How Billion-Dollar Investors Find Blue Ocean Deals | Peter Sack | EP 73

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Speaker 2 What's more important is finding a space, that blue ocean, where when we invest resources in people in terms of originating, to finding opportunities, in terms of underwriting, in terms of operating, are we going to be able to drive returns for our investors through that process?

Speaker 2 And it's not that easy to find sectors where the more you invest, the greater opportunities and the greater expertise and the greater returns you can drive.

Speaker 2 And that's what we've done most demonstrably by investing in the U.S. cannabis industry.
Yeah. That we found a really unique space with strong industry fundamentals.

Speaker 2 And the key was finding a differentiated approach to investing in it.

Speaker 1 What's up, the entrepreneur DNA family? Welcome back to another incredible episode. I have someone super cool, really smart, and hyper successful in the investment space.

Speaker 1 He is the CEO of Chicago Atlantic, but they focus specifically on alternative style investments that a lot of people and a lot of industries are scared of, but they actually give huge returns like equity ownership type returns.

Speaker 1 Peter Sack is here. What is up, dude? Thanks for having me.
Yeah, this is going to be fun. So, you know, I come from the real estate space.
I've done this for two decades.

Speaker 1 Returns, investments, this is my language. This is where I play.
So for all of you watching this, make sure you first follow Peter Sack, but Chicago Atlantic is the company.

Speaker 1 Let's get into the first things first. What industries, what verticals, what are people kind of scared, or companies and lending institutions, what are people kind of scared of?

Speaker 1 And then why are they scared of those things?

Speaker 2 Many institutions are afraid of emerging industries

Speaker 2 mostly because they're different, because they're new, because they operate under different constructs, under different regulatory frameworks, and different levels of uncertainty.

Speaker 2 And so if you can find, as an investor, can find ways to mitigate a lot of those risks or uncertainties through different structuring, through different approaches, through finding the right avenues of entries into these industries that have that uncertainty,

Speaker 2 then you can find really exciting opportunity and really exciting risk reward.

Speaker 2 And that's what we've focused on at Chicago Atlantic over the last six years, is finding ways to mitigate risk in industries that are underserved by the broader financial services industry.

Speaker 1 I think another way of saying it in my world is like red ocean versus blue ocean. Right.
You have found a blue ocean that most financial institutions don't go after, don't look at. Why do you?

Speaker 1 Like what makes those, is it just the simple idea of this red ocean versus blue ocean?

Speaker 1 Or is it, why do you go after the verticals, the industries that other financial institutions go, I don't want to play it in this game? Yeah.

Speaker 2 Blue ocean versus red ocean is just the start.

Speaker 2 That's a first screen to understand. Could there be opportunity here? The key beyond that, I think, is twofold.

Speaker 2 One, are there ways to enter those blue oceans that mitigate the risk that keep others out?

Speaker 2 Sometimes blue oceans are avoided because for very good reason.

Speaker 2 And sometimes they're not, or sometimes you just need to find the right avenue and the right approach in order to gain exposure to them that mitigates those risks that keep others out.

Speaker 2 I think the second piece that we focus on is this blue ocean an area that is large enough, fragmented enough, underserved enough in the long term, that the more that we as a platform at Chicago Atlantic invest in that space through resources, through expertise, through sourcing capabilities.

Speaker 2 Can we drive greater alpha for our investors?

Speaker 1 Now, the thing that I'm hearing without you saying it specifically is getting a better understanding of some of these maybe misunderstood or just simply not understood, not misunderstood, but not understood verticals or industries.

Speaker 1 And you're focusing on, let me actually understand why. What do they have to offer? Why are they there? It's an industry that works.
And you guys really focus.

Speaker 1 Maybe I'm mishearing in, you know, reading into what you're saying, but like, sounds like you actually take the time to understand the industry first.

Speaker 2 Focus is key. Yeah.
Focus and deep understanding is irreplaceable. Yeah.

Speaker 2 We don't consider ourselves tourists in the spaces that we invest. When we invest, we want to go all in as a platform in understanding the space and becoming the leading expert in that space.

Speaker 2 And that's the piece that's hardest to find. It's easy to find sectors of the economy that are underserved by the financial industry or are disfavored by the financial industry today.

