Canopy TM, a venture capital firm and business accelerator for ancillary products and services companies in the legal cannabis industry, announces the launch of a $50 million venture fund called CanopyVentures I, targeting growth stage companies.
Canopy started making waves when they announced the first cannabis ancillary accelerator program, called CanopyBoulder located in Boulder, Colorado. In 2015, CanopyBoulder raised $1.2 million to invest in 20 early-stage startups providing ancillary products and services. Since their launch in 2015, they have funded over 73 cannabis ancillary companies. As of November 2017, Canopy companies have raised over $30 million from outside investors post-graduation from the accelerator.
Insight into CanopyVentures
In our interview with Micah Tapman, we were able to dive in and discuss the new venture fund, the investment landscape and how cannabis businesses can apply for this fund.
Adelia: Micah, First off, congratulations on the fund! CanopyVentures will be focusing on later stage companies, can you give us some insight into what you would consider being an appealing growth stage company?
Micah Tapman: Sure. CanopyVentures fund is looking for companies with great teams that are working on hard problems in and around the cannabis sector. We see tremendous potential for development of solutions to cannabis industry challenges and the transfer of those solutions to other industries. Generally, we’ll look to see revenues of at least $40-50k/mth, an exceptional team, and the ability to rapidly scale. Now, tech companies may have slightly different metrics, more focused on software development, but it’s important to show revenue growth as that validates the product-market fit.
The areas of particular interest are ag-tech, retail tech, data and analytics, media and advertising, machine learning/AI, and blockchain solutions. We are definitely inclined towards software because it’s most scalable, but we’re also open to innovative hardware, smart devices, and crypto-based opportunities. A shorthand way of thinking about our focus is anything on the frontier, meaning the edge of traditional markets.
Adelia: This fund is focusing on cannabis supply chain companies, why did you feel it was important to invest in companies in this specific area?
Micah Tapman: The industry’s development presents an opportunity for companies to create value by solving hard problems. Things like inventory management are a challenge for every company but with cannabis solving that problem isn’t optional. We believe companies will find green space to develop solutions in cannabis that not only apply to the cannabis companies but also represent improvements for companies in many other sectors like agriculture, general retail, data and analytics, media, etc.
Adelia: What are the overall goals for CanopyVentures?
Micah Tapman: First, we’re a venture fund focused on providing great returns to our investors. With that as context, it’s also very important that we do this the right way. The cannabis industry is rife with bad actors, particularly on the emerging business side of the market. There are too many unethical and immoral investors looking to profit from cannabis and showing no remorse as they take money and value from other investors, business owners, and even customers. We want to buck that trend and set a good example of how smart money can help good companies grow. In many ways, this just means being upfront and transparent about our goals, both with our investors and with entrepreneurs.
Adelia: Do you think initially, it will be a slow start finding the right companies?
Micah Tapman: I’d say the first couple investments are actually relatively easy for us to see, the harder ones are probably the investments after the first 6-8. I already have a backlog of investments I’ve been watching and now I can start executing deals. Hopefully, we’ll see a continued emergence of great teams. The cannabis industry is growing at 30-40% compound annual growth, and it’s growing in terms of maturity. Those are very attractive characteristics for great entrepreneurs to either join the industry or transform an existing business into a growth-focused business.
Adelia: This fund will begin looking at investments at the end of Q1, what are key tips or suggestions you would share with cannabis entrepreneurs on how to prepare before they reach out to Canopy Ventures?
Micah Tapman: First, build a good team. We won’t invest in companies unless we believe the team is an “A”. Give me an A team with a B idea and I’ll take it over a B team with an A idea any day. To do that I recommend a focus on self-awareness, transparency, and challenge. Great teams tend to combine almost unlimited confidence with a healthy dose of humility.
That means they know they are good at certain things, weak at others, and are facing tremendous challenges. In many ways it’s similar to how great athletes think, recognizing they can win the championship but understanding it’s never an easy road.
Adelia: Are you only investing in the US or can international companies also apply for this fund?
Micah Tapman: No, we’ll look to invest opportunistically in and around the cannabis sector. That’s going to include a global review and we are likely to make at least a few investments in overseas ventures.
Adelia: So Micah, what will your role look like with Canopy Ventures?
Micah Tapman: I’m the Managing Director for the fund so my focus is on managing our risk/reward ratio to realize exceptional returns. That’s going to involve everything from finding and vetting deals to managing our portfolio, recruiting and hiring our internal staff, and realize gains in latter years.
Adelia: The launch of this fund seems very strategic and aligns well with CanopyBoulder, was this initially something always in the plan for CanopyBoulder, or did it eventually transform on its own?
Micah Tapman: A little bit of both. Patrick Rea, the founding partner of CanopyBoulder, dreamed of a venture fund back in 2013-2014. It was too early then but Patrick’s tireless work with CanopyBoulder helped create the ecosystem of companies and entrepreneurs that make this fund viable. Of course, we’ll still have CanopyBoulder as part of the Canopy brand and Patrick’s already lined up the next cohort of great startups to launch on February 5th.
Adelia: What else is in store for CanopyBoulder and CanopyVentures in 2018?
Micah Tapman: As mentioned, CanopyBoulder will work on seeding another 15-20 companies starting up in the cannabis sector this year. Meanwhile, CanopyVentures will look to fund the future growth of 6-8 top companies. We’ll be doing a lot of research and finding great deals across the industry.
Adelia: For startups who are still in the pre-seed/seed stage roles, what overall advice and insight can you give them when raising capital from investors and venture funds?
Micah Tapman: Focus on (1) team, (2) traction, and (3) scaling. I want to see that A team with great traction and the ability to scale the business to the next level. If you have the right pieces the business should grow by leaps and bounds, and the data will speak for itself. And, if that’s not happening, you don’t have product-market fit so you probably need to change your approach. All VCs, and me, in particular, want you to be extremely honest in your dealings, both internally and externally.
For me, the investment decision comes down to trust. This is a relationship that lasts about as long as the average marriage! We want to be in good relationships that provide not just economic value but also benefit both the entrepreneur and us on an intellectual and emotional level. One of the best parts of investing in startups is learning from all the entrepreneurs. Without fail they are exceptional people because it’s a self-selecting group of non-conformists and overachievers.
Adelia: Micah, thank you again for taking the time to chat with me today. Before we let you go is there anything else you would like to share with our readers?
Micah Tapman: The best way to apply for funding is through our website, canopy.vc. You can follow us on Twitter @CanopyVentures and feel free to engage with questions or comments. We’re always very excited to see demos of products or services so don’t hesitate to show us your latest creation – we’ll learn more from a quick demo than hours of spreadsheet analysis.
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