Raising Cannabis Capital 0140: Arcadian Fund

Matthew Nordgren is back to talk to Dan Humiston about how the investment community's view on cannabis is changing.   Institutional investors and Fortune 500 companies are finally exploring cannabis opportunities.   In preparation of their inevitable participation he's expanded Arcadian Fund's investment thesis to now include cannabis plant-touching investments.   

Produced By MJBulls Media | Cannabis Podcast Network

 

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Announcer:
Today's show is brought to you by a former guest. He looks cheesy, is one of the largest publicly traded non plant touching Cannabis companies in the world. Trading on the OPEC under ticker symbol H L I X, their portfolio of industry leading technology compliance and security companies is designed to scale internationally to capitalize on the inevitable proliferation of legal Cannabis without the risk and limitations of being a Cannabis producer. Record Q2 earnings driven by their market share leading seed to sale tracking software has positioned Helix T.S. S. as one of the most exciting ancillary companies in the Cannabis industry. To learn more about Helix, T.S. S.. Trading under ticker h l i x go to Helix, T.S. s dot com or listen to Raising Cannabis Capital episode 96.

Matt Nordgren:
And if you are a great company doing great things, I hope you can be selected. Hope you get to choose who you want on your cap table. And when that day comes and it's not just about money, it's about how this particular investor group allows for me to succeed, encourages my growth, is there for me when times are tough.

Dan Humiston:
From MJBulls Media, it's the Raising Cannabis Capital show. I'm Dan Humiston. And on today's show, a former guest is back in the M. Gables studio to talk about how they've expanded the scope of their venture capital investments. Today, a Raising Cannabis Capital, we are joined by a former guest and a great friend of the show, Matt Nordegren from The Arcadian Fun. Matt, welcome back to the show.

Matt Nordgren:
Hey, Dan, thanks for having me. Glad to be back with you guys.

Dan Humiston:
Well, for those who don't know Matt. He's had a success in a number of different venues, from athletics to entertainment to investing. Well, we discussed all that last time you were on the show. So if you want to know more about Matt, take a minute. Go back and listen to Raising Cannabis Capital episode 35, because today I'd say let's start off by giving everybody like a quick recap.

Dan Humiston:
You've been in the Cannabis industry for a while and your company is one of the Cannabis industry premiere venture funds. Matt, tell us about Arcadian investment thesis.

Matt Nordgren:
Thanks for asking, Dan. I think our thesis at its core is really to invest in growth rounds of companies. Our specialty is helping join a team that's got enough data and enough traction and revenue being generated to go from a good team to great team as a strategy. We've sort of built that in a few ways. Our previous fund sort of focused on A and B rounds and not plant touching companies. Many of those companies on the servicing side, the B2B side have grown to be relatively larger companies and we're starting to notice that the institutional is the Fortune 500 and also do that type of service are getting closer and closer to entry. So we've launched a second fund which will focus on the later stage aspect in terms of growth and those types of companies are really excited about Dan. Yeah, but we are checking the plant going forward. We do think the B2C side is going to have some outsized returns. We're now in the market with an AP around sort of early stage growth round could be to see consumer focused vehicles while. So I'd say we're growth investors, Dan, but our strategy is kind of change with the times in terms of what companies are doing and how a market has matured.

Dan Humiston:
Well, that's interesting, because when you were the show, the first time institutional investors were don't touch the plant, but we're starting to dabble in non plant touching Cannabis. You'll see you're seeing this change where institutional investors are starting to warm up to the idea of some plant touching companies.

Matt Nordgren:
I think that's correct. Looking at it over the years, you've seen them all start to think about it and then they think about it more. Didn't they keep thinking about it? I think they're in the final stages of figuring out those pieces. And when you start to ask yourself, why is that? Case, inevitably, I think the question continues to come up is why are all these regulations starting to happen? And it's because of the fact that institutionally large Fortune 500 companies are close to figuring that out. And for them to get into this space, they need to have a few things. One, regulation, big, big, big companies and institutional like to know to a higher degree of certainty what they're getting into. The other one is capital flow. You're starting to see things flow in different directions. We didn't get involved in plant touching assets early, partly because of the regulatory risk, but we also felt like they were a little bit overvalued. Not that there wasn't value, but that they were trading at multiples that were a little bit unrealistic. You're going to see a shift for large asset based multi-state operator tech companies, specifically the public ones take on credit and debt.

Matt Nordgren:
That's where you start to feel like a bigger players are starting to want to find a way into Cannabis. But if they feel like the asset values are a little bit heavy, for example, retail and cultivation and manufacturing companies trading at 30 to 50 times revenue multiple is probably not what any market in the world allows those types of assets to trade at. You're going to see credit and debt come in. It's healthy for companies, cheaper cost of capital. It's non dilutive. I think the markets will respond favorite sadly to it. In reality, what's happening is these companies are not going to be able to not hit return numbers, not generate the revenue that they're expected, and that could cause some correction. Yeah. And so we think there's a debt and credit opportunity that we're in short order going to be able to announce some things we're going to have as a partnership on that side. But Arcadian at its core, we'll still focus on equity and growth around investing.

