Receptive Capital Blog

Opinions and updates on the East Coast cannabis markets.

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Converting Demand vs. Creating Demand

Investing in the cannabis space, quite often I receive the question “why did you choose to focus your investment group on cannabis?”

Investing in the cannabis space, quite often I receive the question “why did you choose to focus your investment group on cannabis?”

“Invest in what you know” is a solid answer but there was available and obvious data that was very helpful. In early stage investing you invest in companies with a new or novel product or service. Inevitably, the question of demand for the product or service needs to be addressed. Who uses the product? Will they continue to use it and if they do, how will they use it? You see where I’m going here?

Cannabis has been used by a silent majority for thousands of years and with each year that passes, the silence is evaporating into an unapologetic consumer base finding new and useful ways to enjoy the plant.

Most early stage companies are out driving new demand for the product. Cannabis companies have an opportunity to not only create new demand but to convert existing demand. Creating demand by bringing new users out of their silence or by trying cannabis products for the first time (or again). Converting existing demand through an existing user base that already purchases and uses the products through legacy channels. Most new industries have the former but not the latter. That opportunity was (one of) the deciding factors.

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Step by Step Process of How Our Syndicate Works

Here is a step by step process of how an investment is completed through the Receptive Capital Syndicate.

When you become a member of the Syndicate, you're under no obligation to invest in any deals. You are only showing interest in receiving information about the deals and committing to keeping any information you receive confidential.

The Syndicate Lead invites members to participate in or pass on any given deal. The Syndicate members pool capital into a special purpose vehicle (“SPV”) that invests in a single company alongside the Syndicate Lead, on a deal by deal basis.

Here is a step by step process of how an investment is completed through the syndicate.

  1. Syndicate Lead leads ongoing sourcing and evaluation of investment opportunities.

  2. Syndicate Lead completes necessary due diligence and secures allocation from the target investment company.

  3. Syndicate Lead sends an Investment Memo to the Syndicate.

  4. Syndicate members review the materials and decide whether or not they would like to participate.

  5. If a Syndicate member chooses to participate, they make a non-binding commitment to invest in the SPV.

  6. Once commitments meet or exceed the allocation from the target investment, the opportunity is closed to the syndicate.

  7. Shortly thereafter, those members who participated in the SPV will receive closing documents for review. 

  8. Participating Syndicate members review and agree to the closing documents and wire funds. The investment is now complete.

Sounds like a lot of work? Receptive Capital provides administration services including document review, signature and investment management.

Have more questions?

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