The cannabis venture capital roadmap to value creation

Simply put, our goal is to create value for our shareholders. That value creation may come in any number of forms: above-market yields from our royalty and debt positions, dividends or other distributions from our equity investments, or monetization events from our portfolio companies. Regardless of the method, though, our strategy is straightforward: invest capital in a disruptive company, use our domain expertise to help the business grow, and turn a dollar into something worth multiples of it.

This is simple on the surface, but the process behind value creation is more complex. As cannabis venture capital investors, we hold various types of ownership in different companies, and these investment structures can affect the timelines around value creation. TerrAscend, for example, is a public company whose value we believe will be better realized once the U.S. legalizes cannabis on a federal level. Our interests in other companies, such as the conversion of our preferred shares in Vert Mirabel, have clearer timelines around monetization.

Because these timelines vary, our roadmap to value creation is focused on six milestones:

1. Find

Our dual inbound/outbound strategy helps us identify differentiated companies while capturing important insights during our search process. At this stage, investment prospects undergo deep due diligence processes where we evaluate market size, market need, capabilities, traction, leadership, and the potential return on investment.

2. Invest

Following intensive due diligence, we may invest in a select few companies that hit on key aspects of our investment thesis. Our cheque sizes have ranged from less than $1 million to up to $40 million depending on a number of factors, including round size, investment partners, company type, and the use of funds. Typically, our investment structures are tied to specific transaction goals and needs, including security, optionality, and board representation.

3. Facilitate

One factor we consider when we invest is how both our team and our portfolio might work with an investee once they’re a part of our ecosystem. We strive to add value by identifying collaboration opportunities—how can one portfolio company help another?—and providing support through the expertise we have on our own team.

4. Re-invest

Our initial investment is often not our last. We are lifecycle investors and may deploy capital at multiple stages of a company’s life depending on its needs. Our scale and cash position enable us to invest across multiple funding rounds, giving us the option to bolster our portfolio companies at each stage of their growth.

5. Grow

Patient capital can help portfolio companies scale, build revenue, and generate profitability at a sustainable pace. While each investment is on its own trajectory, our timelines for  investments typically range from 2-7 years.

6. Monetize

A monetization event could occur in the form of dividends from cash-producing assets, royalty payments, or liquidation through M&A or a go-public transaction. These may be significant events that could generate value for our shareholders. 

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In its simplest form, the venture capital roadmap would focus on finding companies, investing in them, and then multiplying that initial investment through a monetization event. But we think smart money is patient and can lead to sustainable growth. Rather than wait for monetization to materialize, we aim to be actively involved with ensuring the operational success of our portfolio companies. Our cannabis venture capital roadmap reflects this growth mindset while keeping our goal—creating value for our shareholders—front of mind. 

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This is not an offer to sell or a recommendation to trade in any securities. This information is provided as of the date hereof. This document contains data obtained from third parties that Canopy Rivers has not independently verified. This document also contains forward-looking information within the meaning of Canadian securities law, which is based on certain assumptions. While management believes these assumptions are reasonable based on information available as of the current date, they may prove to be incorrect. Many assumptions are based on factors outside of Canopy Rivers’ control and actual results may differ materially from current expectations. Forward-looking information involves risks, including, but not limited to, the risk factors set out in Canopy Rivers’ most recent Management’s Discussion and Analysis and Annual Information Form. You should not place undue reliance on forward-looking information. Except as required by applicable law, Canopy Rivers assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances.