Cannabis cash flows into U.S. with Canopy venture arm investment
Craig Giammona, Bloomberg News
Canadian marijuana money is finding its way into the U.S.
Canopy Rivers Inc., the venture capital arm of the world’s most valuable cannabis company, Canopy Growth Corp., is investing more than US$3 million in Headset Inc., a Seattle-based firm that provides data on the marijuana industry and tracks sales numbers in markets like California and Colorado. The cash infusion is part of a US$12.1 million Series A round that values Headset at about US$30 million, according to the startup’s co-founder and Chief Executive Officer Cy Scott.
At the moment, Headset mainly focuses on the U.S. cannabis industry. The investment will help the company expand its international operations and develop data and services targeted at the large packaged food, tobacco, beverage and pharmaceutical companies that are increasingly studying the marijuana market. Businesses in those industries have been reaching out to Headset for insight on the type of marijuana products that are popular in the markets where the drug is legal for recreational use.
“They want to know what people are buying,” Scott said. “They all need data to drive decisions.”
Headset is the first direct U.S. investment for Toronto-based Canopy Rivers. Canopy Growth, which has a market value of US$9.9 billion, owns about 25 per cent of the venture firm and they share the same CEO, Bruce Linton. Canada legalized weed in October, and while the legal U.S. market is already much larger, the drug is only approved for adult use in 10 states and remains banned on the federal level. That’s forced Canadian companies to mostly steer clear of putting money into the U.S. Canopy Rivers is listed on the Toronto Stock Exchange, which only allows marijuana companies that abide by federal law.
The founders of Canopy Rivers have said they’re ready to “go all in” on the U.S. market if the federal ban ends. In the meantime, many investors and industry observers have drawn a line between companies that directly deal with marijuana and those, like Headset, that “don’t touch the plant.” That’s given the company, founded in 2015, access to investors that are otherwise skittish about the U.S. weed industry.
“Investors look for businesses that can scale,” Scott said. “It can be really hard to scale a business in the U.S. that is plant-touching.”’