How Snoop Dogg’s Business Casa Verde Capital Chooses Cannabis Investments

Casa Verde Capital recently closed a $4.3 million seed financing round for vaporizer hardware firm Green Tank Technologies, soon after announcing a $45 million debut around.

The venture capital company focuses on ancillary companies that don’t touch the cannabis plant. Other portfolio companies include Green Bits, Cannalysis, LeafLink, and Eaze.

Yoni Meyer, spouse, Casa Verde Capital. Photo provided.

What qualities convince you that a firm will serve the cannabis industry longterm?

1. Having quality entrepreneurs and founders behind a group.

I’m not saying that there aren’t other situations, but that’s helped set the stage for some really powerful founding teams — which is the anchor of any successful company — versus searching for people that have a bunch of cannabis experience and want to make technology businesses from that.

Having quality founders with experience in different areas that may bring in that discipline is actually critical.

2. Filling gaps in the present cannabis infrastructure.

We recently invested in Vangst, which is a recruitment firm for the cannabis industry. Traditionally, recruitment in and of itself wouldn’t be a venture-backed organization, but because we’re in cannabis, and because recruitment is the center of any industry — this is a completely new industry that shaped very quickly — it’s crucial to have recruiting that focuses only on cannabis. That’s exactly why we spent in Vangst — they’re filling a key, core service which’s necessary to this market.

Why is B2B marketplace LeafLink Casa Verde’s biggest investment so far?

It’s the biggest investment to date because they’re the only company that’s had three rounds of financing. Our next firm, Green Bits, will likely do another round of financing soon. The way we think about these investments is to write the first check, and then based on how the company performs or not, then we’ll be reinvesting into subsequent rounds of financing.

Looking ahead, what types of ancillary companies is Casa Verde looking to improve its portfolio?

Analytics and Data — which’s a crucial component for understanding the industry. We’re looking at distribution platforms, and also banking and payment solutions.

As a seasoned banker, how do you believe the cannabis industry’s banking problems are going to play out?

I think it is going to be a question at the federal level as some of this legislation plays out. But I believe the more technology that we have to provide to banks — to give them the comfort and transparency as to what is coming in and out of dispensaries and cannabis companies — will honestly, push the conversation exponentially further. What else do you need if you have visibility to each dollar coming in and out of my bank account, to make comfortable that this is a legitimate business that I’m paying taxes on? So, on one level, it is going to require rescheduling and legislation. On another level, there are companies already banking.

Not every single cannabis company is putting money into a hole in the floor. Some do this in an above-board, transparent way. There are banks which are banking cannabis companies, and they may be supplied with tools to make their jobs easier, which creates a virtual circle to get more people comfortable with banking these kinds of businesses.

For example, Green Bits — which’s our point of sale company. Beyond the compliance which they provide for companies to push information to the state track-and-trace supplier, they’re also providing visibility for banks as to what these companies are doing.

How involved are Casa Verde partners when it comes to the development of your portfolio companies?

We are super involved with them. We are part and parcel of those companies. We’re very active investors, and for each deal we’re taking , we’re on the front lines of this industry and we’re at the nexus of everything that’s occurring. Everyone’s coming to our offices. Beyond the initial investments, we considerably add value to out companies and supply them with strategic evaluation for markets that they should be entering, whether that’s links to the biggest brands and cultivators in California.

Because we take the ancillary approach, we have the capacity to be quite efficient with clients in the professional services of our portfolio companies overlap.

Some of your portfolio companies are based in Canada. What do you expect when Canada legalizes this summer?

Concerning cannabis legalization this summer, it is going to begin with flower. Green Tank will not have an influx of customers. But in terms of vape cartridges, it will be a matter of a few months later and Green Tank will be the solution everyone is using in Canada.

A larger question is, What are the derovincial authorities in Canada going to do around compliance? Because that’s a vital role in how we look at investments on our conclusion: How are our portfolio companies helping their clients to be compliant? Because that’s the deal — if you’re not compliant, you’re dead in this industry.

As it relates to Canada, what’s the actual compliance framework that they put in place? I think, honestly, they’re approaching a lot of the rest of the questions which have yet to be answered.

We’re very near the senior teams at publicly traded companies in Canada. I believe they’re starting to come around the ancillary side is just as significant as the cultivation side they’ve been primarily focusing on until recently.

From a global standpoint, other nations are focusing on cultivation?

Absolutely. If it comes down to cannabis, it’s going to be treated like any other commodity, and it will come down to who can create the best cannabis at marginal price. Everything is going to be — how are you cutting margins?

In regards to Colombia, the labor margin is going to be slashed considerably, and then off the bat, they’re going to be exponentially more efficient with their power because they’ve got yearlong sunlight, and they’re not dealing with the complexity you’re dealing with in the U.S. and Canadian markets where everything’s indoor and it’s so much more expensive to produce. So we have Canadian firms signing prices in Colombia so that they may set up their new generation down there to be exporting from Colombia. I believe honestly we’re getting too far ahead of ourselves because I don’t see global demand yet for true export advantage — It’s going there, just not yet.

At exactly the exact same time, an overarching purpose for why we’re taking our approach with ancillary companies — whether it’s a race to who can create cannabis at the lowest price, that’s no business I wish to participate with conceptually, because you’re just squeezing pennies, pennies, pennies across the board. So it’s hard to find the true upside. Whereas technology companies don’t have to put money into crazy, difficult infrastructure as well as licenses, etc.. It’s much more scalable.

You need to be paranoid in this industry, which you’re always maintaining that edge — that there’s a new product you’re working on, which you know what your competitors do.

You need to be thinking about your business from every angle, as bad case situations can pop up in enterprise cannabis and in everywhere else. If you’re convinced that you’re going to execute upon the board and triumph and nothing can go wrong, that doesn’t give me confidence. It’s a red flag if you believe no issues will appear.

Released at Wed, 11 Apr 2018 21:08:51 +0000

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