With Canada about to legalize adult-use pot nationwide, and with multiple U.S. states warming to the new sector, mainstream cannabis investors have arrived. There’s still a newness and a whiff of anti-establishment excitement in the sphere, and yet John Boehner and the treasurer of California are in the mix, along with an eclectic and ever-growing crowd of celebrated and chic investors. All told, quite an exciting blend of people and ideas populate the world of weed.
A Growing Industry
Why do they come? Let’s just mention one reason: The value of the legal pot industry is currently estimated at $50 billion. Not even the dot-com surge can match the current and projected rate of return for legal cannabis. The national leader in the arrival of legal adult-use cannabis is California, notes Treasurer John Chiang, who has promised to “find ways to expand cannabis industry banking access” and make the industry easier to enter from a financial standpoint.
And yet, investments are already pouring into the cannabis industry, according to a recent write-up at Forbes, which shines a spotlight on the top financiers:
Phyto Partners will put up to $750,000 into their company investments, for better valuations, more equity and more control, according to Managing Director Brett Finkelstein. Phyto’s connected with cultivators, dispensaries, device/product manufacturers, scientists, lawyers, branding superstars, as well as high-powered ex-DEA and government officials that are shaping the future of this nascent industry.
Steve DeAngelo founded Harborside Health Center in 2006 — California’s main nonprofit medical marijuana dispensary. A decade in, it reached $44 million in net income. In 2010, with Troy Dayton, DeAngelo founded the Arcview Group. Arcview vets and lists companies to its member investors, who can evaluate and collaborate on deals. The results: more than $130 million raised, powering scores of startups.
Los Angeles-based private equity firm MedMen Capital also emerged on the scene in 2010, and since then it’s raised about $100 million. From California to New York it is powering dispensaries and even cultivation — these folks know regulatory compliance. They also have a stake in MedReleaf in Canada.
More recently, Poseidon Asset Management debuted in San Francisco. From its overview:
“Poseidon is committed to showing the good cannabis can render as a medicine, for adult use, and as a material that can aid humans in living sustainably and responsibly in communion with all the other beings of this planet.”
This hedge fund has invested in scores of U.S., Canadian and European cannabis businesses focused on ancillary tech. Poseidon is perhaps best known for leading the financing for Wurk, a cannabis workforce compliance app. It’s also known for real estate. But the preeminent company in real estate might be Kalyx Development, which purchases commercial properties for new cannabis businesses, and can advise on the regulatory and zoning issues faced by cannabis entrepreneurs.
Who’s Who in Cannabis
Some movers and shakers are getting into the green rush and paving the way for others to get into this sector. Here’s a roundup of some of the most notable cannabis investors.
Calvin Broadus, AKA Snoop Dogg, runs Casa Verde Capital with three other partners: Ted Chung, Evan Eneman and Karan Wadhera. Founded in 2015 and based in Los Angeles, the firm specializes in seed and early-growth investments and supports media, mobile apps, and R&D into breakthrough tech. Casa Verde (meaning “Green House”) typically invests up to $500,000 in early-stage companies. Evan Eneman, a former director at PricewaterhouseCoopers, points to the vital role of ancillary markets for the sector. Technology and services, Eneman explains, are building the “backbone of this burgeoning industry for decades to come.”
Celebrities who have followed Broadus into the industry include Whoopi Goldberg, who founded Whoopi and Maya Medical Cannabis. And of course there’s Willie Nelson, whose Willie’s Reserve products support independent farmers and grace the shelves of dispensaries throughout Colorado.
Power investor and super-marketer Gary Vaynerchuk now owns a 50% stake in Green Street, a cannabis-focused L.A. marketing firm. Green Street is as much a think tank as it is a branding agency, and it has developed a unique showroom for some of the leading cannabis startups. Green Street has a grip on how to comply with the myriad of local and state regulations applicable to weed cultivation and distribution. The group provides compliance know-how, as well as other legal expertise.
Vaynerchuk started off with a bang as a wine reviewer who brought the family wine business from a $3 million-dollar company to a $60 million-dollar company.
Since then, Vaynerchuk has aced a string of investments in startups that have gone on to experience world-changing success, such as Facebook, Twitter, and Uber.
No doubt, Vaynerchuk’s move with Green Street is a deal to watch.
Big investors who oversee the movement of billions of dollars are now aware that prohibition is coming to its inevitable end. Take PayPal co-founder and billionaire Peter Thiel, who successfully invested in the cancer treatment startup Stemcentrx, and served as a major funder of the California ballot measure that kicked off the coast-to-coast legalization movement.
By investing millions in Seattle private equity firm Privateer Holdings, Thiel’s Founders Fund became the first venture capital group to enter the legal cannabis market.
“My thinking on cannabis has evolved,” explains former House speaker John Boehner.
The former weed whacker is now working on federal decriminalization, to allow for medical research, treatment for veterans, and a reversal of the opioid epidemic. Boehner has joined the board of the New York firm Acreage Holdings, together with Bill Weld, governor of the cannabis-legal state Massachusetts. Acreage offers the most diverse portfolio of any U.S. cannabis company, with holdings from cultivation to dispensaries in 11 states and counting. These legal pros give the firm the rigor and the vigor needed to develop a national industry. Notably, Weld is a former federal prosecutor.
California’s Office of Treasurer John Chiang is now considering expanding cannabis access to banking by creating a public cannabis financial institution, or lending state support to a private bank or credit union. Chiang’s office also says a consortium of financial services, cannabis-legal states, local governments, and law enforcement can enable legal states to “speak with one voice” and ensure the growth of a safe, responsible cannabis industry.
The “End Game”
The final step is removing federal obstacles, and treating cannabis as any other cash-intensive and regulated business would be handled. Banks would be free to get involved, as long as they comply with anti-fraud and anti-terrorism law. That is the “end game,” as Chiang’s office describes it. Legal weed will then operate in a way that’s attractive to major investors.
The economic value of Chiang’s work is clear. The California cannabis market is on a trajectory to $6.5 billion by 2020.
That will spark legalization efforts in more states. Economically, cannabis is approaching its watershed moment.
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This communication shall neither constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
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