New Frontier Financials, a company aimed at bringing big data and analytics to the nascent cannabis sector, has completed a $1 million seed funding round. Phyto Partners, the US private equity firm focused on investing in the cannabis sector, was the leading investor, obtaining a roughly 6 percent stake in the company.
The successful funding initiative is the latest example of money flowing into companies that provide technical support or services to producers, distributors and regulators in the legal cannabis sector.
Frontier founder Giadha Aguirre DeCarcer, told Agri Investor that the company will use the funds to normalise a backlog of already-collected data and publish it to its Equio platform.
An investment banker by training, DeCarcer became interested in the data and analytics surrounding the cannabis market in May 2014, when a friend asked for her advice on the industry.
“I did what I usually do, which is look at industry reports,” she says. “The usual data points that you would want to see as an investor, or that you would want to see as an entrepreneur. To my great dismay I could not find anything quantifiable that really would answer my questions.”
DeCarcer says New Frontier is working to become the go-to information hub for potential investors and operators looking to enter the legal cannabis market as well as for legislators, academics and healthcare professionals seeking quantitative information on cannabis retailers and consumers.
“Making sense of all this information is really important in order to make business decisions, in order to make policy decisions, in order to make investment decisions,” says Larry Schnurmacher, managing partner of Phyto Partners. “New Frontier Financials is going to provide that, like a Bloomberg for the [cannabis] industry.”
The investment is the third by Phyto Partners since its launch this year. The fund also holds stakes in Steep Hill Labs and Corsica Innovations. Steep Hill operates commercial labs that offer safety, purity and potency testing of marijuana. Corsica presented its self-contained automated home growing system for cannabis and other plants at Techcrunch Disrupt 2015 in San Francisco. Phyto hopes to raise $10 million by June 2016 for future investments. Schnurmacher says the fund’s current portfolio is typical of the supporting services and technologies that will grow as the legal cannabis market becomes more established.
“These three business perfectly show that there is a huge business within this industry that’s going to happen,” he said. “And it’s going to have nothing to do with selling joints, bongs, not even a plant.”
With such fertile ground for innovation, Schnurmacher says there is an abundance of firms looking for relatively small investments to gain a foothold in the market.
“The industry’s still really young and the asks, the capital that’s being raised, in most cases are not gigantic numbers,” he says. “They’re small raises, a million and a half to five million dollar raises, even some as low as half a million.”
As previously reported by Agri Investor, Greenfield Capital Partners committed $5 million to cannabis tech firm Biotrack THC earlier this month.