Brandon David of Investing in Cannabis talked with Jon Trauben of Altitude Investments, a venture-capital fund based in New York that invests in early-stage and growth companies in the global cannabis industry. Targeting great management teams and strong business opportunities across the industry, Altitude has built a diversified portfolio rather than trying to create synergies or pre-plan consolidation at the early, foundational stages of the sector. The fund currently has investments in 15 companies, including BDS Analytics, flowhub, Würk and Privateer Holdings.
With a strong focus on brands as the prime vehicle for value in the industry, one of Altitude’s larger holdings is Canndescent, which has developed premium flower products into a brand that it will expand into a broader product set. Discussing the challenge of identifying strong brand investments, Trauben explained that management teams must have a diverse set of skills to differentiate their products, develop a demographic strategy, ensure reliable distribution, and connect with customers in a sector that has been immensely under-capitalized and restricted in advertising and marketing. To address this last challenge, one company in Altitude’s portfolio, Enlighten, offers a full range of in-store digital solutions, including large-format screens that display a mix of advertising, information and store content.
Altitude has almost 90 investors to date — all high-net-worth individuals and family offices, and no institutional investors. Although some investors are deterred by the fact that cannabis is still federally illegal, the situation presents opportunities for both investors and startups: with institutional capital and “Goliath” companies not yet participating, there is limited competition.
A 3(c)(1) fund that can accommodate up to 100 accredited investors, Altitude is currently raising capital, with a target of $50 million. Areas of interest for potential future investment include multi-state operators, strong brands, marketing and advertising, compliance, and technology. One innovative technology company currently in the portfolio is PathogenDX, which supplies DNA-based pathogen detection kits to test for bacteria and contaminants. This patented product is better and faster than current technologies and can be scaled beyond cannabis into areas like food and water testing, reflecting the potential for the cannabis industry to incubate broader innovation.
To hear the whole conversation, be sure to listen to the podcast: