"Unraveling the High-Flying Cannabis Industry's Trends, Challenges, and Success Stories" Ross O'Brien from Bonaventure Equity, welcomes listeners to another episode of the Cannabis Capital podcast and introduces his guest, Steve Ham, founder of Altmore Capital. They discuss the challenges and opportunities in the cannabis industry, including the importance of strong management teams and the emergence of successful brands. They also touch on the complexities of regulatory compliance and the potential for future changes in the industry. Produced by PodConx Ross O'Brien - https://www.linkedin.com/in/rossobrien/ Bonaventure Equity - https://link.bve.vc/Visit-Us Altmore Capital - https://altmorecap.com/ Steve Ham - https://www.linkedin.com/in/steve-ham-00078b5/
"Unraveling the High-Flying Cannabis Industry's Trends, Challenges, and Success Stories"
Ross O'Brien from Bonaventure Equity, welcomes listeners to another episode of the Cannabis Capital podcast and introduces his guest, Steve Ham, founder of Altmore Capital. They discuss the challenges and opportunities in the cannabis industry, including the importance of strong management teams and the emergence of successful brands. They also touch on the complexities of regulatory compliance and the potential for future changes in the industry.
Ross O'Brien - https://www.linkedin.com/in/rossobrien/
Bonaventure Equity - https://link.bve.vc/Visit-Us
Altmore Capital - https://altmorecap.com/
Steve Ham - https://www.linkedin.com/in/steve-ham-00078b5/
[00:00:00]
Hi everybody, this is Ross O'Brien. Uh, welcome back to another episode of Cannabis Capital, the podcast. your host, uh, sorry I did that in reverse order. Hi. And if you do what I just did, you just pause, give 'em a couple seconds, they'll splice it out.
Yep.
Uh, hi everybody. Welcome back to another episode of Cannabis Capital, the podcast.
I'm your host, Ross O'Brien. Uh, founder of bonna Venture Equity Venture Capital Fund author, uh, and interested in all things entrepreneurship. Um, These conversations are exciting. We wanna share with you the thought leaders who we get to meet, uh, in our daily practice, and, um, talk about a lot of the current trends and, and dynamic, uh, things that are happening in the world of cannabis.
So I'm really excited to welcome today. Um, also a founder and, uh, uh, fellow financier in the cannabis world. Uh, Steve Ha. Um, Steve, uh, [00:01:00] is the founder of Altmore. Uh, altmore is one of the preeminent Altmore Capital is one of the preeminent lenders in the cannabis space, um, and has been around since 2017 doing some really interesting things.
So, Steve, welcome to Cannabis Capital Podcast. Thanks for being here today.
Ross, thank you so much for having me on. Um, really excited to, uh, share, uh, the next 35, 40 minutes with you. Um, talk about some interesting, interesting topics.
Great. Well, really appreciate you taking the time and, uh, and you know, I think we'll have a, a lot in common and a lot of, uh, different perspectives on the space, which should be exciting to dig into. So maybe the place to start would be, Steve, tell us a little bit about the firm and, and your background.
And you've been at this for a while, so how did you find your way into the cannabis arena? I.
Yeah, so before I founded Altmore Capital back in 2018 with my partner Patrick Kim, um, I was in private equity for about two decades. Um, so I cut my teeth in private equity through [00:02:00] Carlisle and uh, also founding another private equity fund. With, uh, one of the owners of an n NFL football team. Uh, back in 2017, I actually, uh, stumbled upon, uh, the cannabis industry.
I really threw a, uh, a, a person that I know. Uh, and it was one of those moments where, um, You rarely walk into a, you know, a situation where, uh, an industry is nascent and you can see the demand side of the equation already pretty much solved. So really, uh, through the legalization process, you're really transferring, uh, what is an illicit demand into the, the illicit demand.
Um, and obviously that process is long and arduous, but, Um, really having one side of the equation solved is a, is a pretty interesting, uh, way to invest, uh, in a, what's going to be a hundred billion dollar industry. [00:03:00] So, so back in 2018, I teamed up with my partner, uh, Patrick Kim, and really thought about a way to invest in a, an industry that's, you know, fairly nascent, but also, uh, very dynamic and, uh, some autopsy turvy.
