By Jennifer Mann
Last year was a significant one for cannabis investments.
U.S.-based private equity firms, venture capitalists and major angel investors pumped $95 million into marijuana businesses in 2014 via 59 recorded deals, according to data from CB Insights.
This represents a 940% increase over 2013, reflecting an average of $1.61 million per deal. (The numbers include only publicized deals; investments under $1 million between accredited investors and privately-held, local cannabusinesses often are not made public.)
Investments in cannabis companies still make up just a tiny sliver of the bigger pie: Private equity deals by U.S. firms hit $48.3 billion last year. Software firms alone raised $19.8 billion in 1,799 deals, while Internet-specific companies raised $11.9 billion via 1,005 deals.
But the marijuana industry made significant progress, and the deal volume was exceptionally large compared with the low dollar total.
In fact, the number of investments in the cannabis sector surpassed several other industries – including prepared foods (7 deals) and energy storage (38) – and was on par with environmental services and equipment companies, which raised $274 million in 66 deals.
This indicates that private equity investors may have considered 2014 an experimental year for cannabis.
It was the first time many of them dipped their toes in the marijuana industry. If these experimental investments do well, expect these investors to fund larger deals – and overall activity to rise.
Jennifer Mann can be reached at [email protected]