Speaker 2 Take, for example, you could invest in commercial real estate today in major city centers and say, gosh, vacancy rates are high. It's difficult to find capital to develop.

Speaker 2 Prices are going down. I should buy now.
I should buy the dip. Right, right.

Speaker 2 But I could spend the next 10 years doing only commercial real estate lending or commercial real estate investing in challenged areas.

Speaker 2 And I still wouldn't be a leading expert in the commercial real estate space because it's a crowded, extremely competitive investing and development world. It's the red ocean.

Speaker 2 What's more important is finding a space, that blue ocean, where when we invest resources in people in terms of originating, to finding opportunities, in terms of underwriting, in terms of operating, are we going to be able to drive returns for our investors through that process?

Speaker 2 And it's not that easy to find sectors where the more you invest, the greater opportunities and the greater expertise and the greater returns you can drive.

Speaker 2 And that's what we've done most demonstrably by investing in the U.S. cannabis industry.
Yeah. That we found a really unique space with strong industry fundamentals.

Speaker 2 And the key was finding a differentiated approach to investing in it.

Speaker 1 You'll say cannabis. I'll use the word weed.
And I say that jokingly to bring a smile. Like for a lot of people out there, they might be users of said flour.

Speaker 1 And there's no judgment on my side. Trust me there.
I just want people to understand is

Speaker 1 remove the title of who you are and what you do and running Chicago Atlantic.

Speaker 1 At the end of the day, you're an investor and you got to get the right type of returns in an industry or a vertical like weed, cannabis, flour, we can name whatever we wanted to say.

Speaker 1 That's exciting.

Speaker 1 There's a vertical that didn't exist 15 years ago for any lenders, let alone business operators.

Speaker 1 Talk to us and maybe bring it down to the layman investor, someone who might not have Chicago Atlantic type of investment strategy.

Speaker 1 Why cannabis? Why marijuana? Why is this a vertical that you say, you know what? Let's lean into this. Yeah, a couple key factors.

Speaker 2 One, fundamentally, it's a growing business

Speaker 2 with

Speaker 2 strong fundamentals. This is a sector with $32 billion in revenue.
It's legal on a medical or adult use basis in close to 40 states and jurisdictions across the country.

Speaker 1 It's legal in 40 states now.

Speaker 2 On a recreational or a medical basis. A majority of Americans live in a state where you can acquire cannabis legally.

Speaker 2 But because of the conflict between federal and state law and regulation regarding the substance, very few institutional established capital providers will provide, in particular, debt capital, but also in many cases, equity capital to cannabis companies.

Speaker 1 You guys do both?

Speaker 2 We primarily focus on providing debt capital to cannabis companies. And why debt capital? Because there's even a greater paucity of lenders that are willing to provide loans to cannabis companies.
And

Speaker 2 that's the unique angle that's allowed us to enter this blue ocean.

Speaker 2 It's that by providing debt capital instead of equity capital, we're able to enter through an avenue that controls risk better,

Speaker 2 allows us to mitigate the valuation risk. How much is this company worse? and allows us to underwrite and control risk through a focus on hard collateral through cash flow generation.

Speaker 2 And in the process, because there are very few operators providing debt capital to cannabis companies generate really strong differentiated returns at differentiated risk profiles so

Speaker 1 i've had several friends who talked about this offline who have done very very well early in this game right there were some of the few first few in california just crushed it sold their company off to i want to say a canadian company but the point being is there was a true build and sell opportunity.

Speaker 1 I think you guys are probably well aware of that, obviously. But let's talk about kind of the idea of the space of like so cash heavy.

Speaker 1 My understanding, the challenges that they went through, because they were some of my closest friends, it was just, again, new enough, so cash heavy, so much federal versus state risk.

Speaker 1 But that's also why they got the multiple they got. I mean, it's insane how much money they made, right? It's insane.

Speaker 1 Like hundreds of millions of dollars. And

Speaker 1 now, are we further enough down this road of the cannabis industry for companies like yourself to have comfort with the risk between federal and state, with the cash-intensive side of this site type of thing, with banking?

Speaker 1 Like not many banks are willing to take in $200,000 every other day, right, in cash. Like, where do you stand with that? Maybe that's not, you may not be a retail bank in that sense.

