When Brendan Kennedy gave up a career in finance to gamble on the commercial potential of legalised cannabis, everyone thought he was crazy. Now his company is valued at $3.7 billion. His next big idea? Weed-infused beer. Interview by Rhys Blakely.
Brendan Kennedy shifts in his chair, folds his arms and smiles. We're talking about how he made his fortune. "Probably the hardest thing," he says, "which people don't often ask about, was telling my in-laws."
Kennedy could boast of being one of the first people to become a billionaire, legally, from selling weed. You doubt, though, whether he ever would. When we meet in a boardroom in London, where the 47-year-old American entrepreneur is catching up with investors, he cuts an unassuming, almost bashful figure. He doesn't consider himself well equipped to deal with the media.
The polished brevity called for when he appears on the financial news channels doesn't come naturally, he says. Yet he's also conscious that he's worked himself into a position where he's expected to be an ambassador – he is the face, potentially, of Big Cannabis.
Eight years ago, he gave up a finance career in Silicon Valley to co-found Privateer Holdings, the world's first private equity firm to invest exclusively in pot-focused start-ups. In turn, Privateer created Tilray, a company that has ridden an extraordinary global surge towards legalisation and now supplies medical cannabis on five continents.
After Tilray floated on America's Nasdaq stock market last July, the shares soared in a manner seldom seen beyond tulip-bulb manias and dotcom frenzies. "We were caught off-guard," Kennedy says of the feverish investor reaction. Within weeks, an outfit that had made a modest US$20 million ($31 million) in revenues in 2017 was valued at more than $20 billion ($31 billion).
At one point, Kennedy's pay package for 2018 as Tilray's CEO, consisting of cash, shares and stock options, came to US$250 million ($393 million). The stock has since dipped – Tilray is now worth about US$2.4 billion ($3.7 billion) – and so has the value of the package. But at the close of last year, Kennedy was listed as America's second highest-paid CEO after Elon Musk, the Tesla and SpaceX tycoon.
And yet Kennedy, essentially, is still jockeying for position. Big Cannabis continues to search for its breakthrough, which is likely to require tie-ups with Big Pharma, Big Tobacco and Big Booze. He has brokered a US$100 million ($ 157 million) partnership with Anheuser-Busch InBev, the behemoth behind Budweiser, to create a cannabis-infused substitute for beer. The aim is to have a product ready before the end of the year for the Canadian market, where Tilray is headquartered and where recreational pot was made legal last year.
The idea is for something that provides a buzz without the downsides of alcohol. "I think what intrigues the beer companies is that you can have a low or no-calorie beverage," Kennedy says, "that doesn't leave you with a hangover."
A deal with the Swiss pharmaceutical giant Novartis, to develop cannabis treatments for conditions including epilepsy and post-traumatic stress, was the first such partnership between a cannabis outfit and a big drugs company. A separate arrangement, with the estate of Bob Marley, secured the rights to market weed and cannabis-infused lotions using the name of the late reggae legend.
The partnerships and the IPO (initial public offering) fireworks, combined with the building hype around the commercial potential of legal pot, have made Kennedy a poster child of the so-called "green rush".
After decades of prohibition, medical or recreational cannabis use is now permitted in around 40 countries and 33 of America's 50 states. Last year, the ordeals of Alfie Dingley, 6, and 12-year-old Billy Caldwell, both of whom have severe epilepsy, forced the British government into a landmark concession: there was a pressing case for letting people who might benefit from cannabis treatments use them, said the home secretary at the time, Sajid Javid.
But back in 2011, Kennedy was taking a step into the unknown. He was ditching a respectable and lucrative career as a Silicon Valley financier to deal in a substance that has skulked in the shadows for decades and is still entirely illegal under US federal law.
There was one evening, after he'd ploughed his savings into Privateer's first cannabis acquisition, when he didn't have enough money in his account to buy a pizza. The fear that the gamble might fail produced "a darkness unlike anything I'd ever faced", he says. There was, and still is, a very real chance that the hype around pot will fizzle out.
Understandably, he felt a certain trepidation about telling his extended family about the career switch. "My wife's grandfather was a Baptist minister. I mean, they're quite conservative," he says.
"Now my-mother-in-law sends me links to stories about medical cannabis legalisation. But back in 2011? People really thought we were crazy, that we had lost our marbles."
For decades, cannabis advocates have championed weed with a quasi-religious, almost cult-like fervour. Kennedy's approach, by contrast, is built on the premise that pot is no longer a countercultural product.
When we meet, he's wearing a conservatively cut chalk-stripe suit. His tie is black. His shirt is white. He wears his hair short and neat. He looks not at all like a cannabis entrepreneur and quite a lot like an FBI agent from the Fifties. He competes in Iron Man triathlons and we spend a while talking about how he paid his way through university by working on building sites, and about how great video messaging is when you're a dad on a work trip wanting to stay in touch with a toddler at home.