Um, You know, we thought equity strategy was a little more, uh, risk than, you know, our, our, our risk appetite would, would, uh, allow. So we decided to, uh, invest through debt. Um, so we made our first investment, uh, early 2018. Um, since then, uh, we have not looked back and we stuck to our knittings. So we've been doing this now, uh, going on our sixth year.
Um, Yeah, well, we're gonna stick to our knittings, uh, for the, you know, for the long term.
Well, I really like that I, I find myself saying we're sticking to our knitting a lot as well. Um, it's interesting, I mean, our process was similar and, and we wanted to stick to the seed series a, uh, arena in healthcare that, [00:04:00] that we've had experience in. So when you were looking at the risk profile of debt versus equity versus late stage versus early stage, I'm sure you looked at public securities as well.
Um, what were some of the things that. That you were seeing six years ago, how did they play out and what did you get right? And what did you get wrong?
Yeah, so, you know, six years ago was still fairly early. Um, you know, I, I would say that was almost like a, you know, inning one of a, uh, a nine inning baseball game. So, you know, then very few companies had, you know, any revenue. So it was pre-revenue, um, investment. Um, So in order for us to get comfortable, um, You know, we had to, uh, collateralize some, uh, some assets.
Maybe they weren't producing any revenues yet, but they still had kind of implicit value attached to them. Uh, a good example of that is a limited license, [00:05:00] um, that we were, uh, structurally able to collateralize. Um, you weren't able to directly UCC those, uh, licenses, but you can structurally do that. So, so we figured that out.
Um, that took a while for us to, uh, Figured that out. But, uh, once we figured it out, uh, we felt comfortably enough to, to move forward with, uh, uh, you know, fairly sizable loan. Um, that investment turned out very well. Um, but I think, you know, some of that had to do with luck. Some of that had to do with some, you know, early due diligence that did, we did.
Right. But you know what, what we learned over the last five, six years is. We don't know everything, right? So we try to do as much diligence as as possible. And, you know, we have to have our, you know, heads on a swivel. So if things, things that, you know, some things occur that, that we didn't expect, we have to be nimble and we have to have a, a team that can respond to that, you know, unexpected event.
So, you know what, what [00:06:00] Pat and I spend a lot of time on is really building a team. Um, that can, uh, support, uh, in that type of, uh, kind of situation. And I think cannabis is, is unique, uh, in that sense that it's not only the most heavily regulated industry in the us perhaps in the, in the, in, in the, in the world, uh, but also it's fast growing as well.
And on top of that, um, it's really, you know, working with 40 different markets, right? Because each state has its own regulatory regime. Um, it has its own, um, Uh, state specific, uh, regulations that doesn't really transfer at all to, you know, any other states. So because of that, it is very complicated, um, especially if you're underwriting a, uh, a credit that has multiple geography, uh, uh, operations.
So, you know, we have invested into a company that has, you know, 10 different state exposure. So doing, I, you know, [00:07:00] it's almost like doing 10 different diligence for that one credit. So, um, it, it is very complicated from that perspective, but I think, uh, that also gives us, uh, a pretty good moat. Um, because, you know, one of the, the, the kind of more, uh, frequent questions that we get from our investor base is that, hey, um, you know, if.
Uh, you know, legalization takes, if federal legalization takes place, aren't you going to lose a lot of your, uh, potential, uh, loans to a bank? Um, and our, and, and my theory on that is, uh, to be honest with you, I think it's just too much war for a lot of banks to, uh, to really, um, Uh, underwrite, right? Um, they're, they're great at, you know, realistic underwriting and, you know, things they don't do things they know how to do well.
But underwriting 10 different states, uh, [00:08:00] to, to put out a, a, you know, one loan I think is something that's probably beyond what they want to do. So I think this is, uh, really a specialty financing type of situation. So I think as long as we stick to our knitting and then, you know, do a great job underwriting, I think, uh, we'll, we'll still have our moat, uh, even through, um, federal legalization or, or different types of regulatory, uh, changes, uh, at the federal level.
