Agrify Helps the Little Guy and Social Equity Companies Win in Cannabis
An Interview with CEO Raymond Chang
I’m bullish on cannabis. The plant, the industry, the benefits to society and the economy. You name it, I’m probably bullish on it (though I have been skeptical of some companies). I’m not alone in thinking like this, but much of the focus from cannabis investors has been on multi-state operators (MSOs). While those companies are attractive, they are just part of the cannabis ecosystem, and there are many other interesting investments that few are discussing.
In my experience, the best investments are those that solve a problem. And one of the biggest problems in cannabis these days is not only the lack of capital, but more importantly the lack of talent. Everyone knows there is a skilled labor shortage throughout the U.S., but the problem is even more acute in cannabis. Who has long term experience with growing cannabis at scale? Not many people, as it has only recently been legalized in many states. Talk to insiders in the industry and many say their biggest challenge is skilled talent. And that’s why many MSOs are using acquisitions to beef up in terms of experienced employees. There is a war for talent, especially on the cultivation side in the industry.
But what do you do if you are small player, a regional cannabis company or worse yet a social equity license holder who doesn’t have the big bucks to recruit the few people who know what they are doing? What if you have a license and don’t have enough money or expertise to grow cannabis at scale?
And this is what makes Agrify (NASDAQ: AGFY) so interesting. They make the equipment and software needed to grow premium indoor cannabis at scale. They sell pods called vertical farming units (VFUs) and the backend software and analytics to help the little guy succeed. But they not only sell you the “picks and shovels” but will finance it for you and help you from soup to nuts in planning your facility and sharing “grow recipes,” as well.
But the best part about Agrify is that because it doesn’t touch the plant and instead sells the picks and shovels, it can trade on the NASDAQ. With the recent news that SAFE banking has yet again been blocked in the US Senate, combined with the bear market in cannabis, capital is more precious than anything right now. Agrify, with its NASDAQ listing and rock-solid balance sheet, can help small cannabis companies like few others can.
And that’s why I think following what Agrify is doing is so fascinating. I interviewed their CEO Raymond Chang and this is what I learned:
1. Agrify is a play on the shortage of talent and a way for social equity cannabis companies to succeed.
2. But it’s not just the small guys, Agrify is now working with industry heavyweight Curaleaf (OTC: CURLF) and we can expect more news next year on their research and development partnership
3. Agrify is building a potentially lucrative razor and razor-blade business where it sells the equipment for low margins upfront to earn wonderful long-term software “SaaS” revenue on the backend. In 2022, this SaaS revenue should start to soar.
4. Agrify is consolidating other companies and moving into processing and manufacturing to be able to offer a total solution to customers.
5. The most fascinating idea is the implications that Agrify’s small customers will all be using the same equipment, same software, genetics and grow recipes. This should enable Agrify and its customers to have the same consistency across states. What is to stop Agrify from consolidating all these customers once cannabis is legalized into one giant MSO? And it could do that starting now all from a NASDAQ listing.
I really think Agrify is a company to watch, and I hope you enjoy the interview as much as I did.