Arcview Group Chief Executive Officer Troy Dayton talks about the state of investing, what sectors are hot, and some of the best deals of the past year.
Arcview Group’s 625 investor members have placed more than $102 million into 137 companies. In 2016, the group made deals with companies including CannaKorp, Mirth, Growcentia, Wurk, and Green Flower Media. Fortune magazine named Arcview Chief Executive Officer Troy Dayton one of the seven most powerful people in the cannabis industry.
Dayton has an impressive resume: He is an elected board member for the Marijuana Policy Project, a founding board member of the National Cannabis Industry Association, and the co-founder of Students for Sensible Drug Policy. He also served as the first sales director at Renewable Choice Energy. He’s especially proud of his work at Arcview.“We have built the broadest portfolio in the cannabis sector, with more than seventy companies, by getting an upside in a number of ways,” Dayton said. “We get equity when we do a partnership like the ones we have done with Canopy and Cannasure.”
“We have built the broadest portfolio in the cannabis sector, with more than seventy companies, by getting an upside in a number of ways,” Dayton said. “We get equity when we do a partnership like the ones we have done with Canopy and Cannasure.”
Arcview also formed a partnership with NeWAY Capital and a Winner’s Fund where they invest $50k in the company that their members select as the best pitch.
“We don’t have a success-fee model, though,” he said. “Investors and companies pay the same whether they raise or invest money. All investors make their own decisions and can invest however they want. Arcview is not a party to the deals.”
What’s the current state of cannabis investment?
We are definitely seeing an increase in both the number of investors and the amount of capital they are looking to place in the sector. However, if the uncertainty created by Jeff Sessions [as U.S. Attorney General nominee] wasn’t there, I bet the interest level would be considerably more explosive. But it’s hard to imagine a better outcome for cannabis on Election Day. That has piqued investor interest in a big way.
Walk us through a few deals you made in 2016.
Seeking to become the “Kuerig of cannabis,” CannaKorp has developed a pod-based vaporizer, enabling consistent, accurate dosing for the consumer while opening a myriad of attractive branding and distribution opportunities for cannabis producers. The company brought aboard some of Keurig’s top talent to ensure every aspect of the product and supply chain are designed with quality and scalability at the fore. CannaKorp oversubscribed its seed round specifically to make room for Arcview investors on their cap table.
Mirth Provisions leverages the Coca-Cola business model to develop high-quality infused tonics and fast-acting sublingual sprays. Profitable ever since the first few months of operation, this lean company is snatching up market share in this rapidly growing sector. Arcview investors placed more than $1 million in Mirth’s Series A round. The company has turned its attention to California and Colorado to dramatically expand profits and brand equity as it continues to execute a national brand expansion.
Growcentia develops organically derived microbial plant growth stimulants that enable growers to maximize yield and health across plants. Various controlled tests show an increase in plant growth and bud yield. The product Mammoth P is creating quite a buzz among the grower community and gaining remarkable early traction.
Wurk provides payroll and human resource solutions cannabis business owners need in order to keep their doors open. Looking to address the issue that traditional payroll companies will not work with cannabis clients due to their banks and shareholders, Wurk makes a solution possible through local cannabis banking agreements, cannabis-friendly shareholders, and extensive cannabis industry expertise. A recent graduate of our partner accelerator Canopy, Wurk made a big splash with investors.
Green Flower Media
Green Flower Media aims to be the main destination for online learning about cannabis and cannabis business. Headed by the person who built Deepak Chopra’s online content business, Green Flower has gotten tremendous traction with its courses. I think more Arcview members have invested in Green Flower than any other company in the last 12 months.
How much vetting does Arcview do?
We hear from about two dozen companies every week, and we choose the top three or four we think our members might appreciate. We then have our chief mentor, Francis Priznar, help them prepare for a pitch that gets sent to the whole membership. From there, our members do the vetting by rating the pitches, asking questions of the company on the weekly webinar, giving comments on the online portal, and collaborating offline to share due diligence. Then a selection committee made up of Arcview members decides which companies present form stage. The prospects are then paired with another mentor who helps them prepare for the Shark Stage: three industry experts who play devil’s advocate asking tough questions about the company.
Another layer of due diligence happens at NeWAY Capital if they set up an investment vehicle for the prospect.
This being said, investors all make their own decisions and Arcview takes on no fiduciary duties. We always remind people of the old adage “trust, but verify.”
In terms of investing categories, on what are you most bullish?
Every time I think the vape market is saturated, I get surprised by another innovation that proves me wrong. Maybe one day I will be right that the vaporizer market is saturated.
The biggest obvious opportunity is obtaining limited licenses for cultivation or dispensing in the new states that are giving out licenses. That’s only going to happen once like that in each state.
I think anything related to agricultural technology is the hottest area. Whether it is nutrients, genetics, technology to automate the growing or harvesting, etc., it is exploding. There is a race to see who can produce cannabis the fastest and cheapest with the highest quality.
ArcView by the Numbers
137: Number of companies for which Arcview has raised capital.
$102 Million: Total amount raised.
625+: Number of high-net-worth investors involved.