Providing Capital to the Global Cannabis Industry
This profile is part of a paid investor education campaign.*
Vencanna Ventures Inc. (CSE:VENI) aims to be a strategic capital provider for state compliant, early-stage, vertically-integrated cannabis companies. Vencanna targets companies that operate in limited licensed jurisdictions or possess competitive advantages whether through scale, branding and / or technical advances. Combining Vencanna’s access to deal flow through their deep global contacts along with the management team’s deal and investment experience, gives the Vencanna shareholder a unique investment opportunity.
Vencanna is looking for earlier stage, licensed, US-based, cannabis initiatives. Vencanna believes this is an attractive entry point, thereby enhancing the potential on the return of investment. Vencanna’s main investment thesis is to focus on companies with strong management teams with expertise throughout the value chain that operate in jurisdictions with barriers to entry such as limited licenses awarded within the state or local moratoriums on new operators entering the market.
Vencanna has loaned $3.25 million to and will be combining businesses with Blacklist Holdings Inc., a multi-state operator that manufactures, brands and distributes premium cannabis products in Washington State, Oregon and California. Blacklist has developed Ionic, a leading line of cannabis vape pens and cartridges, and is the number one selling vape brand in Washington State, servicing over 600 stores. Blacklist has $45 million in pending acquisitions, which are expected to generate over $35 million in revenue annually.
Vencanna’s management team brings vast industry experience as numerous members have invested in the market or have worked in the industry in some capacity. The team also brings over 100 years of combined experience in corporate finance, capital markets, direct investing and operational and legal advisory capacities.
The company also benefits from the experience of their board and advisory board members, most notably from Alan Gertner, Matt Christopherson and Trent Woloveck. All three have been heavily involved in the cannabis industry. Gertner founded Tokyo smoke and was the CEO of HIKU before it was acquired by Canopy Growth Corp (TSX:WEED) in September 2018. Christopherson is responsible for providing the industry with Lift, Canada’s largest database of comprehensive medical cannabis reviews from patients, and he is EVP of corporate development of Twisted Trimmer, the most used cannabis harvester in North America. Finally, Woloveck is the VP of Originations of Jushi and provides the company with his expertise and jurisdictional knowledge (Jushi recently acquired TGS National Inc., a vertically-integrated, multi-state cannabis franchisor where Woloveck was the President).
- Investing in vertically-integrated cannabis companies in markets with barriers to entry with limited licensing opportunities.
- Invest in opportunities that will offer superior returns over an expected time period of two to three years.
- Loaned $3.25 million to and combining businesses with Blacklist.
- Blacklist’s acquisition pipeline expected to generate over $35 million in annual revenue.
- Serves over 600 stores across Washington State, California and Oregon.
- Strategic relationship in place with TGS National and Jushi Inc. one of the first vertically-integrated, multi-state cannabis franchisors within North America.
- Management team brings over 100 years of combined experience in various sectors.
- A board consisting of cannabis pioneers.
- Management and insiders own approximately 19 percent of the fully diluted shares outstanding (and 12 percent of the basic shares outstanding).
The US Cannabis Market
While a lot of focus has been placed on the Canadian cannabis market of late, the US cannabis market is still one of the largest in the world. According to a report released by BDS Analytics and Arcview Market Research, the market is projected to generate $11 billion in revenue in 2018 and is expected to rise to $23.4 billion by 2022.
The report also states that the market is going to be fueled predominately by the growth of the recreational market. Alcoholic beverage companies have also been eyeing the growing cannabis market. Molson Coors Brewing (NYSE:TAP) and Hexo (TSX:HEXO), alongside Constellation Brands (NYSE:STZ) and Canopy, have formed agreements and partnerships to develop cannabis infused beverages for the recreational market. In addition, we’ve recently seen big tobacco (Altria, the maker of Marlboro) enter the market through their $2.4 billion investment into the Cronos Group.
Changing views of the US government are also playing a role in the growth of the market. President Donald Trump has stated that he is in favor of passing the STATES Act, which will protect states that have legalized the use of cannabis from federal prosecution. If this bill passes it will allow cannabis companies to partake in safe banking practices, which they are barred from due to the federal stance on cannabis.
In December 2018, the US federal government passed the Farm Bill, which legalized the use of industrial hemp and cannabis plants with less than 0.3 percent THC and hemp from the controlled substances list. It’s created a hemp-derived CBD market that is expected to reach $22 billion by 2022, according to the Brightfield Group.
Vencanna’s Investment Model
Vencanna is focused on efficiently providing capital to vertically-integrated cannabis companies in the US that are unable to access the capital markets. These companies are operating in high-potential, early-stage markets with limited licenses and experience barriers to entry for that market.
Vencanna ensures that each investment opportunity is fully-compliant with the laws and regulations that govern the jurisdiction that they reside in and that the investments are likely to see an ROI that is multiples of the initial investment within a span of two to three years. They further focus on companies that are at or near cash flow and that the investment will be a catalyst to that company’s growth.
Coupling Vencanna’s business model with their rigorous investment criteria enables the company’s management team to leverage their experience to actively promote and expose their investments to the emerging, high-growth global cannabis market. The company’s management team has proven track record of securing capital, which they can deploy to their target companies to help grow and consolidate in their specific markets prior to the large players entering upon US federal de-criminalization and legalization.
