Private Cannabis Investment Rising Thanks to Farm Bill, Says VC

With valuations in the public marijuana sector bubbling this past year, venture capitalist Kevin Shin is trying to get ahead by finding sophisticated finished products to invest in.

As co-founder and CEO of private equity and venture capital firm Grove Group Management, Shin has dedicated his financial efforts to the marijuana space. In an exclusive interview with the Investing News Network, he opened up about the state of the private investment market for cannabis.

According to Shin, this rise in attention is all due to the passing of the farm bill in the US, which also ushered in the legalization of hemp and its derivatives.

Companies have tapped into cannabidiol (CBD) as a component of hemp to offer a diverse line of health and wellness products. This development has greatly piqued the interest of the private sector, Shin said.

“Investors are getting more interested in finding out what CBD is … People are seeing this as an emerging market in investment,” he said.

In December 2018, US President Donald Trump signed the farm bill into law, opening the floodgates even more to the rush of hemp-derived CBD products for personal use.

Grove Group Management was launched in October 2018 as a collaboration between Shin and retired NFL player Tiki Barber, who also acts as chief business development officer.

The company disclosed a US$12 million investment in two hemp and CBD manufacturing facilities in July, one in Michigan and the other in Wisconsin.

Shin said a year ago there were still skeptical investors who would scoff at the idea of adding marijuana holdings to their portfolios, but that has quickly changed as the sector continues to gain legitimacy.

He credited the rise of information and education as a significant tool for getting to investors.

When asked about the recent warnings from the US Food and Drug Administration (FDA) regarding the CBD product space, Shin said the FDA also shuts down misleading claims with great speed in the supplement and pharmaceutical markets.

The executive explained that he’s making sure to follow how states enforce regulations on CBD products.

Multi-state operator Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) faced a decline in share value in late July after the FDA issued a warning for unsubstantiated claims and misbranded cannabis products.

When it comes to his own investment strategy, Shin pursues unique companies with a runway of performance to follow. Shin wants to strike deals at valuations he feels comfortable with, but explained the space sees a special tax given just from adding the word “cannabis” to any business.

As Grove Group Management continues its development with more mergers and acquisitions, Shin reaffirmed the company is gravitating towards deals in the CBD-based products space.

“We’re not looking at cultivation. Cultivation, as far as we’re concerned, is farming,” Shin said when asked about which areas of the marijuana investment space he is not considering.

The executive confirmed the move in investments is more towards finished products by way of branding and with a deeper focus on distribution.

Shin doesn’t have an exact prediction for when marijuana will be legalized in the US, but said that whenever that is, investors need to be prepared for the actual implementation to take a considerably longer amount of time.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.