By: Debra Borchardt
Investor dollars are pouring into the cannabis industry as it seems lots of people want to get in, but the level of investor and the amount they want to commit varies. A new survey from Marijuana Business Daily found that on average investors plan to invest half a million dollars on cannabis businesses in 2017.
The survey also found that only a handful of investors are willing to risk over $25 million in the space with most planning on investing less than $25,000. Some investors are taking a chance with a friend or family member that has jumped into the cannabis industry. Others are putting their money with venture capital firms that are targeting the industry. The average investment is $100,000 and the average amount placed in a cannabis company was $450,000 to date.
For many new investors that want to get into the space, it’s best to find a company that specializes in this sector. There are many private equity and venture capital funds that are looking at dabbling in cannabis right now, but they are new to the group and not completely committed as they test the waters. Here are the top financial leaders in cannabis.
MedMen was founded in 2010 by cofounder and Chief Executive Officer Adam Bierman and Andrew Modlin and has raised $99.2 million including $60 million raised through the MedMen Opportunity fund that closed in April. With this money, the MedMen Opportunity Fund has invested in seven projects that span from dispensaries in California and New York to cultivation facilities in California, New York and Nevada. They also have a stake in MedReleaf in Canada. The group recently hosted its first Institutional Capital and Cannabis Conference in San Jose that sold out. MedMen plans to keep launching more investment vehicles to deploy in strategic markets.
Investors would choose MedMen because it has operational expertise. Spokesman Daniel Yi said, “It’s one thing to grow weed in your closet, it is another to do it in scale using agro-technology.” The company also spends a lot of resources on regulatory compliance and employs a disciplined investment strategy. “We look for undervalued assets in strategic markets with large addressable demand, constrained supply and high barriers to entry,” said Yi.
Phyto Partners is pretty generous with its investments for emerging cannabis companies. They drop between $500,000-$750,000 into their company investments. “Since we have the ability to deploy a larger amount of capital, the fund can get more favorable terms. This usually means better valuations, more equity and more control,”” said Managing Director Brett Finkelstein. Phyto’s specialty is that it has fostered personal relationships with industry leading companies and participants including cultivators, dispensaries, device/product manufacturers, researchers, and more. This client base and network provides an abundance of inbound data and deal flow pertaining to the space. This proprietary information is what Phyto feels sets them apart.
In addition to having this information, they’ve also assembled a team of experts that includes, but is not limited to, technologists, scientists, lawyers, growers, branding superstars, as well as high-powered ex-DEA and government officials that are shaping the future of this nascent industry.
Casa Verde Capital
Casa Verde is best known for the experience of its four partners. The most famous is Calvin Broadus (better known as Snoop Dogg), Evan Eneman (a former director at PricewaterhouseCoopers), Karan Wadhera (former Goldman Sachs executive) and serial entrepreneur Ted Chung. Eneman said, “We not only bring capital but also operational experience in the cannabis industry across our various sister companies (Merry Jane, Flower Shop and ELLO), which tie in the mainstream experience that we also have from outside of the world of cannabis.” The company has invested in delivery service Eaze, media site Merry Jane, B2B e-commerce platform Leaflink and CapitalG among others.
The company typically invests $250,000-$500,000 into a new company. Casa Verde’s focus at the moment is on becoming the preeminent venture partners for early stage companies. Eneman said, “We believe in venture and ancillary markets because technology, software, hardware, products and services are scalable and will help to build the backbone of this burgeoning industry for decades to come.”
Poseidon Asset Management
Poseidon Asset Management was founded in 2014 with an exclusive commitment to cannabis investing. Emily Paxhia and her brother Morgan got introduced to the medical marijuana industry through the tragic death of their parents from cancer. Poseidon has raised over $25 million and invested in 40 cannabis businesses with technology and real estate being their biggest plays. Their investments span the U.S., Canada and Europe. The company recently lead a $3.5 million purchase of winery that is expected to switch its crops to cannabis. Poseidon also lead April’s extended financing round for Wurk, the cannabis workforce compliance platform.
Poseidon brings to its investors one of the longest running funds in the industry with tracked performance. Morgan Paxhia said, “We are investors and we’re also entrepreneurs. We understand the many challenges, the countless hours, the endless stress of scaling in such a fragmented early stage industry.” Paxhia also noted that they can dissect a business plan in minutes and know the viability of a deal with a high degree of confidence.
Want to be a little more hands on? The ArcView Group is the best choice. The group was founded in 2010 by Troy Dayton and Steve DeAngelo, who is the Chief Executive Officer of Harborside Health Center in San Francisco. DeAngelo is a longtime activist and once a member of the Youth International Party or the Yippies during the 60’s so it doesn’t get more legit than Steve. Companies like Mass Roots, Eaze, MJ Freeway and Medicine Man came to Arcview for their early capital. They vet and present companies that are looking for investment with people wanting to invest. Their investment members get access to a private portal to evaluate and collaborate on deals. With over 625 members, they have funded 141 companies and invested $115 million.