Speaker 1 It might just be lending, but how is that all kind of washed out, so to speak

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Speaker 2 Yeah, the industry's maturing over time. Yeah.

Speaker 2 A lot of the irrational exuberance that drove people to exit at really big valuations early on in the development of the industry has gone away. And

Speaker 2 states that grew really fast have matured into stable marketplaces where competition creates winners and competition creates losers and creates a lot of challenges and a lot of opportunities.

Speaker 2 And the industry is going through the cycle of weeding out strong operators and weak operators as capital has become as equity capital in particular has become more scarce and valuations have declined.

Speaker 2 At the same time, the business has normalized significantly. There's now close to 500 banks and credit unions across the country that provide ordinary commercial banking services

Speaker 2 for cannabis dispensary and for cannabis cultivation facilities. So

Speaker 2 finding a bank that will pick up your cash just like they pick up cash from a Starbucks a couple times a week now is ordinary course. It's certainly still more expensive

Speaker 2 than ordinary than than other than if you were a coffee shop sure um but um a lot of those fundamental logistic problems have been ameliorated i would say though not not gone altogether there's a great word i don't even know what that word means let's let's what is um ameliorated have been uh lessened have been lessened or late right so here i definitely just got schooled there that was great um

Speaker 1 i'm saying that right ameliorated yep okay my challenge to myself is today i need to use that word property somewhere somehow. It just rolls off the tongue.
Like reduced, lessened, ameliorated. Okay.

Speaker 1 Yeah.

Speaker 1 I sure hope I'm using it right.

Speaker 2 Otherwise, I'll just look like an idiot. Yeah.

Speaker 1 So you guys aren't an institution that takes, you're not a bank in that sense where you would be your

Speaker 1 correct? Yep, correct. So you're a lending institution.
Got it. So I just want to know, framing-wise, when talking to you about this.
So my friends had a very big challenge with that, right?

Speaker 1 I mean, it was like the classic like back room full of $15 million in cash because banks wouldn't do anything. That has been ameliorated.
Yeah.

Speaker 2 And there's now, there's still, however, only a handful of lenders regularly providing debt capital to the cannabis industry.

Speaker 2 So you have dozens of publicly traded companies generating strong cash flows, strong equity backing.

Speaker 1 You have thousands of.

Speaker 2 small and medium-sized companies that are generating strong EBITDA, strong equity backing, strong collateral bases that can't get access to debt capital to grow or to buy a competitor or to build, expand their cultivation facility or to build additional dispensaries, things that access to capital that if you were a coffee shop or a vertically integrated CPG company, you would be able to raise debt capital quite easily.

Speaker 2 For sure.

Speaker 2 And in this space, it's just simply not an option. And so we're one of the few providers that are regularly operating in this industry, making those debt investments, helping cannabis companies grow.

Speaker 1 Grow. And the investment, really, the borrower, those companies are really borrowing for growth.
I mean, that's the impetus of it all is growth strategy. So,

Speaker 1 and you, the lending side of it, you're collateralizing that loan against the current operation.

Speaker 2 Against the current operations, the business.

Speaker 1 So they have one operation. I'm just going to say California.
That's where I'm from. It's the experience I have with it.
They have an operation in San Francisco. They're doing whatever X revenue.

Speaker 1 You guys underwrite the current operation. They want to open three more up in wherever the hell.

Speaker 1 You say, great, based around your current revenue, based around your bank statements, based around this operation, we're willing to lend X. Yep.
Standard stuff. Yep.
Very simple.

Speaker 1 Same thing in the real estate space. I mean, it's literally, you're just looking at the business.
You're looking at the PL of the business.

Speaker 1 You say, based around the strength of that P ⁇ L, I'll lend you this money with the collateral of that P ⁇ L.

Speaker 1 I mean, this is the best part about this podcast, dude. I just having so many incredible guests like yourselves and just, I'm getting just as much informed as the listeners are, right?

Speaker 1 And it's so cool to me because I have experience because of how close I was to my friends of the alternate side of this, which is there were no Chicago Atlantics that did not exist.

