Salveo Widens Deal Criteria as Cannabis Industry Blooms

The Deal

By Steve Gelsi

24 October 2018

Salveo Capital is widening its investment criteria in cannabis to companies that touch the plant as it works to fully deploy its $25 million debut investment fund and prepares to launch is sophomore investment pool next year.

The firm expects to make up to five new platform investments for its fund in the next 45 days to bring its inaugural fund up to 14 investments, according to sources. The fund is expected to contain up to 18 investments.

After launching in 2016 with a focus only on ancillary cannabis businesses such as cannabis CRM specialist Baker Technologies, recent developments in the marijuana business have caused the firm to both speed up its investment pace and consider investing in businesses that touch the plant.  In recent months, U.S. federal law enforcement has stayed away from state-legal cannabis businesses, clear winners have emerged as multi-state operators in the U.S., and Canada legalized adult use of cannabis.

In the wake of these and other regulatory advances for cannabis, Salveo has already invested in at least one company that touches the plant, and it plans to do more. In July, Salveo took a minority interest in Flow Kana, a California producer of sustainable, sun-grown cannabis.

The move to expand to plant-touching businesses, "will put us more squarely across the entire supply chain for cannabis," said Michael Gruber, managing partner at the Northbrook, Ill.-based firm.

Overall, the firm plans to get more aggressive on deploying capital to match the velocity of capital raising in cannabis.

The firm is focusing on potential participation in so-called concurrent rounds of capital - the money companies raise shortly before going public. In the case of cannabis, many U.S. firms have been holding these rounds ahead of reverse mergers on the Canadian Securities Exchange.

Salveo plans to exit more investments in the near future and then launch Fund II in the first half of 2019. The firm has said it hope to raise

Salveo has been working with Freeborn Peters on fund formation.

Along with Baker and Flow Kana, Salveo has invested in Front Range Biosciences, Headset, Purissima, Hiku (formerly Tokyo Smoke), Treez and Wurk. The firm holds an undisclosed number of shares in Canopy Growth Corp. (CGC) after Canopy purchased Hiku with about $205 million in stock, earlier this year. Hiku had purchased Tokyo Smoke prior to the Canopy acquisition of Hiku.