Investor Insight: Izzy Zalcberg, Chicago, IL
When you’re sitting across the table from an investor, you can’t help but feel that they have something that you don’t, and that’s a valid feeling; they have capital – a resource that often many startups need. But remember, everyone starts somewhere and with this week’s private investor, Izzy Zalcberg, Chairman of Panther Biotechnology, Inc. (OTC:PBYA), you’ll find what he believes to be the keys to success. And this is coming from someone who started with nothing and helped 2 companies grow that later sold at a hefty price tag of $1.2 Billion…
How did your entrepreneurial journey begin?
My parents are concentration camp survivors. I was born in Israel in 1948 and came to the United States in 1958. I put myself through the University of Illinois and started working as an option trader on the Chicago Board of Options Exchange and I started making a lot of money. Soon after, in 2009, I was diagnosed with cancer and underwent treatment for about 2 years. As a result of that, I decided that I really wanted to do something worthwhile with the money I had made in my career as a trader and I believed that the best way to do that was to invest in healthcare and even more specifically, healthcare surrounding cancer cures and alleviating the side effects that accompanied treatment.
What was the motivating factor for you to invest in the cannabis industry?
I believe that the cannabis industry is an emerging market that has unlimited upside. I also view the plant itself as an alternative to traditional medicine; I don’t see it as a replacement for modern medicine, but rather a choice, an alternative to traditional medicine. I view the cannabis industry as being in an area that will be highlighted for alternative treatments for healthcare in general. It is also an area that will develop as another sector of the entertainment and recreation industry, alongside travel and gambling. The only drawback on the upside of this industry is that there has to be a lot of legislation worked out first.
I view the cannabis industry as being in an area that will be highlighted for alternative treatments for healthcare in general.
One thing many first-time entrepreneurs struggle with is raising money. How would you suggest someone to overcome this problem?
There are a lot of different ways to challenge the money issue. The first thing that I see that is available for a very bright idea is crowdfunding. Crowdfunding, to me, is what advertising used to do; you have the ability to put an idea out there and have people invest in that idea. Aside from crowdfunding, there are other options for entrepreneurs looking for capital. For example, you can apply for a grant in healthcare or you can gather a list of enterprising individuals who have made their own money like myself, people called Angel Investors, who are willing to give you money for your idea and are not necessarily seeking to make a profit off of it. Angel investors are looking to advance ideas, get their money paid back to them, and then take that money and put it into yet another great idea.
What is your best advice to cannabis entrepreneurs when they pitch their project to you?
Make it concise; Have a mission statement, an exit strategy, what you’re going to be using the money for, what the investor will get for the return of their money, and don’t waste a lot of time with paraphernalia that doesn’t make sense. You can’t sell a concept to a smart investor with fluff; It has to be factual, to-the-point, and very brief. My suggestion is that you make it simple; A term I use for this is K.I.S.S., Keep it simple, stupid! Whenever you try to pitch an idea to an investor, assume that they have no understanding whatsoever of what you’re about to talk about. Make it simple as if you’re explaining it to a child; That kind of insight communicates volumes. If I don’t have to spend a lot of time trying to figure out what the communicator is saying, it’s much easier for me to decide whether I want to invest or not.
Can you share your thinking on how to identify a company as a great opportunity?
Yes! The first thing I take a look at is the management; that is the FIRST thing that I look at. I have a philosophy that poor management can destroy a great company and great management can turn around a mediocre or struggling company. A great management team is very difficult to obtain, but it should be TOP priority; it is key to a company’s success. A good management knows the game plan and can execute it. So, when I’m being pitched by a person who wants my money, I first interview them and evaluate if they have a good, mediocre, or poor management team. The second thing I try to negotiate in my head is whether I believe that this person cares as much about my money as they do about their success. The problem with a lot of managements today is that they’ll come to investors like myself who are well off and they don’t even think about the possibility of having to come back to us to ask for more money. If you have to come back to me for more money, you better have a good reason why your projections weren’t correct; the more often you come to me, the less money I want to give you. If you’re executing and exceeding your projections and execution, then you’ll get more money.
