GL Brands Inc. (fka GRLB)

[sillylung]

I agree. Digging into the dd that I stickied about Merida. Very methodical and transparent.

The firm uses a 44-item filtering system called the adoption score to help identify companies that have crossed the gap or are on the brink of crossing it in large markets. The team separately conducts due diligence on investment candidates and then compares their findings with the company’s adoption score to help determine strong candidates. For example, Kush Bottles stood out to the firm because it already had a defined pipeline of capital and business.

Leadership is another key element Baruchowitz and his team look for in potential investments. Merida Capital seeks companies with CEOs who can not only have great ideas, but can also execute those ideas. For example, Giadha Aguirre De Carcer, founder and CEO of New Frontier, stood out because she is willing to create strategic partnerships with other companies – an inclusive model that isn’t always easy to find in the cannabis space. Likewise, Simplifiya CEO Marion Mariathasan’s tech background and ability to marry creativity with operational knowledge got Merida Capital’s attention.

The firm likes to bring the CEOs in its portfolio together in a roundtable, which gives them a chance to network and pool their collective knowledge, but partnerships between the companies in Merida’s portfolio are also starting to form organically. GrowGeneration, which has raw data from the point of sale at its stores, and New Frontier, a data and analytics company, partnered to generate a report on the compound annual growth rate of cannabis and ancillary sales related to cannabis.

That report found that the CAGR of ancillary sales is growing at a faster rate than the sale of cannabis itself, which is part of the reason that Merida Capital’s Fund I investments largely focus on relatively mature companies in the supply chain space, rather than direct growers and dispensaries. Now that the firm has begun to deploy the initial capital of Fund II, for which the firm filed a Form D in February indicating that it had raised $7.41 million of the total offering size of $75 million, it is looking to diversify even more and potentially delve into other areas such as cultivation, dispensing, life sciences, and consumer packaged goods. Merida Capital already started moving into the direct production with an investment in Valley Agriceuticals, one of a handful of growers in the New York medical market. Its “asset-light” model captured the firm’s attention.

Fund II has already deployed about $8 million – and Baruchowitz expects it to reach the $75 million that he believes he can invest into companies that offer asymmetrical reward to risk. The Merida Capital team, which is bigger, more experienced and with more bandwidth, is looking at verticals that weren’t included in Fund I, as well as companies that could complement the companies in its existing portfolio. The firm is looking to use the model it developed and the knowledge it has gained to build on and amplify the success of Fund I, and it has disclosed investments in Fund I holdings GrowGeneration and Kush Bottles, partnering with both companies to help them expand to the East Coast, as well as Valley Ag.

As the firm continues to expand its investment reach, the team sees countless pitches. The firm’s filtration model and due diligence go a long way toward finding the ideal candidates, but entrepreneurs sometimes make the process a little challenging. Baruchowitz has received a lot of pitches the require NDAs and hours of scheduling to simply discuss the company’s business model. Baruchowitz and his team find the companies that more readily share information to be more engaging and appealing candidates.

While Merida Capital has been successful in the cannabis investment space, Baruchowitz emphasized how humbled he is by the entrepreneurial spirit that that he sees driving the industry forward.