Venture Capital Special
Fundraising is frenzied
Casa Verde Capital launched in 2015 to capitalise on the cannabis industry, which some estimates predict could be worth up to $100 billion over the next 10 years. The firm closed its debut fund on $45 million in March and has already backed eight companies. Managing partner Karan Wadhera explains the firm’s strategy.
Casa Verde Capital focuses on the ancillary cannabis industry, commonly referred to as ‘not touching the plant’. Why?
In the US we have a fragmented legal system that’s very tough to navigate. The ancillary companies, though, don’t have the same issues as those that touch the plant. These are companies in compliance, marketplaces, media, accessories, etc, which still play around the entire theme and benefit from the massive growth of the industry but don’t have issues on the municipality and state level that a licensed cannabis business would.
What does your LP base look like?
Family offices are the bulk of our LPs, and then high-net-worth [individuals], so no institutional investors at all. I think it’s a tad early [for those investors]. That is changing because we’re seeing the funds they back start to invest in the space. Most recently we participated in a re-investment into a company called Green Bits and [hedge fund] Tiger Global led that round. I think as you start to see institutional funds step into this space, it trickles up and their LPs will start to go, ‘Ok, it’s time we started to look at the industry.’
It’s an international LP base. We have a fair amount of exposure from Asia. There’s now a lot more interest from folks out of Europe where there wasn’t a year ago. Part of that is there’s a wave of legalisation that’s about to take place there, so I think the topic’s becoming relevant in European countries now as well.
What concerns did potential investors raise with you?
People are inherently nervous about anything that deals with industries with a lot of regulation, so the main initial concern was ‘what if we see a crackdown at the federal level on this space?’ Our view has been consistently that, one, this is an extremely compelling business even as it sits at the state level, but really if you look at the trend from the sentiment to medical research to even the political climate, it’s all looking very favourable towards federal legalisation at some point.
Will the next fund be larger?
We can and will [raise] a significantly larger [fund]. If you look at the last couple of deals we’ve been a part of in terms of follow-ons it’s clear there’s room and opportunity for that kind of size now as well.
Casa Verde was co-founded by Calvin Broadus, better known as rapper and entertainer Snoop Dogg. What are the pros and cons of having a well-known figurehead?
He’s one of the most important cultural figures in this space, but sometimes investors are not aware of that and so there’s definitely some level of explanation to clarify if someone’s concerned of this being a gimmick of some sort. On the pros, there are very few partnerships that have an organic fit from an entertainer perspective, but Snoop’s passion and interest in cannabis has been there from day one, so I think it’s actually a perfect fit. And as it pertains to the companies that we’re trying to invest in, that’s something very exciting because it’s a cultural stamp of approval or validation for what you’re doing by extension of a Casa Verde investment.