As cannabis investors, who have deployed capital in over 50 companies across 25+ sectors of the industry, we’ve deciphered a lot about navigating both the process of sourcing investors for companies and vetting opportunities as investors; something we’ve learned is an art form of sorts.
Given the optics, the majority of capital injected into the cannabis industry is sourced largely from private investors, Venture Capitalists, Family Offices, and High net worth (HNW) individuals. A dynamic that has created a tremendous opportunity for investors to enter the industry at a relatively early stage, well before large-scale institutions and banks who will eventually corner the cannabis market with funding as soon as it’s viable for them to do so. When we began our journey in 2014 as seasoned investors excited to deploy capital in a promising new industry, we had no idea just how much we would learn about what makes a cannabis opportunity investable and how best to raise money for companies.
Here are the prime highlights from our top capital raises to date, and what they taught us about the art of matching cannabis companies with the right investors.
Abstrax – Funding the Future of Terpenes
On our quest to source capital for a revolutionary flavor and fragrance manufacturer that specializes in cannabis raw materials, terpenes, and aroma compound research, we found: our network is our currency and our portfolio is our credibility.
Abstrax is an innovative company in the cannabis terpene space. Terpenes are the compounds responsible for the way most plants smell. They are abundant in cannabis and many other plants, fruits, and herbs. The company has developed proprietary technology that provides the most advanced terpene mapping, testing, and analytics, along with custom formulations for cannabis, beer, alcohol, and consumer packaged goods.
Initially, when we met with the team and learned more about the company’s vision, mission, and proprietary tech, we knew we had to invest. In March 2020, we made our first investment with a follow-up investment in December 2021. Still, as investors with a keen stake in the success of the business, we wanted to utilize our expertise in capital sourcing to add new investors who could provide strategic value in addition to capital in order to fortify the company’s bottom line.
The goal: Utilize the Panther Ecosystem, our exclusive marketplace with a reliable roster of investor contacts, including High Net Worth Individuals, Family Offices, and Venture Capitalists who we knew would see the immense opportunity in Abstrax.
The result: We successfully raised $1.5M. $500K from a Family Office, $1M from a VC firm and with our own contribution of $500k, we were able to provide Abstrax with $2M of growth capital. Abstrax used these funds for essential expansion efforts to further build up the sales and marketing teams, operational headcount, research programs and raw material inventory.
In this scenario, we demonstrated our value as investors, advisors and connectors in a multitude of ways. First, to get this particular capital raise the traction needed to secure funds, we leveraged our relationships with various VCs in our network who were more than willing to discuss the details of this opportunity with us. Then, once we shared more aspects of the deal with potential investors, we harnessed our expertise to help them understand the nuances they needed to know about the industry, the unique focus of the business, overcoming objections as the market fluctuates, potential exit timing, etc. Which was key in sourcing the right investors for this opportunity.
Funding SPVs (Special Purpose Vehicles)
The problem: Greenlight came to us for capital, but at the time we were only able to commit $450K from the fund, and wanted to bring more capital to the table. We felt confident that we could raise an SPV given the criteria of the deal: high growth, strong sales, strong management team that had executed an exit previously, and clear path to exit.
Our mission: raise an additional $1.5M for the SPV to contribute more capital and strategic value.
The challenge: Given the confidential details of the deal and entity, we were limited to which sets of investors we could engage. We knew we would only be able to present this opportunity to a select few.
The solution: We introduced this opportunity exclusively for Panther Investors in the Ecosystem, i.e. only LPs from previous funds, sending out investment memos then inviting our investors to meet with the Greenlight management team.
After, we focused on follow ups and providing any support to help investors make decisions until we received the initial verbal commitments. Then, we garnered final commitments and capital. The entire process took about three weeks to complete. In total, Panther was able to raise $1.8M in outside capital to support Greenlight in their expansion efforts in new states, along with the $450k from the fund, for a total of $2.25M invested.
Are You A Cannabis Company Curious About How We Can Help You Achieve Your Capital Raising Goals? Or An Investor Looking for Access to Highly Vetted Cannabis Deals?
Companies, send us an email at firstname.lastname@example.org.
Investors, reach out to email@example.com