Phyto Partners is quickly making its name known for picking winners in the cannabis space. The company includes in its portfolio some of the cannabis industry’s leading software brands including Baker, WURK, Flowhub, and Leaflink.
In addition to software, Phyto has invested in laboratory testing company Steep Hill, packaging company Safer Lock and cultivation management system company Grownetics.
“My approach to investing in this industry is to find the businesses that help the licensed businesses to function,” said Larry Schnurmacher, Managing Partner at Phyto Partners. “Whether it’s safety, quality, business intelligence or tech platform solutions.” Schnurmacher doesn’t invest in companies growing marijuana or in chains of dispensaries. Schnurmacher, along with Phyto’s other Managing Partner Brett Finkelstein, have over 50 years combined experience investing in public and private companies. Last year the company was named one of the “Top 5 Marijuana Investment Funds” by Forbes Magazine.
He chooses companies that help other cannabis companies get to cash flow positive and aren’t subject to 280e tax restrictions. His investment targets can process regular payments and they have bank accounts.
Phtyo’s first fund was open for two years and closed at the end of December 2017 after having raised $5 million. The firm is planning on having its first closing of the next fund dubbed Phyto II on April 20 with roughly $12 million to $15 million raised with the ultimate goal for the second fund at $100 million. Phyto II fund is for accredited investors.“The rolling closes quarterly,” said Schnurmacher. He added that there are six companies he’s been watching in order to put this money to work.
As far as raising money goes, Schnurmacher said that finding investors is pretty easy, but many people continue to get cold feet when actually signing the check. “Some are still scared and don’t understand it,” he said. With prices of publicly traded companies skyrocketing in Canada, it looked like easy pickings for big returns for cannabis investing. That has changed as the prices have rolled back to more modest levels. Still, as more states legalize marijuana investors continue to be drawn to this new industry.
The companies that Phyto has picked to invest in are all leaders in the space. It was involved in the $3.2 million dollars raised this week by workforce software company WURK that saw many original investors sign up to invest again. Another company that Phyto backed, Flowhub, began working with the tech giant HP.