California's Largest Sun-Grown Cannabis Company Raises Record-Breaking $125 Million Financing Round
By Katie Shapiro, Forbes
Amid the marijuana industry’s already massive first quarter of M&A and capital infusion activity this year, a new record has already been set. Flow Kana announced today the completion of a $125 million round of financing from Gotham Green Partners — the largest private funding round of a cannabis company executed in the United States to date.
Since its start in 2015, the Redwood Valley-based supply chain and distributor of sun-grown cannabis from the Emerald Triangle (the world-renowned growing region spanning Mendocino, Humboldt and Trinity counties), the company has raised a total of $175 million. Gotham Green Partners also led Flow Kana’s Series A raise in 2018.
Flow Kana has grown into the number one selling brand of cannabis in the state over the past four years, but doesn’t cultivate its own flower. Instead, the first-of-its-kind company acts as an conduit — think Whole Foods — for small, decentralized and sustainably-operated cannabis farms to provide processing, distribution and white-label services to supply medical and recreational licensed retail and delivery operators.
“Since our initial investment, Flow Kana has continued to execute on its mission of developing a robust and inclusive California cannabis supply chain,” says Michael Henderson-Cohen, a principal at Gotham Green Partners. “We are excited to participate in this recent raise, which will enable the company to leverage its unique position in the Emerald Triangle and broaden its reach and message across the state.”
Flow Kana CEO Mikey Steinmetz was born and raised in Caracas, Venezuela and growing up, his mother used cannabis for chronic medical reasons, to which he credits as the reason for his longtime passion and advocacy of the plant. He attended college in the United States, worked in investment banking and returned home for a career in international food distribution.
But when the recreational movement started to make waves in California, Steinmetz says, “I realized that legalization was actually going to happen in our lifetime and could feel the potential.” He sold his business in 2012 and relocated with his wife to the Bay Area with plans to start a new one in cannabis.
Steinmetz admits, “When we got here, we didn’t know much other than we wanted to get involved and do something meaningful to add value and drive this new industry forward.”
Almost immediately, he started volunteering at a medical dispensary to learn cannabis commerce from the inside out and soon after, met a flower broker in the purchasing room who offered to take him to the Emerald Triangle to see a few of his client’s farms first-hand.
“I had always known about this legendary region and that trip changed my life. I saw the plant for the very first time in its rightful place under the sun and in the soil and growing in harmony with fruits and vegetables.”
Through networking with “a real community of real farmers” he met “a visionary partner” in Casey O’Neill, who Steinmez credits with “planting a seed in my mind that cannabis for this community is a cash crop that subsidizes the production of everything else. So many small farms were getting pushed off of the land by big agriculture and cannabis could be the tool to enable them to get back to being shepherds of their land."
Together, they identified parallels between traditional food distribution models and mass cannabis cultivation — both weighing negatively on the environment — and Flow Kana was born. O’Neill’s own HappyDay Farmsbecame Flow Kana’s first official partner.
“He shared this vision of a future of regenerative cannabis farming, regenerative food farming and regenerative capitalism — using business as a tool to create the kind of world we want to live in,” says O'Neill.
Steinmetz adds, "This area and region of the world cannot be replicated and what's fascinating is that it totally defies the template of Big Ag. There's a climate crisis and monocropping is decimating the land and soil. With the fragmented ecosystem that prohibition left us, we have a rare opportunity to usher in a new form of farming."
For O'Neill, food is the focus of HappyDay's operation, which includes running a thriving CSA program for the past nine years. He says of his first meeting with Steinmetz, “In preparation for his visit, I made a braised pork shoulder and a bunch of veggies … we first truly connected over a meal. Farming food and farming cannabis is this very tight-knit community here and Flow Kana is very mindful of that culture, respects the land and ensures we all avoid losing that closeness.”
Out of the 53,000 farmers in the Emerald Triangle, Flow Kana worked with 200 partner farms in 2018. Now with even stronger financial support, Steinmetz envisions the majority of the world’s cannabis cultivation will move to California.
He says, "Our hope is to bring in as many farmers as we can. We are planning for a federally regulated landscape with the capacity to supply every state.”
For Daniel Stein, owner of Briceland Forest Farm, the draw to Flow Kana was its “farm-forward image.”
While there is still considerable concern against big cannabis taking over the region, Stein says, “It’s very hard to transition from the black market this community is used to, but legal cannabis is becoming big business. Most corporate companies in this industry are completely driven by money and some people … they’ll look at Flow Kana and that’s what they might see. But when you dig a little bit deeper you see that it’s bridging a gap for our community of small producers — farmers who wouldn’t be able to have a voice in this industry otherwise.”
Steinmetz adds, “We were recently called the ‘anti-big cannabis of big cannabis’ and this round certainly puts us at the level of a major global player. But the way we see capital is rocket fuel to build on dreams. Without capital it would be impossible to build the infrastructure we need to empower and engage these master farmers. Our thesis is that we don’t cultivate and our model is in true partnership … we’ve maintained our vision since day one and we will continue to do that.”
Civilized reported, "The Lawrence Berkeley National Laboratory estimated that growing cannabis indoors makes up as much as one percent of electricity use nationwide. That comes to $6 billion a year and amounts to 15 million tons of greenhouse gases. With the passage of the Farm Bill to legalize hemp production, this number will only increase, unless, of course, measures are taken to decrease the cannabis industry's carbon footprint."
There is a formal application process for farmers interested in working with Flow Kana. All partner farms have been awarded annual or temporary permits and are cultivating compliantly in small batches using only the power of the sun. Flow Kana also closely considers cultivation techniques, production capacity, personal values and heritage to ensure its producers fit into its model.
The company took over the former Fetzer winery estate in 2017 as its manufacturing headquarters, the Flow Cannabis Institute. Currently providing processing and white-label services, the company is on track to complete the 200,000-square-foot facility this spring, when it will further expand into extracts, oil-based vapes, topicals and tinctures along with the addition of an on-site, third-party research laboratory.