Each month, Grown In curates and chronicles cannabis funding, mergers, and acquisition deals of most importance to cannabis operators, investors and the industry at large.
Three year-old cannabis software startup Dutchie raises $350 million Series D round at a $3.75 billion valuation
Point-of-sale and e-commerce software provider Dutchie on October 14 announced that it had closed $350 million in a Series D round of financing, after raising more than $250 million since its inception in 2017.
The Bend, Oregon-based company serves dispensaries in Boston, Detroit, and Ann Arbor along with facilities in Western states including California, Colorado, Oregon, and Washington as well as in Canada. Dutchie’s last investment round closed in March, with a $200 million equity infusion at a $1.5 billion valuation. The funding was concurrent with the acquisitions of competitors Leaflogix and Greenbits.
New York-based Hedge Fund D1 Capital Partners led the investment round, which also included participation from existing investors Tiger Global, Casa Verde Capital (Snoop Dog’s fund), among other institutions and individuals. Former Starbucks Chairman Howard Schultz is also an early investor in the company.
Proceeds from the funding will be allocated to new hires, North American and global expansion as well as technology investments.
Dutchie’s valuation appears to be the highest to date for software companies focused on serving cannabis operators. A so-called ancillary company that serves the industry without touching the plant, Dutchie is one of multiple digital startups, including Chicago-based Fyllo, San Francisco-based Eaze and Denver-based Flowhub (which raised $19 million on October 19), attracting 9-figure valuations and beyond from institutional and individual investors that avoid licensed and federally illegal cannabis companies. investors unencumbered by the federal illegality of the plant.
J.P. Morgan closes door on cannabis
Meanwhile, as near-term prospects for federal banking normalization dim, effective November 8, state-licensed cannabis operators will no longer be able to raise money from JP Morgan clients. This move could add insult to injury for publicly traded operators already facing steep stock declines in 2021.
After beginning the year with a stock bounce from investors believing a Biden administration and democratic-controlled congress would pass legislation making it safe for federally chartered banks and financial institutions to deal with plant-touching companies, the delay coupled with other factors are depressing stocks and impacting operations including widespread layoffs in at least one leading U.S. operator.
While JP Morgan’s motivations can be questioned, what is certain is there is one less option to obtain capital in what already is a capital-challenged emerging industry.
Columbia Care and PharmaCann buy into Colorado
Multistate cannabis operators focused on developing markets east of the Mississippi have so far focused on becoming vertically-integrated in states with a limited number of licensed operators.
New York-based Columbia Care and Chicago-based PharmaCann bucked the trend in recent weeks as Columbia Care on November 1 finalized a $42 million acquisition of Denver-based vertical operator Medicine Man that it initiated one year earlier and PharmaCann on October 14 acquired Denver-based multistate vertical operator LivWell for an undisclosed sum. Columbia Care is adding to it’s already extensive Colorado presence, as it purchased The Green Solution in 2000, shortly after the state lifted its local license ownership requirements.
While profit margins are limited for operators in more competitive states like Colorado and California, executives and investors expanding to those markets point out the difficulty of building national brands without access to top selling markets, which also includes Michigan. Further, says one prominent Chicago-based CEOs, properly managed cannabis companies should be able to compete anyplace.
“At some point in the future and perhaps the relatively near future, all of these states are going to become a lot more competitive,” explained Cresco Labs CEO Charlie Batchell to Grown In in September. “You should know how to operate a company in competitive marketplaces that don’t have any artificial barriers to entry.”
Three Michigan operators raise $6 million in debt deals
Troy, Michigan-based debt financing consultant Seed to Sale Funding recently announced the closing of $6 million raised by three separate state operators of cultivation facilities.
Bangor-based Sterling Heights Holdings secured $2.9 million, Nunica-based Trivium Cannabis raised $1.9 million and Legendary Leaf Holdings raised $1 million. Seed to Sale owner Judy Rinkus in June was part of a Grown In webinar focused on debt financing for cannabis operators.