Marijuana Business Magazine September 2018

B¬G H¬TS • Professional management. • A broad sense of how they should align themselves with partners. • Corporate behavior that shows an understanding of governance and transparency. • A passion and vision for the pursuit of their entrepre- neurial goals. Q What’s your biggest investment mistake and how did you overcome it? A I think any professional investor in the cannabis industry would say that mitigating risk and avoiding big mistakes are a key component of a successful investor. There was one specific instance where we overestimated the sophistication of an executive team and ended up having to work tirelessly with them for weeks to extricate them from a complicated and clumsy transaction that was a major distraction. Ultimately, this served as a great teaching moment for our team and really showed the power of our col- lective experience as investors. Q What’s your top tip for judging the credibility of valuations? A If I had one tip, it would be to find a range that ade- quately recognizes inherent risks and the high-prob- ability results and then back strong management who have the right mindset to scale their operation, which will more than adequately compensate you for not getting the lowest price possible. Q What products or sector are you most excited about? A We really like extraction-related precision equipment and services as companies spend to create formula- tions and branded products in the cannabis version of a space race. We also really like medical delivery method- ologies and some of the solubility tech we have seen. Q What’s one of your top investment goals in the next year? A We have spent the past year focused on the tidal wave of regulation that we envisioned coming as cannabis laws loosen, and the difficulty of applying that across jurisdictions. From the looks of Califor- nia, Canada and other evolving markets, compliance and standards are going to be a major issue going forward. There is no industry in the United States or any G-7 country that allows you to put something in your body without a ton of regulation, and we feel fortunate that we found a strong group of companies that help serve the needs of operators on a variety of regulatory requirements. We are still very focused on adding to the compli- ance/validation components of our portfolio and also targeting the health and wellness aspects of CBD, particularly with a few foreign investments we think are highly synergistic to our other global portfolio companies. ◆ This interview has been edited for length and clarity. Canopy Growth Lands Industry Record Investment New York-based liquor behemoth Constellation Brands significantly increased its ownership in Canopy Growth by investing an industry-record $3.8 billion (CA$5 billion) in the Ontario, Canada, marijuana titan. The massive deal included the first major play in the cannabis space from Wall Street: Bank of America Merrill Lynch financed the deal, which Goldman Sachs advised. The deal’s structure positions Constellation to possibly control a majority stake in Canopy, should the alcohol giant exercise war- rants valued in excess of CA$4.5 billion. Acreage Scores Landmark $119 Million Funding New York-based Acreage Holdings appears to have set a record for the largest private funding round ever closed by a U.S. cannabis company, raising $119 million to bankroll acquisitions and list its shares on the Canadian Securities Exchange. The vertically integrated, multistate company’s Series E raise surpasses what previously was believed to be the largest private U.S. funding: a $100 million raise by Seattle-based Privateer Holdings in January. Aurora Cannabis Secures $152 Million Loan Alberta-based Aurora Cannabis landed a loan for $152 million (CA$200 million) from the Bank of Montreal. The deal includes a $114 million term loan and a $38 mil- lion revolving-credit facility. The company plans to use the capital to boost its global expansion. Number of Note: $10 Billion Retail marijuana sales in the United States are expected to grow by as much as 50% in 2018 versus 2017 — reaching $8 billion to $10 billion, according to estimates in the 2018 Marijuana Business Factbook. By 2020, U.S. retail sales are projected to be as high as $20 billion. September 2018 • Marijuana Business Magazine • 13

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