Seventh Point’s New Cannabis PE Fund Oversubscribed on First Round
July 17, 2016
Seventh Point, a Connecticut-based private equity firm focused on investing in legal medical marijuana cultivation and dispensary assets in the state of California, announced that its $750,000 friends and family round of fundraising has closed oversubscribed.
In addition. the firm has received two separate $5.5 million financing Letters of Intent for the first round. The investment will be used to acquire a legal Los Angeles-based dispensary, its license, an on-site cultivation facility and a cultivation buildout.
“The reasons for focusing on LA are the favorable regulatory environment and the fact that nearly 25% of the industry’s $4.1 billion in revenue was generated within LA last year. LA is to cannabis as New York is to fashion and Silicon Valley is to tech,” said Dermod (Trip) Ives, III, Seventh Point’s chief operating officer.
Currently, there exists approximately 80 fully compliant medical marijuana licenses in Los Angeles. If able to control between 10% and 12.5% of these compliant licenses, Seventh Point predicts it can secure between 25% and 50% of the $1 billion in annual revenue generated from LA alone.
“We are excited to close our first round and will be working with several investment groups to deploy $75MM into the legal cannabis market over the next 36-42 months,” said Steve Gormley, chief executive, Seventh Point. “We have seen a tremendous shift in the willingness of investors to come off the sidelines and take advantage of the tremendous opportunity available in legal cannabis.”
The legal marijuana industry is still dealing with inter-state regulatory issues, and the lack of legalization on a federal level has left those operating legally within the sector with a lack of commercial credit. This void has left a vacuum rife with opportunities for institutional and private investors. Indeed, as legalization spreads throughout the U.S. and the industry finds its feet, the sector is gaining traction and credibility. This was made evident with the recent entry of Microsoft Corp. into the legal marijuana sector.
Seventh Point notes that once cannabis is rescheduled, the industry is expected to see a value of $38.6 billion – a value that is 12% larger than the entire organic food industry. And it will be players like Seventh Point, that have an established history of success and due diligence that will be best positioned to benefit from the estimated 500% increase in market size.
“What separates Seventh Point from its PE competitors is that Seventh Point does not simply make passive investments in existing companies,” notes Ives. “Instead, Seventh Point wholly owns its acquisitions, manages the day-to-day operations and bring years of industrial cannabis experience to the table…At this time, Seventh Point is focused on bringing mature, enterprise level strategies to this “cottage” industry…”
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