Marijuana Business Factbook 2019

276 Marijuana Business Factbook 2019 Chapter 7 | Cannabis Business Funding & Investing © Copyright 2020, Marijuana Business Daily , a division of Anne Holland Ventures Inc. You may NOT copy this Factbook, or make public the data and facts contained herein, in part or in whole. For more copies or editorial permissions, contact CustomerService@MJBizDaily.com or call (720) 213-5992, ext. 1. CHART 7.02: Global Investment Activity In The Cannabis Industry By Company Type & Year Note: All values in USD. Source: Viridian Capital Advisors © 2019 Marijuana Business Daily, a division of Anne Holland Ventures Inc. All rights reserved. Global Investment Ac�vity In The Cannabis Industry By Company Type & Year 2017 2018 2019 YTD $0.6B $7.1B $9.8B $2.9B $3.3B $4.1B Capital Raised By Public Companies Capital Raised By Private Companies (Through 10/4/19) . . $7.1B Global investment in the cannabis industry skyrocketed from 2017 to 2018, with total investment increasing from $3.5 billion in 2017 to $13.9 billion in 2018 ― a nearly 300% increase. To date, investment activity for 2019 is on pace with 2018, hitting $10.4 billion in the first week of October 2019. By early October, investment for the first three quarters of the year was trailing total 2018 investment by only $3.5 billion. If investment maintains the average rate for the balance of 2019, then total investment will equal or surpass 2018. Public companies account for the majority of investment activity, making up 71% of total capital raises in 2018 and 68% of capital raises to date in 2019. Canadian businesses are outpacing companies in other countries for a number of reasons, including a greater need for funding. Canadian operators have much more production capacity than U.S. businesses and are rapidly expanding into international markets ― necessitating significant levels of capital deployment. Additionally, Canadian companies are viewed as safer investments than U.S. firms because they operate in a country were marijuana is federally legal. Canadian cannabis companies are also allowed to trade on major stock exchanges, opening even more public investment and providing a signal of legitimacy to investors and consumers. What the data doesn’t represent, however, is the significant slowdown in capital raises during the third quarter, as the market has entered a correction cycle. Large consumer packaged goods companies, for example, have become more reticent about investing in cannabis, looking for more realistic metrics than wishful thinking. In particular, investors have become leery of some of the Canadian companies that drove the industry forward in the early days, as they have been the source of regulatory infractions, guidance disappointment and infrastructure overbuilds. This, however, likely will lead to a more professional investing environment based on business fundamentals, such as cash flow.