Emily Paxhia - Managing Director, Poseidon Asset Management
Emily Paxhia is an experienced investor, market researcher, and strategist. She worked as a brand consultant for numerous influential companies, including Comedy Central, American Express, Pepsi Co., Time Warner, HBO, and McKinsey, among many others. She’s the cofounder and managing director of Poseidon Asset Management, a hedge fund comprising more than 27 cannabis-oriented portfolio companies along varying verticals of the nascent industry, from agriculture to SaaS and machine learning. She earned her M.A. in psychology from New York University.
Ms. Paxhia graciously agreed to a 30-minute interview in June 2017, which has been edited for length and clarity.
[OnlineEducation.com] How did you initially get into investments? Please tell me a little bit about your education and work experience prior to cofounding Poseidon.
[Ms. Paxhia] I studied psychology as an undergraduate and also completed the master’s program at NYU; one of the things that was always interesting to me is how people make decisions, and how that impacts purchasing behaviors, brand development, and product development. After finishing at NYU, I transitioned into consulting for companies to help them understand their consumers better to increase their market share, develop products, and potentially reposition brands. I was working for massive corporations like American Express, Viacom, Rainbow Media, Time Warner, and Pepsi Co.; they were all trying to get a bigger slice of a competitive pie that was quite saturated with their apt competitors. I spent many years analyzing markets and trying to help those companies.
I moved to California in 2011, and started really looking at what was happening out here in the cannabis industry. From a psychology standpoint, my brother, who’s my business partner, always talked about how in finance, psychology is a really key aspect because the markets are very much a psychological phenomena; people and markets react to things. I saw that cannabis was an emerging market opportunity, and unlike the businesses that I was working for—ones where they were all competing for a very addressed market—cannabis is very different because the market is still unaddressed. There’s a lot of pent-up demand around cannabis from a medical and adult use standpoint, and there aren’t as many products and services to cater to that. Also, the businesses that are running tend to be underserved by software products, appliance solutions, and other aspects. For me, it was just a blank slate of opportunity. I started having conversations with my brother, who came from a more traditional finance background, and he thought we should put together a fund.
[OnlineEducation.com] Can you tell me a little bit about your transition over to the West Coast culture?
[Ms. Paxhia] I was in New York, and then I moved to California because I was already doing a lot of work with companies on the West Coast. Also, I was interested in just getting more access to nature, the outdoors, and a focus on health and wellness. California is also the oldest market for cannabis and the sixth largest economy in the world. Plus, we’ve seen what California can do for wine, beer, and coffee; they really know how to take something that can be commoditized and mass produced, but instead really focus in on the craft nature of it and build experiences around it. It’s all about experiences with the Millennials, and I don’t see that changing with the generation behind them.
Colorado passed a recreational marijuana law and it went into effect in January 2014. The adult-use market opened up, and then shortly thereafter, Washington state and Oregon passed similar laws. More states passed it in November last year. So being in California was really important for us because we wanted to be near the Silicon Valley tech community, which we felt would be the nexus of cannabis and technology.
[OnlineEducation.com] One thing that impressed me about Poseidon is all the different verticals that you invest in. Can you tell me more about ag-tech, software as a service, and the genetics/lab testing? What do you look for in your potential investments across these areas?
[Ms. Paxhia] The first thing we are trying to look for is team. You can’t always find the perfect team in a company, but you try really hard because every time there’s a challenge in a company, it usually comes back to a team problem, so we really try to look at the founders.
Also, it’s very much about looking at the gaps in the industry and the areas ripe for disruption. Agriculture technology, for example, we’ve focused on for a long time because the existing practices around cultivation were super inefficient; it’s just not good for the bottom line or the environment. Cannabis tends to be a testing ground because it’s a premium priced-product, but at some point it won’t be; it’ll be commoditized. I think that having the opportunity to improve growing efficiencies is something that’s been important to us.
Then, software as a service: these business owners and managers have been operating with pencil and paper—quite literally—for years, and that slows them down; it’s more expensive; it’s not as transparent; it’s also hard from a compliance standpoint. Technology companies who serve the business aspect with point-of-sale services, sales-tracking, compliance, and data analytics have been absent but now are emerging.
We talk about what it was like during the Gold Rush with Levi Strauss and the bankers. Those companies became very, very wealthy at the edges of the Gold Rush, but they weren’t the ones with the pans in the rivers doing the work.
[OnlineEducation.com] For most of these smaller ventures, do most of them come to Poseidon, or do you seek out the ideas you’re interested in?
[Ms. Paxhia] It goes both ways. We get a lot of inbound inquiries, but they can be difficult to address; we’ve gone after a couple of them. We go to job fairs and see who’s hiring, and start talking to those groups before they need to raise money. We try to just be everywhere. Right now, the deal flow is ample, but we don’t take it for granted because someday it will be more competitive as more investors really come into this phase.
[OnlineEducation.com] Can you tell me about one business or service in the cannabis industry you think holds a lot of promise in the future?
[Ms. Paxhia] For us, data analytics is really exciting because everywhere in the world, everyone is very focused on trying to understand or put meaning behind behaviors. That also ties to my background of being a researcher. I think that having access to data, understanding what the modern cannabis consumer looks like, what their preferences and behaviors are, and enabling people to better match the product to their preferences is really exciting.
[OnlineEducation.com] Has there been any change in strategy or fear with Attorney General Jeff Sessions in power, someone who has explicitly stated his opposition to marijuana?
