Josh Held had a spring for the books. The entrepreneur closed two exits in consecutive months, cementing his success and influence in the wellness and cannabis industries. In mid-April, Acreage Holdings closed its $160M buy of cannabis-infused edibles and beverages manufacturer Form Factory Inc., which Held co-founded and continues to serve as president.
Less than a month later, CURE Pharmaceuticals paid $115M to acquire Chemistry Holdings, a company he founded and led to revolutionize drug delivery and development, including the creation of chewable, oral thin film, quick-dissolve tablets, and ingredient delivery systems. Quite a run, considering he had no experience in these industries a decade ago as the recession raged, which led him to acquire a host of credentials after graduating from California State University, Long Beach.
“I was in retool mode,” says Held, who in a calendar year acquired a real estate broker’s license, a Series 7 to sell securities, a Series 66 for investment advisory services, and an insurance license. After a brief stint working at a Northern California law firm, he relocated to Los Angeles to be with his fiancée.
A friend who worked at MTV helped him land a job on the digital media team under parent Viacom. His media-buying clients were Red Bull, Adidas, and Honda, among other heavyweights. “It really gave me an understanding of audience and the digital landscape,” he says. After a year, he left to become a financial advisor at J.P. Morgan, which better aligned with his credentials and was far more lucrative. He built a book of clients with more than $100M in assets.
Working through day jobs, he self-funded a chewable alcohol concept in 2009 that was more garnish than spirit. His now wife, Stacey, who was managing nightlife and music professionals, put him in touch with DJ, songwriter, and producer Diplo. For his seed round of capital, Held rallied an eclectic group of backers, including Diplo, entertainment company Disco Donnie Presents, the Cipriani family, and Brando Correggiari, moguls of hospitality and fashion who helped him raise about $750,000, enough seed capital to launch Chemistry Spirits.
His oracle of micro-encapsulation systems and processes, Teresa Virgallito, unlocked the first of many products for the company. “We could put a greater density of an ingredient in a chewable format then was previously possible,” Held says. The ingredient could be a proven pharma-molecule, nutraceutical, vitamin, or herb, with time-released ingredients and capable of being made in any color, shape, and flavor.
In 2012, he raised an additional $750,000 from the likes of Dyrdek Machine and Michael Greenberg, president and cofounder of Skechers, transforming Chemistry Holdings into a platform agnostic to industry use and poised to repackage molecules of all kinds.
Most of Chemistry Holdings’ early work was consulting for nutraceutical companies, helping them fix the instability of ingredients, a challenge facing many in the emerging cannabis industry.
The company’s breakthrough came in 2015 when transformed cannabis distillate, the pure, potent, odorless oil, into powder. Made by Science Inc. was spun off to solely handle cannabis operations and silo the risk. It raised $1M from North Bud, a Canadian cannabis fund. “I really started to see the opportunity for repackaging products,” Held says. An encounter with Tony Bash at a cannabis event in Aspen led to a partnership and an eventual merger with Gesundheit Foods, a commercial food co-packing company.
This marriage of technology and scale was overseen by Held and Todd Boren, managing partner of MacArthur Capital, which became the largest shareholder of the newly dubbed Form Factory. Held and Boren embarked on a three-day, 27-pitch road show last year in Canada to raise money for the new entity, meeting with the industry’s largest and most influential players. Reps from Acreage Holdings visited Form Factory’s Portland, Oregon, manufacturing and distribution operation and offered to buy the company outright. The all-stock deal, announced in December 2018, closed in April 2019.
With the use of the technologies in the cannabis vertical now set, Held reengaged Rob Davidson, CEO of CURE, to potentially unload Chemistry Holdings, which held intellectual property in hemp, CBD, and other non-psychoactive products. With the help of Entourage Effect Capital, Held raised $10M, and in May 2019, Chemistry Holdings was acquired by CURE, positioning Held as one of its largest shareholders and with a board seat, while providing a sizeable return for investors.
CSQ recently caught up with the busy CURE director and YPO member to discuss innovation, lessons learned, and his leadership style in one of the nation’s most volatile sectors.
What were some of your earliest lessons in business that you continue to apply today?
When you’re building a business that has operationalizing manufacturing as part of it, it’s going to take three times longer and cost three times more than you planned. Also, much of my success comes from my ability to communicate what my needs are, what my expectations are, and ultimately, the results. For me being very levelheaded and having a range of skills—both professional credentials and otherwise—allows me to listen. Resilience helps too.
You’ve launched, grown, and sold two companies for more than $100M. What were the big drivers in those exits?
To enable platforms, you need sound intellectual property that allows for differentiated products, but you also need scale. The combination of innovation and scale has unlimited upside if positioned correctly.
What are some of the biggest challenges you’ve overcome or lessons you’ve learned?
Raising money is really hard and while raising that money, stretching those dollars to meet payroll and keep morale high and manage personal life. And the ability to be agile and overcome adversity. I wouldn’t say it’s a series of failures, I’d say it’s a series of walls that you run into. You can’t give up. You have to look at every situation as something that can be overcome. If you ever change that frame of mind, you can go back to a 9-to-5 somewhere else.
What are the biggest problems in cannabis product development, manufacturing, and distribution?
R&D. Every product needs to be developed before it’s scaled. Senior talent in other industries is still shying away from coming in. They’re still waiting for those lower barriers to be removed, and they’re not going to compromise all they’ve built in other categories. The enabler will be fed permissibility, not legalization. So, enterprise can start to support the category. It will be a lightning bolt for the economy because of all the peripheral industries impacted. The back of the house, enterprise solutions that all other industries have in terms of centralized procurement, lines of credit, HR, software, and solutions—name it, we don’t have it. So it makes it that much harder to recruit talent. The other pain point is consistency.
What are some misperceptions about the cannabis industry?
That everybody who consumes product is just trying to get high. Nine of out 10 people we make products for [use the product] to help them with something versus recreational consumption. The biggest misperception is that recreational use is what’s driving the cannabis space. It’s people with therapeutic needs looking for alternatives to other formats—opioids and otherwise. I find that part of my job rewarding, though. I wanted to do something that was having a legitimate impact. We make products that help people in a whole range of ways, whether it’s epilepsy, sleep, pain. It’s an alternative to things that may be harming them.
How do you navigate the changing regulatory landscape of the cannabis industry?
Having a great network of strategic partners that are spending a fair amount of energy and capital to understand how to navigate the value chain today. It’s a brain trust that our legal team supplements to help us understand the risks. As an operator, I’ll always lean on legal to keep us out of trouble, but in an ever-evolving industry such as this, business needs to reserve the right to quantify the risk and take action or we’d be out of business.
What is the next big evolution in the cannabis industry?
Pharma truly stepping into the space in a clearly defined way. For example, any product over a certain dosage becomes a pharmaceutical versus a recreational-focused product for consumption. I’m a huge fan of low-dose sessionable products for recreational purposes. Right now, the market really needs to define use cases, and pharma needs to step up and say anything over a certain dosage form, we are making as an optimal sleep aid or to mitigate pain or inflammation, etc. As data becomes more available to substantiate therapeutic effect and the value chain can more consistently produce these inputs that will drive product efficacy at scale, the full potential of this industry will become a reality.
