Cannabis Venture Investing Sets Record Pace in 2019

20 Bipartisan Governors Pen Letter To Congress Urging Support for SAFE Banking Act

Michigan Governor Gretchen Whitmer became the latest gubernatorial signatory of a bipartisan letter to Congress urging action on SAFE Banking reform, the preeminent marijuana banking reform bill currently making its way through the House and Senate.

Governors Back Cannabis Ban… by on Scribd

The Governors are just the most recent group of bipartisan state officials to show their support of the bill, joining the American Banker’s Association, National Association of State Treasurers, and National Association of Attorneys General.

New Jersey Gov. Phil Murphy (D) led the letter. The bipartisan group of signatories also includes the governors of Colorado, Connecticut, Guam, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, North Dakota, Oregon, Pennsylvania, Utah, Virginia, the U.S. Virgin Islands, Washington, West Virginia and Wisconsin.

“Currently, thirty-four U.S. states, three U.S. territories, and the District of Columbia have legalized the medical use of cannabis. Additionally, ten states and the District of Columbia have legalized recreational use by adults over 21 years of age.” the letter says

“Despite legalization of cannabis at the state level in many cases to provide medical treatment,” it continues, “our financial institutions face enormous barriers, legal risks, and criminal and civil liability under the Controlled Substances Act that prevent them from providing banking services to state-licensed businesses. As a result,very few banks and credit unions will provide these services, leaving many businesses in this sector unbanked”.”

This occurs after 12 governors sent a separate letter to congress supporting additional reform – specifically the Strengthening the Tenth Amendment Through Entrusting States, or STATES Act. Some of those 12 also signed the SAFE Banking letter.

29 different governors have now expressed written support for cannabis reform to lawmakers in D.C., not counting those who signed more than once. Attorney General William Barr also verbalized his support for reform, making a compelling case for action on Capitol Hill.

The passage of reform like the STATES act or the SAFE banking act would greatly reduce the risk for financial institutions to get involved in legal cannabis industry, and with an increasing number of large financial markets opening up (see: Illinois, potentially New York) this bodes well for innovative investors in this emerging, underfunded sector.

Cannabis Venture Capital Investments Top $1.3bn in 2019

Venture capital investments have reached $1.3bn in the first five months of 2019, already surpassing the total amount from last year, according to a report by the accounting and advisory firm MGO and Ello (you can download the full version below).

Interestingly, recreational cannabis is outpacing medicinal cannabis in VC investments, despite being legal in only 10 states, compared to 23 that have legalized medical uses of marijuana. This is the first year the breakdown has favored recreational cannabis—it’s pulled in $864m to medical’s $337m—signaling an increased interest in the upside for that market.

The report stated, “momentum in the broader US market played a major role in the rapid increase in VC volume…In 2013, just over $16 million of institutional capital was invested in the sector, and the $1.0 billion invested last year marked a 64-fold increase over the span of six years…Through mid-May of 2019, the industry has already set a new record in terms of value at $1.3 billion, with more than half a year to go. The only question this year is how high the final numbers will be.”

According to Evan Eneman, CEO of MGO and Ello, “public opinion in the US is overwhelmingly in favor of medical cannabis, and there are ample models of successful regulatory programs…If cannabis is fully embraced by the medical/pharma sector, there is vast and lasting growth potential,” he added.

Said Eneman, “On the [recreational] side, the potential of the adult-use market is colossal. If federal legalization does occur, a couple years down the road cannabis products are likely to be household items.”

“Several cannabis startups have now crossed the Series C threshold…which has historically symbolized long-term potential. Moreover, the industry is seeing its first billion-dollar valuations…More unicorns are likely on the way over in the next two years.”

— 2019 Cannabis Private Investment Review, MG | Ello

Softening Regulations Lead to Increased Interest in Cannabis Markets Around the World

Cannabis and its derivative products are experiencing softer regulations around the world, and that is opening up commerce and capital markets to a variety of projects.

Hemp, a species of cannabis plant made legal in the US just before Christmas, has a wide range of practical uses. It can be made into paper, clothing, rope and twine, insulation, even animal feed.

On the other hand, the therapeutic properties of the more widely-recognized cannabis sativa and cannabis indica varieties are being investigated for applications in medicine—having shown some promise as a treatment for conditions ranging from the prevention of Alzheimers, anxiety, treating effects of autism and epilepsy, relieving arthritis, reducing nausea and even helping prevent cancer.

“This report is the first in-depth, quantitative and fact-based analysis of the global hemp industry since the United States’ 2018 Farm Bill and Canada’s Cannabis Act passed; two groundbreaking changes in North America that dramatically re-shaped the entire hemp industry.”

— Giadha Aguirre de Carcer., Founder and CEO, New Frontier Data

In fact, according to a report by New Frontier Data, US sales of hemp and hemp derivatives reached $1bn in 2018 alone, second only to China, and is projected to surpas $5.7bn by 2020.

“As regulatory barriers diminish in the months and years ahead, businesses will continue to expand the ways in which hemp is utilized, especially across medicinal and industrial applications,” said New Frontier Data Founder and CEO Giadha Aguirre de Carcer.

The interest is permeating through capital markets as well. In Canada, where cannabis has been legal since last October, the world’s first cannabis ETF, the Horizons Marijuana Life Sciences Index Fund, has become one of the most profitable ETFs in Canada, returning almost 50% this year as reported by the Financial Times.

With the news of Illinois passing a recreational cannabis bill, and New York positioning to possibly do the same, one can only assume this trend likely to continue as an increasing number of valuable markets open their doors to cannabis commerce in the US.

IRI Partners with Leading Cannabis Data Firm BDS Analytics

via Businesswire— Leading retail data analytics and market research firm IRI announced a new strategic relationship with cannabis data analytics firm BDS analytics last month that will provide retailers and CPG manufacturers a holistic view of the rapidly growing legal cannabis marketplace.

While the legal cannabis industry matures, data analytics is a particularly intriguing sector as retail and cultivation operations seek an understanding of consumer behavior and preference in a highly competitive space.

IRI plans to fully integrate BDS Analytics’ retail sales data into their Liquid Data platform and consumer reporting options later this year. In connection with this new relationship, BDS Analytics and IRI will be developing additional solutions that leverage the full capabilities of their combined technology and expertise.

“In a challenging CPG and retail environment, the cannabis market – including the exploding CBD category – represents an extraordinary opportunity to deliver growth,” said Robert I. Tomei, president of Market and Shopper Intelligence for IRI.

“A holistic view of the cannabis market, its customers and retail sales is imperative for IRI and BDS Analytics’ clients to capitalize on this unprecedented opportunity. IRI is proud to partner with BDS Analytics, who, in addition to featuring deep cannabis industry market intelligence, distills the most granular retail sales data directly from dispensaries and enables us to continue offering the industry’s most comprehensive view of the modern retail landscape.”

“As the cannabis industry has become more mainstream, it is expected to grow to $45 billion by 2024…Companies need to have a clear understanding of one of the most dynamic growth categories experienced by the CPG industry in decades.”

— Roy Bingham, CEO and co-founder, BDS Analytics.


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