Narbe Alexandrian’s plan to invest Canopy Rivers, the ‘Google Ventures’ of pot

Narbé Alexandrian, CEO of Canopy Rivers, the venture arm of Canopy Growth, is leading an ambitious strategy to fill a funding gap for startups expected to drive growth in the burgeoning global pot industry.

Alexandrian, hired last year from OMERS Ventures to head Canopy Rivers’ investment team, told Venture Capital Journal the firm is targeting long-term financings of early-stage marijuana companies, a space investors have largely ignored.

“There’s a lot of cash flowing around the cannabis market and much of it is impatient capital,” Alexandrian said. “We want to be there for startups looking for patient capital.”

Investing from a C$300 million ($222 million) pool, Canopy Rivers commits $500,000 to $40 million to Series-A-to-B rounds for opportunities across the cannabis value chain. That takes in everything from cultivation and production to tech, vaporizers and edibles.

This broad market focus also differentiates Canopy Rivers, Alexandrian said.

“Everybody is chasing the next cultivation deal,” he said, noting this overlooks a wealth of ancillary activities representing strong growth potential.

Canopy Rivers identifies nearly 100 segments in the cannabis ecosystem, each researched by its 15-person team. Alexandrian said this work is key to the firm’s domain approach and ability to “carpet the entire industry.”

Eye on global reform

The firm sources deal flow in regions where medical and recreational pot is legal and related market opportunities exist or are emerging. Accordingly, it keeps an eye on the international regulatory environment.

Most of its 17 portfolio companies are in Canada, where adult-use marijuana was legalized last October, and select U.S. states.

Increasingly, however, Canopy Rivers is expanding its horizons. This year it debuted in Europe, investing in Canapar Italy, an organic hemp producer, and in New Zealand, investing in BioLumic, maker of an ultraviolet crop-yield system.

The rapid pace of regulatory reform is likely to increase the scope of opportunities.

An analysis of legalization in North America, Europe and Latin America by Jefferies Group suggests the global pot market could be worth as much as $130 billion by 2029.

The trend is also mirrored in levels of investment. CB Insights reports worldwide funding of cannabis companies in 2018 reached a record of almost $2.2 billion.

The ‘Google Ventures’ of cannabis

Canopy Rivers’ goal is to be a first mover in the global pot industry, deploying capital and lending operational support to startups that can become leaders in their niches and geographies, Alexandrian said.

It’s a “high risk, high reward” strategy, he said, backed by the deep pockets of Smith Falls, Ontario-based Canopy Growth, the world’s largest marijuana business.

Founded in 2013, Canopy Growth today has a market cap of roughly C$20 billion. Growth was spurred by several factors, including legalization in Canada, acquisitions, and last year’s C$5 billion investment by alcohol giant Constellation Brands.

Canopy Rivers was formed in 2017 to give the parent organization a window on opportunities in the nascent industry. Along with supplying resources, Canopy Growth partners in deal sourcing and portfolio support.

The venture arm, however, operates autonomously, Alexandrian said. Because of this and the nature of its strategy, Canopy Rivers resembles GV (Google Ventures) more than other corporate VC groups, he said.

Canopy Rivers has ramped up investing of late, fueled by what Alexandrian calls “crazy” deal flow and some six to seven pitches from entrepreneurs a day.

Along with BioLumic and Canapar, recent investments include Greenhouse, a Toronto healthy-beverage maker, Headset, a Seattle cannabis data and analytics platform, and High Beauty, a Santa Rosa, California, cannabis-infused-beauty brand.

Alexandrian’s prior career was tech-focused. In addition to his role as a senior associate at OMERS Ventures, he was a senior strategy manager in Telus Corp’s internet-of-things group.

In May, Alexandrian was named CEO of Canopy Rivers, succeeding Bruce Linton, co-CEO of Canopy Growth, who continues as chairman.

Uptick in pot VC players

Even before Canada’s legalization initiative last year, the local market saw increasing activity on the part of specialty marijuana investors.

Along with Canopy Rivers, top players include Peter Thiel-backed Privateer Holdings, the founding investor in Tilray, a Nanaimo, British Columbia, medical cannabis producer. Tilray went public on Nasdaq in 2018, raising $153 million, but Privateer remains the majority owner.

Other active investors in Canada’s pot industry include Snoop Dog’s Casa Verde Capital, Green Acre Capital and family office Serruya Private Equity.