Raising Money in the Cannabis Industry: Q&A With Brendan Kennedy of Privateer Holdings

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By Tony C. Dreibus

Privateer Holdings made waves earlier this year when it closed on a $75 million round of financing, the largest infusion of cash into a cannabis-focused private equity firm in the marijuana industry’s short history.

What’s more, a major mainstream investor contributed to the round: Paypal co-founder Peter Thiel.

The financing windfall underscores growing investor interest in cannabis and proves that the industry can finally attract big bucks.

Privateer – which owns both Leafly and the Canadian cannabis producer Tilray – plans to use the money f0r geographic expansion and to acquire other companies. It also will pump money into its cannabis brand named after reggae legend Bob Marley.

Marijuana Business Daily sat down with Privateer CEO Brendan Kennedy at the Marijuana Business Conference and Expo in Chicago in May to talk about the fundraising round and to get an idea of what investors are looking for in cannabis companies.

What approach did you take to raising money in a market that’s still new and holds a lot of unknowns for investors?

Five years ago when we went and talked to several venture capital firms, we started meetings by saying, “Hey, we’re not asking for money.” Between my two partners and myself, we knew a lot of venture capitalists wouldn’t invest in this industry five years ago.

We were very methodical in our approach to this industry. Every time we met with someone, we said, “These are the next three things we’re going to do.” And the next time we met with them we’d say. “We did those three things, and here’s the next three things we’re going to do.” We told them what we were going to do, and we did it, and people liked that.

What type of person or company are high-net-worth individuals looking for right now?

Investors are looking for audacious entrepreneurs who have a vision to capture a large market. They’re looking for operators. It’s all about constantly pointing out the next milestone and meeting those milestones.

What advice would you give to someone trying to land a capital infusion from a venture capitalist, angel investor or private equity firm?

Be persistent. You’re not always going to close an investor in a single meeting, so prepare yourself for that next meeting. In our last round, we closed an investment from someone we pitched four years ago.

Founders Fund approached us 16 months before they made an investment. If someone tells you no, learn from it. Be nice to people who tell you no, because a no can turn into a yes.

Privateer owns a company licensed to grow cannabis for Canada’s medical marijuana program. How is the regulatory climate different there than in the U.S., and how has that helped or hindered your ability to do business?

The biggest difference is it’s federally legal and we operate with a federal license in Canada – that’s the biggest pro. That makes it easier to do business, but it’s not as easy as one might imagine.

Everything in this industry is difficult. It doesn’t matter which state or country you’re in, it’s hard to find marketing, accounting, branding, banking and law firms. Some global firms won’t touch this industry.

How would you rate the various states and countries in terms of ease of running a cannabis company?

We think of things on a regulatory spectrum: On one hand you have California, which is defined by lack of regulations. Spain is similar to California. On the other end of the spectrum, you have Colorado, which is highly regulated, and you have Canada, which has the tightest regulatory environment in the world. That’s why we chose to work there – we like tight regulations.

Why do you like working in such a tight regulatory environment, and is there room for improvement even in Canada?

Regulations on medical cannabis ensure patients receive a safer, consistent product, which is really important, especially for those with compromised immune systems. But there are other parts of the program that can use additional refinement.

That’s one thing Colorado has done well from a regulatory standpoint – they realize nobody is going to get it right every time, and whether you like its program or not, Colorado has done a good job of continually refining in a way that benefits patients.

Tony C. Dreibus can be reached at tonyd@mjbizmedia.com