Week in Review: Mainstream Investors Finally Starting to Eye Green Rush

By Chris Walsh

The dam holding back massive pools of investment money from the marijuana industry hasn’t burst yet. But cracks are starting to emerge, and millions of additional dollars could start flowing into the industry as the year progresses.

The newest – and perhaps most significant – crack: An increasing number of established investment firms, wealthy individuals from the mainstream business world and even politicians are starting to pump money into cannabis companies.

Earlier this week, we reported that a marijuana-focused angel investment network – The ArcView Group – has seen a 50% spike in membership over the last three months. What’s more, its ranks have ballooned more than five-fold in a year.

The growth alone is impressive. But it’s who has joined that is turning heads.

ArcView members now include Tom Bollich, co-founder of online social gaming giant Zynga; New York Assemblyman Steve Katz; and Douglas Leighton, founder of Dutchess Capital, a New York-based investment firm that manages $125 million in assets and has invested more than $200 million in companies across the globe.

Here’s some other evidence of the increased mainstream investor interest:

– We at Marijuana Business Daily are now getting calls and emails on a weekly basis from established investment firms and investors seeking information about the industry and startup companies looking for funding. These types of inquiries were few and far between just a few months ago.

– The Chicago investment firm Lincoln Park Capital Fund cemented a deal to funnel as much as $27 million into the publicly traded biotechnology company Nuvilex, which said it will use some of the money for MMJ research.

– Another publicly traded company – MediSwipe, which provides various products and services to the cannabis industry – received a $1.1 million funding commitment from an unnamed private equity firm (also based in Chicago). The company then announced this week that it will offer up to $500,000 in loans to help Colorado dispensaries and cultivation operations buy expensive equipment and real estate.

– Privateer Holdings, a cannabis-focused private equity firm run by several investment banking veterans, has seen interest from investors soar and is well on its way to raising $25 million in its second funding round. During its first round – completed last summer – the firm raised $7 million.

While some well-known business bigwigs have funded marijuana efforts in the past (most notably the late Peter Lewis of Progressive Insurance), you could count the number on one hand until recently. Reputable Wall Street investment firms that wouldn’t touch the industry with a 1,000-foot pole six months ago are now clamoring to get involved.

In addition to the surge in interest from mainstream investors, successful cannabis executives are increasingly looking to fund other marijuana companies.

Two executives from High Times magazine, for instance, recently teamed up to start a new investment fund and are looking to raise $100million in two years, while the co-founder of dispensary listing giant WeedMaps has gone in a similar direction.

Cannabis business leaders, it seems, are bullish on the future and want to double down on the industry.

So what’s sparked investor enthusiasm ?

The smooth, highly profitable roll-out of recreational marijuana sales in Colorado and the impending launch of Washington’s adult-use program have been game-changers. The recreational market is where the real money lies, and investors now have every reason to believe that it will be a powerhouse industry.

The fact that the federal government hasn’t stepped in (and recently even indicated that it will take a hands-off approach to regulated marijuana markets ) also has lowered the perceived risks.

To be sure, there’s still a long way to go. Average investments in cannabis companies remain relatively paltry, totaling in the tens of thousands or low six-figures. A single investment in the million of dollars is seen as a coup in the cannabis industry but would induce yawns in other sectors.

Still, the cannabis business has taken a huge step forward when it comes to establishing an effective investment climate. And when you add it all up, the future looks much brighter from a funding perspective than it ever has in the past.

Chris Walsh is editor of Marijuana Business Daily

7 comments on “Week in Review: Mainstream Investors Finally Starting to Eye Green Rush
  1. Ralf-Rainer von Albedyhll on

    While it is great to hear about the growing interest in funding for the industry there is still a long way to go. We just listed NextRX – a startup specializing in patient management software – on CanInvest.com but are amazed at the relative lack of interest. Maybe we are just too far ahead of our time. Go figure.

    Reply
  2. Windy City on

    …while a statement like “The recreational market is where the real money lies, and investors now have every reason to believe that it will be a powerhouse industry.” may seem correct, I have often thought that the “real” money would be in something more tangible like industrial hemp and medical marijuana.

    While recreational marijuana is still in its embryonic stage, waiting patiently for the federal government and other nations of the world to climb onboard, hemp is already producing results even without full compliance yet from the feds.

    Imagine the rush of investors when the United States will be able to produce our own industrial hemp.

    Investors involved with hemp will see benefits from construction, textiles, beauty and health, even biofuel, that the recreational aspect cannot keep up with economically speaking.

    There are literally thousands of applications that will transform the economy of this country into a positive direction, and the investors will be out in droves.

    It is conceivable that industrial hemp will be approved shortly so I am anticipating good things from cannabis without depending on the money that recreational provides…

    Reply
  3. Riley Peters on

    Please… Talk about paid advertising. Mediswipe has done nothing noteworthy of any “investment from private investors”. They spent damn year a year to complete a dividend spinoff of their other company which turned out to be a dud. Way better plays out there. Nuvilex anyone?

    Reply
  4. Lisa D. on

    Though you seem a bit bitter, I agree that Mediswipe is a stalemate and has been for some time.This industry is taking off the government giving banks the green light couldn’t be more revealing of the future legislative changes that are sure to come. Once they do, BOOM, straight to the moon MMJ!!!!! I’ve been watching this industry for 2 years now and seeing how quickly the movement is gaining traction and notice from big time investment companies is cause for excitement.

    Reply
  5. Harris Shapiro on

    Great article. We are a small/mid-cap advisory service. We have an outstanding record. We would like to add a contributor in the Cannabis Industry to our roster of experts.Please contact me. Thanks

    Reply
  6. Tim Bob on

    We as investors need to recognize the difference between value and hype.
    The current marijuana market, when viewed in the future, will look like the alcohol
    market after prohibition in the 1930’s – plastics in the 1960’s – tech market (DOT COM)
    of the 1990’s – biotech market of the 2000’s – solar market of 2007 and – the 420 rockets of 2014

    Cannabis stocks are one of the biggest stories on Wall Street so far in 2014.
    The market has been dominated by retail investors chasing a relatively small universe
    of mainly low-quality companies, leaving stretched valuations. The fundamentals
    remain very strong, but the easy money has likely been made. Going forward, look
    for higher quality choices, a phenomenon that could lead to substantial losses among
    some of the lower quality names investors are buying today. Its most important now to do your homework

    This sector is just getting heated up and there are millions of people
    learning more about marijuana daily. I beleive this will be become the 420 rocket market
    of 2014 and will be a 10.2 billion dollar industry by 2018.

    Reply
  7. brian billings on

    i have been following sourcevapes for some time, and hear they may be going public. i think they are going to go above and beyond what most vapes have done, unlike mcig, people are actually loving their products.

    Reply

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