Cannabis biotech company Front Range Biosciences closed a $10 million Series A with participation from Phyto Partners, WelCan Capital, Salveo Capital, Cornerstone Opportunity Partners, Sand Hill Angels, Harvard Business School Alumni Angels of New York, New York Angels, Altitude Investment Management, and other new and returning investors.
This is the largest cannabis biotech raise in the US to date, according to Front Range Biosciences.
Based in Lafayette, Colorado, the company specializes in tissue culture propagation at industrial scale to ensure that it offers growers pest and disease-free stock. It also maintains a varietal development program to address some of growers’ biggest challenges like drought tolerance, pest tolerance, and overall hardiness.
The company has four projects earmarked for the new round of funding. First, it will be used to help the company meet what it views as a rapidly increasing market demand by scaling up its several programs, including the Clean Stock Nursery program.
“We are seeing international and national surges in the industrial hemp side of the industry, and there is also the pending 2018 Farm Bill, as well as the first approval of a CBD drug earlier this year. So there are all kinds of things fueling the industrial hemp side of our business,” Jon Vaught, CEO, and founder of Front Range Biosciences explains.
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The capital will also boost the company’s participation in the regulated marijuana space, where it’s focusing its operations on California as a new recreational use market. Front Range Biosciences is opening its first California-based facility this Fall as part of the targeted effort. In addition to California, and as the third component of the raise’s deployment, Front Range will continue bolstering relationships with the Canadian market.
“We are in conversations with multiple folks in Canada, but we haven’t made any moves there yet. We certainly see that as the next move for Front Range as we get our operations here in the US solidified,” explains Vaught. “That could include regulated cannabis as well as the work we are doing on industrial hemp.”
The final spending component for the Series A is to enhance its varietal development program. The raise opens the door to expanding Front Range Bioscience’s resources, which will allow it to focus on developing new IP and creating new varieties of plants that will be slated for commercialization into the marketplace. This includes both cannabis and industrial hemp.
Front Range Bioscience Technology
There are essentially two components to Front Range’s technology. Its clean stock program leverages tissue culture, the sterile propagation of baby plants through duplication on a nutrient culture medium of known composition, to address problems that plague growers like disease, inefficiency, inconsistency, and scale.
“We are taking something like good management practices and applying it to the nursery part of the supply chain for the cannabis industry and other crops,” explains Vaught. “We use a tissue culture process on each plant material to remove specific diseases, pathogens, or pests to ensure that the plant is clean. We then test it for viruses and other things to make sure we aren’t placing plants that can cause viral outbreaks in a greenhouse.”
This process also allows Front Range Biosciences to produce at a larger scale and more vigorously due to the health and vigor of each plant. The company provides documentation for all of the testing completed to ensure that the nursery stock is free of any potential threats.
The second component of Front Range’s technology is an R&D-based breeding platform that the company is building from the ground up to select for varieties that will suit each grower’s individual needs.
“We also use traditional selective breeding and combine that together with a process called marker-assisted breeding. We leverage our understanding of the cannabis plant’s biology to improve efficiency so we can get really targeted around certain traits that are valuable to commercial growers like drought resistance, performing well in humid environments, or making sure that plants used for CBD products stay low in the amount of THC in the plant.”
Cracking cannabis’ genome is a relatively new endeavor for the nascent industry, as Vaught points out. Learning more about the complete genome and understanding the plant’s chemical pathway and how it produces different cannabinoids is a central goal for Front Range Biosciences.
Best of all, the clean stock nursery program and the varietal development program dovetail nicely. The company selects plants from growers that have attractive qualities and runs them through the clean stock nursery program before offering them to other growers. It also runs each new varietal it develops through the clean stock nursery program to ensure the highest quality.
In addition to hemp and cannabis, Front Range Biosciences also provides Clean Stock for other high-value crops including coffee. In March, the company partnered with Frinj Coffee to supply Clean Stock coffee rooting cuttings to farmers across Central and Southern California. In June, the company expanded its cannabis Clean Stock production into California through a partnership with Faith and Family Farms, a 100% family-owned cannabis cultivation facility located in the Salinas Valley. FRB is now taking orders for late 2018 production.
A New Industry with an Insatiable Appetite
As almost every cannabis startup will agree, most businesses in the industry face a common set of challenges regardless of whether they are raising a seed round or closing a Series C. Although the industry will benefit from the wave of legalizations across the country in recent years, states have taken very different regulatory approaches. The compliance procedures in one jurisdiction may look entirely different than the requirements in another jurisdiction. This is part of the motivation behind Front Range’s decision to focus on California, which ushered in recreational cannabis use at the beginning of 2018.
“I think the big challenges are first and foremost around this being a new crop and a new industry that is experiencing unprecedented demand because it was under prohibition for so long. That presents other challenges like a changing regulatory environment and changes in market volatility,” says Vaught. “There is a constant pressure to go, go, go, and we are all working really hard. That’s good in some ways but it also creates challenges because mistakes can get made, or things can come up that you didn’t expect to happen.”
As for competition, Vaught has identified a few companies that are operating in the same or a similar sphere. One of the benefits of a burgeoning industry, however, is that there are usually enough seats at the dinner table for everyone looking to get in on the action.
“This industry is so big, and it’s growing so fast that we don’t really spend a lot of time looking in the rearview mirror or at the competition,” he says. “There’s enough space in the market for multiple companies to exist. Competition is good and healthy. It keeps us on our toes, and it validates what we are doing.”