This Is How To Invest in the Marijuana Industry

Among Phytos’ investments (which are +/- $500,000) is New Frontier Data, which provides analysis and real-time data for the global marijuana industry. Another is Steep Hill Labs, a cannabis science and technology company that engages in lab testing, genetics, R&D, and licensing of intellectual property. Phyto has also invested in LEAF, a tech startup that offers a smartphone-controlled, automated home grow system that can be used for  plants, vegetables and marijuana. The firm’s portfolio also includes Baker Technologies, a software company that allows dispensaries to bring in new customers and develop customer loyalty, and LeafLink, an online B2B E-commerce platform for cannabis vendors, brands and dispensaries.

In selecting its investments, Phyto Partners takes into account the management team behind the startup and it prefers companies led by people who have achieved success in another industry before moving into marijuana. It also focuses on companies that have other institutional investors that have invested in them and it uses changes in valuation after financing rounds to measure the returns, as a higher valuation suggests positive returns, and vice-versa. However, valuation is not an accurate assessment of an investment’s profitability, as they are not market valuations and the private equity is not liquid, Schnurmacher warned in his interview.

In conclusion, while US investors have some choices to invest in the marijuana industry, most stocks like AbbVie Inc. (NYSE:ABBV), Insys Therapeutics Inc (NASDAQ:INSY), and GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH), are far from offering good exposure to the broader cannabis industry, while over-the-counter pure-plays are way too risky at this point. On the other hand, Phyto Partners’ approach seems like the sweet spot, as companies solving business execution problems and servicing the marijuana industry are poised to win, no matter which licensed operator, growers or sellers, succeed in the industry.