By Jonathan Rose – Associate editor, Denver Business Journal January 31, 2019
“The only firm licensed to invest in Colorado cannabis companies is a father-son team with roots in finance, yes, but also comedy and cable television.
Cliintel Capital Management Group is the one investment fund that’s been blessed by the state with the “Qualified Institutional Investor” designation, a classification and term created by state Senate Bill 16-040 that became law in 2017. It allows “qualified institutional investors” to own as much as 30 percent of a retail or medical cannabis business.
That gives CCMG the opportunity to not only guide businesses through its expertise in operations, products and branding, but also take an ownership stake.
“It may be a small nuance, but pretty simply we actually own and operate the businesses,” CCMG Chairman Richard M. Batenburg Jr. told DBJ. “We do understand how these businesses work, what the relationship is with the customers and the regulations — not just from rec and adult use, but from state to state because we have investments in seven states. This is really how we were able to get qualified institutional investor when nobody else has.”
“My real love was in bars and restaurants, and I was working at the time Monday through Friday as a stockbroker, and at nights at the [then] new Comedy Works.”
Batenburg Jr. became owner of Comedy Works around 1987, remaining an entrepreneur in the industry for nearly 10 years before finding a new calling in cable television. He developed systems for Tele-Communications Inc., a cable provider that was purchased by AT&T Broadband in 1999, where he stayed for another four years.
Around the time he left AT&T, the Colorado medical market was on the verge of its original “green rush,” thanks to a court ruling that allowed caregivers to grow more than five plants. Suddenly there were dispensaries everywhere. “I’ve always kind of been drawn to new things with an entrepreneurial spirit, perhaps because I am otherwise unemployable,” Batenburg Jr. said.
He noticed parallels between the cable industry he was witnessing consolidate and the mom-and-pop shops that were popping up in strip malls around the city. These companies were also, at the time, mandated to be vertically integrated, or required to grow most of the cannabis they sold over the counter.
Batenburg Jr. saw an opportunity: “Even Procter & Gamble doesn’t run the grocery store that sells all their products,” he said.
He started consulting, using his years of entrepreneurial and system-development experience to help cannabis companies run their businesses. In 2015 he launched CCMG with his son. The company now employs 32, including recently hired operations czar Monica Pina. The investment fund piece of it, he says, is simply a complementary arm to the operations and business optimization skills the company brings to the table through its partnerships.
CCMG currently owns either minority or controlling interests in several licenses in Arizona, California, Colorado, Michigan, Nevada and Washington. “It’s pretty much an ecosystem of about 10 companies that are shaking hands with one another and introducing each other to one another,” Batenburg said. In addition to being the master license-holder of popular concentrate company The Clear, CCMG has ownership in Bonsai Cultivation and CBD company Subtle Relief. It’s involved in everything from cultivation to manufacturing and retail.
“It’s [often] about manufacturing and distribution happening ostensibly within the same building with a high level of oversight, so it’s a fairly complex business,” Batenburg said. “This is a brand-new industry and it’s filled with people who … either saw the opportunity or were in it illegally. They didn’t necessarily have a burning desire to be an entrepreneur, but they loved the product.”
Meanwhile, the fund, which is registered with the Securities and Exchange Commission, allows outside accredited investors to invest in Colorado cannabis businesses through CCMG. Something that state law has intentionally made near-impossible to do. “Most of the investment bankers who are in this space are first and foremost investment bankers,” Batenburg said. “They are really players who understand investment banking, but I believe they have a hard time talking to the operators because there’s no ‘playbook.’”
CCMG’s first fund has closed, but the Batenburgs are promising big news in the coming months.
“I really wish I could tell you more,” Batenburg Jr. said. “We are preparing to look at some rather interesting concepts for non plant-touching assets.”
What he’d be doing if he wasn’t working in cannabis: “I’ve always kind of been drawn to new things with an entrepreneurial spirit, perhaps because I am otherwise unemployable.””