulators come knocking, you'll be one of the people they want to talk to

If you want to talk directly and more openly about it, feel free to PM.

OP Here. I think the fear for VC is that I'll be forever stuck in a pure legal role if I went to the fund. Conversely, while I won't be stuck in a pure legal role at the cannabis company, the fear is what you mentioned above. I think in 3-5 years this industry will be fully consolidated under a few big players (e.g., Canopy, Altria, etc.) and I'm not sure that there will be an easy exit to another cannabis CPG company as GC. Not to mention that winter [recession] is coming and fundraising will not be fun...

[canna_counsel]

OP - could you PM me, or perhaps answer this question here:

When you were in biglaw, how did you get experience in this industry that got you in the position you are now? I'm a first-year associate with a similar background as you, but my firm wouldn't touch this type of work, and I don't see them doing so for a long time (unless perhaps fed regs come, as you suggested above). Thanks for any info!

OP Here. I think a lot of people fall into the fallacy that you need industry specific experience. You need a base level of general corporate transactional experience (preferably M&A or EGC) and scrappiness.

I got this job literally through cold e-mailing people at companies to meet up (while offering value) without asking for anything. Then, I had them connect me to others who I thought were working at other interesting companies. This is why they didn't give the job to some random 8th year nerdling from WSGR, etc. Cannabis is a tight knit community. There are a lot of "OGs" and you need to be able to shoot the shit with them. This isn't law school or biglaw. Having a nice degree and a fancy V10 doesn't really get you that far -- you need to have the personality to drive it home.

Sounds dope, you looking for people? It sounds exactly like the kind of industry I'd like to be a part of at the end of the big law wasteland (I've got 15 years of experience, so if anything I'm an expert).

In all seriousness though, I think if you stand to gain $6M from a 2-3X event, then I would stay put without thinking twice, especially if the company is as much a key player as you say it is. I think federal legalization is starting to gain momentum and I know tobacco companies are starting to create strategies for quickly building out their cannabis businesses, leveraging their supply chain to quickly grow it, which almost always will include M&A of companies like yours.

Additionally, for what your goals are, I would think the experience is better and more well-rounded, especially if you want to be the COO of a high-growth company in the future. I feel like most people that are leaders at fast growing start ups are the kind of people that would find the VC side boring, especially the legal function. Just negotiating NDAs and LOIs and governance documents all day, every day. I also don't think there is any reputational risk in working for a Cannabis start up, especially if the state you work in has legalized recreational use of it.

All this being said, the VC job could be more cushy and less stressful, and the VC firm is probably more well equipped to handle a downturn if that is a concern of yours, and you'd work with a wide array of companies, so you could see what works and what doesn't work (at least at a high level), which could also be good experience for a COO role down the line.

Don't think you can go wrong, but I'd stick with the trees

OP Here. I'm actually looking for a replacement for my M&A role at my current cannabis company. Send me an email at [Removed].

OP - would you either PM me or re-add the email address you had listed above for me to reach out? I’m very interested in getting into the cannabis industry generally and this specific opportunity sounds awesome. I’m confident I’d be qualified - not only in terms of experience (4th year in corporate/M&A at a V10), but more importantly in terms of fit/personality. In any event, would generally love to connect with you.