The medical marijuana industry may have finally turned a corner on the financing front, as evidenced by two important developments last week:
#1. Five ancillary cannabis companies received a combined $1 million in funding commitments – a number that could swell to more than $2 million when the deals are finalized – from angel investors via an event hosted by The ArcView Group. Sure, the overall investment total is relatively small in the financing world. But the development shows that angel investors are starting to get serious about investing in cannabis, and that could bode well for the industry going forward.
The companies that received funding commitments run the gamut (from a business selling vaporizers to one providing security services and products) and are in various stages of business development, from those at the concept level to those that have been making products for years. What’s more, the companies are based in various parts of the country, from states with MMJ laws (California, Colorado and Oregon) to those where medical cannabis is still illegal (Ohio and Florida). This diversity highlights the potential for entrepreneurs going forward and proves that you don’t have to be located in the epicenters of MMJ to attract investor interest.
#2. A new private equity firm has launched a $250 million fund that will offer several financing options for marijuana businesses, including lines of credit and cash advances. The interest rates are high compared to other industries, coming in at between 14.9% and 28%. But they reflect the huge risks involved of investing in the MMJ business and are reasonable for the cannabis sector – especially given the lack of other options, as banks typically won’t lend money to dispensaries, grow operations or ancillary cannabis businesses.
These developments come on the heels of several other recent signs that the investment climate is improving:
– A new site set to launch this summer will provide crowdfunding options for the cannabis industry. The site (called WeCanna) will allow individuals – marijuana advocates, consumers, small-time investors, etc.- to make relatively small investments in startup cannabis businesses and related projects such as films, political campaigns, etc. in return for rewards and/or recognition.
– KannaLife Sciences – which provides standardized packaging for cannabis-based products and specializes in the research and development of pharmacological products derived from botanical sources – recently announced that it has landed a $1.5 million investment from Medical Marijuana Inc. and CannaVest Corp.
Combined, these developments are extremely welcome news for an industry with limited investment and financing options. An increasing number of investors seem ready to take the plunge into the cannabis industry, so expect more activity in the months to come.
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