So Steve, you, you mentioned, um, looking at licenses as, um, an asset that you can collateralize. Is it your view then that. Well, a couple of questions on that. So one, is it your view that, um, understanding the value of that asset is nuanced and a, you know, sort of bespoke skillset. The second part of that is what happens.
Have you had a situation, not on specifics, but um, are you assuming if you had to assume a license, if somebody was tripped up their covenants [00:09:00] and you know, you had to go after assets to recuperate your investment, um, is it about disposing of the asset to another operator? Um, is it about, uh, you know, taking over operations yourself?
One of our. Perspectives was actually the antithesis of this is that we said early on as venture investors, we do not want to invest in non-operating assets, right? We invest in teams and people. So the licenses don't have value to us from our underwriting process, right? Unless there's a team in place that can operate it.
So what have you learned in that dynamic? Using that as as, as part of your underwriting?
Yeah. And, and I think that this is where cannabis investing becomes, uh, more comple complex than, uh, you know, perhaps other industries. Um, that, that license value really depends on the, the state in which you invest. So, um, you know, I think a, a good, good example is, [00:10:00] Uh, a cultivation license in, say, Oklahoma has very little value versus a cultivation license in Ohio, for example.
So, you know, I think, you know, rather than having a view of collateralizing the license, I think, um, really we take a view that, um, having the license that has, um, that can be at least collateralized structurally so that. We have, um, some hard assets that, that, that, um, that we can, uh, uh, monetize or, or at least have some value against, uh, as we, as we underwrite these, uh, these deals.
Um, so, you know, I think. You know, I think that, you know, the Ohio is a great example. Um, you know, Ohio, you're not able to collateralize, uh, the license over there, but you can do it in a, in a structural way where you, we felt we [00:11:00] were, uh, mitigating enough risk for us to, uh, invest into that particular operator, um, against the, you know, the, the returns that we were getting.
Um, Luckily for, for us, it actually worked out very well for us. But, um, you know, obviously, you know, the license itself really has everything to do with how the regulatory regime is in that particular state, and it's really all about un unlimited license versus limited license. There are some in between as well.
Definitely. So one of the, the things you mentioned as well was being heavily regulated. I would question, are we, I. Are we currently heavily regulated or is the heavy regulation yet to come? And from your vantage point as you've been watching this over the years, um, how do you see, what have you seen happen on the regulatory side?
What do you think will be happening on the regulatory side? Are you, you know, do you have your lender crystal [00:12:00] ball that you're looking at for the next kind of three to five years that, uh, you know, you're tracking some signals coming out of the, the states or the federal level?
Uh, I mean, certainly I don't have, I don't have an answer for you. Uh, it's, it's a, it's a, it's a difficult, uh, loaded question to answer, but you know what I, what I. I do think is, at least in the, the near to medium term, I think there isn't gonna be a lot of, uh, big changes that that's gonna happen. I mean, I think, you know, we're, we're based in DC so we do talk to a lot of lobbyists and people on the hill.
Um, and you know, because of the political kind of climate in the US is such that, um, we don't see a lot of large. Headline changing, uh, changes coming up anytime soon. There might be some, uh, regulat regulations that may pass something like, you know, safe Bank, uh, banking Act and, and such. Um, [00:13:00] so they will perhaps solve some, some issues around the fringes, but, uh, Federal legalization, um, really isn't, uh, at least in my my perspective, uh, something that's, you know, near, uh, in the, in the, in, in, in the near term.
So I think that'll take, you know, five to 10 years perhaps to, to, to get, get through. And, you know, I think because there's so many different, uh, facets of that, uh, federal legalization exists, um, it's not one thing, uh, If you change one thing, there's a lot of knock in effect as well. So, you know, the, the, the lawmakers are considering all the facets and they're just, so, this is a very broad, um, uh, uh, legal issue that's gonna have to go through a lot of different committees and as well as different, uh, discussions before it gets, uh, it gets changed.
