Cannabis brands accelerator and distribution platform Petalfast has raised $8 million in an equity funding round led by a group of family offices in order to support the business’s expansion into new markets.
Launched in 2020, Petalfast services the adult-use recreational dispensary channels in California, Arizona and Massachusetts. According to CEO Jason Vegotsky, the business is modeled after the traditional three-tier beverage alcohol distribution model, but also functions like a broker for brands, providing marketing and sales support.
Speaking to BevNET today, Vegotsky said Petalfast is now aiming to take advantage of the “breakdown” of vertical integration models across the cannabis industry, where businesses responsible for growing, branding, selling and distributing cannabis products are now looking to outsource services due to the high costs of doing business and increased competition. Petalfast is targeting states where the breakdown is most apparent, he said, starting with an expansion to Michigan in March.
“With the inability to raise capital in the space right now, operators have to make a decision – prices drop, margins fall, and then they have to figure out ‘Where should I invest my money?’” he said. “We’ve seen that people are comfortable handing over the sales and marketing side of things to a company like Petalfast.”
Although the rise of Delta-9 hemp-based THC has created a new boom for brands in mainstream outlets, Petalfast’s focus remains on the adult-use dispensary channel. The company services cannabis products across categories, including edibles, beverages, vapes, flower and more. However, he noted the rise of Delta-9 has led the number of beverage partners to shrink as past clients, such as Cann, have embraced the hemp-derived ingredient.
In addition to expansion, Petalfast is also now exploring M&A opportunities, he said. The company is looking at logistics and selling companies it can “bolt on” to its current operations.