A pot plant blooms on the latest cover of VCJ, a leading trade magazine for venture capitalists. That means the so-called smart money folks - who typically invest in young biotech and technology companies to seed the next Google, Facebook or Twitter - are smelling a chance to cash in on medical marijuana in 20 states and full legalization in Washington and Colorado.
VCJ tracked down some young investment groups focusing on the legal marijuana industry, an estimated $1.7 billion market, according to research by IBISWorld.
The article by Palo Alto-based journalist Tom Stein flags Justin Hartfield of WeedMaps Media, an online community for medical marijuana users and dispensaries. WeedMaps generates more than $20 million a year in revenue and now Hartfield has launched Emerald Ocean Capital Group, a venture capital firm attempting to raise a $10 million fund for pot entrepreneurs specializing in plant-growing gear and other marijuana gadgets.
The ArcView Investor Network is made up of about 70 private investors aiming to finance a potentially massive industry. Co-founder Troy Dayton told VCJ the group has invested about $2 million in startups including vaporizer maker Uptock, cannabis packing firm Rodawg and Canna Security America, a security solutions specialist. Some of the ArcView investors get together after meetings to smoke and unwind. "That’s where the real deals gets done,” Dayton divulges.
Also in the mix, Seattle-based Privateer Holdings hopes to raise $7 million from private investors for ganja-related investments including one so far: Leafly, an online resource to match marijuana strains with medical needs of patients.
Mjardin, which is targeting $15 million for cannabis businesses, was founded by Adam Denmark Cohen, a former private equity executive from Brilla Group, a firm that buys stakes in vacation resorts. Cohen sees an opportunity to roll up marijuana businesses in Colorado, where more than 80% of licensed retail operations are mom-and-pop operations.
Like any venture capital investment, many of these initiatives could fizzle if the legalization movement sputters or the federal government steps in. While some independent marijuana businesses may bemoan the corporatization of pot, it’s bound to happen just as it has in nearly every other industry. But in today’s pay-to-play democracy, the more money behind you, the better your chance of success in building a regulated, legal industry that generates sorely-needed jobs, medicine and tax revenue.