When he's away on business, he insists on returning to his home in Seattle for Friday nights and weekends. He can also tell you, because he is a data obsessive who has his assistant send him monthly analytics on his travel, that he took 91 flights during the first six months of the year. Altogether he gives the impression – and this is in no way meant as a criticism; in fact, it's a very likeable quality – of being really quite square.
Kennedy is an obliging introvert and a numbers nerd, and by the time this article is published it is likely that he'll have celebrated the birth of his third child, which will mean that he'll have a newborn, a three-year-old and a five-year-old. "I think probably the biggest thing that's changed is that when I travel, my wife has a bit more help," he says, when I ask how his material circumstances have changed in the past year.
"Right? Like that's probably the biggest change in my life. Just someone to help tidy up, drop off the kids, help cook dinner, things like that. It makes me feel less guilty when I travel."
But he's still operating in a kind of twilight zone. As well as remaining illegal under US federal law, recreational use of cannabis is prohibited in Britain, where many of his investors are based. Does he ever give abridged accounts of his travels when he passes through US immigration on his way home?
"Well, I don't say, 'I was just in Jamaica touring cannabis farms.' "
He grew up in San Francisco as the sixth of seven children and, while he smoked it a few times, he was never a big fan of pot as a youngster. "You know, my dad is 87. My parents got married in 1955. I'd describe them as a little more Frank Sinatra than the Grateful Dead."
He was born with a cleft lip that required surgery when he was eight days old, and his worried parents asked for him to be baptised before he left hospital. He attended a Jesuit prep school, where his dad was a science teacher. He went on to study architecture at Berkeley in California.
He was, he says, "a horrible architect; the artistic side was not in me. But I loved how complicated it is and how smart the other students were."
At graduate school, he studied engineering. During the early Nineties he moved to Seattle, where he wrote engineering software. "It doesn't matter if it's architecture or construction, software or building a company – it's all the same skill set," he says. "It's about taking an idea and then, step by step by step, turning it into reality. And that's sort of the thread that I see across these different things."
After going to business school at Yale, Kennedy landed back in California in 2006 to work for SVB Analytics, an offshoot of Silicon Valley Bank, which focuses on technology companies. The job involved evaluating fledgling start-ups. "I had all kinds of venture-backed start-ups as clients – software companies, hardware companies, biotech life science companies. Tesla was a client. Twitter was a client.
"I spoke to really smart people all day long and I had this little glimpse of the future – products that didn't exist yet, but soon would." He put together a mental map, a structure into which each new business proposition had a natural home.
"And then I talked to a cannabis company and I couldn't figure out where it fitted in the matrix. And that either meant it was a really good idea that no one was paying attention to, or was a horrible idea that all the other smart people had already dismissed."
The company, he decided, was not worth gambling on. "They were the wrong team, with the wrong strategy. But the industry? The industry was interesting."
Asked why public attitudes on pot have shifted, Kennedy says that it began with the use of cannabis during the Nineties to help Aids patients. It seemed to do them good, helping them to eat. He credits the internet with loosening the grip of an anti-pot establishment on how the drug was portrayed.
To form his own opinions, though, he wanted hard evidence. He began searching for data on the size of the market. What did the polling on public attitudes look like? How many states in the US were likely to legalise? How many cartel shipments were being seized by the US Drug Enforcement Administration? What were the State Department's estimates for international drug-trafficking revenues?
"We kept getting to US$40-US$50 billion in the US and, you know, US$150-US$200 billion internationally, no matter which source we used," he says.
Later, he visited cannabis growers to learn what was involved at ground level. "We went to farms in the redwoods of northern California and southern Oregon. We went to fields in Colorado and basements and barns in British Columbia. We went to the Blue Mountains of Jamaica. We went to licensed producers in Israel, from the Sea of Galilee to Gaza. And I did a trip to the Netherlands where I probably went to 100 coffee shops in 3 days."
He tried pot again, for the first time in years, sampling sleepy "indica" strains and comparing them with uplifting "sativa" varieties. "I tried various vape products. I found out, you know, how the cookies work."
Kennedy and his two Privateer co-founders, Michael Blue and Christian Groh, dressed down for these forays. But they still stood out in a world of potheads and bandit farmers. "One of the skills I didn't know I had was that I can go to any country and fairly quickly get into an illegal cannabis farm," he says.
"It helped me understand where the genetics [of the most coveted strains of pot] come from, how the supply chain works, how people deal with problems."
He left his job at SVB Analytics in the spring of 2011. A few months later he made a pitch to his old boss, a Silicon Valley financier. Soon afterwards, Privateer Holdings, a private-equity outfit with the aim of acquiring and creating cannabis companies, was formed.
