TVC Capital's Jeb Spencer Shares Insights On Cannabis Market, His Latest Investment

Last month, Jeb Spencer — co-founder and managing partner of growth equity firm TVC Capital — joined GrowFlow’s board of directors.

His firm led an $8.4 million Series B funding round for the Los Angeles-based software-as-a-service startup.

GrowFlow, which operates in the cannabis and hemp industries, also saw the Bull & Bear Fund and two individual angel investors participated in the funding round as well.

At the time, Spencer told Benzinga his firm was pleased to lead a growth equity investment in GrowFlow.

“We could not be more impressed with the company’s leadership position in the cannabis space and their significant penetration into the market," Spencer said.

We followed up with Spencer to discuss his investment and other related topics.

State Of The Industry

We asked Spencer about his vibe of the cannabis industry, its current state and its market potential.

He explained the team at TVC Capital believes the industry has matured “significantly” since they first started speaking with cannabis SaaS companies almost four years ago.

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“I can remember sitting in the office of one cannabis software solution provider in Colorado as the company’s courier arrived with a pile of cash in his arms. He had just concluded driving around the Denver area picking up the monthly subscription fee from their dispensary customers,” he told Benzinga. “I can recall calling my colleagues back at TVC and saying that we might be a little too early to this party, but that something really big was happening.”

Fast forward four years and the conversation in the industry is now about topics such as compliance, scale economies, vertical integration and customer success.

“The industry has grown up remarkably fast and become highly professionalized, attracting top tier talent such as Travis and his team at GrowFlow,” he said. “We are seeing very driven and focused executives taking leadership positions and using the knowledge they gained in other sectors to scale their cannabis software businesses and differentiate their products in a chaotic and highly fluid environment.

More To Come?

As for TVC’s plans to invest in more cannabis startups, Spencer disclosed that the firm is in discussions with several other cannabis SaaS companies and hopes to get another deal closed in this space during 2020.

“We have spoken with over 30 companies in the sector to date and are tracking many of them as they grow into our minimum revenue requirement of $5-$10 million in CARR,” he said. “These companies must meet or exceed the same benchmarks we use in all of the other software sectors in which we invest.  We are closely tracking performance indicators such as growth rate, net retention, gross margins and CAC.”

Fundraising During A Pandemic

Finally, we asked about raising money during the COVID-19 pandemic.

Spencer explained the raise was fortunately “very far down the path of this deal closing as the first statewide quarantine announcements were being made.

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“While we know many PE and VC firms used the pandemic to force lower prices and valuations, that’s just not the way we do business,” he added. “I know all of us on both sides were nervous about what was going on and horrified by the loss of life, but we kept our heads down and got the deal closed.”

Seeing the long lines outside of the dispensaries on both the West and East Coast and having visibility into dramatic volume increases across the country certainly helped give TVC confidence that they were doing the right thing with this investment.

“In addition, GrowFlow is on an absolute roll right now given the strength and efficacy of their product. In speaking with GrowFlow’s customer base during due diligence we observed some of the highest NPS scores that we have seen in the history of our firm,” he said.

Courtesy photo, edited by Javier Hasse.

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