Ron Strider
Well-Known Member
When Karan Wadhera abandoned a successful career as an investment banker in Asia to plunge into North America's cannabis industry, former colleagues could have been forgiven for thinking he was smoking weed himself.
But for Mr Wadhera, Indian by birth but who has a US education and entertainment-industry connections in Los Angeles, the move was a no-brainer. "By 2013, it was clear that there was a business opportunity," he says. "It was a great moment to get proactive."
Today, Mr Wadhera is managing partner of Casa Verde Capital, a venture capital firm launched in 2015 that invests in technology companies serving the cannabis industry.
With an initial fund of $25m, Casa Verde, which counts rapper Snoop Dogg among its four founding partners, is small compared with the likes of Privateer Holdings or Tuatara Capital, two of the US's biggest cannabis-focused investment firms. But it has set itself apart by investing exclusively in the ancillary side of the market. With the majority of its investments made this year, Casa Verde has typically sunk $500,000 initially – often ramping up later – into each of seven start-ups in return for an equity stake ranging from 5 per cent to 10 per cent.
It has invested in Green Bits, which makes payments terminals that can handle the exacting compliance requirements for cannabis sales in retail dispensaries. Mr Wadhera says that their machines, in roughly 800 locations so far, are on course to process $1.7bn in payments this year alone.
It has also invested in LeafLink, a business-to-business platform that provides a market for dispensary owners to buy inventory from cannabis brands. In April 2016, when it started, the platform processed $12,000 in transactions; in September this year, it processed almost $14m.
Casa Verde plans to raise "a much larger fund" over the next year or two, Mr Wadhera says.
The portfolio-building comes as US states are fast adopting more flexible laws on cannabis. At least 29 states have now legalized marijuana in some form. In January, California is set to legalize recreational marijuana, creating what is expected to be the world's single-largest legal cannabis market.
Roy Bingham, founder of cannabis data firm BDS Analytics, estimates that the legal North American market last year was worth $6.7bn in sales – a figure he expects to grow to $22.6bn by 2021. He also says that the market is evolving beyond recognition.
"A lot of people still tend to think about bags of weed," he says. "But half of the legal market is now branded consumer products sold in packaging similar to what you might buy at Walgreens.
"In spite of the market's rapid growth, Casa Verde's strategy of targeting ancillary companies speaks to two related structural issues hanging over the industry.
The first is that cannabis remains illegal under federal law – a fact that poses potentially onerous risk even as the federal government has generally allowed businesses to operate as long as they comply with local laws.
"None of our investments touch the plant," explains Mr Wadhera. "There was some level of risk mitigation in that decision so we would probably not be under the same level of scrutiny" as hands-on cannabis companies.
More important is the potential that ancillary businesses have for scaling up given that they are not bound by locally issued operating licenses and regulations, which place strict limits on how and where producers and retailers can operate.
"We only wanted to be in businesses that could touch the entire industry," says Mr Wadhera. "If you have a friend with a license for Santa Monica, you are very limited. You just can't scale in the way you might want to."
News Moderator: Ron Strider 420 MAGAZINE ®
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Author: A.K. Thomson
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Photo Credit: Getty
Website: Financial Times
But for Mr Wadhera, Indian by birth but who has a US education and entertainment-industry connections in Los Angeles, the move was a no-brainer. "By 2013, it was clear that there was a business opportunity," he says. "It was a great moment to get proactive."
Today, Mr Wadhera is managing partner of Casa Verde Capital, a venture capital firm launched in 2015 that invests in technology companies serving the cannabis industry.
With an initial fund of $25m, Casa Verde, which counts rapper Snoop Dogg among its four founding partners, is small compared with the likes of Privateer Holdings or Tuatara Capital, two of the US's biggest cannabis-focused investment firms. But it has set itself apart by investing exclusively in the ancillary side of the market. With the majority of its investments made this year, Casa Verde has typically sunk $500,000 initially – often ramping up later – into each of seven start-ups in return for an equity stake ranging from 5 per cent to 10 per cent.
It has invested in Green Bits, which makes payments terminals that can handle the exacting compliance requirements for cannabis sales in retail dispensaries. Mr Wadhera says that their machines, in roughly 800 locations so far, are on course to process $1.7bn in payments this year alone.
It has also invested in LeafLink, a business-to-business platform that provides a market for dispensary owners to buy inventory from cannabis brands. In April 2016, when it started, the platform processed $12,000 in transactions; in September this year, it processed almost $14m.
Casa Verde plans to raise "a much larger fund" over the next year or two, Mr Wadhera says.
The portfolio-building comes as US states are fast adopting more flexible laws on cannabis. At least 29 states have now legalized marijuana in some form. In January, California is set to legalize recreational marijuana, creating what is expected to be the world's single-largest legal cannabis market.
Roy Bingham, founder of cannabis data firm BDS Analytics, estimates that the legal North American market last year was worth $6.7bn in sales – a figure he expects to grow to $22.6bn by 2021. He also says that the market is evolving beyond recognition.
"A lot of people still tend to think about bags of weed," he says. "But half of the legal market is now branded consumer products sold in packaging similar to what you might buy at Walgreens.
"In spite of the market's rapid growth, Casa Verde's strategy of targeting ancillary companies speaks to two related structural issues hanging over the industry.
The first is that cannabis remains illegal under federal law – a fact that poses potentially onerous risk even as the federal government has generally allowed businesses to operate as long as they comply with local laws.
"None of our investments touch the plant," explains Mr Wadhera. "There was some level of risk mitigation in that decision so we would probably not be under the same level of scrutiny" as hands-on cannabis companies.
More important is the potential that ancillary businesses have for scaling up given that they are not bound by locally issued operating licenses and regulations, which place strict limits on how and where producers and retailers can operate.
"We only wanted to be in businesses that could touch the entire industry," says Mr Wadhera. "If you have a friend with a license for Santa Monica, you are very limited. You just can't scale in the way you might want to."
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: Subscribe to read
Author: A.K. Thomson
Contact: Help us to improve
Photo Credit: Getty
Website: Financial Times