Opportunities in the US
Thirty-three states plus the District of Washington have legalized medical cannabis use, and nine of those have legalized cannabis for recreational use. This creates a large pool of companies that are going to need access to capital in order to make their businesses succeed. The challenge being able to attract the required capital while cannabis is illegal at the federal lever. Vencanna has been, and continues to, evaluate and prioritize its investment opportunities in these legalized areas.
Vencanna has signed an agreement to loan $3.25 million to and combine businesses with Blacklist, a multi-state operator that manufactures, brands and distributes premium cannabis products in Washington State, Oregon and California. Blacklist has $45 million tied up in pending acquisitions, which are expected to generate over $35 million in revenue annually. The company intends to acquire a Nevada-based cultivation, manufacturing and distribution company, a 140-acre Washington cultivation facility and an edibles company, an Oregon manufacturing company and a hardware company.
“The US cannabis market continues to expand as additional states legalize medical and recreational use. Currently, over 65 percent of the US population in 33 states has access to medical cannabis, and 10 of those states have given the green light for recreational use. The combination of Vencanna and Blacklist offers our shareholders immediate participation in the largest and most dynamic cannabis market in the world,” said Vencanna CEO David McGorman.
Vencanna believes that the US cannabis industry is moving towards vapes and cannabis concentrates as consumers look for convenience, discretion and less harmful effects. According to Arcview Market Research and BDS Analytics, US concentrate product sales are expected to reach $8.4 billion by 2022. Vapes will be driving the growth of the market because its discreet and portable and emits less odor than bongs or pre-rolls.
Blacklist has developed a leading line of cannabis vape pens and cartridges, named Ionic, which is the number one selling vape brand in Washington State. The company refines cannabis oil using an ultra-clean CO2 extraction system and services over 600 stores across three states.
David McGorman — CEO & Director
David McGorman has 25 years of experience in the financial services industry with a wide range of transaction experience. He has participated in over $12 billion in transaction value, including private and public equity issues, debt placements, including M&A advisory and restructuring assignments. Mr. McGorman has held senior positions at a number of independent brokerage investment firms, including being the Vice Chairman of Mackie Research Corp. and President & CEO of Jennings Capital Inc.
Jason Ewasuik — VP Originations & Capital Markets
Jason Ewasuik has over 10 years of global financial market and trading experience. Ewasuik brings capital markets and acquisition expertise, including sourcing, structuring, financing and managing investment opportunities. Jason led Venexo Capital’s cannabis efforts as Director of Healthcare where Venexo has placed its private capital in over 20 cannabis initiatives. Previously, he was Director of Trading at Auspice Capital, a quantitative and systematic investment fund.
Jon Sharun — Executive Chairman & Interim CFO
Jon Sharun has 18 diverse years of international investment, real estate, branding and business development experience and is a 40 under 40 winner. He is the Founder and Managing Partner of Venexo Capital, a boutique private equity firm that has raised in excess of $100 million in healthcare, hospitality and real estate. Venexo has been an early investor into the medical cannabis sector; such as Aurora, Friday Night, The Green Organic Dutchman and Emblem to name a few.
Matt Christopherson — Director
Matt Christopherson is the EVP of Business Development at Keirton Inc. Keirton’s Twister Trimmer™ provides cannabis growers with the world’s fastest and most dependable harvesting machines. Twister Trimmer™ is the most recognized and widely used harvesting solution, not only in Canada, but internationally. Prior to Keirton, Mr. Christopherson co-foundered Lift, Canada’s largest database of comprehensive medical cannabis reviews left by real patients.
Alan Gertner — Director
Alan Gertner, is a lover of technology, design and everything in between. Prior to taking the reins at HIKU Brands and founding Tokyo Smoke, he led a $100 million organization at Google in Asia and was a founding member of Google’s first Global Business Strategy team while based in Mountain View, California. In September 2018, HIKU sold to Canopy Growth for $300 million. Mr. Gertner was formerly a Management Consultant at Oliver Wyman in New York.
Dr. Inbar Maymon-Pomeranchik — Director
Dr. Inbar Maymon-Pomeranchik, is a scientist and Biotech Investment Consultant Expert, specializing in life science, biotech, ag-tech and a particular expertise in the global medical cannabis industry. Dr. Maymon-Pomeranchik brings more than 15 years of experience in molecular & genetic research and as an R&D researcher and project leader in the biotech industry in large, small and start-up technology corporates. Due to her vast knowledge, you will often see her speaking at global conferences, sharing her knowledge and exposing investors to insights, various opportunities and key industry topics.
W. Scott McGregor — Director
Scott McGregor has over 20 years of energy and corporate finance experience as a senior investment banking professional working for prominent investment dealers in both Toronto and Calgary. Most recently, he served as Executive Vice President of Merrco Payments, a secure payment gateway that provides a fully customizable method to regulate a direct-to-consumer cannabis mail-order system in Canada.
Trent Woloveck — Advisory Board Member
Trent Woloveck is currently the President of TGS National Holdings which is responsible for the national and international expansion of two of the largest cannabis brands, The Green Solution and NectarBee., Prior to TGS National, Woloveck was the Chief Operating Officer of American Cannabis Company (AMMJ) which has successfully procured licensing agreements for its clients in several states and has accessed existing and new growth opportunities, in both domestic and international cannabis markets.
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