Dan Humiston:
Something you said triggered a thought. It has a lot to do with how to invest in this industry or what to look for in this industry. And I mean, you wouldn't believe how many people reach out to me on a daily basis and say what company should invest in. I basically tell everybody the same thing. Cannabis is a whole nother animal. It's changing so fast that unless you're at every event and you have a network of Cannabis companies that you're talking to, you're basically blind. I know that's one thing about your company that you and your team were so ingrained in the Cannabis community. It's important to explain to. People, why that makes a difference when it comes to investing in Cannabis.

Matt Nordgren:
We need to work together at macro level. This industry is going to continue to grow by volumes that are rarely seen in human history. Real assets, real cash flow, going to talk to everybody and it's going to continue to grow well. It's micro level. Who's going to be a part of that growth? Who's going to do it right? During that journey?

Dan Humiston:
I want to take a quick break. Thank you for listening to today's show. As the leading Cannabis podcast network, we're constantly adding new Cannabis podcast to support our industry's growth. And that's why we're so excited to announce our newest podcast, The Cannabis Brakeout, which premieres October 18th. The show's about the thousands of Americans who remain in prison for violating Cannabis laws that have long since been overturned. The Cannabis Brakeout gives Cannabis political prisoners a voice. If you're a former Cannabis prisoner or have a loved one who is a Cannabis prisoner, we want to share your story. Please go to MJBulls.com and sign up to be a guest.

Dan Humiston:
One thing that you said to me last time we spoke is that you get invited into all almost every big deal. You have such a good reputation within the investment community that most of the time the other investors will invite you in and the deals. And I suspect that is a lot to do with your approach to this and your willingness to bring others into your deals. I mean, I think it makes such a big difference.

Matt Nordgren:
It makes a difference. And I think we're just scratching the surface. What kind of difference that approach makes. Because up until recently and even today, capital has been the number one driving factor for a company to take on investors capital. My hope and belief is that this industry continues to grow into a place where it has lots of capital options. And if you are a great company doing great things, I hope you can be selective and hope you get to choose who you want on your cap table. And when that day comes and it's not just about money, it's about how this particular investor group allows for me to succeed, encourages my growth. It's there for me when times are tough. And I think right now we're really seeing that be the case.

Dan Humiston:
Well, you mentioned a minute ago that you are starting a next fund, which is going to be a plant touching fund. And I know you have a lot of other things in the works. Maybe you can give us a peek at some of the things that you're working on right now.

Matt Nordgren:
One of them is preaching a collaborative message. I mean, personally, I think the industry is giving us so much already and feel very good about our future as an asset management firm.

Matt Nordgren:
We we brought a new partner in from Goldman and Guggenheim, who we think is going to help drive our impact, investing both in terms of the way we think about Arcadian and the way we want to hold our portfolio companies accountable in a socially equitable, environmentally equitable impact way. So that's really important. Number two, we are building out new funds. We're very excited about the second wave going through North America on the B2B side of the industry and short term, probably a year and a half, I think we'll start to see real big transactions and flow there. We're really excited about the future of the B2C side. That's why we're building out the plant touching fund. It's really focused on the consumer delivery, distribution, branding, medical testing, IP. So many wonderful things to do on that side. It feels like you're just trying to build Apple and you have all this technology. How are you going to put it together for the consumer? And we're still on a day where no brands have won anything for the most part. So, yeah, being excited about the future there. And we are also going to announce some things we're doing on the credit and debt side at some point in time that I think are beneficial to our LP base. And so we like all three in North America and other markets in the world. Couple investments in Asia that we're really, really excited about for what those could be one day working on things in Latin America. Some opportunities in Africa that are really interesting in, of course, Europe.

Dan Humiston:
That's exciting stuff, Matt. As always, it's it's fun to speak to you and with your company. It's looking for growth funding or you're an investor looking for a company to manage your Cannabis investments. You really should check out the Arcadian Fund. We'll have all of Matt's contact information on the MJBulls Web site. And Matt, it's always great to have you on the show and hopefully you'll be available to come back on again soon.

Matt Nordgren:
Dan? Yeah. I think there's nothing more important than transparency having these types of conversations in the industry, education and understanding the most important aspect of everything we're trying to do today. So I'm encouraged by you guys work. Love to be a part of it eight times.

Dan Humiston:
It's always good to have you on that. Thanks again for doing this and going. Thanks for listening to Raising Cannabis Capital to learn more about today's guests or to become a guest. Visit our Web site at MJBulls.com. Today's show is produced by MJ Bulls Media with original music produced in part by Jamie Humiston. I'm Dan Humiston and you've been listening to the Raising Cannabis Capital.

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