The Arcview Group’s Investor Forum in Brooklyn, N.Y. on September 12–13 drew participation not only from young entrepreneurs launching their first businesses, but also from a new contingent of seasoned pros from the ranks of corporate America looking for funds to launch mainstream cannabis brands.
If these companies play their cards right, they could become stock-market darlings of the future, or an acquisition target for a Fortune 500 company. For now, they’re in liftoff mode, with private capital needed to build and expand their businesses.
More than 200 cannabis industry investors were in attendance at the event at the New York Marriott Brooklyn Bridge. The main focus was the shark-tank sessions—where promoters presented investment opportunities to potential investors—representing cannabis consumables, technology, business-to-business solutions and cannabis science industry subsectors. About a dozen start-ups were selected by Arcview to pitch. Companies showed off their wares in a large room, and took impromptu meetings.
Shark tank sessions don’t guarantee success in getting funded, but they help investors see how well entrepreneurs from this budding industry think on their feet under hot lights. If potential investors like what they see, private meetings with start-ups follow, with capital commitments—from tens of thousands to millions of dollars—on the line.
In the main ballroom, a trio of so-called sharks sat on the stage on throne-like chairs, asking questions, providing feedback and commenting on PowerPoint presentations delivered by the earnest entrepreneurs. “It’s great to see world-class people getting involved in the business,” said Alain Bankier, ex-CEO of The Manischewitz Company and one of the sharks presiding over a session of consumables (i.e., edibles) companies.
His comment referred to the founders of Toast, a New York-based marketing company that’s launching a luxury cannabis brand in Aspen, Co. in time for this year’s ski season. Toast’s executive team includes CEO Punit Seth, a veteran of Bridgewater Associates (a major hedge fund); Chris Burggraeve, former chief marketing officer of of Anheiser-Busch InBev; and David Moritz, who founded the luxury marketing agency Viceroy Creative, which has repped high-end Patron tequila and other prestigious labels. Toast was seeking $500,000 to fund its expansion.
Another shark, Jay Czarkowski of Canna Advisors, bared his teeth slightly when he commented about Toast’s use of a “half-naked woman” in its presentation. “It’s something that we’re trying to get away from in the industry,” he pointed out. “Other than that, I’m intrigued by the product.”
At the end of each presentation, audience members provided reactions through an app on their phones,
with the tabulated results displayed on the main screen in the room. A significant number of respondents ranked Toast’s presentation as “Poor.”
Mirth Provisions and CEO Adam Stites drew higher marks. The Seattle-based company sells canna-drinks and sprays in three states to more than 200 stores. They were seeking $1.5 million to boost Legal, a line of cannabis sodas (Rainier Cherry, Lemon Ginger, Pomegranate and Cranberry CBD) and Drift, a cannabis tincture spray positioned as an alternative to vape pens. “It looks just like Binaca,” Stites crowed.
“Great presentation,” Bankier cooed in return. “Pretty impressive.”
Another carbonated drink, from Brooklyn’s own LOFT, whose motto is “Be Free,” is what they call a “hemp-infused herb tonic.” The company was seeking $1.25 million as it works out distribution deals with Whole Foods and other retail outlets. They also have a THC drink, which CEO Michael Christopher predicted is “the next Red Bull.” LOFT’s executive roster includes co-founder Eric Schnell, who’s known in the beverage business for his 2002 launch of Steaz, a sparkling tea drink that ranks as the largest private fair-trade tea brand in the U.S.
Arcview, based in San Francisco, receives applications from 20 or 30 companies per week. From that pool, they invite three to five companies to take part in weekly webinars to pitch their businesses. (Each company gets an experienced mentor to guide them.) Member events such as the one held in Brooklyn take place five times a year, in different cities.
Since 2010, 130 companies have raised more than $84 million through Arcview investors. In the world of venture capital, such fundings qualify as angel investments, a term given to cash infusions early in a company’s evolution, often with more risk attached.
While these young companies may be chancier for investors, the pay-off could be big. MassRoots (OTC: MSRT), the social network backed by Arcview members, had raised about $2.4 million and provided a 10,000% potential return for early investors before the company recently defaulted on its payments.
“The presentation by entrepreneurs are important, but unless you’re raising money for a presentation company, it’s only one of many factors,” said Troy Dayton, who co-founded Arcview with Steve DeAngelo. Investors vigorously kick the tires on each company, paying close attention to the competitive landscape, the viability of the business, how unique and differentiated it is, market opportunities, financial data and many other aspects before they decide to invest.
Dayton agreed that New York’s restrictive medical use law offer less upside potential than those of most other states, but the region plays an important business and finance role as the U.S. legal cannabis trade reaches a projected $7.1 billion this year. “We’re seeing a lot of talent and capital coming from New York,” Dayton added.
Arcview’s next shark tank (a.k.a ArkTank) is scheduled for Nov. 13–14 in Las Vegas with entertainment provided by the Blues Brothers. Wall Street is listening.
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