Speaker 1 Their growth and expansion, quite literally, was private financing, right? And so they would have to raise all this capital, give away equity, give away debt,

Speaker 1 and then they could go open up another shop. And it was just a burden.
Now they did very well, you know, they had a nine-figure exit,

Speaker 1 but now they can play enough space with you to say, hey, I want to go open up five more shops at this type of revenue stream. And it's a call away.
Yeah, exactly.

Speaker 2 Exactly. And we're certainly expensive capital.

Speaker 2 We pull investors from high net worth individuals, family offices, RIAs, some pension funds that also look at this space as a big opportunity in a big white space in order to invest and be a first mover driving really attractive risk-adjusted rewards because there are so few lenders operating in the space.

Speaker 1 Are you guys on the back end of this? Not for the operators, but for the investors, your investors. Are you guys constantly raising capital? Have you filled that?

Speaker 1 Is that a constant work in progress also?

Speaker 1 If I have a handful of family offices I can connect you to, is that a direct like

Speaker 1 I'd be interested? Absolutely.

Speaker 2 We're constantly raising capital and deploying.

Speaker 2 And that's the game, raising capital and deploying and seeking to be able to be

Speaker 2 a more fulsome partner to our clients in the space.

Speaker 2 I think the lifeblood of what we do is opportunities to deploy capital with really strong risk-adjusted returns with some of the best operators in the industry. No doubt.

Speaker 2 And we do that by managing a platform of investment funds such that

Speaker 2 when there's a really strong operator, we have a funding source to support what they're doing and make strong returns in the process.

Speaker 1 Yeah, and so

Speaker 1 this is so incredible. Now, the kingdom of space is one

Speaker 1 vertical. I just use the word vertical for internal purposes, but like that's one industry.

Speaker 1 What else would be considered a riskier industry or maybe the more of the blue ocean type industry that there aren't a lot of people out there that is an open lane, that is an open, you know, freeway to like, hey, there's opportunity here that's legitimate these days, where

Speaker 1 five years ago, this was not necessarily the case. What else are you guys looking at?

Speaker 2 Yep. I think a lot of, a lot of, I think there's a lot of,

Speaker 2 there's a lot of ancillary businesses surrounding surrounding digital currencies today.

Speaker 1 I was just going to say, like crypto was, like five years ago, crypto was like, this isn't a thing. Now it's like the president's basically saying, hey, the government's going to have crypto, right?

Speaker 1 Like we have come a long ways in five years.

Speaker 2 And this is a space where

Speaker 2 we're focused still on providing downside protection, yield investments that provide equity-like returns with stability. and downside protection.

Speaker 2 And so in the crypto space, you don't get that by just buying cryptocurrency.

Speaker 1 That's right. I mean, look what it's done.
I mean,

Speaker 1 I'm not a crypto guy heavy, but like the actual market dropped 66%.

Speaker 2 Yeah, that's the type of volatility that we're not looking to give our investors exposure to. Right.

Speaker 2 But we're looking for ancillary business that operate within that ecosystem that provide real services that can generate real cash flow and profitability over the long term.

Speaker 1 Like a, like a, what's sort of like Coinbase, right? Meaning they charge me every time I buy and sell. There's consistency, there's stability in that, right?

Speaker 1 If I'm losing money, making money, I'm selling, I'm buying, every time it's, oh, here's $8 goes to Coinbase. Yeah.
$22 goes to Coinbase. I'm like, but that's the level of consistency.

Speaker 1 You guys are like, that type of service, we can invest heavy into that because there's consistency in the security of it.

Speaker 2 Exactly. Exactly.

Speaker 2 And then there are other industries where we spend time looking to understand, looking to understand the fundamentals and understand why other institutional providers may or may not be providing capital.

Speaker 2 One example is a business that we gave a loan to that makes equipment for shooting ranges for the police and the military.

Speaker 2 And

Speaker 2 this ordinary business makes equipment for shooting ranges, has a big backlog, has a long track record of success.

Speaker 2 Really challenging for them to find debt capital in particular because many institutional investors simply can't invest in the firearms industry.

Speaker 2 And we also don't invest in firearms manufacturing, but

Speaker 2 this is not firearms manufacturing. This is adjacent to that space

Speaker 2 for

Speaker 2 training military and police.

Speaker 2 But still, because of that adjacency, they have trouble finding capital sources.

