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Raising Capital In the Marijuana Industry - Mushroomstocks | Mushroomstocks
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Raising Capital In the Marijuana Industry

Jan 26, 2015 • 12:20 AM EST
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4 MIN READ  •  By Michael Berger
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Raising capital is a much easier process for cannabis businesses today than it was in in the past, however, it is still very difficult for many ‘pot-repreneurs.’ If are a business owner or entrepreneur looking to raise capital, you need to show your potential investors that you are worth investing in. Here are few basic things that you should have:

  1. A business plan
  2. Financials (Income statement, Balance Sheet, Cash Flow Statement)
  3. A plan for their investment.

Back in 2011 when Brain Kennedy started Privateer Holdings, he said how difficult it was to raise capital in the cannabis industry. He said that it was an arduous process that took 18 months to get people to invest $7 million in Series A funding. Four years later, Privateer Holdings is in Series B round of funding and raised $75 million, which included an investment from the Founders Fund, a $2 billion venture capital firm led by Peter Thiel, the co-founder of PayPal and Facebook’s first outside investor. While the Founders Fund is a part of the Series B round, they are not the largest investor in the round.

Brian Kennedy offered an anecdote in a recent interview about the first investor he ever met. That investor declined Kennedy’s offer to invest in Privateer Holdings in 2010. In 2014, however, that same person invested in Privateer Holdings Series B round of funding… at a much hirer valuation.

That was the past, and now investors have a voracious appetite for investments in the marijuana sector. In 2014, investors spent $104.5 million across 59 companies operating in the marijuana industry. When compared to the total amount of money invested during 2013, marijuana investments skyrocketed 941.5 percent in 2014.

 

Some multimillion dollar investments include:

  1. Leafline Labs ($12.4M) — Leafline Labs is a medical marijuana company based out of Minneapolis, Minnesaota. Leafline is one out of only two cannabis companies in Minnesota that has a license to operate in the state. Leafline raised capital from a group of 113 individual investors.
  2. Four Twenty Investments ($10M) — Four Twenty Investments is a private investment firm based in Toronto. The company completed a $10 million debt financing in December. The firm invested an equal sum in Nhale (NHLE), a publicly traded grow-technology company based in Houston. NHLE stated that they plan on acquiring other pot startups.
  3. Palliatech ($10M) — This New York City producer of marijuana-based pain medicines is also a grower and distributor of medical marijuana. PwC reported that the funders include Russian venture capital firm, Gruppa Sputnik OOO.
  4. Vida Cannabis ($9.39M) — Vida Cannabis is medical marijuana producer that is based out of Ottawa. The company recently raised nearly $5.8 million in a private placement last July. Vida Cannabis used part of the funding to acquire a secure, hydroponic production facility in Nova Scotia.
  5. CannTrust ($3.79M) — CannTrust is a Canadian medical cannabis producer. The company CannTrust is owned and operated by pharmacists. It raised $1 million of its funding this month, CB Insights reports.
  6. MedMen ($3.75M) — MedMen is based out Los Angeles, California and they are a provider of turnkey management services to companies that operate in the legal-marijuana industry. MedMen raised its funding so they could to expand their business operation into Nevada and Illinois. The company had a lot of well-known financial backers, including Florida-based N Squared Management.
  7. Agricare ($2M) —Agricare is based out of Chicago, Illinois and the company is focused on helping legal cannabis companies through the licensing process. The company raised its funding in October, however, the funders’ required full disclosure. Besides for its hometown, the company is also in the licensing process to set up operations in Peru, Ill.
  8. Eaze ($1.5M) — Funding for this San Francisco pot-delivery app came from technology microfunder Fresh VC in November.
  9. MassRoots ($1.2M) — A social network for the cannabis community, MassRoots most recently raised $500,000 in September. Funders include investor network The ArcView Group, and Dutchess Opportunity Fund, a fund of global investment firm Dutchess Capital.
  10. Aquarius Cannabis ($1.16M) — Aquarius Cannabis is a marijuana branding company. The company raised a majority of its funding from angel investors at its October launch, CB Insights reports.

“In the beginning of this industry, our biggest challenges were legal, but we solved many of those challenges. After we figured out the legal landscape, many of our challenges were financial to help scale up and professionalize the businesses,” says DeAngelo, who is also the co-founder of Oakland, California-based Harborside Health Center, one of the largest medical marijuana dispensaries in the U.S. “Today, investment is not really a problem. If you have a good team and a good idea, you’re in a good position. There is a phenomenal amount of investment interest.” With many of these companies raising funds through venture capital and other financial institutions, investors should gear up for a slew of IPOs that should be coming soon. 

http://www.inc.com/will-yakowicz/cannabis-raised-104-million-venture-capital.html?cid=sf01001

http://dealbook.nytimes.com/2015/01/12/ethical-questions-of-investing-in-pot/?smid=tw-nytimes&_r=1

http://www.thedeal.com/content/private-equity/private-equity-firing-up-medical-marijuana-sector.php

http://mmjbusinessdaily.com/after-2014-boom-marijuana-investments-poised-for-another-big-year/#more-33042

http://mmjbusinessdaily.com/report-cannabis-industry-investing-up-942/

http://fortune.com/2015/01/08/founders-fund-privateer-holdings/

https://www.cbinsights.com/blog/cannabis-startup-industry-funding/

http://www.forbes.com/sites/alexkonrad/2015/01/08/the-vcs-and-privateer-betting-on-pot/

 

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Mushroomstocks.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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