What the heck is going on with investing in cannabis? For the last two weeks, I've been calling every cannabis VC fund manager I know and taking their temperature on #investing in today's #cannabis industry. What I learned was pretty interesting, so I want to share it with you...
The industry is definitely in flux, and I'm fortunate to have access to the most active investors in cannabis VC. My hope is that by sharing this information with you and answering questions, we can all work together more efficiently and effectively in 2023 and beyond....
At Poseidon, we track close to 50 funds investing in private cannabis industry companies, but in the current economic climate, only about half are active...
Industry fundamentals are strong, but valuations are down. Colored by a focus on the custody-constrained public markets and growth challenged states digesting huge revenue gains made during Covid, investor sentiment is negative to neutral. This of course overlooks...
...increasing unit sales and state legalization wins - a rising tide expected to continue over the next 3+ years. Coming to agreement on price and terms is difficult. Public comps are depressing. Risk is off. There is a common belief that...
... financings in this environment should provide 18-24 months of runway. The era of FOMO investing in cannabis appears over (at least this one). Most angels who made early cannabis investments are...
... sitting on the sidelines, waiting for returns from their existing portfolio companies. Hedge funds are mostly in a holding pattern when it comes to new private offerings, as they work to resuscitate their larger public holdings. When it comes to valuations...
...flat is the new up, and up comes at a cost. Ancillary companies are raising flat rounds even if they have grown ARR 2-5x since their last raise. VCs admit these previous financings were overpriced and are privately relieved when founders offer...
... the flat extensions that bring their portfolio companies closer to public market multiples. Still, private multiples are 2-3x higher than where SpringBig, WeedMaps, and Leafly are currently trading. With local angels out of...
...cash or taking a break until things settle out, valuations for licensed operators are falling fast. Structured rounds with profit sharing or repayment plans are growing more common. With public market comps trading at low multiples, and lenders reluctant to...
...back unproven operations, early stage growers, processors and dispensaries may expect to give up 30-50% in exchange for their startup capital. But once an operator proves their ability to generate a profit, financing options grow significantly. Debt is a...
...growing concern for licensed operations. As prices compress, the impact of compliance costs and 280E make interest payments more difficult to meet. A chain is only as strong as its weakest link, and any weaknesses may create...
...systemic problems. Interestingly, a lack of interstate commerce may provide an unexpected firewall from where the debt crisis may become most acute - California. No one interviewed mentioned...
... New York as an investable opportunity right now. Illegal storefronts, a delayed rollout, and unclear regulations and state funding strategies are all red lights. Wait, watch, and learn seems to be the strategy for New York, while disappointment with the...
... way New York has rolled out adult use was palatable in a number of investor conversations. New license application processes in...
... Florida, Texas, and Minnesota carry very different expectations for operators and investors, compared to the last 10 years...
10 states will likely turn on adult use in the next 3 years per Vicente Sederberg and MPP and unlock 6.8 million consumers and $9.1 billion in new sales, but also shift the percentage of Reps in Congress from adult-use legal states from 48% to 67.5%. The future is...
...bright for #cannabis, if not different than before. Disclaimer - I am a Managing Director of @PoseidonInvest, a #VentureCapital fund focused on early stage ancillary companies and license operators. Since we first started deploying capital in early 2021, we have...
...invested in 11 companies - three licensed operators and eight ancillary technology companies (Adaviv, Dispense, Birchmount, Happy Cabbage, Sunburn, Amnesia, JKL2, Komplyd, SPARC, ChromaCann, and one more to be announced soon...
Prior to Poseidon, I co-founded CanopyBoulder, a seed-stage business accelerator focused on the cannabis industry that funded 116 companies, including BDSA, Wurk, Weller, Abaca and Potguide...
...the team at @PoseidonInvest is second to none and includes @SavingPlants @empax1 @naviaandres and @MorganPaxhia - If I have one piece of advice for those working in or investing in the cannabis industry, it is to...
...go into business with people you know, admire, and enjoy working with every day.
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