The founder and managing director of Hypur Ventures decides to ‘go big’ with a $500 million fund focusing on long-term value
Christopher Galvin founded Hypur Ventures just over five years ago. With a background in corporate finance and hedge funds, his initial target was providing software to banking services in the cannabis industry, and Hypur is still working with about 20 banks in the cannabis space. Galvin estimates his company is involved in about 50% of all cannabis banking transactions.
It was that exposure that led him to establish an investment fund focused on the cannabis industry, and so Hypur Ventures was born, initially as a $13 million fund. “We were trying to get a gauge on how to evaluate these companies, how to price these companies, how to finance these companies,” he said.
Galvin then looked at an intermediate-size fund as a follow-up but, in his words, decided to “go big.” He launched a second fund, Hypur Ventures II, in March. Galvin calls the fund, sized at $500 million, the “largest fund in cannabis.” The first $200 million of the fund comes from high-net-worth individuals and family offices; the balance of it will be made up of institutional investors.
The check size is between $1 million and $25 million for each investment, Galvin said. “We take the lead in some environments; in other deals, we are part of a syndicate. We may go bigger in some cases.”
Galvin and his team are looking forward to reaping the benefits from what he expects will be significant consolidation in the industry. He talked with Marijuana Business Magazine about his investment philosophy and choosing companies.
What initially attracted you to cannabis investing?
We saw ourselves in a unique position in the ecosystem, and we saw opportunities that other people were maybe not able to see. We were able to provide capital in a market and take advantage of the opportunities to make capital on that.
Which cannabis sectors are you most excited about?
The evolution of technology is still, frankly, in the beginning stages. Biosciences—the extrapolation from the plant—we are still so early in that. In brands, there will be a lot of consolidation: retail, consumer, CBD, distribution. There is a market consolidation overall that comes with the evolution of any industry. This is our generation’s Prohibition. We are interested in the supply chain, and then we are interested in international. We are looking at that: South America, Europe. Europe is the U.S. 10 years ago. It is about sticking your flag in these markets now and investing smartly.
What is your investment philosophy, and who makes up your investor base?
We look at long-term value, that is our investor profile. We are playing chess, and everybody else is playing checkers. There has been an evolution in the market. Things have changed quite a bit. There are opportunities through consolidation, there is disruption in the market, and there is much larger financing available. We have more sophisticated investors now. There was a lot of scared money in the beginning. It was still nascent back then. It is still nascent now, but there were not a lot of places to put sizable checks to work. Cannabis is cool today. Even just three years ago it was not cool, and five years ago it was downright scary. But people still don’t want their name on it, so it is a tremendous opportunity both for us and the investors to use our financial expertise without them putting their name on it.
What’s your biggest investment mistake, and how did you overcome it?
In a nascent industry, there is what I call the bright, shiny object syndrome, where less-savvy investors can get hypnotized by said bright, shiny objects. Everyone makes mistakes, and mine have been where the management team has not fully thought through the business plan, and so it may have been a short-sighted investment. I didn’t properly vet the deal. Saying that, if you are batting .300 in the venture business, you are going to get to the Hall of Fame.
Which industry sectors are ones to avoid in terms of investment?
The grow business is a dead dog. This is an agricultural product, and it will become a commodity. There is no long-term value in this business. The minute Big Tobacco comes in, the grow business is over. You cannot compete.
It starts with management first and foremost. Are you able to scale? Do you understand scale, how to commercialize? Do you understand how to build a business? That is our cornerstone. Then, it is about defending your position. How easy is it to get into your sandbox? How much runway do you have? Is it sustainable? Can you execute?
Get access to more in-depth market analysis, premium features on cannabis investing trends and monthly executive webcasts with Investor Intelligence.
