The acquisition of Oakland, California-based The Arcview Group boasted a relatively small price tag, but the impact to the cannabis industry as a whole might be more substantial than the $7.7 million sum.
The deal was structured as a Series A funding but was effectively a takeover by the main investors, Trivergance and Cresco Capital Partners.
Institutional capital has been making its way into the U.S. cannabis industry for quite some time but rarely as a lead in capital raises or acquisitions.
Trivergance, a New Jersey-based private equity group, has invested over $1.5 billion of institutional equity capital since 2006. This stake in Arcview is its first move into cannabis.
“This is a huge and growing new sector,” Jerry Stone, managing member at Trivergance and new executive chair of Arcview, told Marijuana Business Daily.
“We bring institutional quality to a space that hasn’t had it before. Or, I should say, it hasn’t had enough of it.”
When Troy Dayton co-founded Arcview with cannabis activist Steve DeAngelo, there were a number of missed opportunities, given the obvious need for short-term revenue, Dayton said previously.
Arcview had to forgo possible upside in a number of companies to focus on the immediate bottom line.
Sign of maturation
The advent of institutional money could have an effect on the way companies pitch going forward, but the bottom line is there will be more money available generally, Dayton told MJBizDaily.
“It is a sign of maturation and, with maturation, comes more of a focus on the bottom line than on the passion and the impact of the cause,” he said.
“But more money is great. It means further layers of investment, a larger ecosystem, more supply of capital.”
Max Simon, co-founder and CEO of Green Flower Media, a cannabis education platform, agreed.
Green Flower, which received initial seed investment from Arcview, just closed a $20 million Series A funding backed by Tuatara Capital with additional investment from Poseidon Asset Management and Phyto Partners.
“I think this is a great move,” Simon told MJBizDaily. “I think that companies are going to find investors that are really going to support them.”
A new cultural mix of investors
Arcview’s Series A financing also included a number of investors who are both well known to Arcview and the cannabis industry as a whole, including Chris Burggraeve, former chief marketing officer for alcohol firm AB InBev; Sumit Mehta, CEO of investment group Mazakali; and Tripp Keber, owner of Dixie Elixirs.
“The investors who have been brought in are aligned with Arcview’s value set,” Simon said.
“They will bring a different kind of skill set to the table, but there is no incongruency just because they are institutional investors. That intersection is hard to find.”
Arcview’s Dayton said both Trivergance and Cresco care a lot about the cause of legalization. “We were able to build in a long term commitment to supporting this cause in the deal terms,” he said. “It is one of the main reasons we were willing to give up control.”
Going forward, the cannabis industry may increasingly be an interesting cultural mix of established investors who have been present in the space for some time, and new institutional players eager to play a big role.
Nick Thomas can be reached at firstname.lastname@example.org
(Editor’s note: Marijuana Business Magazine will feature Troy Dayton in the August issue, where he will discuss his investment philosophy and lessons learned.)
For more analysis of this deal, visit MJBizDaily’s Investor Intelligence.