Greenfield Capital Partners is investing $5 million in a company that produces in tracking and reporting software for the legal cannabis market. BiotrackTHC is the first addition to the fund, which focuses on legal cannabis market technology and infrastructure investments.
BiotrackTHC provides software that facilitates tracking of cannabis inventory from seed to sale for business and regulatory use. The company has contracts with the states of Washington, New Mexico, Illinois and New York to provide tracking information for cannabis inventories, for taxation and to prevention of illicit sales.
Greenfield Capital’s partner, Mike Devlin, told Agri Investor the move reflects the group’s strategy of targeting investment towards the technology and infrastructure necessary to grow burgeoning legal cannabis markets in the US and other regions.
The complex, evolving regulatory environment surrounding legal cannabis sales and resulting barriers to entry into the technology and infrastructure side of the market create greater potential for risk-adjusted returns than investment in cannabis cultivation or dispensation, Devlin said.
New entrants to the market for cultivation and sale of cannabis will surely follow further easing of state and federal restrictions, he added. However, a reliable means for tracking and regulation will be crucial to overcoming the anxieties of legislators whose fear of an increase in illicit cannabis trade would otherwise keep them from supporting more permissive legislation.
The unique particulars of the cannabis market make specialised tracking software as much an essential for merchants as it is for state and federal regulators, according to Patrick Vo, chief executive of BioTrackTHC.
“Every fraction of a gram [of cannabis] has to be tracked throughout the life-cycle,” Vo told Agri Investor. This, he explained, becomes increasingly difficult when weights of wet inventories are compared with dried product, or when solid inventory is processed into oils.
Greenfield credits its analysis of past disruptive financial events with the development of its investment strategy for the legal cannabis market. Devlin compared the current wave of legalisation and decriminalisation of cannabis to the 19th century American gold rush or the internet boom of the 1990s.
“The people that made money were those who invested in the infrastructure. Those that made the buttons and the switches,” said Devlin.
Beyond inventory and reporting software, Devlin noted production of machinery for processing cannabis into oils and equipment for indoor cultivation as potential areas for growth, in which Greenfield could look to invest in the future. Citing an international trend toward acceptance of recreational and medicinal use of cannabis, he said the fund is not geographically constrained in its search for investment opportunities.
Devlin declined to comment on the amount of capital committed to Greenfield Capital Partners. However, he said the group is still actively raising money for the year-old fund.