Snoop Dogg: Betting Big On Cannabis
A Deep Dive on Snoop Dogg's Cannabis-Focused Venture Capital Firm Casa Verde Capital.
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Friends,
Snoop Dogg is synonymous with, well, weed.
While he is best known for his consumption of the herb, Snoop Dogg is also the founder of a cannabis venture capital firm called Casa Verde Capital.
Just this week the firm announced that they have closed a new fund with over $94,500,000 USD committed from their LPs (licensed partners). So I thought for today’s edition of Four PM we should take a deep dive on the firm.
Some background information to set the stage
Casa Verde Capital was founded in 2015 with the idea that it was only a matter of time until cannabis legalization would go mainstream, and to give credit where credit is due, they were as correct as anyone could be.
Although Casa Verde was founded in 2015, it wasn’t until the beginning of 2018 that leadership decided to take on outside investment when they raised $45 million USD for their first fund courtesy of Karan Wadhera, a former employee of Goldman Sachs who joining the firm to lead their financing.
With a deep well of capital to draw on, the firm got down to business.
The deployment of their first fund
The two core tenets of Casa Verde’s investment thesis is their disciplined approach to investing in ancillary companies, otherwise known as non-plant-touching and investing in consumer-facing cannabis brands.
Their best bets…
Case Verde has made some very impressive investments. Like all bets in the venture capital world, though, some of the breakout stars end up covering your losses as well as generating profits.
Undoubtedly one of the best bets Casa Verde made was joining cannabis e-commerce company Dutchie’s seed round when Dutchie raised $3 million USD, placing its valuation somewhere in the neighborhood of $15 million USD.
Based on Dutchie’s latest round, in which it managed to raise $35 million USD from some of the top investors in the world—the former CEO of Starbucks among them—we can estimate that the value of Dutchie has increased at least 10X since Casa Verde’s initial investment.
(📸 / The Co-founders of Dutchie)
Another bet that seems to be paying off is Casa Verde’s investment in the B2B cannabis marketplace LeafLink, founded back in 2016.
With the announcement just last week that LeafLink raised $40 million USD from one of the most highly-rated venture capital firms in the world, Founder Funds, we can assume that once again the value of Casa Verde’s early investment has increased significantly since 2017.
(📸 / LeafLink)
Their worst bets…
Every venture capital firm spends there days searching for what’s called asymmetric bets. This is a type of bet that has a chance of failing just like any other, but if the bet/company should succeed, the potential upside is enormous.
High-risk, high-reward: Think Bitcoin in 2011.
With this model, not every bet will pay off, and Casa Verde, like most firms, has already placed some bets that probably won’t be appearing at the top of its resume.
One of the more obvious bets that has yet to pay off is cannabis startup Eaze, often dubbed the “Uber of cannabis.” Although Eaze seemingly got off to a great start and captured market share at an alarming rate, the company has faced many setbacks: from being sued by a competitor for not following the rules to burning through the boatloads of investor cash they managed to raise.
Eaze completed a down round at the beginning of this year in order to keep their lights on amid reports that the company was on the verge of going bust. This round enabled Eaze to pivot from being a third-party delivery service (think UberEats) to a vertically-integrated delivery company (think Domino’s).
(📸 / Eaze)
Another bad bet is Trellis, a seed-to-sale management software company that supports cannabis cultivators, manufacturers, distributors, and retailers.
In spite of raising $2.5 million USD from Casa Verde in 2017 at a valuation likely north of $10 million USD, Trellis failed to find product-market fit and seemingly sold to Akerna Corp for a mere $2 million USD in an all-stock deal earlier this year.
(📸 / Trellis)
What’s next for Casa Verde?
With their newly replenished war chest of capital waiting to be deployed and a strong track record of picking the winners in cannabis, we can expect to see Casa Verde's name being around for many years to come.
As the company invests extremely early in the life cycle of startups, we will have to wait sometime before we can say with certainty just how successful its bets have been. Based on their early success, though, it certainly seems like Snoop's foresight is beginning to pay dividends.
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