Private Equity Archives - Green Market Report

StaffSeptember 20, 2017


Several themes emerged from this week’s meeting of the cannabis financial minds at the CannaBrunch yearly event. One thing that these investors agreed upon was that investing in Colorado or California was out. What these cannabis investors wanted were emerging states.

I’m staying out of Colorado and California because there’s too much competition. I prefer a limited environment like Pennsylvania,” said Ryan Ansin of Ansin Investments an early stage investor. Ansin echoed what others were saying with regards to the crowded fields of these states and the higher valuations on companies. Many preferred states like Illinois and Pennsylvania because there were fewer licenses and a better chance for cannabis businesses to be profitable.

Others pointed out that states like Florida had approved of too many licenses, which has too many dispensaries for the patient population. Washington was also mentioned for its over-supply of cannabis with pounds of product per person being produced.

One of the pitch companies GTI a Chicago-based cannabis company also said it focuses on states where they can be the big fish in a small pond. Chairman Ben Kovler said he likes the states that other larger companies have ignored. Although the work to get these businesses established is extreme, he feels the payoff is better in a state where they are fewer players.

Another theme was one that has been playing out over the past couple of years and that is more investment money than quality investment deals. Eric Shoemaker a founder of Swell Companies said, “I can raise $50 million, but it’s hard to put it to work.” Swell is one of the leading cannabis processing companies in the country. He noted that the industry has had a dearth of exits and that doesn’t present very many opportunities for others to come in. “The biggest exits don’t seem to come with a lot of cash attached to them,” he said.

Ralph Amato CEO of Ventana Capital Partners said, “It’s hard to find quality deals and companies with people who have strong backgrounds and good experience.” He said that any deal they do, his company insists on complete financial control over the company.

Many of these smaller investors agreed that they were happy that bigger players like Goldman Sachs were staying out of the cannabis industry and giving them a chance to make some choice investments. So, while President Clinton might have been good for legalization, it wouldn’t have been so great for these investors.

Established investment funds seem very interested in the cannabis industry, but many are still wary of investing in an industry that is still federally illegal. What does seem to be a trend is that the fund and family office founders are putting their own personal money to work. They may not feel comfortable putting client money in a highly risky investment, but they are personally fascinated and want to be a part of the emerging industry.

Somme investments there were also mentioned included platforms to address deal making due to an oversupply of product. There was also interest in the company that won the pitch contest, Go Fire a digital health company that collects user data based on patient experience and Green Rush a mobile platform that powers the online connection between dispensary and customer.

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