We chatted with Casa Verde, one of the most talked-about venture capital firms in the cannabis field, to see how things played out for their well-positioned investments over the course of the pandemic.
Beyond the hype of being founded by Snoop Dogg, any group of investors would be thrilled to have the stuff in Casa Verde’s portfolio. Names like Eaze and METRC are competitive or dominate their respective spaces within cannabis.
We caught up with managing partner Karan Wadhera and started the conversation by asking about their plans for the $93 million dollars they reported in their coffers. Since then, they took part in Bespoke Financial’s $8 million program to provide financial services to a cannabis industry that continues to wait for regulatory relief from lawmakers.
“You know, to that degree, on what you’re referring to, that was like an official SEC filing. So, from our standpoint, obviously, we have not announced anything but of course that’s a government thing we did file,” Wadhera told us with a laugh. We quickly moved to current events, which generally have not been going bad for the VCs at Casa Verde.
Even with the perils of life over the last 15 months, Wadhera basically kicked off the conversation explaining life is pretty dope. He’s particularly enthusiastic about the pace of change in cannabis.
“I don’t think I’ve ever felt this much momentum before from investors, from entrepreneurs, from even consumers,” he told us. “It feels like a completely different landscape and I’ll have to say that the regulatory momentum is probably some of the most interesting. Just how quickly states are now coming online in a way that they never have before.”
Wadhera was particularly excited that it doesn’t need to happen at the ballot box anymore. This is an important aspect of things because not all states even feature a ballot initiative process in their constitution.
Federally, banking reform seems to have the most steam at the moment. We asked what it meant to a company like Casa Verde.
“It will depend on exactly how SAFE banking fully shakes out,” Wadhera said. “For example, it seems unlikely that SAFE banking will be a conduit to, let’s say, capital markets activity in terms of listing on U.S. exchanges. It also looks like SAFE banking may not be a direct conduit to payments in the space. But, you know, it will help solve a real major issue which is that so many businesses in the cannabis space are still unable to open bank accounts at a minimum. Just that change will be incredibly useful.”
Wadhera admits the legislative stuff on the table at the moment doesn’t fix everything, but at the very least, it’s certainly a sign of the momentum we’re seeing right now. He noted it’s been pretty clear each one of those steps gets investors, consumers, and legislators more comfortable with the industry.
With much of the cannabis pie chopped up already, we asked Wadhera how much trickier it is to evaluate new talent for the portfolio.
“It’s a great question,” he replied. “I think there continues to be lots of areas we have yet to touch. And while it may seem like we’ve hit many areas, I think the cannabis industry is super nuanced. And it’s very complex from a compliance and regulatory perspective, which always makes room for technology to come in and help solve some of those issues. So I think there are still a number of areas where we are super excited.”
Data compliance and consumer-facing brand development are a couple of places he’s keeping an eye on.
A lot of people believe that if you had your ducks in a row going into the pandemic, and you were a cannabis company, it probably went pretty good for you. We asked Wadhera if that was the general spirit for the companies in their portfolio.
“Yeah, I think so. Again, I think it depends on where you were, but I think largely, for 90% of our businesses, that was true,” Wadhera replied. “Some of the obvious ones are businesses like Dutchie which saw a huge transition to delivery, and it helped their business tremendously. And then, obviously, anyone who was sort of involved in the retail side. You just saw so much more consumption.”
Wadhera felt like things in the space looked a little weird at times in 2019, so those companies that battened down the hatches early were in good shape for what was to come.
“We were already prepared for what we felt was a potentially dire scenario. You would cut a lot of the fat. You had gotten more efficient. You were putting yourself in a really strong position for any kind of volatility.” This put cannabis businesses in a much stronger position, Wahhera argues. Then the icing on the cake was obviously the fact that cannabis became “essential.” He reasonably believed that such a designation was a large inspiration for the amount of reform we’ve seen in the year since.
As we noted, Casa Verde certainly raised a lot of cash during the pandemic. But the early goings weren’t always as easy.
“There was just a halt on any kind of conversation around any funding from anyone. People just got nervous and didn’t know what to do,” Wadhera said. “But I would say as we hit into the fall and the numbers were clear — how well some of these businesses were doing — a lot of activity sort of picked up. And I think you saw within our portfolio and the businesses that raised some pretty significant rounds, Dutchie and LeafLink in particular. It showed that there was still a tremendous amount of excitement.” ❖
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