Pot Firm Arcview Targets Institutional Money With Venture Fund

(Bloomberg) -- The Arcview Group, which has been connecting cannabis companies with investors for almost a decade, plans to raise up to $100 million for its own fund to take advantage of a growing investor base that’s interested in pot but wants someone else to do the legwork.

The San Francisco-based marijuana investment and research firm has helped over 1,400 investors place more than $235 million into about 200 companies since its inception in 2010, according to Chief Executive Officer Troy Dayton. This is the first time it will operate its own investment fund.

The venture fund, which aims to raise $50 million to $100 million and is expected to close in the next couple of months, reflects the changing profile of cannabis investors as the industry grows and matures, Dayton said. Arcview will target high-net-worth investors and larger companies that want exposure to the venture cannabis space.

“Up until very recently the people that were investing in this space were intrepid investors who wanted to get their hands dirty on deals,” Dayton said in a phone interview. “Now you have a new set of investors who recognize that the scale and the complexity of this market demands people whose full-time job it is to understand and evaluate this space.”

Arcview will leverage the high profile of its general partners Jeanne Sullivan, co-founder of venture capital firm StarVest Partners, and Brian Sheng, co-founder of Fresh VC, to attract investors to the fund.

Ebbu Backer

Through Arcview, investors have previously helped fund companies including Colorado hemp firm Ebbu Inc., which was sold to Canadian pot giant Canopy Growth Corp. last year for about $330 million, and cannabis delivery platform Eaze Solutions Inc., which has been valued at over $100 million.

While most of the money invested in the cannabis space to date has been in cultivators or vertically integrated firms that grow and sell, those companies are “incredibly overvalued” today, Dayton said. Instead, the fund will look at ancillary businesses with intellectual property as well as firms that are focused on hemp and cannabidiol, the non-intoxicating extract that was legalized via the U.S. farm bill in December.

“Agricultural technology and genetics and software -- these kinds of things are going to be huge to the industry, and the private companies in those spaces still have quite low valuations,” Dayton said. “So there’s a pretty unique opportunity there.”

Tipping Point

While cannabis investment is still largely dominated by retail investors, family offices and a few venture funds, Dayton believes the industry is at a “tipping point” where institutional money will begin to flow. He hopes Arcview can take advantage of that shift with its new fund.

“You’re getting into larger pools of capital where people recognize that they want to back managers, not necessarily back specific companies,” he said. “This industry is moving so fast and the valuations could explode at any time.”

To contact the reporter on this story: Kristine Owram in Toronto at kowram@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, David Scanlan, Stephen Wicary

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