Stel Valavanis, a Chicago-based tech CEO and angel investor, felt so great last year about a weed delivery startup he was mentoring that he flew the Ontario-based management team to Midway Airport to convene with the Chicago ArchAngels investment group at a local pizza joint.
“I realized when we arrived that I couldn’t buy them beers,” he recalled. “None of them were 21.”
The company’s CEO, Evan Adcock, happened to be a relative. But it was more than family ties that convinced Valavanis to throw down $100,000 and persuade other members of his investment cohort to pony up significantly more.
Online weed delivery, at least the legal kind, is in its nascent stage. Illinois cannabis executives, dispensary owners and legislators believe the state is at least a year or two away. Yet, as more U.S. states become recreationally legal, and Canadian markets mature, it’s not a bad idea to own a piece of an application that is operating in Saskatchewan, prepping a launch in Massachusetts and setting up the technological foundation to operate and grow in multiple emerging markets.
The first-mover in the space is San Francisco-based Eaze, which has raised more than $200 million in seven investment rounds since its founding in 2014. That company currently promotes delivery capabilities in multiple California markets – but nowhere else.
While still a teenager and fresh off his first cryptocurrency venture experiment, Adcock – raised by Ph.D. biologist and Christian humanitarian, and mentored by his serial entrepreneur uncle in Chicago – saw a commercial market he could put his heart and soul into.
“We have all experienced the pain of ordering from the grey market,” he lamented. “Verda was then founded on the basic principles of wanting to pave the way for how people experience legal cannabis. To differentiate our product, we had to take into consideration that regardless of federal legalization, each state and province would adopt their own set of rules for the sale and distribution of cannabis, which meant that for our product to operate in numerous locations simultaneously, accommodating for the evolving regulations, including tax rules, possession limits and delivery protocols was crucial.”
Fundraising to operate and expand within multiple countries
The eight-person company is currently raising a small seed round to “ride the uncertainty of COVID” and support its Massachusetts launch. Yet at no point has the precocious founding management team waited on funding to operationalize a capability and pitch customers.
Adcock noted that his uncle since day one has infused the company with a Greek streak of scrappy entrepreneurial zest. (Full disclosure, this reporter is Greek and encouraged him to go there).
“His first advice was to scrap whatever money we could together and build a prototype of the platform we wanted to build and take it to potential customers,” Adcock said. “If they liked it, and would use it if it was fully built, he told us to ask for a very simple non-binding Letter of Intent. His famous words to us were ‘you know what’s better than a business plan, building a business’. We took this advice to heart and got to work. Within months we had 3-4 LOIs from major cannabis players in Canada.”
Verda, Eaze and other competitors have a long way to go before anyone can be anointed the GrubHub of weed. Unless you live in Saskatchewan, and in other markets Verda plans to operate, all you will see is a growing directory of dispensaries with prompts for operators to claim ownership and for users to start their wish lists. A search for dispensaries in Chicago currently yields three results.
Yet the company has the market traction, systems in place and late adolescent energy and chutzpah to build a powerful brand within an embryonic industry, says Valavanis.
“You can build apps, websites and social media on the cheap,” he said, and leverage interns from the University of Waterloo, which is Canada’s Silicon Valley.
Angels in the greenfield
Valavanis is one of 15 members of Chicago ArchAngels, one of many investor cohorts in the state focused on seeding new companies. Multiple, but not all, members elected to invest in Verda, which has additional individual investors.
As cannabis investing becomes more mainstream, multiple angel groups and early-stage venture firms in Chicago are considering investments in the sector. Last month, Hyde Park Angels participated in a $2 million investment round raised by Chicago-based CBD retailer and personalization platform Equilibria. That followed the angel group’s lead investment in the $4.2 million investment round raised by Chicago-based Leaf.Trade, a wholesale distribution platform that matches dispensaries with available inventory.
Other Illinois-based early-stage institutional investors that invest in (mostly ancillary and non plant-touching) cannabis companies are Chicago Ventures and Listen (managed by Jeff Cantalupo). Those entities invested in Venice, California-based media company Miss Grass. Local early-stage venture capital firms that focus exclusively on cannabis include Salveo Capital (the lead investor in Equilibria) and Panther Capital (an early investor in CannaRegs, since acquired by Chicago-based cannabis marketing technology Fyllo.