Source: Marijuana Moment
As cannabis becomes more mainstream, companies in the pharmaceutical, consumer packaged-goods, alcohol, and tobacco spaces are going to want in, according to venture capitalists focused on the cannabis industry.
That could mean more capital for the cannabis industry, which is still being funded in large part by family offices and cannabis-focused venture-capitalist firms, because mainstream investors are reluctant to touch an industry selling a product that is still federally illegal.
Those investments might also lead to further normalization of the industry, which, in turn, could potentially create a push for more regulatory reform.
Insider talked to 14 top cannabis VCs who collectively invested $925.8 million into the industry in 2021 to ask them about what we should expect over the next year. Two of them told us that they predict a rise in mainstream companies making deals with cannabis businesses.
“We expect to see several high-profile strategic transactions from non-cannabis companies looking to enter the space,” Jason Wild, the president and chief investment officer of JW Asset Management, told Insider. The firm invested $22.5 million into private cannabis companies in 2021, across 11 deals.
Several others said they expected more institutional capital to turn to the cannabis industry as it becomes more mainstream.
Big tobacco and alcohol firms like Altria and Constellation Brands have already made large investments into cannabis, but so far their efforts have focused on companies that operate in Canada, where marijuana is legal under federal law.
Large consumer packaged-goods companies also invested in cannabis businesses as the industry was getting off the ground in Canada, but the adult-use market there failed to meet lofty expectations.
Cannabis investments were heavily focused on the US in 2021
In recent years, much of the funding in the space has turned to the US, where cannabis companies operate under a state-by-state framework — meaning that even if they are growing and selling marijuana in accordance with state regulations, they’re still operating illegally under federal law.
In 2021, US investments made up over 85% of the total $2.7 billion invested in cannabis start-ups globally. Legalization efforts have also ramped up, as voters in states like New Jersey, New York, and Arizona have supported legislation to legalize cannabis. Big brands like Amazon have also signaled support for federal cannabis legalization.
Gregory Heyman, a managing partner at Beehouse, told Insider that in 2022 he expects big companies from the pharmaceutical, consumer packaged-goods, alcohol, and tobacco industries to make strategic investments into “plant-touching” cannabis businesses, or companies that grow and sell cannabis directly.
Beehouse invested $30 million across five private cannabis businesses in 2021 and has over $300 million in assets under management.
Companies in these other industries “are losing market share to cannabis products that offer cheaper, better, safer, more specific, and healthier alternatives favored by first-time and longtime cannabis users across every demographic,” Heyman said.
He added that investments from mature industries would futher propel normalization and legalization and encourage other institutions and individuals to invest in the space.
Handcrafted cannabis investments