From, from our [00:14:00] perspective, we tend to just dismiss federal legalization as kind of ever being a thing. Um, you know, we're much more on the healthcare side, life sciences side as opposed to recreational. So for us, rescheduling versus legalization is, is meaningful. Um, but it, it's. One of the, one of the concerns we had early on was how, um, sign how high these valuations were for a lot of these companies and this sort of like exuberance of the green rush a few years ago and we're still seeing it today and a lot of that.
Took on this tenor of pricing in the inevitability of federal legalization, meaning that you're already adding that into the valuation of the company today. So if it was to happen, where's the arbitrage? Right? So, you know, from an investment standpoint, we're like, okay, it would be nice to have, but not a need to have if you underwrite and, and underwriting's different for you as this for us.
But we use the same, you know, terminology, right? So when you think about the things like Safe Banking Act and two 80 E, um, you know, from a tax [00:15:00] standpoint, You know, from it, it would appear and, and tell me if this is still the way things are shaking out, but it would appear that, you know, banks are still reluctant to bank on a, on a broad scale, anything that, certainly anything that touches the plant.
Um, two 80 E has a massive drag on net income, i e paying your taxes versus acquiring through growth or reinvesting to grow an organization. Um, and so. Are you seeing, are you seeing institutional, uh, are you seeing more competition from, uh, or more competitive terms coming in, or more banks coming in on a more traditional basis, or is this still pretty wide open for you guys to kind of pick the, the, the cream of the crop?
Yeah, I, I, I don't see a lot of banks coming in at all. I think, you know, this was my hypothesis, you know, call it three, four years ago, if the banks were to come in, I think they will come in, uh, at a, a local [00:16:00] real estate level. So, you know, 30 mortgages and, and whatnot. And I think, you know, over the last two years, that's basically proven to be right.
Um, there are. Very few if, if any, banks doing a cash flow loan. And, and that's kind of where we thrive and that, that's kind of our bailiwick. So, um, our, our typical borrowers are, you know, minimum call that $30 million in revenue with, you know, typically 20% EBITDA margin. Um, and, um, you know, they have cash flow to, to grow their business, but not enough to expand, um, and have a transformative, um, Uh, expansion.
So that's where they come to us for that transformative, um, capital. Um, so typically the, the, the loan proceeds are used to, you know, double, you know, their double their size, whether it's cultivation or retail footprint. And, you know, over [00:17:00] the next 12 to 24 months, they typically de de-leverage, uh, significantly through the growth.
So, um, that, that's kind of how we look at it. And we, we really don't see a lot of banks coming in and, and, and competing with us or providing term sheets to our, you know, prospective borrowers. Um, you know, even, you know, over the last quarter or so, we've seen other, um, cannabis focused lenders, um, Actually leaving the space, right?
So we've seen a few of those, you know, happen over the, just over the last month and a half. So I think the competition actually has gone down. Um, and the, the industry is still growing. So, you know, I think, you know, from kind of how we look at the space, you know, there is still, you know, seven to $8 billion worth of.
Projects that can be financed. And I'm just talking about the, the middle [00:18:00] market of the, of the cannabis industry. Um, perhaps, uh, call it maybe a billion dollar, maybe a little bit more has been funded. So, you know, people ask what, what happens to those six to $7 billion that are not being funded? Well, they're just being, they're just waiting.
Right. So, you know, great example was, you know, Missouri for example, you know, during the pandemic, uh, you know, obviously the, the capital did not flow to this industry as quickly as people anticipated. So a lot of the, you know, Missouri operators were not able to open, uh, their cultivation as well as retail as quickly as the, the regulators want it.
So as a result of that, a lot of them. Were their licenses were either revoked or were transferred to other people who were opening them. So that is typically kind of, uh, flavor du jo and, and, and in cannabis, um, ho hopefully, you know, some, you know, regulation or some catalyst, uh, happens in the, in the, in [00:19:00] the cannabis industry with regard to regulations so that more capital comes in.