Speaker 2 And so

Speaker 2 that's an area where we see an opportunity like that, and we want to lean in and we want to be their partner for growth.

Speaker 1 So let's talk about some of that. That's fun to talk about.

Speaker 1 I want to talk to all investors.

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Speaker 1 You're looking at basically, I'm going to bring it to real real estate just because it is my strong suit but so you go to a

Speaker 1 phoenix and it has been

Speaker 1 a madhouse for the last eight years like everyone and their mother is investing in phoenix it is just overridden with investors etc

Speaker 1 but you go and do a an adjacent city like a tucson that doesn't have is that like talk to the investors like what should investors in a general sense banks institutions family offices doesn't matter what what is the secret to your success when looking at things is it this like adjacent structure where it's like you don't go after the big everyone knows red ocean thing you go where's the side

Speaker 1 you know alley that people don't really know about the back door that is just rich heavy and just people don't like what's that philosophy that you guys run with yeah so if i'm looking at something like the phoenix market i want to see and appreciate what the market is driving that could be a bubble, could be temporary, could be not.

Speaker 2 But if everyone's looking at the basics of the Phoenix market, I probably want to find something different from that.

Speaker 2 I want to find an angle into that space that other people aren't doing because it's more complex, because it carries more execution risk.

Speaker 2 Maybe that's a conversion. Maybe that's finding something that has zoning and entitlement complexity.

Speaker 2 Maybe this is a property where by adding an improvement like a drive-through, I can make a lot more, I can create a lot more value for this commercial retail property than was before.

Speaker 2 But finding an avenue that

Speaker 2 justifies our focus and

Speaker 2 justifies our efforts. Ultimately, particularly in the alternative asset management space, there are a lot of people pitching products and managing funds that are not differentiated.

Speaker 2 And they make management fees and they earn incentive fees for doing something that

Speaker 2 for creating risk reward, exposure to risk reward that you could get by buying ETFs, by buying publicly traded lending companies. And

Speaker 2 frankly, that's just not how I want to spend my life. I want to spend my life in the investing world, creating something new, creating risk reward that is truly differentiated.
You're a true investor.

Speaker 1 And I love that, right? That's why this episode is here. This is why this podcast is because

Speaker 1 we talked about it offline. Like giving someone a guaranteed 5%

Speaker 1 is as boring and is basic and they sell themselves is the risk eliminator right that the downside risk we're going to make sure you don't have it you know but man is that not fun or sexy or you have a big upside if you want to guarantee five percent you should buy treasury bond 10-year treasuries at four and a half percent yield and then never look at it for the next 10 years that's right and you don't need to pay anyone else to do that for you yeah great suggestion by the way for all you guys that want a very secure safe steady now I'm more risk, not averse.

Speaker 1 I'm, what's the right word I'm looking for? Like, I'm into risk. I'm okay with risk, right? I bought four apartments, sight unseen in Alabama, right? Now that comes with its own hurdles.

Speaker 1 I wouldn't suggest everyone to go through that kind of stuff. But having the risk is the bigger opportunity.
Yeah.

Speaker 1 Your word focus means a lot to me, right?

Speaker 1 My wife told me

Speaker 1 just a little while ago, right? Is if you had a little bit less trust and a little bit more focus, you exponentially would grow your businesses and have multiple businesses, right?

Speaker 1 So focus is a hard word, right? Because how do I do these things all at a high level?

Speaker 2 And it's easier said than done.

Speaker 1 Yes, it is very easy for my wife to give me that advice and then for me to have to go execute on it.

Speaker 2 Yeah, there's always a new shiny, shiny object, there's always a new opportunity, there's another, always a new vertical.

Speaker 2 Um, but the discipline to say, if I focus on this space, if I commit resources to it, I know the opportunity will come and I know I'm going to be better at it, a better executor at it as a result of that.

Speaker 2 It's challenging to keep that over a long period of time.

Speaker 1 How far in the red are you willing or able to go? And I don't want to speak to Chicago Atlantic, obviously, because this is a little bit different.

Speaker 1 It's much bigger, but like I think most investments of any sort into your own business, into a property, into whatever, you got to have some level of like sustaining the pain, knowing that you're likely going to go in the red for a little bit because

Speaker 1 you just said it in a way, if you do it long enough,

Speaker 1 it can get that hockey stick you're looking for. But you might have to go down, not just kind of coast, but like go down first

Speaker 1 to come up, right?

