CannTech Captured: Fundraising Panel with TechCrunch’s Connie Loizos
Photo by Christopher Howard of Tom Roche Productions
CannTech was huge, and we’re still processing all of the conversations, learnings and experiences from the event. Our CannTech Captured mini-series is a way for us to share some of the big takeaways from the event as we reflect back on some of the best moments of CannTech. To kick off the series, we’re spotlighting one of the most highly anticipated talks, the fundraising panel, where we brought together some of the top VC’s and entrepreneurs in the cannabis industry to discuss the lucrative nature of the market and the nuances of securing capital, amidst complex regulations. TechCrunch VC and startup reporter Connie Loizos interviewed a panel of investors and executives to uncover where the hottest investing segments are and what we can expect to see for the year ahead. The panel included Casa Verde Capital Managing Partner Karan Wadhera, Atrium CEO Justin Kan, Poseidon Asset Management Managing Partner Emily Paxhia and Canopy Rivers President and CEO Narbe Alexandrian. While on the topic of money, here’s an opening anecdote on the importance of funding from DCM General Manager David Chao, who introduced the panelists.
“Often entrepreneurs ask: what’s the most important attribute of a startup? My answer is that at the end of the day if you can’t raise the money for your company, then your company won’t have enough oxygen to survive. It’s the most important element in any startup.” — David Chao, Co-Founder and General Partner, DCM
Betting on Precision and Micro-Dosing
Cannabis isn’t as stigmatized as it once was, and folks with different backgrounds and reasons for using it besides just getting high are valuable new market entrants, which is why precision dosing is the wave of the future and particularly appealing to investors. Two of the fastest-growing segments of the population using cannabis are seniors and women, which bring forth new opportunities for the cannabis industry. 3.7% of U.S. adults age 65 or older used cannabis in the past year, a more than tenfold increase from 0.3% in 2007, according to a study published by the University of Colorado. Marijuana delivery startup Eaze also conducted a survey revealing that for the third year in a row, the market saw its share of women consumers grow, jumping from 25% in 2015 to 38% in 2018. Poseidon Asset Management Managing Partner Emily Paxhia noted that products that allow new entrants to experiment with cannabis in moderate doses are extremely important for retention and growth among those demographics. According to Emily, while there still isn’t much research around the effects of cannabis on women, they tend to have a lower tolerance for cannabis than men, so having low dose options will help keep women interested in using cannabis. For seniors, many are turning to cannabis to help with chronic discomfort and fatigue resulting from arthritis, or even chronic conditions like an autoimmune disease.
Consumer data shows that there are intenders and rejectors of cannabis. Many rejectors have actually tried cannabis but were turned off a by a bad experience, resulting from too high of a dose, which is why precision dosing could be the answer to decreasing the number of rejectors and increasing the number of intenders. “People really do care about actual precise dosing, and being able to guarantee precise dosing means more people will be willing to try the product,” said Casa Verde Capital Managing Partner Karan Wadhera, “[but most] products don’t explain dosing specifically and accurately enough for the average consumer.” Companies like Indose and Dosist are building products to tackle this issue, while DCM portfolio company K-Zen, a cannabis beverage company, is selling flavored THC-infused shots that provide the exact milligrams per shot along with more specific descriptors on how the product will make you feel. As more types of people take an interest in cannabis, we will see an uptick in products that allow for more controlled dosing.
Ancillary [Non-Plant Touching] Companies
Just like any other emerging industry, services like point of sale, manufacturing and staffing create incredible opportunity for new companies to provide solutions. In the case of cannabis, these companies are non-plant touching and present a low-risk opportunity for investors. Unlike dispensaries and cultivators, ancillary companies can scale across multiple state lines and grow more rapidly by avoiding the regulations. Ancillary companies are the primary focus for Casa Verde Capital Managing Partner Karan Wadhera, who has made fifteen investments in the space. One such investment was in Dutchie, an online ordering platform that now operates in Oregon, Washington, and Michigan, Colorado, Nevada and California. Likewise, he saw potential in LeafLink, a wholesale management platform that connects cannabis brands to retailers, that recently surpassed the $1 billion dollar mark in annualized cannabis orders. Some of the most salient opportunities in cannabis come as a result of finding creative solutions to the complex regulatory environment.
Photo by Christopher Howard of Tom Roche Productions
It’s clear that cannabis funding is in its infancy, which makes this an exciting time to expose new segments and invest in forward-thinking companies. Investment activity boomed in 2018, increasing to $13.8 billion in total value from $3.6 billion the year before. We’re excited to see how the market shakes out and even more excited to see where things are a year from now at CannTech 2020. We have more recap content coming your way, so stay tuned for more blogs on the highlights from CannTech 2019.