Our lives have dramatically changed over the past few weeks as we come to terms with the reality of the situation in which COVID-19 has placed us. For most Americans, the economy has come to a complete standstill as social distancing and increased ‘stay-at-home’ measures have become the new normal. Only certain ‘essential’ businesses remain open across the country as the nation works together to flatten the curve of this pandemic. In this blog post we will explore the impact of COVID-19 on the cannabis industry, how private equity has performed historically in distressed periods and why cannabis investors should look at the current state of the economy opportunistically.
In venture capital, fundraising and deploying capital is difficult in any environment, and one of the most important (and uncontrollable) drivers of fund returns is market timing. This raises the question, is the tenth year of a bull market really the right time to be raising a cannabis-focused VC fund? Our view is that from a relative value perspective, in the event of a market correction in the next few years, cannabis VC offers one of the most attractive sectors for risk-adjusted return.