Speaker 1 How long do you think is the right time frame? Like you can't just be foolish and torch money and torture time and torch, but you also have to be reasonable.

Speaker 1 To do this right, you probably have to take some,

Speaker 1 I don't want to say losses, but you have to go in the red first to come up and find the green.

Speaker 2 Yeah, I'd say yes and no.

Speaker 2 We focus on lending and debt investments. And debt, you can define debt in a dozen different ways.
For me, the fundamental principle for all definitions of debt should be downside protection.

Speaker 2 And so when we're making an investment, we're trying to find multiple avenues of uncorrelated pathways where we can have downside protection.

Speaker 2 That could be because they have revenue streams coming from many retail locations and cultivation and wholesale products across multiple states, a really broad, diversified footprint.

Speaker 2 That could be because, in addition to strong cash flows, the company has hard collateral.

Speaker 2 That could be because we have personal guarantees and pledges of assets outside of the business that provide us downside protection.

Speaker 2 And so, we're looking for a number of different ways that if this part of the thesis goes wrong, we still get paid our interest in principal.

Speaker 2 If this part of the thesis goes wrong, we can still recoup value from this part of the business that's uncorrelated. And so, we can feel really comfortable

Speaker 2 seeing underperformance in an investment on a consolidated basis if we have really strong conviction in our downside protection thesis.

Speaker 2 And that thesis of downside protection, that thesis of being able to recoup value may allow us to take risk or allow the business to take risk in a growth project that we wouldn't otherwise because we have that margin of safety in our downside protection.

Speaker 1 As an investor at all levels, being able to understand

Speaker 1 and looking at where are my downsides. If I pull the trigger on this opportunity, this investment, this thing,

Speaker 1 I need to look at the landscape of like, here's a hole, here's a hole, here's a hole, here's a hole. And then how do we protect those holes?

Speaker 1 If we fall in this hole over here, how do we make sure that we can come up over here? If we fall in this hole, how do we make sure this, right?

Speaker 1 So you're, you're really looking at the entire landscape of your downside. So you know, you can minimize it by having multiple, what I would call exit strategies.

Speaker 2 Yeah. And credit, it is a different lens than equity and venture capital and new initiatives.

Speaker 2 In venture capital, you may be willing to lose all of your money on two-thirds, three-quarters, 90% of your portfolio because you're confident that 10%, you may not know which 10%, but 10% is going to 10x.

Speaker 2 In credit, you can't do that.

Speaker 2 In credit, you have to have very strong downside protection and downside conviction on your investments because you can't sustain that many full losses and if we've if we've sustained losses of principle then something has gone very wrong in our thesis that's right

Speaker 2 and that that's the difference between that's what that's sort of what fixed income means fixed income means when you make an investment there is a maximum amount of upside that you can get in most debt investments and that's that could be your your interest, that's fees, that's exit fees, but ultimately those are contained within a contract.

Speaker 2 You're going to make this percent return on the investment over this period of time. And so that's why that return could be really attractive.

Speaker 2 In our case, in some of our vehicles, our returns, our weighted average returns are in the high teens for portfolios of first-lean senior secured debt. Wow, that's great.

Speaker 2 And that's how we can create equity-like returns in portfolios that have really strong downside protection. But that downside protection thesis is still very key.

Speaker 2 We gain additional upside by, in addition to fixed returns, also securing warrants or conversion features in some of our investments that can provide incremental upside.

Speaker 2 But

Speaker 2 that doesn't

Speaker 2 take the place of solving the question of downside protection first, because our first goal is to provide principal protection for our investors.

Speaker 2 And then on top of that, provide a really attractive, risk-adjusted return.

Speaker 1 So who's your preferred client? Like if there was someone listening or watching this on all these platforms, who would you say is your person that should be reaching out to you, right?

Speaker 1 Whether it's a company, industry, go contact Chicago Atlantic. You might not get Peter, but reach Chicago.
Like who are you talking to? Who should consider using you for financing?

Speaker 2 Yeah, please, in the cannabis space, we focus on states that have a limited license environment.

Speaker 2 So states that have issued a relatively small number of whether that's retail licenses or cultivation licenses.

