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Part of cannabis and small business and retail

Demand for private-equity investments in the cannabis sector remains high as Canada’s legalization of recreational marijuana approaches, says the head of a firm that has just launched a second venture capital fund.

Calgary-based Green Acre Capital has received commitments of $35-million from the likes of major cannabis producer Aphria Inc., financier and Green Acre adviser Brett Wilson and Saskatchewan cannabis funding firm York Plains Investment Corp.

Aphria is the largest contributor, committing $15-million. Its chief executive officer, Vic Neufeld, is on Green Acre’s advisory board.

Green Acre’s first fund invested $25-million in 12 companies, with a focus on small firms offering ancillary products and services, such as cultivation technology, software and retail brands, notably Tokyo Smoke.

“The cultivation side is a challenging, competitive market, and what we observe in the legal U.S. states is that the pricing of cannabis tends to drop pretty sharply in those competitive markets,” said Green Acre managing director Tyler Stuart. “So we decided to focus on all of the infrastructure around those growers. We found there’s a lot of opportunity, and the valuations are quite good.”

In addition, there is less competition for such investments, Mr. Stuart said.

Private-equity firms are expanding in the cannabis sector, seeking opportunities outside the volatile public markets, in which financing and takeover activity has been at a fever pitch in anticipation of the Oct. 17 legalization of recreational marijuana in Canada.