C3 and 4Front raise capital; Ayr arrives in Illinois; More funds for mushrooms

Ann Arbor-based MSO C3 Industries raises $25 million in venture capital

With plans to fortify existing operations in Michigan, Missouri and Washington, operationalize licenses in Massachusetts, and expand into other U.S. markets, Ann Arbor-based C3 Industries announced on July 16 that it had raised an additional $25 million from existing and new venture capital investors. 

Founded in 2018 by brothers and University of Michigan alumni Ankur and Vishal Rungta, vertically-integrated C3 has raised more than $65 million in venture capital financing. The latest round was led by existing investor Madison Square Park Capital, and included new commitments from existing investor Welcan Capital and investor Navy Capital.

C3 operates a 36,000 square foot cultivation and manufacturing center in Webberville, Michigan and multiple High Profile retail stores throughout the state. Funding will be used in part to build out production and retail licenses it has for Massachusetts. 

C3 recently entered Missouri’s less than one-year-old medical marijuana market via its affiliate QPS Missouri Holdings, which has six cultivation, processing and retail licenses in the state. Jack Cardetti, a spokesperson for the Missouri Medical Cannabis Trade Association, is an investor in QPS Missouri. 

C3 initiated its cannabis operations in Portland, Oregon with a 36,000 square foot indoor cultivation facility. Co-founder and Chief Horticulture Officer Joel Ruggiero, a childhood friend of the Rungtas, previously served as head of cultivation at Colorado cannabis company The Green Solution. 

While all of C3’s cannabis operations to date were developed through licenses it secured, a press release noted that the company is pursuing expansion opportunities in “attractive new states, which it plans to enter organically and via pragmatic, accretive M&A opportunities.”

With operations in the Oregon market where licensure is not limited and Michigan, where it is easier to secure cannabis licenses than in most developing markets east of the Mississippi River, C3 is an outlier for venture capital-backed multistate operators. The expansion plan for most multistate operators, which has been rewarded handsomely in recent years by public markets, is a focus on states where licenses are limited. 

In 2020, Vishal Gupta told Grown In that his company is, “willing to compete anywhere,” regardless of the competitive landscape.

“We cut our teeth in Oregon,” he said, “which is the most competitive market in the world. I would go toe-to-toe with anyone.”

Innovative Industrial Properties commits $50 million to fund 4Front’s Illinois cultivation expansion

Phoenix-based 4Front Ventures Corp, which is vertically integrated in Illinois and operates one retail store in Michigan, secured up to $50.25 million from San Diego-based cannabis real estate investment fund Innovative Industrial Properties (IIP) via the sale and lease-back of a Elk Grove Village facility that will vastly expand the company’s cultivation and production capabilities in what is becoming a $2 billion Illinois market. 

4Front, which entered Illinois in 2018 via the acquisition of medical marijuana license-holder Illinois Grown Medicine, plans to construct a 558,000 square foot facility, starting with 65,000 square feet of canopy and 70,000 square feet of production space.

In recent years, IIP has leased-back Illinois operations from cannabis corporations including Curaleaf, Green Thumb Industries, Cresco Labs, Ascend Wellness and Pharmacann, and Michigan-based operations for Cresco, Ascend, LivWell, Holistic Industries, Green Peak Innovations (formerly Skymint), Emerald Growth Partners and Sozo.

In addition to expanding cultivation operations in Illinois, which also include an existing facility in Elk Grove Village Grown In toured earlier this year, 4Front operates dispensaries in South Chicago and Calumet City, and the Om of Medicine dispensary in Ann Arbor. The publicly traded company also operates in Arizona, Massachusetts, and Washington. 

Ayr Wellness enters Illinois via acquisition ahead of winning two additional licenses

New York-based multistate cannabis operator Ayr Wellness quietly secured four Illinois retail licenses in July via a $30 million acquisition of medical and recreational dispensaries originally operated by Quincy-based Herbal Care and the winning numbers pulled for two of the 55 Illinois retail licenses dispensed via a lottery held on July 29. 

Founded in 2017 and funded through reverse takeover and debt transactions, vertically-integrated Ayr also operates in Arizona, Florida, Massachusetts, Nevada, and Pennsylvania. The company’s stated ambition is to be vertically-integrated in multiple states where populations are high, regulations are thorough and licenses are limited.

Marijuana money moving to mushrooms 

Many cannabis investors believe the trendy psychedelics industry will mushroom in the coming years and are reallocating capital to fund emerging companies in the headier and federally regulated space. 

On July 13, Chicago-based Palo Santo announced an initial close of a $35 million investment fund that already has more than 20 portfolio companies. Also this month, Chicago-based WeSana Health, co-founded by former NHL enforcer Daniel Curcillo and cannabis entrepreneur and Fyllo CEO Chad Bronstein, acquired Toronto-based Psytech for $17 million in stock. Additional investors in WeSana Health include Grassroots Cannabis co-founder Mitch Kahn, serial cannabis investor David Friedman of Panther Capital and New York-based JLS fund, which is advised by Michael Gruber of cannabis VC Salveo Capital.