Marijuana Business Magazine July 2019

Marijuana Business Magazine | July 2019 16 The managing partners at Salveo Capital discuss the importance of a company’s team as well as red flags to be wary of when picking investments Jeffrey Howard and Michael Gruber S ince launching in 2016, Illinois-based Salveo Capital has invested in more than a dozen companies across cannabis sectors, from biotech and tech startups to multistate operators. The firm’s 15-company portfolio comprises a number of rapidly growing cannabis firms, including: • Denver-based Würk , a tech firm focused on regulatory solutions for cannabis operators. • Harborside , one of the oldest and largest cannabis retailers in California. • Massachusetts-based Ascend Wellness , a multistate operator with licenses and operations in Illinois, Massachusetts, Michigan and Ohio. By the third quarter, the Salveo team expects to launch its second fund, targeted at $100 million, and build off the investment focus and strategies set in motion with fund one, say the managing partners Jef- frey Howard and Michael Gruber . They shared their investment insights and top strategies with Marijuana Business Magazine. What attracted you to the companies in your portfolio? Gruber: For technology and services companies that we had invested in—which includes Treez, Würk, Headset, Baker, PathogenDX, Front Range Biosciences, etc.—we were attracted to these companies because they were providing a capability that directly addressed a lack of similar services for the cannabis industry. These companies were specifically focused on addressing pain points for cannabis companies as it related to regulations, workflow and production efficiencies in their businesses. We saw the ability to build robust and scalable companies with sticky relationships that would not be readily copied, and with a very plausible road map for a potential acquisition by either consolidators within this industry or by traditional industry providers that would want to add a cannabis offering in the future. What about plant-touching companies in your portfolio? Gruber: For brands (Tokyo Smoke and others not yet dis- closed) and operators that were touching the plant such as Harborside, Ascend and Grassroots, we saw the trend toward brands making a big difference in purchasing behavior—but also that the producer and the retail expe- rience made a difference to consumers. We are big believ- ers in the need for a product to resonate with a consumer based on their demographic and psychographics, and cannabis companies are in the early days of optimizing this. In addition, consistency in quality and effects is important, and building a relationship between the brand and the consumer will take time through multiple interactions. What sectors are you focused on as you prepare to launch your next fund? Howard: Salveo is actively investing across the entire cannabis ecosystem, from growing, processing, retail, technology and services that enable industry operators to operate their businesses more efficiently. What are some of the common red flags that cause you to pass on an investment? Howard: Team is critically important in our companies, and we like to see not only competence in the individuals but also passion. It will be the persistence and drive and the belief in the c ompany’s mission that will enable a company Money Matters | Lisa Bernard-Kuhn $229.9 MILLION That’s the total amount of capital raised within the hemp sector through mid- May, according to Marijuana Business Daily ’s data and analytics partner,Viridian Capital Advisors.That figure is up from $33.7 million during the same period last year. Howard Gruber