By Kennedy Weible
In the fall of 2014 Adam Cohen split the company he co-founded, MJardin (pronounced Em-har-deen), into two separate entities: MJardin Management and MJAR Holdings. It was a move that demonstrated a mature business strategy and a firm belief in major future growth, not just for MJardin but for the whole cannabis industry.
Adam Cohen founded MJardin with John Fritzel and James Lowe to provide turnkey business management and cultivation services to the cannabis industry. Cohen, who has a law degree from the University of Colorado and is licensed to practice in Florida, had previously served as COO for Brilla Group, a private equity firm that specializes in investment in luxury resorts and hotels. As a license holder for medical cannabis businesses in Colorado, Fritzel already had a stake in the cannabis industry. Lowe, too, was already baptized in green waters, with a background in facility design and cultivation services.
“We recognized a few things immediately,” Cohen said. “One: there’s a tremendous macro opportunity in the space, dealing with a multibillion industry without any institutional investors. We knew that would not last. Two: we knew that despite potential bumps in the road, the industry was not going away. And we predicted that there would be a significant need as more professional money and more professional individuals came into the space to provide large-scale, professionally managed cultivation services.”
The three of them had complimentary skill sets. Cohen, given his background, realized they could use the hotel management model with which he was so familiar. Fritzel knew the retail aspects of the cannabis business. Lowe was the cultivation expert and knew how to run crews across multiple facilities.
“We were looking to create a platform company that could scale nationally,” Cohen said. “Something beyond a siloed business in any one given state. It’s very difficult, even to this day, to create a dispensary brand and take that state to state because of the complex and differing barriers to entry in each market. But a professional services company would face less barriers to entry and be easier to scale. That was the driving factor for the development of this business model.”
MJardin is currently working with clients in seven states and engaged in talks with clients in three more. The majority of its business, though, is in Colorado, a state that continues to be a bellwether for legalization. As Cohen mentioned, it’s difficult to carry a brand across states when every state is subject to different laws. The most consistent aspect any dispensary can hope for across state borders is the quality of the end product. That’s where MJardin believes they offer a stable value by providing services that steadily produce, as the company motto says, premium cannabis. A sizable chunk of the company’s value is in its know-how. Which brings us to MJAR Holdings.
MJAR Holdings: The Parent Company
Last year MJardin reorganized and formed MJAR Holdings, a parent company that holds an intellectual property portfolio it received from MJardin, essentially everything MJardin knows about the cannabis business from retail to acquiring licenses to growing premium quality plants. MJAR Holdings monetized this IP portfolio by licensing it back to MJardin Management to use servicing its clients. It can also license this IP to other companies outside of MJardin Management.
This makes MJAR its own company that creates its own revenue without ever actually touching a cannabis plant; it traffics exclusively in know-how. A company like that, which is in compliance with federal laws, has the potential to one day offer an IPO. This doesn’t just signal that Cohen, Fritzel, and Lowe want to play in the deep end of the business pool, but that they expect to be able to soon and already know the way there.
“We recognized that there was a distinction between the management services and operating company, and the development and deployment of the intellectual property under-girding the management company. Separating these two activities allows the companies to focus on their core competencies,” Cohen said. “[MJAR Holdings] is an ancillary company now, and there’s an opportunity to potentially take that company public one day if that makes sense down the road.”
This company reorganization is nothing if not prescient. On January 8th, 2015, it was announced that Peter Thiel’s Founders Fund was making a multi-million dollar investment in Privateer Holdings, a company that owns cannabis-related businesses. This is the first instance of an institutional investor putting money into the cannabis industry. Peter Thiel is the co-founder of PayPal and the human embodiment of the business zeitgeist, having previously invested in AirBnB, Lyft and Space X.
Privateer holds marijuana information website Leafly, Canadian medical cannabis company Tilray, and Marley Natural, which offers cannabis products and accessories, as subsidiaries. Founders Fund’s investment doesn’t just show that the financial world is ready to get on board with the cannabis industry, but that the industry itself, through organizational structuring, scalability, and brand management, is primed for serious investment and ready to deliver returns.
“We know the Privateer guys well and commend them on [their funding] and wish them all the success in the world. The entry of sophisticated entities for capital in the space is a watershed moment,” Cohen said. “They’re sending a very loud message across the board both to the capital markets and to the political world that this industry is here to stay and that there’s confidence in the industry and the markets. It’s always hardest to get the first movers off the block, but now that [Founders Fund] has made the foray I think we’re going to see a lot more institutional players enter the space in the next year or two.”
MJAR Holdings is ready for them.