Flow Kana raises $125 million to expand cannabis supply chain

Flow Kana, a Mendocino County-based cannabis company that sells prerolled joints and flowers grown on small farms throughout Northern California, announced a $125 million infusion of capital Thursday to fund its ambitious growth plans.

The company touted the investment as the largest private funding round in history for a privately owned cannabis company in the United States.

The money will allow Flow Kana to finish building its manufacturing facilities on the former Fetzer Vineyards ranch in the Redwood Valley and add cannabis-infused oils, tinctures, vapes and topical ointments to its product line, said Michael Steinmetz, co-founder and chief executive officer. The company, which currently only produces marijuana flowers, will also expand its distribution reach throughout the state.

“The long-term vision of this company and industry is to play at the national level,” Steinmetz said. “For the short term we’re hyper focused on California. It’s the state that matters most in the long term.”

The lead investor was Gotham Green Partners, a New York City-based private equity firm. Other investors include San Francisco-based hedge fund Poseidon Asset Management, Salveo Capital headquartered outside Chicago and venture capitalist Roger McNamee.

The company has now raised a total of $175 million since 2014 to create a statewide supply of cannabis from small, decentralized farms.

Investors are increasingly showing confidence in the industry, and the amount of money raised by Flow Kana is a prime example of that, said John Downs, director of business development at the ArcView Group, a cannabis industry investment and research company based in Oakland.

Cannabis companies in Canada, where marijuana is legal, have secured top-dollar investments not yet seen in the United States, according to Downs. Capital funding for cannabis ventures in the United States have traditionally come from individual wealthy investors, but a growing amount of capital is coming from family offices and institutional investors, he said.

“This investment is a positive sign for Northern California, for the Emerald Triangle,” Downs said. “That’s a big thing, and I think it’s important to note some of this money should make its way into partner farms and the economies of Northern California.”

Steinmetz launched Flow Kana about four years ago as a delivery company that brought cannabis flowers grown under the sun by small-scale farmers in Mendocino and Humboldt counties to customers in the San Francisco Bay Area.

In 2017, a group of investors helped the company buy the $3.5 million Fetzer property, which had about 87,000 square feet of warehouse and production space, mostly in disrepair. After significant renovations, the company started operations at its processing plant in April 2018 and began offering white-label services to farmers who sell sungrown marijuana to be packaged and sold under the Flow Kana brand.

Today, it produces prerolled joints and cannabis flowers for Willie Nelson’s line of marijuana.

Flow Kana has 230 employees and distribution facilities throughout the state, from southern Humboldt County to San Diego. It sources cannabis from 200 farmers, including about 85 growers with long-term purchase agreements.

“This model of centralization is used throughout agriculture, and we’re bringing it to cannabis,” Steinmetz said.