Why this brother and sister quit their jobs to run a cannabis hedge fund
Emily and Morgan Paxhia’s respective career paths started off in vastly different areas, but they ended up intertwining, as the siblings decided to leave their jobs to launch a firm focused on legal cannabis investments. They currently manage a marijuana-focused hedge fund calledPoseidon Asset Management, with more than 27 cannabis-oriented portfolio companies spanning agriculture and machine learning, but their plan is to eventually move towards raising a venture capital fund.
Morgan has a wealth management background. After graduating with a B.S. in applied mathematics from the University of Rhode Island, Morgan worked as a sales and service coordinator at US Watercraft before becoming a financial adviser associate at UBS. He does due diligence on cannabis companies and develops and implements Poseidon’s investment strategies.
“My brother [Morgan] came from UBS and was working for a smaller RIA in Rhode Island, and he had the same reasons for starting Poseidon as I did,” Emily said. “I hear this every day from friends on the more traditional investment side of the industry: It’s hard to do anything remarkable or new, and other markets very saturated, and many investment strategies are played out. We see cannabis as an alternative investment class with a linear upward trajectory and an opportunity to generate some real wealth rather than follow a herd mentality.”
Emily got her B.A. from Skidmore College and her M.A. from New York University, both degrees in psychology, with the idea of becoming a clinical therapist or an academic. Ultimately deciding against pursuing that profession, she worked as a market research analyst at Houghton Mifflin, followed by consulting roles at Sachs Insights and Miner & Co. Studio, where she worked for brands such as American Express, Time Warner, Viacom, Pepsi, Tropicana, AMC Theatres and the Independent Film Channel (IFC).
“We have different skill sets – he has a broader analytical skill set, so he analyzes the deal flow that comes in, while I handle communications with investors and create the content that we put out into the world,” Emily said. “He does more of the nuts and bolts of analyzing the financials of companies – he likes working with numbers and focusing on the details, so he’ll dig in and look at the nitty gritty of the financing, while I primarily focus on relationship-building.”
[caption id="attachment_256285" align="alignnone" width="300"] Emily Paxhia of Poseidon Asset Management[/caption]
If you’re going to San Francisco…
Before the siblings had even started contemplating a career change, much less going into business for themselves, Emily had decided to move from New York to San Francisco.
“I traveled to the west coast regularly for research projects, and I liked the entrepreneurial spirit and access to the natural world,” Emily said. “When you’re working really hard, it’s nice to be able to go hiking or sailing, and the boom in cannabis has been fascinating to be a part of since relocating to San Francisco.
“With cannabis, my brother and I saw an untapped market with opportunities to invest in companies that could really make a difference and reach a whole new demographic or serve the existing demographic in a better, more innovative way,” she said. “That’s when my brother quit his job and moved to the west coast, and we began working to launch what would become Poseidon Asset Management.”
The opportunity has been fueled by regulatory changes at the state level in the U.S., as ballot referendums have made cannabis fully legal or decriminalized for medicinal and/or recreational use in more than half of the 50 states, although it remains classified as a Schedule 1 substance at the federal level.
“In 2011, we just starting to see the rough shapes of more sophisticated brands starting to emerge in the cannabis industry, and we started to see some of the ballot initiatives, most significantly 2012 when it was legalized in Colorado,” Emily said.
Poseidon Asset Management launched in 2014, and Morgan followed his sister to California soon after to focus on the business full-time.
“There is so much untapped potential and so much momentum with Colorado adult use going online in January of 2014, when Poseidon officially opened to outside investors,” Emily said. “We’re a bit early, but the minute it becomes a popular idea it’s too late.
“People might think we’re crazy, but we’re young enough that we can give it a shot,” she said. “It’s the right timing form a personal and market standpoint – we’re seeing more sophisticated investors coming in [interested in investing in cannabis companies].”
Getting out of traditional finance roles
One factor spurring their decision to go all-in on Poseidon was the Paxhia siblings’ feeling that the financial industry is going to go through a significant transition that is already underway. That made an entrepreneurial path more appealing, despite the risk and uncertainty involved.
“Financial services is changing all the time, with fintech companies like Betterment and other robo-advisers changing what it means to be an RIA and what you can do with your investments, and investment banking landscape changing dramatically since 2008, becoming a more difficult space to play in,” Emily said. “If you’re going to do something that’s nontraditional, you have to be ready for the challenges.
“In a traditional [financial services] environment, I’m concerned about how long some of those jobs will be available, as fintech is making the process of investing capital in broad markets more automated, and you’re seeing good stats around it,” she said. “Those trends will generate a need to be creative in how you create a career in the financial world, because the path to wealth in that space not the same as it’s always been.”
Photo credit: razyph/GettyImages; headshot of Emily Paxhia courtesy of Poseidon Asset Management