Connecticut’s venture capital fund is among the first institutional investors to jump into the growing cannabis business, committing $1.25 million to a manufacturer of edibles intended to enhance energy, focus and mental health.
Connecticut Innovations, which has more than 200 portfolio companies and $300 million in assets under management, invested in 1906 New Highs, which makes pills that combine “moderately dosed cannabis” with medicinal plants.
Connecticut Innovation invests in sustainable technology, or greentech, consumer and health care products, tech companies and venture funds with the goal of creating jobs in Connecticut. It’s taking a new direction into cannabis, viewing 1906 New Highs as an emerging area, said Lauren Carmody, vice president of marketing and communications.
“We like the science behind it,” she said. “It could open the door for other entrepreneurs.”
1906 New Highs’ products are focused on energy, cognitive focus, mental health and happiness and are alternatives to alcohol and pharmaceuticals, according to the company. Founder and Chief Executive Officer Peter Barsoom said products are not targeted for depression, which is a clinical condition.
According to the company, the pills promise “fast action” and “precision highs” to deliver a range of benefits, including greater energy and focus from plant medicines and caffeine; euphoria-inducing plant medicines to promote happiness; and an aphrodisiac to increase intimacy and arousal.
For 1906 New Highs, which employs 80 workers, the Connecticut Innovations investment is a “huge milestone,” Barsoom said. The industry has attracted few institutional investors as many are waiting for Congress and the president to change federal law listing marijuana as a controlled substance.
The privately-held company, founded in 2015, said it gets its name referencing 1906 for the last time cannabis was “widely accepted as a beneficial medicine.”
Gov. Ned Lamont signed legislation last year authorizing the sale of recreational marijuana for adults 21 or older who may purchase and possess up to 1.5 ounces, or up to 5 ounces locked at home or in a vehicle’s glove box or trunk.
The state is now establishing an industry, running lotteries for licenses to grow, distribute, manufacture and sell cannabis.
1906 New Highs is applying for a Connecticut license as a food and beverage business, and if it were to win a license in the general lottery, it would follow though with research and development and manufacturing, Barsoom said. It’s one of 122 general lottery applicants, which he said presents better odds than the 7,245 applicants for retail licenses or 2,945 grower applications.
If he were to fall short in the lottery, Barsoom said he would find another way to establish a manufacturing operation. The company is not competing in the Social Equity Council Lottery that was established to promote cannabis business in Black and other underrepresented communities.
What’s lacking is institutional backing that could unleash billions of dollars in investment in cannabis. Businesses cannot get access to capital available at banks that fear losing their federal charters, said Todd Harrison, a founding partner and chief investment officer at CB1 Capital, an investment manager specializing in the supply chain of cannabinoid-based wellness products and therapies.
Because of the size and lucrative potential of the cannabis industry, federal law could change this year, he said. He said his view of him is in the minority.
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“Our sense is that this is all going to go away,” Harrison said. “It will take some time. Banking problems will go away this year.”
The US House of Representatives voted in April to decriminalize marijuana at the federal level, but the Senate has yet to act.
Access to capital is also restricted by brokerage firms that have come down against buying cannabis stocks, instead allowing only their sale. The result, Harrison said, is to “push institutions away.”
As much as 96% of owners of US cannabis stocks are individual investors, he said.
Harrison emphasized the medicinal and other beneficial effects of cannabis, a growth industry that can spur employment and investment.
“This is real money. This is real jobs,” he said. “This is about getting well. It’s not about getting high. This is a very good plant.”
Stephen Singer can be reached at firstname.lastname@example.org.