2016 is shaping up to be great for the cannabis industry, with its legal branches continuing to show growing demand and increased revenues.
Last year alone, market estimates for legal cannabis sales, including both medical and recreational , were at $4.4 billion. For 2016, estimates, according to the Ackrell Capital U.S. Canabis Investment Report 2016, show a 30 percent increase, to $5.7 billion, as the industry matures and new markets like Oregon open up.
Another growth indicator bears mentioning: With this year's election, we’ll see a number of prominent states, such as California and Nevada, voting for complete #legalisation.
Market has big potential, the cannabis industry is not without its flaws, and #fund-raising is one of them. Certainly, there has been a significant positive trend of more active investment in the space, but traditional VC #financing could be better.
The limitations of traditional #fund-raising
Drug Enforcement Agency classifies drugs into one of five different groups based on their potential use; among those groups, "I" is #classified as the most dangerous, and "V" is the least.
Currently, cannabis is listed as a Schedule I drug, alongside some of the worst offenders, like heroin and LSD. This classification means that the# federal #government regards #marijuana as an #illegal substance. It also means that many limited partners of VC companies won't go near a cannabis investment.
The Privateer Holdings investment brought with it a flurry of media attention and was one of the first, big VC-structured deals in cannabis. Other traditional VC firms that have invested in cannabis-related companies include Tao Capital out of San Francisco, DCM Ventures in Menlo Park and Dutchess Capital in Boston.
Alternative fund-raising methods
With traditional VC #investments being scarce, a new opportunity has risen for cannabis-dedicated funds to step in and support the #industry.
Other routes of financing which have worked in other tech verticals include accelerator and incubator programs. One newer entry is Gateway, based in Oakland, California which helps companies turn their initial #ideas and #products into something that’s ready for prime time, in #exchange for a small percentage of #equity.
In addition to these accelerator programs, there are specific groups such as ArcView, which have the capacity to get your company in front of a group of cannabis-friendly investors for demo days and pitch competitions.
Individual angel #investors have also shown a real interest in and willingness to invest #money, as shown by recent investments in Meadow. Meadow is a platform for #dispensaries to manage delivery operations.
Family-office investments are another channel for investing, as illustrated by events like the Cannabis Private Investment Summit, which discusses and showcases cannabis investment opportunities for high net worth investors and family offices.
Today, in contrast, countless opportunities for investment capital exist, and with #2016 shaping up to be a pivotal year and more states looking at legalizing cannabis for medical and adult use, we’ll undoubtedly see even more capital entering the #market.
