Private Investment is on the Rise in Cannabis Industry
Jason Mueller
June 26th, 2017
Policy
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Federal prohibition of cannabis since 1938 has had profoundly negative effects on the ability to re-establish a functioning cannabis industry today: an industry that is expected to be worth about $30 billion by 2021. Due to its longstanding black market ties, much of the cannabis industry has been financed with private funding. Though bank restrictions have eased since the first emergence of a recreational cannabis market in CO and WA, many dispensaries and production operations still rely exclusively on cash transactions. Recent talk of AG Sessions requesting permission from Congress to pursue medical cannabis providers has done little to slow an industry that has thrived against all odds: new private venture capitalists and new cannabis companies are emerging faster than any Federal “crackdown” could disrupt.
According to a report called, The State of Legal Marijuana Markets published in 2013, cannabis is “poised to bloom into a $10.2 billion market by 2018.” This was stated after establishing an over $1.4 billion dollar market cap in 2013. According to a recent Forbes article, “The Marijuana Industry is Getting Supersized”, legal cannabis sales totaled $6.5 billion last year, and “is projected to grow to $30 billion by 2021. Given these zealously bullish projections and reports, it is obvious why private investors are banking on cannabis: the returns have been good for years, and they’re only expected to grow.
Privateer Holdings
In 2010, for example, a company called Privateer Holdings was formed by three finance-minded entrepreneurs, and to date, no cannabis company has been able to match their record amount of capital raised. All founders of Privateer were experienced in both venture capital and investment banking, and it clearly shows as they raised $122 million dollars to start Privateer Holdings. Since 2010, Privateer Holdings has been busy: they are the parent company of three major, nationally known cannabis brands:
- Tilray Medical Cannabis – with a research and production facility in Canada, Tilray is the only American-owned commercial cannabis production facility that is also Federally licensed.
- Marley Natural – A line of body care products, accessories and cannabis started by Bob Marley’s family members.
- Leafly – A vast online consortium of cannabis culture and information designed to inform cannabis consumers about the industry and plant with about 10 million page visits per month.
PharmaCannis
Despite receiving the largest amount of private funds out of any other cannabis company, medical or recreational, Privateer Holdings is not the only majorly funded player in the cannabis industry. Medical cannabis purveyor, PharmaCannis, has claimed their stake in New York and Illinois. Private funding from undisclosed lenders amounted to about $68.8 million throughout PharmaCannis’ funding cycles. Currently operating eight dispensaries in the US, PharmaCannis is the highest funded medical cannabis company that operates dispensaries, and they entered the cannabis industry years after Privateer Holdings was formed.
Oreva Capital / High Times
In early June, 2017, the forty-three year veteran in cannabis culture and customer-facing marijuana journalism, High Times, sold their publication to an LA-based investment firm called Orega Capital. To the tune of $70 million, High Times will now be led by a group of 20 investors, including founder, Adam Levin: all of which have experience in tech, networking, and media concerning cannabis companies and organizations. Perhaps more valuable than the nearly 250,000 subscribers of the magazine, 75% of High Times’ revenue is from events like their world renowned Cannabis Cup, where the most potent and delicious strains are judged by a panel, all for the glory of their growers being awarded “The Cannabis Cup”. Levin is quoted saying, “The value is in the brand and its identity.”
Why Private Funding Will Keep Floating the Cannabis Industry
As has been established, the cannabis industry will not be getting much help from the government or major banking institutions like Bank of America or TD Bank. Prohibitionist policy has kept many financial institutions from taking the risk of entering the industry, in fear of a crackdown that could disrupt billions of dollars. Private funding, however, is the buoy that the industry needs and gets: enthusiasts and entrepreneurs alike see the potential for cannabis as a fully, societally-integrated medium for medicine, construction, agriculture, and more. Similar to how prohibitive laws couldn’t contain the black market cannabis industry, strict financial regulations and red tape will not prevent a legal cannabis market from burgeoning and getting funded.
In 2013, it was predicted that the cannabis industry would be worth $10 billion a year. Today, the cannabis industry cleared $6.5 billion in 2016, and continues to grow, with expectation of $30 billion by 2021. There is no doubt that returns on cannabis will grow: the year that cannabis was outlawed, Popular Mechanics called hemp the first, “billion dollar crop”. Little did they know in 1938 that “marijuana” prohibition would kill the hemp industry’s chances… for at least 70-80 years. At this point, hemp and cannabis are finally taking their place as a dominating US market.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
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