Chicago-based cannabis investment firm Salveo Capital has participated in a $10 million Series A round for Front Range Biosciences, a Colorado-headquartered company focused on tissue-culture propagation of high-value crops.
Other investors in the round included Cornerstone Opportunity Partners, Altitude Investment Management and the Harvard Business School Alumni of New York.
The capital will be used to roll out the company’s Clean Stock Program, which FRB said “leverages tissue culture – the sterile propagation of baby plants through duplication of a nutrient culture medium of known composition – to solve operational problems such as disease, inefficiency, inconsistency and scale.”
Front Range also has a genomics-driven breeding platform that creates new varietals and traits and is already accepting production orders from cannabis producers in Colorado and California.
In a demonstration of how its products can be used in markets other than cannabis, FRB signed a letter of intent with specialty coffee breeder and producer Frinj Coffee in March to supply it with more than 3 million coffee root cuttings produced through the Clean Stock process between 2018 to 2022.
Jeffrey Howard, a managing partner at Salveo, told Agri Investor that FRB’s $10 million Series A is the largest biotech cannabis investment round to date and that its size reflects, in part, the significant increase in investor interest in cannabis since this summer.
Attention on companies such as Tilray and Cronos – two Canadian cannabis producers that trade on the NASDAQ exchange – has filtered through to private markets, which Howard said have seen an explosion of interest from family office and high-net-worth individual investors specifically.
“The amount of money entering the space is incredible and I believe it’s just the tip of the iceberg,” Howard said. “What used to be fairly small raises – or companies having a tough time raising capital – a lot of these rounds are getting oversubscribed very quickly.”
Howard declined to comment on fundraising for Salveo’s own debut fund, which market sources told Agri Investor had raised $8 million as of July and which the firm hopes to close on $25 million by the end of 2018.
Wholesale prices falling
FRB’s offerings attempt to bring practices long-established within traditional agricultural crop protection to the burgeoning legal cannabis market which producers are likely to embrace, Howard said, given that cannabis is likely to remain a tightly regulated commodity.
“There is a significant need to have clean, healthy crops harvest after harvest after harvest that are disease-free, mold-free and pesticide-free and the ability, through some intellectual property, to identify specific strains,” said Howard.
In addition, because the firm’s view remains that the price of wholesale cannabis is likely to continue dropping from $4,000 per pound a few years ago to below a current price of around $1,000 per pound, Howard said that growers of high-quality cannabis are likely to value the ability FRB’s offerings give them to start each season with clean seeds producing improved yields.
“In some markets, depending on whether it’s grown indoor, outdoor or in a hybrid greenhouse, some of it is down to $500 a pound. We think the range is somewhere between $500 and $1,200 per pound,” Howard said. “An increase in yields, on the grower side, is significantly important in a falling wholesale pricing environment.”