Six months after a planned $642 million all-stock sale to MedMen was scrapped, Chicago-based cannabis corporation PharmaCann is reloading with tens of millions of dollars of 2020 equity and debt financing.
PitchBook reports that PharmaCann raised $19.6 million from four investors in May. Additionally, the company secured debt financing, confirms senior vice president Jeremy Unruh, who added that the total amount of new capital raised by the PharmaCann was between $30 million to $50 million.
Privately-held PharmaCann initially raised $20 million in 2014, just as Illinois was introducing its medical marijuna program. The vertically integrated company – which operates dispensaries in six states via the Verilife brand, as well as cultivation and processing facilities in Illinois, New York, Massachusetts – also raised $22 million in venture capital in 2018.
On December 24, 2018, the company announced plans to be acquired by Culver City-based MedMen, a glitzy and high-flying vertically-integrated cannabis company that experienced steep stock declines and cash-flow shortages beginning in 2019. Both companies were financially backed by Chicago-based Wicklow Capital, the family office of Dan Tierney, co-founder of Chicago-based trading firm GETCO.
PharmaCann’s organic growth was stunted as it prepared to be absorbed by MedMed, says Unruh, a member of the company’s founding team.
“We did not invest internally in employees because we assumed all that would be owned by MedMen, he said, adding that PharmaCann, “had to back-fill and make up for a year in this incredibly fast-paced industry after we divorced from MedMen.”
The equity and debt capital was raised by a mix of new and existing investors, Unruh said. Wicklow Capital declined to comment on PharmaCann’s capital raising. Crunchbase lists Techstars, Y Combinator, 500 Startups, SOSV and The European Union Executive Agency for SMEs as previous investors.
Valuations for cannabis companies fluctuated wildly in 2019 with sharp market capitalization declines for publicly traded companies, including Chicago-based Green Thumb Industries and Cresco Labs. In March 2020, Chicago-based Verano’s $850 million stock deal to Arizona-based Harvest Health (first announced in April 2019) was killed. The $875 million cash and stock sale of Chicago-based Grassroots Cannabis to Wakefield, Mass.-based Curaleaf, announced last July, is reportedly on track to be completed in coming months.
Given the federal illegality of cannabis in the United States, mainstream debt and financing options are not available to cannabis corporations or small businesses. Most banks are unwilling to risk their national charters to extend a loan. Capital intensive cultivation facilities and retail dispensary startup and expansion costs were no longer buoyed by public investor markets as 2019 wound down. PharmaCann’s new financing comes from individual investors and family offices, says Unruh. The company also secured capital through the sale of assets to real estate investment trusts, including Chicago-based NewLake Capital and San Diego-based Innovation Industrial Properties.
Proceeds from recent investments and sales are paying for an influx of talent. In March, former Goldman Sachs partner and electronic trading CTO Mike Blum joined PharmaCann as its chief technology officer. In that same month, longtime Apollo Education executive and former Singularity University board director Mehul Patel became PharmaCann’s COO.
“The addition of new people gives us comfort,” said Unruh, who added that the company’s recent financing “shows that there is new interest in investing in the cannabis space.”
MATTER’s interest in PharmaCann and cannabis
Chicago-based biotechnology business accelerator MATTER, an offshoot of the city’s 1871 digital entrepreneurship center, included PharmaCann as a member company shortly after its inception.
Now nationwide in scope with more than 200 member companies that receive mentorship and commercial connections in the healthcare industry, MATTER has served a few cannabis companies as members since launching in 2014.
“Cannabis is a unique opportunity from a healthcare point of view,” said MATTER CEO Steven Collens. “At least in modern times, I don’t think there’s an analogous example or situation where you have a product like cannabis that exists, that so many people use and have used, where there is enough data to suggest very powerful health benefits, but where there is no established market product for healthcare.”
Other local entrepreneurial hubs are getting the drift.
In the months prior to COVID 19 shutdowns, 1871 hosted regular cannabis panels and networking events for entrepreneurs and professionals interested in investing and taking their talents to the industry. A number of cannabis-specific business accelerators are also emerging in the state, including Chicago-based Gromentum Lab.