In Many Ways, Less is More!

Karan Wadhera, Managing Partner, Casa Verde CapitalAs a venture capitalist, how has your journey been so far?

My journey to venture capital has been long and rather circuitous. I’ve traveled along two concurrent career paths: traditional finance and entrepreneur/investor. On the former, I joined Goldman Sachs’ San Francisco equities division immediately out of university; and in 2006, I jumped at the opportunity to move to India and help establish Goldman’s first front office in Mumbai. After five years at Goldman, I transitioned to Nomura and eventually left India for Hong Kong to head up the firm’s Asia Ex-Japan equities trading desk.

On the second track as an active entrepreneur and investor, my first venture was a digital media consultancy for recording artists, which I began in college and got me acquainted with the entertainment industry in Los Angeles. Returning to India, I contributed to the conception of MissMalini, a lifestyle/entertainment publication, and I was an early investor in Steadview, which is now one of the largest India dedicated hedge funds in the world. I even brought Snoop Dogg (my partner at Casa Verde) to Bollywood, where he penned a song and made a cameo in Singh is Kinng.

Having experienced the journey as a personal investor in Indian startups and other global brands, I left Nomura in 2015 to explore new opportunities—with the intention of adding value to early-stage companies in the private sector. I was compelled by the macro trends pertaining to cannabis legalization across the world, especially in the US. While some incredible entrepreneurs were leaving Silicon Valley and Wall Street to build out the cannabis industry, I quickly realized there was no real institutional capital to support them. That became the white space that we set out to fill.

How have the companies in the cannabis space that you invested in, grown over the years with recent developments?

Over the last couple of years, Casa Verde has invested in 17 companies, 13 of which have raised follow-on financings from 3x to 25x our entry price. In that vein, we’ve also achieved two exits - one full and one partial - and garnered considerable institutional validation by powerhouses in the industry. Established firms like Tiger Global have followed on and joined us in investments for companies like Metrc and Green Bits. Thrive capital recently led a Series B investment into one of our businesses, LeafLink. We even participated in the first major investment by a tobacco giant into cannabis biotech when we joined Imperial Brands in a funding round for Oxford Cannabinoid Technologies.

The cannabis industry, still in its nascency in terms of growth and development, can draw inspiration from the old adage of investing in people over products

Over these last few years, global interest in cannabis has grown significantly, and we are extremely fortunate to have been at the epicenter of a number of key industry milestones.

What are the key elements that you look for while investing in a company or a product?

The cannabis industry, still in its nascency in terms of growth and development, can draw inspiration from the old adage of investing in people over products. Given that the industry needs malleable people, adept at rolling with the punches of an ever-shifting marketplace/regulatory system, we spend a significant amount of time assessing the entrepreneurs and their teams, based on their background, journey, and previous iterations. With legalization and other short term issues preoccupying the cannabis industry, we work closely with entrepreneurs to understand whether their business has a long term role in the industry. The purpose here being our desire to invest in players who are in it for the long haul and standing by them throughout the entire maturation of the industry. And just like any other prudent investor, we care about the price we are paying for a business, so valuation is always an important factor to generate great multiples and impressive returns for our investors.

What is the role of technology in an industry like cannabis?

The strict and fragmented US regulatory system has resulted in the cannabis industry already being one of the most tech-forward industries in the world. Because we have no legacy systems in place, we are beginning our journey with the latest technology. Beyond that, there are technological and scientific advancements in cannabis consumption as well. A major issue with smoking or vaping cannabis is that people often do not realize how much they should be ingesting. We recently invested in a business called InDose, which precisely measures the vapor coming through the channel while using a vaporizer, to inform the user as to the dosage of each draw they take.

Outside of hardware, there has also been considerable innovation and growth in terms of enterprise solutions for compliance. With the onerous level of regulation and scrutiny on the American cannabis industry, an ambitious, holistic legal framework has emerged, called seed-to-sale tracking. This approach entails a constant tracking of a product through the entire value chain, right from the moment a plant is put in the ground till the point someone purchases the product developed from it. Our portfolio company, Metrc, has developed an incredible technology that allows regulators to protect public health/safety through robust monitoring of the entire cannabis supply chain, while also enabling governments to identify taxes owed.

Is there a piece of advice you would like to give to young entrepreneurs?

My advice for all the entrepreneurs out there is twofold: First, in many ways, less is more! While concepts carry more complexity than mere statements, pitching your idea to VCs still requires a clear, concise message for what your business does. This can be followed by the details of what makes you unique, why you think you will succeed, and what are the challenges. Secondly, be transparent about the hurdles and challenges in your business. Humanize yourself to the investor, tell them about what can go wrong with your firm at any point. I always respect people who are forthright about the issues prevalent in their business. This indicates both an awareness that there’s always room for improvement and that they are not blindly optimistic about a result that is anything but certain.