Um, I think that'll help everybody in the, in the industry, including us.
Uh, that makes it, that makes a ton of sense. And with respect to, um, You know, the types of founders and, and teams that you work with. Um, you know, we always talk about how important it is that, you know, we back people as much as anything. Um, for those folks that may be hearing this and just being introduced to you for the first time, a what sort of advice do you have for founders that are out there or folks that are operating in this space if they're looking for alternative sources of financing and who are the types of teams and what does a relationship look like with you and your firm over time?
If you have somebody in your portfolio,
Yeah. You know, I, I can't, I can't emphasize this enough. I, I've seen so many, um, companies that, that start off, uh, with. The capital structure, [00:20:00] uh, being upside down. And what, what I mean by that is because the capital in the cannabis industry is still hard to come by. Um, they actually over leverage and, and because of, um, kind of dynamic nature of the market, um, Things move very fast here.
So the expected cash flow to support the debt, uh, may or may not be there, call it three, four quarters from now. Um, so it is hard to raise equity. Um, but I tell everybody, um, if you're gonna start a cannabis company, come with enough, um, equity to really, uh, Operate your business. Um, and if only, and if only, and only if you need, uh, debt capital to really expand the business, that's where, that's where you would want to come to us and talk to [00:21:00] us to get our capital.
But, you know, to, to start your business, um, and, and, and take on debt is, is really a, a, not a, a great way to start a business really in any industry, but especially in cannabis.
And, and are you talking about types of debt that are, you know, that's equity and debt sort of hybrids or, you know, shareholder loans and investor loans, founder loans, those types of things?
No, no, that, that's convertible loans are, I think, perfectly fine as long as they're structured, right? So, so same for or others. Um, but, um, I think the types of loan that we provide, which is senior secure loans, so you need to start. You know, servicing the loan and amortizing loan, you know, after X number of months or x number of years.
And if, um, uh, construction or licensing or permit process takes longer, which, which it always does. So let's say that that gets delayed, you know, three quarters [00:22:00] or a year, um, then, then you're gonna, you're gonna have to start, you know, Worry about how to take care or rebalance your, your, your capital structure.
So, and, and, and that type of, you know, activity takes a lot of time for the management. And from my perspective, management should be a hundred percent focused on growing the business, not how to service, you know, their loans. So in the early days of, uh, you know, the cannabis company growing, it really should be fully, um, capitalized with.
Um, equity and once it's grown up and has an opportunity to, you know, expand, I think that's a great time to come, you know, take on some debt and, um, you know, be able to, uh, you know, you know, potentially double your business, but on a foundation of great, great business that they've already started with equity.
Uh, that makes a ton of sense. And clearly Steve, [00:23:00] you know, having the time and discipline to stay in the space. I, I, I wanna go back to something you said just for a moment about, um, you know, other folks sort of falling to the wayside. Certainly our observation early on was a lot of people got really excited about this as an emerging sector and emerging industry.
Um, and a lot of folks, um, So one of my mentors early on in venture capital, right said, you know, never forget that it's not get rich quick. It's get rich slow. And a lot of folks sort of rushed into this, why I hate using that green rush phrasing, but it was a thing, right? All, there were all these premature IPOs and everybody could, you could raise anything you wanted for a period of time if had the word cannabis in it.
And at the end of the day, You know, the folks that brought, you know, years of experience from other markets and combined that then with building a knowledge base within cannabis, seem to be the ones who are, uh, sticking around, right? So it's great to, to see that being proven out yet again. [00:24:00] Um, When you, when you think about the, the, I love that you talked about management and where you'd like to see their focus.
Um, is your approach to be at all hands on with management, do you take board seats? Do you, you know, where something is so the value is so intrinsic to successfully managing these businesses that have a lot of opacity to them? Is that something that you do?
You know, management team is number one, uh, in our underwriting. Um, And, and, and because we're not an equity investor, we're a debt investor. So, so even more, it's even more important to us. Um, you know, we do very rarely take a board seat, but that is not our mo Um, you know, we're, we're really a debt passive investor.
