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Money is flowing into the cannabis industry at an unprecedented pace. And it’s not just the Canopy Growth Corp (NYSE:CGC) and Cronos Group Inc (NASDAQ:CRON)’s of the world on the receiving end: public and private companies across the spectrum are drawing considerable investor attention.
Cannabis investments surpassed $5.6 billion as of Sept. 7, according to Viridian Capital Advisors' cannabis deal tracker.
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While we know who’s investing, it's rare for funds to explain why they chose certain companies over others. Fortunately, Altitude Investment Management were willing to let us in on some of their secrets, offering to walk Benzinga through the latest additions to their Altitude Investment Partners, LP fund.
10 Investments, 6 Months
From March to August of this year, Altitude’s fund invested in 10 companies. Six were add-on investments to existing portfolio companies; four others were investments in companies new to the Altitude portfolio, which now consists of 15 company stakes.
The fund made an add-on investment as co-lead in BDS Analytics’ Series B preferred stock $3.5-million capital raise.
BDS is one of the leaders in cannabis business intelligence. This funding places BDS in a strong position to execute the national expansion of its GreenEdge software and to roll out its "Consumer Insights & Industry Intelligence" services, according to Altitude.
The fund also made an add-on investment in Canndescent’s Series C convertible note $13-million capital raise. The company is commencing a multistate expansion strategy in the west, the fund said.
“We took a small position in Canndescent’s Series B preferred stock raise and have increased our investment significantly based on the milestones the company has achieved in such a short period of time," said Altitude partner John Brecker.
In addition, Altitude made investments in both Pennsylvania-based AES Compassionate Care and Illinois-based Grassroots Compass Ventures. These fully licensed, vertically integrated cannabis companies are active in cultivation, extraction, manufacturing and retailing, and are managed by the same team.
“Our investments in multistate, vertically integrated operators will allow us to participate in the growth and value creation as the medicinal markets grow, new patients are added and new approvals for qualifying conditions increase the patient base. Additionally, large upside exists when a planned rollup takes place and as these states legalize adult use," said Altitude partner Michael Goldberg.
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Between March and August, the fund made an add-on investment in Flowhub’s convertible note $3.3-million capital raise. “Flowhub’s software serves more than 300 of the largest retailers and cultivators in the United States,” according to Altitude.
Another investment: Golden Systems’ Class B preferred units $5-million capital raise.
“Golden Systems owns C4 Distribution Co. (aka C4 Distro), a California-licensed distribution operating company. C4 has most recently added four new brands for distribution to its growing list of products,” said Altitude partner Rod Stephan.
Finally, Altitude was the co-lead investor in PathogenDx’s convertible note $3.4-million capital raise. PathogenDx provides DNA-based disruptive testing technology and solutions to the cannabis, botanical, food and agriculture markets at an adaptable scale for both large and small testing facilities.
Partner Thoughts
Benzinga asked Altitude partner Jon Trauben to explain the firm’s philosophy.
“We’ve been making great progress in filling out our investor base and finding compelling investment opportunities. We have a longer-term view and we think we are in the early stages of an emerging global cannabis industry," Trauben said.
Altitude focuses on strong management teams and companies it believes have a chance to be "foundational" in the sector, he said.
“Altitude plans to grow with the industry with subsequent fund vehicles and other investment strategies in the coming years targeting compelling risk-adjusted returns.”
Picture by Javier Hasse.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.