Marijuana Business Magazine July 2019

Marijuana Business Magazine | July 2019 18 to pivot and adjust to the never-ending challenges that a fast-growing company will experience. The quality of the team, the chemistry among the members and the culture that has developed will be easy to sense, and so the absence of these factors will be a big red flag. Tied to team is the understanding of the business and a grounding in reality. So, a big red flag would be the lack of understanding of the key drivers of their business, lack of knowledge of key players as well as absurd projections for the company that have no basis. What products or sector are you most excited about? Gruber: The market is constantly evolving, and so we continually have a changing set of priorities. That being said, a few areas that are of strong interest include brands, CBD and drug-delivery platforms. What are your top three key investment criteria? Howard: 1) Team. Successful business takes a lot more than an idea, and it is the people through a combination of intellect, passion and raw determination who will be able to execute a business. The original business model may not always be the righ t one, but a good team will be able to weave and pivot as necessary to work through challenges and adversity and find a way to be successful. 2) Market opportunity. We want to see a big-enough total available market and a company’s ability to com- pete with other players attacking same problem. 3) Investment return potential. Our investments are looking for both a significant cash-on-cash return as well as IRR (internal rate of return). Not only do we want the exit to reach a specific size, we are very cognizant about the timeline in order to get to an exit. For each investment, we are looking to achieve at least 4X-10X returns and with IRRs that exceed 35%. Businesses that are capital efficient and can grow to scale with more limited amounts of capital are more attractive. Lisa Bernard-Kuhn is editor of Marijuana Business Daily ’s Investor Intelligence. You can reach her at lisabk@mjbizdaily.com . Get access to more in-depth market analysis, premium features on cannabis investing trends and monthly executive webcasts with Investor Intelligence. BIG HITS Pax Labs Inks Blockbuster $420 Million Raise Pax Labs, a San Francisco-based maker of vaporizers, raised $420 million in equity financing, a record for a U.S. marijuana company. The firm said the round included both new and existing institutional investors, including New York-based Tiger Global Management and San Francisco-based Tao Capital Partners. The raise nearly doubled the previous high for a U.S. cannabis company, a $250 million debt financing by California-based multistate marijuana operator MedMen in March. Harvest Health Closes $100 Million Tranche of Private Placement Multistate marijuana firm Harvest Health & Recreation closed the initial tranche of its previously announced private placement for gross proceeds of $100 million. The Arizona-based company plans to use the net proceeds to cover working capital and for other general corporate costs. 4Front Secures $50 Million Loan to Help Build Facilities Phoenix-based 4Front Holdings, a vertically integrated cannabis operator, secured a $50 million loan to help it build cultivation and production facilities connected with the company’s expected merger with Cannex Capital Holdings. Vancouver, British Columbia-based Cannex, via its subsidiaries, provides a range of services—including real estate, management, financial, branding and intellectual property—to licensed cannabis businesses in Canada and internationally. The merger is awaiting final approval from U.S. antitrust authorities. The combined entity will be named 4Front Ventures. Marijuana Firm Green Growth Brands Raises $45.5 Million Ohio-based Green Growth Brands raised $45.5 million through a private placement of convertible debt. Terms of the financing included 15% secured convertible debentures at a price of $1,000 each and a conversion price equivalent to $5.20 per common share. Proceeds from the financing will be used for general and working capital. Money Matters | Lisa Bernard-Kuhn