Um, But you know, we, we, we have a very frequent contact with management team. Um, I think a lot of our borrowers, uh, reach out to us for advice or, or, you know, or, or just, uh, just be a sounding board, um, to discuss, you know, [00:25:00] what's happening in their businesses and, and. You know, at least getting some, some, you know, uh, feedback from us with regard to what's happening with their, you know, capital stack and whatnot.
So I, I'm happy to get on the phone, uh, with them, uh, anytime they need. Um, but certainly we're not an equity investor, so, you know, we, we typically shy away from taking board seats, but happy to engage with them and, and provide any, any kind of feedback, uh, you know, that they would. They, they're, they're seeking.
Um, yeah, so, so management team is number one. Um, I think, you know, with regard to the management team, we've seen, um, you know, I think, you know, couple different rounds of, uh, you know, management team shifting into or, or coming into the industry, um, you know, I think. Like what we call, uh, inside of, uh, altmore is Management 2.0.
Um, I think, um, great example is, you know, a lot of the. Professional managers that were successful in C P [00:26:00] G, uh, you know, other industries that are able to transfer their, uh, professional management to cannabis, uh, have been very successful. So we try to back those, uh, those teams. Um, and um, you know, we've been very successful with those types of credits.
Um, and, you know, it's difficult for us to underwrite anything other than the, that type of, uh, you know, management team who can really, you know, fine tune, um, their businesses, uh, and, and be able to be very nimble as well. So number one is, is management team. No, no question about it.
Well, we're very much aligned there as well, Steve. And I think, um, it's proving out, especially in the, uh, choppiness of, of the cannabis markets that seem to move very, very quickly, sometimes correlated a lot of times uncorrelated to what's happening on a macroeconomic scale. Uh, and time and time again, it seems that the, you [00:27:00] know, disciplined, long-term, focused professional management teams are, you know, surviving and thriving.
Um, when you think about what's, what's coming, um, Obviously the, the regulatory market is, uh, is, is a key driver. Um, however, um, we're also starting to see, you know, some trends emerging around the stickiness and strength of brands. The, you know, um, changing of, you know, licenses from limited to unlimited, the, you know, multi-state.
Interstate commerce issues. Um, is there, you know, are, are, are there areas, waves of momentum that you're seeing in any of those buckets? Sort of either direction right now?
Yeah, we're, we're beginning to see some really interesting brands emerge and, uh, you know, th they're, they're beginning to cashflow beautifully. Um, so we are looking at a few deals. Uh, Brands are by nature, fairly, uh, [00:28:00] light asset model. Um, but they are. Approving to, to have brand value, uh, as they move from their original state, where they started, uh, to multiple states.
Um, so we're looking at a few brands that have really struck a chord with the end users, um, and diligence in a few of those opportunities right now. Uh, with regard to M s O and, and verticalization, I think. I, I, I think number one, they're really, really hard. Like MSO is really, really hard. Um, managing, you know, multiple different states with multiple different, different compliances and regulatory regimes.
Super hard to do. Uh, on top of that, trying to verticalize in, in states is even that, that makes it like exponentially hard. Um, So we like states or we like operators that really kind of focus and, and, and really stick to their [00:29:00] knitting ju just like we do. Um, so we tend to, not always, but we tend to seek out, uh, a company, uh, that, that really.
Has found its niche and, and has, has done really well. They do one thing better than everybody else in that one single state. And the reason we, we, we like that is they've kind of built a moat around either their brand or their proprietary business model. And on top of that, uh, you know, these type, these types of companies are becoming a, a very in interesting and, Uh, invaluable, uh, potential acquisition targets.
So, so I think, I think that's kind of where we're, uh, really kind of honing in on. I think, you know, vertical companies are, are great when they figure it out, but man, it's so hard to, uh, have a management team that has skill sets to, to manage a full vertical. Um, Managing [00:30:00] a cultivation and manufacturing, uh, company versus managing a retail is so different and it's so hard to perfect.
