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

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 [email protected]

7 comments on “Raising Money in the Cannabis Industry: Q&A With Brendan Kennedy of Privateer Holdings
  1. Mountzioncollective on

    Tight regulations means large companies win with expensive lawyers helping them navigate a limited playing field where small and medium sized companies are completely shut out. Obviously it’s awesome for anyone who makes it through, buts it’s a fake bubble.

    Cannabis is one of the least harmful substances in existence, to a cannabis smoker who doesn’t drink caffeine coffee will bring on a more intense experience than a joint… their is no justification for continued reefer madness with Canada like cannabis approaches. BIG business operating under TIGHT regulations that limit small/medium operations benefits no one but the profiteers.

    Prices are higher, innovation is stifled, no benefits from real legalization and the companies begin operating in a unreal bubble that will certainly be popped when the people legalize it for themselves in Canada.

    Reply
  2. Observer on

    They also cleaned house at Leafly….

    The article clearly states they are experts in fundraising… Which as they are learning is a very different skill than operations.

    Reply
  3. Patrick Rea on

    Excellent interview. Brendan and Privateer are doing very good things for the industry. They are the tip of the spear for many businesses in the legal cannabis industry. Hats off to them

    Reply
  4. Kevin Mahoney on

    This interview took place in May at the MMJ Business Daily Conference in Chicago, the layoffs took place after the conference. It is impossible for the interviewer to know to ask these questions… I thought it was a great article about industry regulations and spot on about how tight and loose laws are throughout the world.

    Reply
  5. Bruce Ryan on

    In any sector that is this “new”, regulatory landscapes are often used to stifle the industry. Relentless determination is required. The Canadian framework is designed to delay, deny and destroy the market, not encourage it in any way. The recent unanimous Supreme Court of Canada decision struck directly at the Law rather than the draconian “regulations”. This, of course, outraged the Minister of Health. Handwriting is on the wall. Another court case is in the pipeline.

    Reply

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