5 Big Investors Diving Deep into the Marijuana Industry
This is not your father's marijuana industry. In a couple of decades we've gone from a completely black market in marijuana to a legal market valued at $4 billion a year—and projected to increase rapidly—and from tie-dyed Northern California pot farmers hiding from helicopters to people in suits and ties with dollar signs in their eyes.
Increasingly, marijuana is being seen as just another commodity, another profit-source for restless capital seeking to put itself to work in the endless task of creating more capital. Sure, Ma and Pa Pot Farmer are still out there trying to find a place for themselves in the legal markets being born, especially California's, where the legal, recreational pot business will begin next year, and sure, there are countless people in the industry who just believe in weed.
But the industry (and potential profits) is attracting a growing number of people for whom marijuana is no more inherently interesting than mops or mopeds. They're not about the weed or the good vibe or anything like that; they're about the money.
In a recent survey, Marijuana Business Daily reported that investors planned on average to invest half a million dollars in pot businesses this year, with a handful willing to risk more than $25 million. And business is booming: In just a few days, the industry daily has run headlines such as "A $200M Day: Two Investors Reveal Big Plans to Fund Marijuana Businesses" (the principals being "a California real estate investment firm and a wealthy Florida medical marijuana advocate") and "Investors Pump Up to $80 Million into Oregon Marijuana Startups."
It's not just individual investors. Private equity and venture capital firms are also circling, looking for profitable opportunities to monetize marijuana. In fact, we now have any number of firms that are dabbling in doobage. Some have real roots in pot culture or the legalization movement, some don't. According to Forbes, the five below are some of the biggest.
1. MedMen Capital
The MedMen Opportunity fund that closed in April raised $60 million, and MedMen has another $30 million to invest as well. It's into seven different projects ranging from California and New York dispensaries to grow facilities in California, New York and Nevada. "We look for undervalued assets in strategic markets with large addressable demand, constrained supply and high barriers to entry," said spokesman David Yi.
2. Phyto Partners
This group tends to invest chunks of $500,000 to $750,000 in emerging pot businesses, which gives it a significant say in how it operates. "Since we have the ability to deploy a larger amount of capital, the fund can get more favorable terms. This usually means better valuations, more equity and more control," said managing director Brett Finkelstein.
3. Casa Verde Capital
Casa Verde's investments are smaller—typically $250,000 to $500,000 per new company—but its names are bigger. Cannabis culture hero Snoop Dogg is one partner, serial entrepreneur Ted Chung is another, and the other two are a former PriceWaterhouseCoopers director and a former Goldman Sachs exec. Casa Verde has Merry Jane, Flower Shop and ELLO as sister companies, and has invested in a delivery service and an e-commerce platform. "We believe in venture and ancillary markets because technology, software, hardware, products and services are scalable and will help to build the backbone of this burgeoning industry for decades to come," says partner Evan Eneman.
4. Poseidon Asset Management
Founder Emily Paxhia and brother Morgan started Poseidon in 2014 after their parents died of cancer. Because of their newfound knowledge about medical marijuana, they are committed exclusively to marijuana companies and have raised over $25 million, investing in 40 different companies, mainly in real estate and technology. Poseidon led the $3.5 million buy-out of the winery that is expected to switch to weed and also led on the April financing round for Wurk, a workforce compliance program.
5. Arcview Group
These guys grew up in the marijuana reform movement. Partner Steve DeAngelo, head of the Harborside Health Center in Oakland, has been actively trying to free the weed since the 1980s, while partner Troy Dayton earned his spurs as a movement activist in his days with Students for Sensible Drug Policy. Arcview has provided capital for 141 companies including Mass Roots, MJ Freeway, Medicine Man, and Eaze, and has $115 million invested.