When I talk to a management and I ask them what they plan on doing… I expect a concise answer followed by high-performance and I expect that they won’t ask for a lot of money. I shy away from companies that have a lot of debt. When you have debt, what you’ve done is released and relinquished control of your own company. That’s the MAIN fault I see in startups of all industries. If you go to the bank for a loan and aren’t making payments, they get to take your car, your technology, and your home. You don’t want to put your company in someone else’s hands.
In my first conversation with a management, I encourage them to put in as much of their own money as they have as well as getting any friends or family members to invest as well. If people like you and they believe in your ability to achieve success, they’re the first ones you need to talk to. Taking on too much debt will kill you, even if it’s at a low interest rate.
What are the key ingredients in building a successful start-up?
The key components are these:
- Build a team who collectively believes in and is passionate about everything you believe in
- Curate a team that works together like a well-oiled machine
- Ensure that your entire team has similar ideas about the direction of the company
- Designate a person or persons of authority, so that there is no misunderstanding or conflict over decisions
My idea is always to put together a Triple-A team and move forward.
How does the role of the founder evolve as a company goes from seed to early growth to later-stage scaling?
The person that is there at your seed stage, should be the person who’s with you all the way through to the exit strategy. If you’re able to make me an investor and a lender and I like what you’re doing, meaning you’re executing on everything you told me, I’ll be there at Stage 1, Stage 2, Stage 3, and hopefully, the exit strategy as well. You want to make the person who is your funder, one of your best friends on a business-basis. When something is not going well, you should go to them; they’ve got their money on the line, just like you have your sweat and tears on the line. People like myself often have the experience and knowledge to help you face the challenges that come along with building a business and we are here to help.
What is your new knowledge in regards to investing in the cannabis industry?
It’s a very brand-new industry that is being torn by legislation; The federal government does not agree with the state governments and there are even state governments suing each other to prevent other states from doing something about it. That’s always the growing pain in a new industry. I believe that this will, in time, get figured out. It definitely won’t be tomorrow, but I believe it will be soon! We’re getting closer and closer to making the right decision and I could even see us making that big decision in the next 12 months!
As an investor, what are some of the key things you wish cannabis entrepreneurs knew?
There are always going to be those entrepreneurs that succeed and those that fail. I believe that the distinction between the two is the ability to execute. If you make a business plan that sets out to accomplish X, Y, Z… get X, Y, Z accomplished. I would also seek out people in other industries and gain knowledge from them about how they overcame some of the challenges that came their way. There is always a roadblock in every emerging industry; reality is, where are you going to be at X and where are you going to be at Z? And how do you navigate from X to Z? The journey is really what builds your character, not the destination. Learn from your mistakes, learn from the people who’ve already made the mistakes, and try not to make the same mistake twice. You can make new mistakes, but don’t make the same mistake twice.
I encourage everyone in this industry to gain a wealth of knowledge. Learn as much as you can about business in general, about the cannabis industry more specifically, and learn from people who’ve been successful in their ventures and study what they did to become successful. Carry that knowledge as part of the development of your own character. You have the power to develop your own choice and your own personality. Don’t underestimate the power of self-development; this is how you can distinguish yourself.
Lastly, success needs overtime commitment, but is only worthwhile if family and health are not damaged. Find balance; its an absolute requirement.
I encourage everyone in this industry to gain a wealth of knowledge.
What needs to happen in order to create a billion-dollar company in the cannabis industry?
That’s a very very tough question to answer. I can tell you that to become a ‘whale’ in our industry, you’re going to have to capture the attention of the institutions. That individual can become a billion dollar enterprise. When you’re talking about companies like Amazon and Facebook,… you’re talking about companies that just recently surfaced in last 10 years that were driven to billion dollar valuations because the institutions kept throwing money at them. The cannabis industry is more of a niche market compared to that of social media or online shopping, so to become a billion dollar industry, you’re going to have to become a lot more creative than what they even did.
How do you decide between shutting down, keep funding, or selling your start-up?
There are points you’ll reach in your life when each one of those answers makes more sense. As I get older, I am always thinking about an exit strategy; I’m 66 years old and I want to make sure that in 4 or 5 years, I won’t be having to put full-time hours into developing the startups. That’s my stance at this point in my life. When you’re young, you can take more chances because you always have the opportunity to start again. Whatever point you are in life and resources is what will help you decide whether to shut down, grow, or exit. I don’t have a one-size-fits-all answer to that question because it will always be based on the individual.