Can you actually make money investing in cannabis? If you are a smart, patient investor who does their research—and you can get past the endless pot puns—the answer is “yes.” The numbers bear witness and show why there is so much interest in Venture Capital cannabis: 

  • Global expansion: The legal marijuana market is predicted to reach USD 102.2 billion by 2030 globally, according to a recent report by Grand View Research, Inc.
  • High rate of return: The legal marijuana market is expected to expand at a CAGR of 25.4% from 2023 to 2030.
  • Product observations: As most of the countries that have decriminalized marijuana have done so for medicinal purposes, the oil and tinctures segment has posted the largest revenue share with roughly 53.2% in 2022. 

Overall, oil and tinctures are projected to have the fastest growth rate—at about 26.1%.

  • Further applications: The biggest revenue share for applications has come from the medical industry—registering at just over 82.6% in 2022. 

Growth in the field is predicted to remain steady from 2023 to 2030.

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How’s the cannabis venture capital market?

Not surprisingly, the venture capital cannabis market has been heating up. Since 2014, 544 cannabis-related enterprises around the world have received investments amounting to roughly $5.3 billion. The first five months of 2021 alone accounted for 132 funding raises for cannabis companies—with an average of $15 million per deal. 

One of the top cannabis investments has been in Dutchie, a cannabis technology platform that sells point-of-sale software to dispensaries—and has been chosen by the State of New York to be the only provider of technology and point-of-sale (POS) hardware for the Empire State’s Conditional Adult-Use Retail Dispensary (CAURD) licensees.

Dutchie has raised  $350 million in a Series D funding round and its last valuation has gone up to approximately $3.75 billion. 

What’s the market for cannabis ETFs?

Some investors looking to invest in cannabis startups may want to diversify—and put their greenbacks into a cannabis ETF. They may also be surprised that there is already a robust cannabis ETF market with a few clear leaders:

  • AdvisorShares Pure U.S. Cannabis ETF (MSOS): The ​​first-ever US Cannabis ETF is also the first actively-managed ETF listed in the U.S. with dedicated cannabis exposure that only focuses on U.S. companies—including multi-state operators. 
  • ETFMG Alternative Harvest ETF (MJ): The Prime Alternative Harvest Index is the first U.S. ETF to go after the global cannabis market. It has been made to track the output of companies within the cannabis ecosystem—and understand the upsides from the global movement to legalize medicinal and recreational cannabis.
  • Horizons Marijuana Life Sciences Index ETF (HMLSF): Horizons made headlines when they introduced the world’s first cannabis-focused ETF—the Horizons Marijuana Life Sciences Index ETF in April of 2017. The next year Horizons started offering Horizons Junior Marijuana Growers Index ETF, related to smaller cannabis enterprises involved in cultivation, production, and distribution.

Final thoughts: What should potential cannabis investors keep in mind?

Any investment is a major decision requiring proper due diligence, but cannabis investments require even more precaution—and you may even wish to hire a cannabis consulting company. Here are a few extra things to keep in mind before you invest: 

  • Know the differences: There is recreational marijuana (legal in 21 U.S. states and Canada)  and medical marijuana (legal in Canada and 37 U.S. states). Also, some companies work on the direct distribution of cannabis—whereas others help with soil or lighting or even the biotech and pharmaceutical side.
  • Know the risks: Cannabis is not legal in every country or U.S. state, some banks and other financial institutions may not want to work with cannabis retailers, and—like any plant or crop—cannabis is subject to the fate of weather and economic uncertainty that can affect any plant-based product.  
  • Know your heart and your head: Some people may feel that any investment in cannabis is unethical, while others may feel it is a liberating experience and the wave of the future—and thus overinvest. If you are keen to start investing in cannabis—make sure you’re truly ready and start small to get a better feel for investing in this burgeoning industry. 

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Igor

PARTNER AT WAVEUP

In the last 10 years Igor helped over 500 startups and venture funds around the globe to raise over $3B+ in funding | Big fan of everything lithium-powered - helped on several battery and bike-sharing investments; and now driving & exploring the world of EVs on his own | Huge believer in the enormous potential of VR, AR and Metaverse | Travel addict - visited over 100 countries & completed 2 round-the-world journeys | Spent his first money on a snowboard and has been snowboarding ever since - 16 years and counting