MJBizMag July 2020 - 48

RECESSION ROAD MAP
RAISING MONEY
IN A RECESSION
Cannabis investment guru Sheri Orlowitz weighs in on funding
when cash is tight By Jeff Smith
W
hen Marijuana Business
Magazine spoke with Artemis
Holdings Group founder
Sheri Orlowitz a year ago (see " Raising
Capital " in the July 2019 issue), a range
of investors was keenly interested in the
cannabis industry.
Then came the double-whammy of the
vaping crisis and the coronavirus-fueled
stock market crash. Now, money is
tight-especially for plant-touching
companies.
Artemis, a cannabis-focused venture
capital firm in Washington DC, is still
making direct investments up to $500,000
in early growth companies and making
syndicate deals up to $50 million.
In an interview with Marijuana
Business Magazine, Orlowitz, a former
federal prosecutor, offered a variety of
tips for cannabis entrepreneurs keen
to raise money in today's recessionary
environment. She also shared her
thoughts on the current investment
climate and what the future holds.
What has changed the most
about the investment landscape
during the COVID-19 pandemic?
Valuations went down, and the risk
profile is even greater. Equity will cost a
company more; debt will cost more than
pre-COVID-19. While the traditional
cannabis funds say they are investing, in
reality they are keeping their powder dry
for their portfolio companies' needs.
Sheri Orlowitz
How do you view the investment
opportunities for different
sectors of the cannabis industry?
I would separate them between vertically
integrated or touching the plant versus
the ancillary businesses.
With regard to ancillary businesses,
if there is a legal route to go-for
example, you have a device that can
be utilized for marijuana but can also
be utilized for hemp, for either vaping
or ingesting-then that might be very
interesting for a fund that invests in
medical devices.
Hemp-ingredient companies should
be interesting to venture capital/
private equity firms that focus on food,
nutraceuticals and vitamins.
There's only one ingredient right now
that is a problem, and that's marijuana.
What would you advise
marijuana companies trying to
raise millions right now?
Avoid raising equity if you can because
it's very expensive right now.
46 Marijuana Business Magazine | July 2020
Could raising capital be even
more difficult and costly a year
from now?
It could, and that's a call the CEO needs
to make. That's a future-direction call.
The companies looking for money
obviously don't have a long enough
runway and probably didn't raise
enough in the first instance.
What is the elevator pitch that
would impress you right now?
Top-notch management team that has
executed on a similar-type opportunity
in the past. Really good credentials:
people, people, people. Traction. A clear
pathway between growth and exit.
How concerned are you with
the investment and economic
climate right now?
I don't think the SAFE Banking Act
is going to pass the Senate this year.
I think it's going to be a very tight
market. As I'm sure you've heard,
potentially only the strong will survive:
companies that are well-run, wellfinanced,
well-connected and have
a good product. Once upon a time,
you could put seeds in the ground
and the next thing you know, you
have $1 million. Unfortunately, those
days are gone.
(This interview has been edited for length
and clarity.)
N
MJBizMag July 2020

Table of Contents for the Digital Edition of MJBizMag July 2020
