Cannabis Startups Could Draw Over $2 Billion in Venture Capital in 2019
May 21st, 2019
Venture capitalists have already invested more than $1.2 billion into U.S. cannabis startups in 2019, according to PitchBook data, which already surpasses the $836 million invested in 2018. At this rate, Tech Crunch’s Kate Clark believes that investment could hit $2.5 billion this year.
There are many different catalysts behind these trends.
The most obvious is the legalization of medical and recreational marijuana across a growing number of states. Most recently, California became the largest single cannabis market in the world and Nevada has sought to create the “New Amsterdam” in Las Vegas.
These new markets have enabled some startups to grow at a breakneck pace. For instance, the marijuana delivery company Eaze went from a $65 million million valuation during its Series C in December to a $500 million valuation during its most recent raise.
Many venture capitalists are also eager to not miss the boat after years of prohibition. Early VCs have already seen tremendous success in their portfolios, but there could still be significant upside left in the market given that the drug remains illegal on a federal level. There’s still a significant black market that could be converted into a legal market over time.
The ongoing M&A in the space is also attractive to many VCs. As companies look to scale up their size, they are making a growing number of acquisitions, particularly to expand from single state to multi-state operators. Examples include Altria’s $2.4 billion investment in Cronos, Constellation Brands’ growing stake in Canopy Growth.
In addition to these deals, there have also been several high-profile partnerships. HEXO and Molson Coor’s, and Tilray and Anheuser-Busch InBev, both announced joint ventures that would bring cannabis beverages to market over time.
Investors may want to keep an eye on these trends as capital continues to flow into the cannabis startup space.
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