Northern Swan Holdings, a New York-based investment firm, closed a $58-million Series D financing round this week, and the management team is describing the oversubscribed funding round as the “largest capital raise to date for a Latin American-focused cannabis operation.” The firm holds a 72-percent ownership stake in licensed Colombian cannabis grower and extractor Clever Leaves.
“I think a good portion of that is going to head down to Colombia with the model of ‘bigger, faster, better,’” Northern Swan CEO Kyle Detwiler told Cannabis Business Times. “We’re trying to become one of the largest agricultural cannabis producers on planet Earth.”
With plans for the cultivation of 30,000 cannabis plants for research purposes—and the extraction of 514 kg of dried cannabis—Clever Leaves has quickly picked up international attention. The company is now allowed to export cannabis to Health Canada and, ultimately, to Cannmart Inc. (a subsidiary of Namaste Technologies Inc.). Colombia allows only the export of cannabis oils; Clever Leaves sent its first sample batch of cannabis product to Health Canada in February.
In March, Clever Leaves received Colombia’s first commercial cannabis cultivation quota: 175 mother plants and to be used for commercial propagation for the country’s medical cannabis market.
Detwiler pointed to those two fronts—domestic production in Colombia and emergent international trade—as a foundation for Northern Swan’s longer-term strategy. As companies began planting roots in Canadian greenhouses, Detwiler said that Colombia’s climate and 8,300 feet of elevation make it an enticing geography for cannabis cultivation.
Clever Leaves’ 500,000 square feet of greenhouse space and 200-plus employees are located a few hours outside the capital city, Bogotá, and the company is in the process of adding 980,000 square feet of greenhouse.
“I tend to take a more Adam Smith, ‘Invisible Hand’-view to the world,” Detwiler said. “I think, over time, if we can grow it at 90-percent lower cost in Colombia, we’ll win.”
Prior to Northern Swan, Detwiler invested in commodity industries like sugar cane, ethanol, oil and gas, coal, iron ore. It’s that background, he said, that will inform Northern Swan’s future.
Most of what Clever Leaves produces will fall into the CBD-dominant value chain (as opposed to THC-dominant and industrial hemp), which, Detwiler said, keeps the company focused on the nuanced regulatory changes within CBD policy across the globe. “Watching how economies or nutraceutical systems or medical regulators tackle CBD is something that we’re acutely focused on,” he said. “We’re watching how CBD evolves.
“We were trying to build a business that could stand the test of time,” he continued. “If there was one thing that I learned from commodity-based investing, it was: If you are not on the bottom of the cost curve when costs come down, you could not just lower your profit margin—you could be wiped out. We want to make sure that when the commoditization of cannabis occurs, that we are a winner in that scenario.”
With that in mind, Northern Swan’s management team is closely watching how the global playing field is settling. The firm is tracking trends Europe, where just in February it invested $8 million in Cansativa GmbH, a German cannabis distribution and wholesaling company.
“Germany offers one of the largest legal medical cannabis consumer markets in the EU, with the patient population growing at a steady rate—there are already nearly 50,000 registered patients,” Detwiler said in a public statement at the time. “Domestic supply and production are severely restricted, which creates substantial need for importing flower and oil products. Of all the markets in the EU, Germany is arguably the most attractive from a distribution standpoint.”