Canopy Rivers laying the foundation to build a global cannabis ecosystem
“We’re fielding five or six pitches a day. The deal flow is crazy.”
Canopy Growth has never been a company that shies away from both creating and seizing opportunities. Having achieved a leading position in the global cannabis space through its willingness to make bold moves, it took a step further in defining the future of the industry when it launched Canopy Rivers in April 2017.
Canopy Rivers is a unique investment and operating platform focused on pursing opportunities in the emerging global cannabis sector. Its goal is to identify promising companies within the cannabis value chain and provide financial and/or operating support to create a strong ecosystem of complementary companies.
The concept fills an important gap in the industry, says Narbe Alexandrian, who joined Canopy Rivers as Vice President of Business Development after spending almost four years with OMERS Ventures. “There are a lot of companies with large funds putting money into cannabis operations that are pre-public. There are also a lot of angel investors financing small amounts in early stage seed startups. But nobody is playing in between – the Series A and B rounds are wide open.”
Alexandrian says the cannabis industry reminds him a lot of what tech investment looked like in 2010. “There were a lot of companies with great ideas, but not enough capital to go around in Canada.”
Further, Alexandrian says the volume of emerging companies he has seen in his time at Canopy Rivers is unprecedented in his experience. “A typical tech VC looks at 300 to 400 companies a year. Within one month here, we have looked at over 70 companies in the ancillary space alone. We’re fielding five or six pitches a day. The deal flow is crazy.”
He stresses that for Canopy Rivers, investing with the intent to acquire is only one arrow in its strategic quiver, and one that will not always be relevant at this stage of the industry. “The whole premise is that a lot of companies don’t want to be acquired this early in the game. They want to ride the wave of cannabis. But they will take a minority investment from us in exchange for our strategic and operational support, which is much like how Google Ventures operates.”
As new cannabis companies continue to emerge, Canopy Rivers provides a means to take minority interests or alternatively structured exposure to promising companies and entrepreneurs before they are ready to be acquired, confirms Sean McNulty, Principal of XIB Financial Inc., a co-founder of Canopy Rivers. “Great entrepreneurs often prefer to maintain their autonomy in early stages of their company’s development. This platform facilitates collaboration with these groups that can benefit from financial and strategic support today, and it ideally positions us for additional investment or increased exposure, and potentially even an acquisition, further down the road.”
Further, and importantly, McNulty notes that Canopy Rivers’ strategy is to provide motivated entrepreneurs with demonstrated aptitude with the means to grow. “Our goal is to identify great entrepreneurs and innovators and arm them with the resources they need to succeed. We encourage them to explore collaboration opportunities with Canopy Growth or other portfolio companies so that each company can benefit from the specialization of the others. We customize each investment structure based on the unique needs of our counterparties, using a balance of royalty, debt, equity, and profit-sharing structures.”
With almost $200 million in funding raised to date, Canopy Rivers has already built a diversified portfolio of 11 companies, including licensed producers, late stage licensed producer applicants, pharmaceutical formulators, brand developers and distributors, retail networks, and technology and media platforms, both domestically and internationally.
In selecting companies, Canopy Rivers is focusing on the entire cannabis value chain, much of which is materializing in real time as the cannabis economy develops, Alexandrian notes. “We’re looking at everything from technology to vaporizers to edibles to try to capture as much market value as we can.”
Up until now, however, the public company face of the cannabis value chain has been relatively cultivation-heavy. While there are more than 40 public companies in the cultivation space, they only account for a relatively small percentage of players in the cannabis realm, Alexandrian explains. “We’ve identified more than 3,000 startups in the cannabis space across North America, many of which play within ancillary industries and non-cultivation spaces. Cultivation is a $9 billion industry in Canada. Ancillary industries are multiples of that amount.”
The company is extremely selective when adding portfolio partners – Canopy Rivers and its advisors have evaluated hundreds of opportunities, McNulty reports, but has thus far invested in only 11. “We are very picky as we focus on ensuring each investee fits into a specialized segment of the cannabis value chain.”
Just a few examples of the company’s investments to date include TerrAscend, a Mississauga-based indoor hydroponic producer with strong pharmaceutical expertise specializing in formulations, compounding and R&D; YSS by Solo Growth, an Alberta-based private retail operation that is also bringing its model to Ontario in light of the new Ontario retail regulations; and Agripharm, a joint venture between Canopy Growth, Organa Brands and Green House Seed Co., the latter having cultivated significant success in its global travels in pursuit of land-based cannabis genetics, which will become increasingly important as cannabis consumer tastes and cultivation techniques evolve. “These people have set up a genetics portfolio that is second to none,” McNulty says. “These are just a few examples of how we are able to establish vertical integration on our investment platform and take the cannabis community to the next level.”
Its board of directors is reflective of the diversity of the portfolio as well. Independent members include Joe Mimran, who has more than two decades of high profile retail experience through founding successful ventures such as Joe Fresh and Club Monaco; Richard Mavrinac, former EVP at Loblaw and former CFO of George Weston Ltd., who brings pharmacy and retail-focused experience; and Asha Daniere, a lawyer with extensive experience in mergers and acquisitions and marketing. The board also includes John Bell, Chairman of private equity company Onbelay Capital Inc., and is led by a globally recognized industry pioneer in Bruce Linton, Chairman and Acting CEO of Canopy Rivers and co-CEO of Canopy Growth Corporation. The broad-based experience of the board members will be valuable in guiding the company going forward as it explores the expanding universe of opportunities in the cannabis space.
With recreational legalization on the immediate horizon in Canada and global cannabis regulatory reform unfolding in real time, there is certainly going to be no shortage of opportunities in that universe for Canopy Rivers to take a look at.
Our goal is to identify great entrepreneurs and innovators and arm them with the resources they need to succeed