Show me the money

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There are signs that funding for cannabis start-ups, which waned in 2020, may be on the road to recovery, according to a new report by Crunchbase.

Start-up stumble

Since 2014, Crunchbase’s data shows that $5.3 billion of venture capital has been invested in 544 cannabis companies. Funding hit its high in 2019, when 178 companies received about $1.9 billion. In 2020, those dollars shrank by an alarming 68%. 

Jim Cacioppo of MSO Jushi Holdings said the unrealistic projections of yore dampened interest, and is likely one of the reasons for the decline.

MSOs making moves

Legal state markets are separating the wheat from the chaff, and capital is coming from beyond VCs.

So far, $357 million has been invested in 29 companies in 2021 (including Dutchie’s $200 million Series C round), according to Crunchbase data — a sign the tide could be turning. And we’re keeping a close eye on multi-state operators like Parallel, which is planning to go public in a deal with Ceres Acquisition Corp., putting the company’s value at an estimated $1.88 billion.

Legalization limbo

Federal legalization — or rather, its uncertainty — is likely another major factor affecting venture capital interest. But some VCs aren’t just laser-focused on weed, such as James Pelligrini, managing partner at Goat Rodeo Capital, but on categories like beverages.

“Most invest in cannabis and not much else,” he told Crunchbase. “Our funds operate in a similar space and include cannabis. Our background in beverage and alcohol, as well as understanding how brands can grow in regulated environments, gives us interest in the space because of the nascent characteristic of it today.”

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