[Ms. Paxhia] Yes. He is a nightmare. He makes life really hard for people. He ruins medical patients’ lives by making it harder to access, and he’s very ignorant about it. It’s too bad because he could be taking some time to become educated on a hot topic. But we can’t change that, so we’re just trying to continue to grow the industry, and I think people are rising above the assumptions or stereotypes about the industry.
You know what it has done: it’s actually enriched Canada. We’ve left money on the table in the country. My brother always says that capital flows to where it’s treated best, and right now Canada has been a better environment because it’s federally decriminalized and PM Justin Trudeau has said repeatedly that he’s in support of full legalization. It’s just another area where the United States is falling behind.
These other leaders are really supportive of innovation, growth, and the whole environmental impact of what we’re doing, but we’ll see. It could turn around at that level, so I’m optimistic. There’s nothing like the American entrepreneurial spirit to unleash fantastic companies.
[OnlineEducation.com] Do you see California’s new legalization of recreational marijuana as a significant tipping point?
[Ms. Paxhia] Yes, without question. I don’t think we have any idea yet what that will unlock, so I think it’s pretty exciting to see what’s happening there.
[OnlineEducation.com] Moving to another topic: what are your impressions of the demographics of hedge fund management and venture capital? Is it equitable?
[Ms. Paxhia] It’s mostly men that we interact with. There are a couple of females who are in the investment phase, and I’m really close with them; they’re people I respect very much, but in general, it’s men as far as the eye can see in the financial side of the industry.
[OnlineEducation.com] What do you think accounts for that?
[Ms. Paxhia] I don’t know. There are a lot of women in finance, but I just don’t know if they’re willing to have the potential resume risk of working in cannabis investing. I also wonder if the male investors are hiring females. It may just be that they’re not being presented with the opportunities. My brother is, of course, the exception to that; he’s the only fund manager that has a female business partner in the industry right now.
[OnlineEducation.com] Have you faced any unique challenges being one of the only women in your position? Have you experienced any situations where you think things would have been different had you been a man?
[Ms. Paxhia] Yes. I think fundraising is harder as a woman in general—a belief supported by statistical information about the amount that women raise and the frequency with which their raises are successful. Sometimes I wish I had calibrated a little bit better when we were in heavy fundraising mode and potentially had Morgan, my business partner, make a couple of those calls; reflecting back on it, I do think that I might have been received differently.
I think the majority of the investors in our fund, for example, are men; the great thing about them is that they tend to be incredibly progressive and smart people. I think very highly of the investors that we have.
It could be more challenging as a woman to try and raise money for female entrepreneurs, as well as for fund managers. Sometimes I feel like if you’re the female at the table, sometimes the eye contact doesn’t go to you; it goes to your male business partner, and that can be frustrating.
I grew up sailing, which has been a more male-dominated sport; I was used to spending more time around men. Sometimes I think about that when I’m sitting at a table with all men: “Well, here I am again—the only female in the boat.” My sister is the same way. She tends to get out there. She’s a surfer, and she’s the only female in the lineup half the time. I think our dad and mom did a really good job of not letting us think that we were any less than the guys.
[OnlineEducation.com] Do you think differences in treatment are rooted in old, tired assumptions? Or is it something else unique to working in finance and investments?
[Ms. Paxhia] I was a psychology major, and I think that insecure men in general have a difficult time with smart women. I don’t think that it’s unique to investment, but I believe that in general, the finance world is more male-centric, perhaps due to societal assumptions that men are good at math and women are not. I do get intimidated occasionally when I’m in a more traditional finance situation just because it does tend to be extremely male, and they’ve all been raised in that faith.
[OnlineEducation.com] Taking those challenges into consideration, do you think it’s getting better or worse for women? I know that the percentage of women working as VCs is low, and there’s also a very small slice of the pie going to female-owned businesses, as well. Do you think that we’re moving in a positive direction?
[Ms. Paxhia] Silicon Valley has its own issues with equity, and we’ve heard that time and time again with the tech companies. I do know women who are on other VC teams in a more traditional space like General Catalyst, and I think it will move in a positive direction because women are strong analytical thinkers and good listeners.
In terms of women getting investments to their companies, I’ll say we take—or I take—more meetings, cold meetings, and inbound inquiries from women founders. I try to almost always respond to a female founder if I can.
One of the things that’s depressed me is that if you’re a female, you’re going to raise around 40 percent less money, and you have only half the chance of having a successful raise at all. And then—this statistic threw me off the most—the better looking you are, the worse you’re going to do at raising money. I don’t know if there’s some implicit bias that you can’t be smart and pretty. You never know how statistically significant these studies are coming out, but…
[OnlineEducation.com] And the external validity…
[Ms. Paxhia] Exactly. So I don’t know where they were pulling that from or how they were measuring it, but I feel like it was in TechCrunch at one point.
[OnlineEducation.com] What advice do you have for other women who are aspiring to manage funds such as yourself, become VCs, or otherwise work in finance?
[Ms. Paxhia] I think it’s a great place for women to work. Finance is a great place for women to work, and if they’re interested in it, they should go for it. The skills that go into investing are not just about going to college and having a finance background; those things are great on paper, but being an analytical thinker is—I think—one of the most important attributes. Just being passionate about growing businesses is another key aspect. It’s something women are probably inclined to do just as well as men—if not better—so I think it’s a great time to jump in while being aware that there may be some challenges along the way. Like I said before, I don’t think that it’s any different than other spaces—media, product companies, or any others. It’s just a good time to get involved.