This ex-Morgan Stanley SVP left banking to cultivate cannabis – and has no regrets
Plenty of people have left huge, prestigious Wall Street banks to join an elite boutique, hedge fund, private equity shop, Big Four professional services firm or management consultant. Others former bankers have started their own wealth management or headhunting firm, while some have decided to ride the fintech wave. A minority have pursued more off-the-beaten-path endeavors, such as wine broker, Hollywood talent agent, pastry chef, swimwear designer and craft beer brewer.
None of those moves, though, seems quite as bold as the decision of Derek Peterson, a former senior vice president at Morgan Stanley, who left to become a cannabis entrepreneur, especially given the U.S. Drug Enforcement Administration’s classification of marijuana as a Schedule 1 substance, the same category heroin is in.
On the other hand, maybe Peterson picked the perfect time to leave Wall Street to join the cannabis industry as the legalization movement continues to gain momentum, with many polls finding that a strong majority of U.S. voters support marijuana decriminalization or outright legalization.
From Morgan Stanley to cannabis cultivation in California
Peterson graduated from Pepperdine University’s Graziadio School of Business and Management and spent five years working as a wealth manager, first at Cromwell, Weedon & Co and then at Wachovia.
Then, toward the end of 2008 – just before the stock market reached its nadir – Peterson joined Morgan Stanley Smith Barney, as senior vice president, where he and his team managed a combined book of close to $100m. When the effects of the global financial crisis started to hit, he began to think about leaving the sector.
“I had become disenchanted with finance, and I had started exploring potential marijuana businesses and eventually actively looking into starting Terra Tech,” Peterson said. “My boss found out and gave me ultimatum, ‘You’re either in or out,’ and I decided to jump head first into the cannabis space.”
Peterson used his industry connections to secure seed funding, and in 2010 Terra Tech Corp. was born in Irvine, California. In February 2012, Peterson executed a reverse merger takeover or reverse IPO and now it is publicly traded as TRTC on the OTCQX market.
“My first job on Wall Street was in 2000 just before the dot-com implosion, then the September 11th attacks, which completely rattled the markets, then the 2008 credit crisis,” Peterson said. “My career in finance was about 10% non-crazy static times, while the rest was non-stop market turmoil, and I became frustrated with my ability – or lack thereof – to control the outcomes, with companies telling you they’re doing really well and you’re trying to evaluate them, but you don’t have control of management.
“We didn’t have sufficient autonomy or insight to understand the risk profile or compliance and control structures of many of these companies, nor did many other or the 2008 crisis wouldn’t have taken place,” he said. “After I left, senior Wachovia executives said, ‘The markets are in turmoil but we’re fine – we’re solvent.’ I watched former colleagues, people who had worked there for a long period of time and built a sense of family with the company, financially wiped out.
“It hurt when I watched the CEO at that time get an $8m golden parachute package, which was the topper for me – I knew I wanted to look for something else where I could have more control over the outcome.”
The growth of Terra Tech
Terra Tech Corp. “is a vertically integrated cannabis-focused agriculture company that is committed to cultivating and providing the highest quality medical cannabis and other agricultural products.”
“I didn’t have a biotech or a tech background, but I knew cannabis – I’d used it recreationally and medically, and I knew that everyone on Wall Street used it,” Peterson said. “I asked myself, ‘How do I get involved and use the skill set that I’d developed as a banker and wealth manager?’
“Taking a company public was a nice amalgam of my skill set, but Terra Tech was a little ahead of its time in 2010, but fortunately in hindsight it was the right move,” he said.
Terra Tech Corp. is a holding corporation with several subsidiaries, including Blüm, a retail medical cannabis facility selling to patients with chronic medical conditions and a doctor’s prescription.
“Blüm is a retail facility that services 1,000 people or more a day,” Peterson said. “It’s usually about three times as busy as the busiest Starbucks you’ve ever been in.”
IVXX (Roman numerals for 420) produces cannabis products, including custom-rolled joints and concentrates such as oils and waxes.
Edible Garden, headquartered in New Jersey, uses “classic Dutch” hydroponic farming methods to grow herbs and leafy greens such as living butterhead lettuce that it sells via a distribution network of traditional grocery stores, including ShopRite, Kroger and Walmart. MediFarm is a medical cannabis enterprise in Nevada, which Peterson sees as the next frontier of expansion for Terra Tech. Its medical marijuana establishment license is still pending.
“This has been more difficult than anything I’ve ever done in my life – I underestimated how challenging it would be,” Peterson said. “At the banks I worked at we had huge legal teams, huge audit teams, expense accounts and every comfort you can think of.
“When you jump to a startup, you’re all those people until you build up enough sales to hire a team, and I was running up hill at more than one occasion, but now I have control,” he said. “It’s probably the most fulfilling thing I’ve ever done in my life, aside from having my children, and it’s certainly been the most challenging – the reward is so much sweeter because it was so challenging.
“It would have been easier to stay where I was at but working at a bank was nowhere near as rewarding – I like the chaos and the challenge, but my grey hair has tripled.”
Photo courtesy of Terra Tech Corp.