Kennedy, Blue and Groh dipped into personal savings to make Privateer's first acquisition. They bought Leafly, a website where users reviewed different strains of pot. It was another valuable source of data.
In 2013, Canada's health department contacted Privateer. Canada was introducing a new medical cannabis licensing process and growers in the country needed capital. The health department wondered whether Kennedy would supply it. Unimpressed with the growers they met, he and his partners decided to become farmers themselves.
They used Leafly to identify two dozen of the most popular, high-strength strains of pot in Canada. They then set out to secure the plants. "We would go and meet people at a Tim Hortons [fast-food chain outlet], and we would follow them down a road. Then we'd have to ditch a car," Groh told Fortune magazine earlier this year. "We'd be in rooms with a lot of cash and weapons."
Were there any truly hairy situations? "We built a network of people around the world to trust us," Kennedy says. "We could always get a reference."
He was on the same page, he adds, as the people he was meeting. "We believe in the same thing. I mean, I believe fundamentally that prohibition is wrong. I believe that consumers and patients have a right to access cannabis. And when we talked about that to people, they believed us."
Eventually, they secured dozens of strains. Thousands of clones of the original mother plants are grown at Tilray's headquarters, a 65,000sq ft laboratory and cultivation facility in British Columbia.
So how about Britain? Where do we fit into the global drift towards pot becoming respectable? In the investment houses of Mayfair, there's plenty of interest in the business potential. One research outfit, Prohibition Partners, has estimated that the UK's medical marijuana market could be worth £8 billion a year. At least two of Boris Johnson's senior aides, Blair Gibbs and Danny Kruger, have advocated cannabis reforms, including for recreational use.
And while relatively little credible research has been done on pot, Britain can claim to be a pioneer in its own right. More than 20 years ago, the UK biotech company GW Pharmaceuticals won approval from the Home Office to conduct clinical trials on whether cannabis-derived medicines could help patients with multiple sclerosis.
Still, Kennedy says that before last year he believed that the UK would be one of the last countries in Europe to sanction medical use. He had often visited London, which was one of the biggest sources of capital for Privateer, and had met government officials, investors, doctors and policy-makers. The British media would be hostile to legalisation, he was told, and he decided that the NHS would only move towards medical use if the clinical evidence was overwhelming.
He now says that he's stunned by how far the UK has come, with the Home Office opening the way for the use of medical cannabis last year.
But there is also the sense that the UK is in a kind of limbo. Medical cannabis is permitted in theory, but the medical establishment is still deliberating and few patients are benefiting. The National Institute for Health and Care Excellence, which rules on which medicines the NHS can prescribe, is not convinced that cannabis-derived substances are effective for chronic pain, spasticity and severe treatment-resistant epilepsy. It has approved the use of one drug, nabilone, for chemotherapy-induced nausea and vomiting, but only if conventional medicines haven't worked. Its main message? That more research is required.
The inertia makes reforms on recreational (Kennedy uses the term "adult use") cannabis feel distant. And would they be welcomed? British doctors worry that the potency of pot, already far stronger than in previous decades, will climb even further if it is legalised. It is already estimated that a third of psychosis cases that are treated in London, most of them involving teenage boys and young men, can be attributed, to some degree, to cannabis use. Do we want children who might not otherwise have indulged to take up the habit?
"Well, let's do the kids first," Kennedy says, speaking with a new briskness. "When you look at the data coming out of Colorado or Washington state [where recreational use is now permitted under state law], we've seen teen consumption decrease since 2012.
"It turns out that it was easier for teens to access an illicit product than a well-regulated product. And probably the best example is Washington state, where the illicit market has been completely stamped out. Back in 2010, 2011, it was really easy for me to bring people to illegal farms in Washington. Now, I don't even know where you would find one. The legal market has done a very good job of decimating the illegal market."
Still, some of Tilray's recreational products contain as much as 25 per cent THC – the active ingredient that gets people high. By comparison, the most potent forms of skunk available in the UK are probably about 15 per cent. Back in the Sixties, weed contained perhaps 3-4 per cent THC.
A 25 per cent THC product is very strong, I say.
"Look, I can put a glass of beer in front of you, a glass of wine and a glass of whisky, and you know the difference," he replies.
So would he be comfortable if his own children, in a couple of decades, chose to use pot?
"I think in 15-20 years, cannabis products are going to be really different. It'll be much less about potency and more about the state of feeling that is induced.
"You'll have a product that is 'go for a run' and a product that's 'go to sleep'. And you'll have one that's 'focus' and one that's 'I want to giggle for the next 30 minutes'."
Written by: Rhys Blakely
© The Times of London