Would you say PR is a risk tolerant or risk averse industry? How about you? Are you risk tolerant or risk averse?
Before you answer, picture this. You’re a senior team member at a boutique, 50-year-old public relations firm. It is profitable and has done well for decades, serving mostly microcap publicly traded companies, start-ups and the occasional enterprise client.
Then, one of the partners has a harebrained idea to go all in on a new industry that has been operating in the shadows for decades, is federally illegal, and might prompt your current client base to fire you.
Is your tolerance for risk high enough to put the firm on the line? Or would you prefer to go along slow and steady, guaranteeing a paycheck and comfort? That was the question my partners and I faced in 2014 before KCSA Strategic Communications jumped headfirst into the budding (pun intended) cannabis industry.
Why did we move into an industry that threatened our ability to bank (and thus, make payroll), our ability to get directors and officers liability insurance, and our ability to pitch for major, enterprise level clients who have little tolerance for risk?
I argued that cannabis had been de-risked. The illicit market was growing by leaps and bounds and the effort to convert the $75 billion industry was just getting started. I believed the perceived reputational, business and financial risks were limited or would be eliminated over the near-term.
I saw that the cannabis industry was protected at the federal level under the Obama administration (it continues to be under the Trump administration).
Thanks to the Cole Memorandum, Rohrabacher/Farr/Blumenauer amendments and work from congressmen Earl Blumenauer (D-OR) and Dana Rohrabacher (R-CA), the federal government was prohibited from enforcing Federal prohibitions in states where medical cannabis was legal under state law.
The fear of the Feds raiding medical cannabis operations had become, if not nil, pretty close to it. And while the Cole memorandum has since been repealed by Jeff Sessions, there has been no enforcement at the federal level.
In 2014, approximately 10-15 states had medical cannabis laws and only Colorado, Washington state, Oregon and Washington D.C. had adult use laws and regulations.
The trends favoring national legalization were mounting, and the need for PR and IR services was never greater. Both the U.S. over the counter market — penny stocks — and the Canadian Securities Exchange, sometimes referred to as the cannabis stock exchange, were beginning to list cannabis companies.
Canadian investment banks like Canaccord Genuity were supporting major capital raises, and Cowen & Company had its best analyst, Vivien Azer, covering the public cannabis space well before anyone else. If investment banks were willing to get involved, why shouldn’t we?
More importantly, in 2014 my partners and I recognized that there were no serious business-financial public and investor relations firms serving the cannabis industry.
The argument I made was simple. In the 1980s many PR/IR firms, think WE (then Waggener Edstrom Communications) bet big on the nascent technology space and became massive. We were convinced KCSA could become the WE of cannabis.
Five years later, KCSA represents a large swath of the international cannabis industry. We work with major Canadian LPs, the biggest multi-state-operators in the US, international cultivators in Colombia, ancillary service providers and sources of capital.
Since we made the leap, revenues have reached all-time highs, staff retention has skyrocketed, morale increased, and our brand became more recognized.
My partners listened in 2014 when I laid out a vision of what KCSA could become. They looked at our firm, ourselves and the industry and agreed with that vision.
So the question for you is, do you have the tolerance to bet on something perceived as risky and take a leap of faith? Or do you prefer to travel down a safer, well-travelled road, where you do not get to live your best professional life?
Lewis Goldberg is a Managing Partner at KCSA Strategic Communications and oversees the firm's public relations practice.