We do have a couple companies that have figured it out though, so once you have figured it out, it's a real mo right? Because, you know, having, having t having to figure out how to grow the best cannabis. How to manufacture the best can, uh, you know, cannabis product. And then learning how to distribute that product to a very wide geography and then selling them through your own, uh, retail chain is really, really hard to do.
But once you figure it out, uh, it's very hard to replicate. So we like those businesses too, too.
Uh, that's so interesting. We, we always talk a lot about how, um, we think vertical integration is the achilles heel of, um, the regulatory momentum. And it's funny, uh, uh, we literally say the same things when we look at, at the founders that we invest in. You know, it's, it's, um, Not impossible to find somebody who [00:31:00] really understands cultivation in agriculture, who really understands logistics and supply chain, who really understands retail and managing people and point of sales and inventory management, who really understands brands and you know, and, and when you have something.
And the risk we think is significant, right? If one of those pieces, uh, falls down. If you have, you know, something go wrong from the cultivation side, it ripples through the entire organization and, and has a higher risk, uh, impact on what could otherwise be a standalone successful business. Uh, and we just don't see that in other sectors.
So we're not sure why it should ring true in this business versus others. Right. So, which is also why much like yourself, the. You know, professional quality of the management teams where you can bring experience from other sectors, I think is, is really important. Um, so. This has been really exciting, Steve.
I, I, I think you guys are, are clearly setting the standard out there for, um, this, [00:32:00] uh, for, for a much needed service in, in alternative sources of financing. So tell us a little bit more where, you know, folks can find you. Just reiterate again, I know you said sort of 30 million is the, the benchmark in terms of top line revenue for companies that would be interested in, in connecting with you.
But, uh, tell us how that process goes and what they should be thinking about.
Yeah, we typically our, uh, lower. Our end of borrowers look something like, you know, call it 25 to 30 million in revenue. You know, they're generating positive ebitda. Typically, we like to see about 20% EBITDA margin. It can be a little bit lower or certainly can be higher. Um, but we like to invest into already cash flowing businesses and typically the, the, these borrowers come to us because they have a, a great project or expansion plan, uh, that could potentially double the size of the business, right?
So, Good example is, you know, Maryland for example. So, you know, as the Maryland state of [00:33:00] Maryland is, is looking to go adult, use legal, uh, in January, um, uh, some, some operators are looking to expand their, uh, cultivation to, to, to max out their allowed, uh, square footage. They're, they're, they're looking to, uh, get some leverage to, to get that accomplished.
So that type of situation is pretty, uh, uh, pretty, pretty often. Uh, we also, uh, work with companies that are looking to potentially consolidate, uh, a certain state or a certain, um, supply chain. So let's say that they are a dominant player in, you know, X, Y, Z, um, Uh, supply chain, uh, part of the supply chain, and they have a potential acquisition target that they, they wanna, they wanna acquire.
They'll come to us for, uh, some of the acquisition financing as well. [00:34:00] So we like to see that type of, um, Uh, situations where the company can come in, acquire that business for fairly low multiple, um, they can, uh, synergize the, the operations between the two. And some of those two operations are greater than the, the parts.
Um, So we like to, to finance that type of situation. Um, and and third thing is, you know, brands, um, that is something that is slightly a little bit newer for us, uh, because it is a, uh, you know, obviously an asset light business model. But you know, as I said before, these companies are, you know, beginning to cash flow beautifully and um, to the extent that we can, uh, really kind of see a clear path to.
Um, increasing their cash flow over the next two to three years. Uh, we'd like to be part of that type of situation as well.
Steve, that's awesome. Um, thank you very much for joining us today. Um, I didn't even [00:35:00] get a plugin for my book yet, so you know, cannabis Capital, the book is sending Copy your way. So thanks for joining us.
Beautiful. Love to read it. Uh, yeah. Thank you so much. I really am, uh, very excited to read that. So thank
Oh, thank you Steve. Everybody, this is Steve Ho. Hi, I'm sorry, everybody. Steve Ham from Altmore Capital. Thanks for listening.
Thank you guys.