Speaker 2 We like those markets because those states create more barriers to entry for new entrants to come in.

Speaker 2 And that means that existing operators have more stability in their margins, more stability in their outlook. That's right.
And when they make new investments, they can do that with greater certainty.

Speaker 2 And so we're spending a lot of time in Missouri, Ohio, New York. We've invested a lot here in Florida,

Speaker 2 Maryland,

Speaker 2 Illinois.

Speaker 2 These are markets that are stable, lots of profitable operators executing on theses to develop their space, to provide more products, to provide more attractive products for the end customer and ultimately growing this industry by creating something that's more accessible.

Speaker 1 No doubt. And then

Speaker 1 who would you like to talk to? So cannabis in general, that is your main put.

Speaker 1 If someone's out there in the cannabis space period in general, you guys would at least like to have a conversation, Chicago Atlantic. Make sure you're looking up Chicago Atlantic.

Speaker 1 Is there a website or a best place for them to chicagolantic.com and you can find me on linkedin and then linkedin peter sack uh so then let's go to the other side of your business if someone was interested like i like this but i like the protection of having chicago atlantic have my money not me throwing a hundred grand at some operator who are you talking to in terms of the capital raise who are you talking to people

Speaker 1 small, large, big, family office style? Do they need to be a corporation? Is it, you know, debt arbitrary?

Speaker 1 Like, so who are you talking to about people you would like to talk to specifically to finance some of this stuff?

Speaker 2 Yeah, we spend a lot of time talking to family offices, high-net worth individuals, and wealth advisors. Yeah.

Speaker 2 And we spend our time thinking about and talking about how our private credit offering is distinct from the broader private credit industry. Yeah.

Speaker 2 And we're never going to replace investments in some of the largest private credit funds out there.

Speaker 2 But we think that

Speaker 2 we offer something, a really distinctive risk-adjusted return in a really distinctive industry that investors probably don't have exposure to elsewhere in their portfolio.

Speaker 1 I was going to say, you give them an opportunity to get exposure to something that they don't have. Like they might have a friend, whatever, but again,

Speaker 1 they

Speaker 1 risk mitigate by giving Chicago Atlantic their capital versus their friend that has a shop, if you will.

Speaker 1 And then investing in a diversified portfolio of debt investments versus what's inherently more risky, equity investments the the word you use right there portfolio i love that word because i'm a real estate investor but i look at my entire portfolio it's not always puppy dogs and rainbows if you individually look at every single asset i own right uh i'm doing a flip right this second that yeah is transactional so it's not in a portfolio play but it's going to be a loser

Speaker 1 but i can sustain that loss based around the portfolio's revenue that i generate right the word portfolio to me is a much better word than diversification of what you're doing.

Speaker 1 Like if you can invest in something that has, again, your downside risk, like this one crushes, this one's eh, this one's a loser, but this one's okay.

Speaker 1 Now you have this diversity, a diversity within your downside risk. I think everyone needs to look at investing in that way.
Yeah,

Speaker 2 this is why you hire investment managers to focus on a space and make an aggregate of smart decisions,

Speaker 2 an aggregate of smart individual decisions that create a portfolio versus reward.

Speaker 1 Peter, this has been really informative for me. This is fun.

Speaker 1 What have we not covered about either the cannabis space, Chicago Atlantic that we want to, because I kind of feel like I could go left with it. What else would we like to talk about here?

Speaker 2 When we think about the world, we think about

Speaker 2 what can we add to it? What's the different lens that we can apply that other people aren't doing? And

Speaker 2 we like talking to operators, regardless of what industry they're in, that are trying to do something different.

Speaker 2 And

Speaker 2 we want to hear that message. And we want to see if there is a way that we can support that differently from other capital providers.

Speaker 1 That's great. That is incredible.
Peter Sack, thank you for coming on to Entrepreneur DNA. Thanks for having me.
It was a blast. Right on.

Speaker 1 Guys, if this is pretty cool and you were interested in any of this or you think someone should hear this, share this with two of your people.

Speaker 1 Make sure you check out Chicago Atlantic and Peter Sack all over LinkedIn, social media.

Speaker 1 And again, share this with two more people that might find this interesting. We'll see you on the next episode.