Venture Capital Investment in Cannabis More Than Doubles in 2018

Pitchbook recently released its2018 results for cannabis related investments, and the data is impressive: 139 deals scooped up a whopping $881 million. Those numbers are up over the prior year by 26 percent (number of transactions) and 120 percent (total amount invested), reflecting larger average deal sizes.  Leading the way,Privateer Holdings closed a $100 million Series C financing.

Clearly, the success of Canadian public offerings in the space is creating a “chimney” effect where a few big exits result in early-stage capital being pulled into the ecosystem.

For example,Green Organic Dutchman Holdings, Ltd.(TSX: TGOD) IPO’d in May of 2018 is currently trading at $1.0 billion market cap; Privateer’sTilray(NASDAQ: TLRY) went out for $153 million in July and currently enjoys a $6.0 billion market cap.Canopy Growth Corp(NYSE CGC) is valued at $17.0 billion.

The Pitchbook report also lists the top dozen cannabis-related venture investors, led by Altitude Investment Manage, Casa Verde Capital and Salveo Capital, each with six or more investments in 2018.

The addition of sophisticated, institutional capital to the cannabis marketplace is, from our perspective, a welcome game-changer. The net result is likely to be increased scrutiny on the quality of management teams, the scalability and defensibility of business models and heightened attention to corporate governance. All of which should lead to a more stable and ultimately more profitable industry for stakeholders.

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Frank Paganelli

Frank Paganelli counsels clients on issues ranging from corporate structuring and governance to capital strategies, organizational development and commercial transactions, with a focus on social impact companies and investments.  He is an experienced general counsel with significant corporate strategy and business management experience, and works with management teams, investors, boards of directors and business owners to address strategic opportunities and challenges. Frank has held a number of executive roles for companies including public telecom firm Rhythms NetConnections, biofuel retailer Propel Fuels, organic produce e-commerce leader Full Circle Farm and waste-to-value pioneer Clean Conversion Technologies.

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