WeedMaps co-founder Justin Hartfield made waves in the cannabis industry earlier this month when he launched a new venture capital fund that will invest in and acquire marijuana-related companies.
Hartfield and his partner are just now in the early stages of finding investors, but they hope to raise between $10 million and $25 million. If successful, the fund – called Ocean Emerald Capital – will help fill a big hole in the industry, where investment dollars are few and far between.
Medical Marijuana Business Daily spoke with Hartfield recently about his new fund, what types of people are making bets on the marijuana industry and how much money they have to invest.
#1. As co-founder and CEO of WeedMaps, which was founded in 2008, you’re considered an old-timer in this industry. Why did you decide to start a venture capital fund now specifically as opposed to earlier on?
There are lots of opportunities in the coming couple years on the eve of federal legalization, and we want to have a fund to take advantage of that. We are in the early stages of the end of marijuana prohibition. In the last six months, maybe a year, I’ve seen a kind of the culmination of a very young industry becoming a pimply teenager. The recent Pew study (which found that, for the first time ever, a majority of Americans support marijuana legalization) was extremely influential. It was kind of like the literal tipping point for investor types that need to see numbers on everything. When that study came out we started to see more sincere businesspeople approach us, and more polished entrepreneurs coming at us. At WeedMaps, we get pitched on everything, so we have a good perspective on this. It went from people who were maybe not as professional to those who are exceedingly professional.
#2. What types of investors are putting money in the cannabis industry at this point?
It’s not the traditional Silicon Valley limited partners, that’s for sure. There are two main types of people I’m seeing. There are entrepreneurs who are self-made business men, such as CEOs of successful companies in other (risky) industries…who see this and want it. These are very savvy businesspeople who don’t have ties to the industry and are able to take a risk and not have anyone’s assets on the line. These are very ballsy-type guys and gals
The other group, which is increasingly more frequently, are older folks, 65-plus, that have a lot of cash on sidelines and want to get back in the game. At the High Times Cannabis Cup in Denver (this spring), I was shocked – there were older folks in suits in the middle of a crowd of teenagers, and they wanted to talk about investing. A few even flew in from New York. Some of them were retired investment bankers who have lots of money are aren’t afraid to deploy their capital. After seeing that, and how many people from out of state there were, we had to get a fund up and gauge interest.
Of the people we’ve heard from so far, the average is about $10,000 to $50,000. On the other hand, a good 10% have millions of dollars to play with. We’ve also heard from companies – nationally recognized brands – that generate (tens of millions of dollars) in revenue that are looking to partner or invest. We heard from one large food delivery company that makes north of $200 million in revenue.
#4. What are the best investment opportunities?
Medical is great and will always be huge because there will always be a need for medical marijuana and products/accessories. But the real opportunity here is on the recreational side, with everything from suppliers and software to new forms of vaporizers and other consumer-facing products. We think that the entire industry is ripe for innovation. There’s so much of a need out there. Everything that is done in legal industries will be needed in the marijuana industry.
#5. What else are you up to?
We want to establish an industry association and a political action committee, because business and politics are deeply intertwined. Until prohibition is over, this business is entirely political. Without people lobbying, without people on the ground pushing this issue forward, there won’t be any industry for any of us. A really important key in these efforts is that we’re going to be releasing sample legislation for California, New York and other states. We’re also going to be running a blog that focuses on what we envision as a real regulated future. We’ll be proposing regulations, putting out some that might work for vendors, dispensaries, growers, consumers. It’s essential to the future of the industry that we have these things, so as an industry we can propose standards and regulations. Changing federal marijuana laws is a Herculean task, but these types of efforts are a start.