Sunday, June 21, 2015

"The Weed Funding Bubble"

You knew this was coming as soon as you saw the always-fashion-forward chameleons of the pink sheets make their move: "Junior Gold Miners Consider Cashing Out, Pursuing Medicinal Marijuana Opportunities".

From the WSJ's The Accelerators blog:
ED ZIMMERMAN: “Businessmen they drink my wine,

Plowmen dig my herb.”

For years I listened to Jimi Hedrix’s version of Bob Dylan’s song “All Along the Watchtower,” convinced I heard those lyrics (according to, the actual line is “Plowmen dig my earth”). But then again, I’ve had another misconception related to marijuana — I didn’t think that, during my career, I would see a venture capital conference dedicated to startups pitching their weed-based businesses to investors. Yet, that’s exactly what cannabis startups will be doing at a conference next week (in Colorado, naturally), and there are even sponsorship opportunities.

A number of weed-based startups have reached out to me with investment opportunities, and I have friends who have invested or have considered investmenting in these companies. I’ve seen weed tea, micro-loans to weed-based business and the concept of a seed weed fund (no pun intended?) to invest in early stage weed-based startups. Two years ago, VentureBeat wrote an article detailing some web-based startups capitalizing on these opportunities, and even a private equity-style roll-up (acquisitions) in the medical marijuana sector. That was, of course, long before Peter Thiel’s Founders Fund invested in that group, Privateer, which has subsequently raised over $80 million. And following the trends of startup capital flowing into marijuana-based businesses from traditional venture and the ‘Uberification’ of everything, Eaze reportedly raised a $10 million Series A venture round last month from credible funds. I believe we’ll see many more venture dollars fanning the flame of weed-based startups.

Despite my belief that this sector is on fire, I’ve not invested in cannabis-related startups, nor have I taken a deep dive into the businesses. Forget, for a moment, the moral issues on both sides (I believe I understand the moral arguments articulated by people on both sides of the legalization issue, including why taking an underground market and regulating it is game-changing from a safety and tax perspective). I’m not investing in weed because I try to invest in sectors where I feel like I have an advantage, whether it’s because I have visibility into the market, care deeply about the product/service, have meaningful experience in the sector or connections that will be helpful. For me, those just don’t apply to weed-based companies. Of course, I have to know and like the founders too, and that may well apply to some weed-based startups.

When I say “care about” the product or service, I refer to a standard far short of being passionate about the product or service. Sometimes, we get to be passionate about what a startup is doing (Flatiron Health, in which I invested, is a good example – they’re using data to fight cancer), but that doesn’t always apply. For instance, I can’t say that I’ve ever felt truly passionate about advertising technology, but before I made my first investments in ad tech startups, I spent a slew of time representing them, doing deals with the funds that backed them and seeing how they grew or didn’t grow. I lack that experience base with weed startups.

I’m not judging those who pursue the sector, nor do I doubt the credentials and skills of a number of the executives and investors in the industry. They’re placing an educated bet on broader legalization of marijuana and if that bet bears fruit, they will not only be well-positioned to make money on the current investments, but they will be viewed as pioneering investors in that sector. I’ve repeatedly seen pioneering investors and executives in successful sectors get (and arguably deserve) great deal flow. That axiom should apply to early investors in a post-legalized marijuana market....MORE
Here's the Playing for Change | Song Around the World version of Mr. Marley's One Love:

Previously on the ganja channel:

"Peter Thiel's Founders Fund becomes first institutional investor in marijuana"
Frontrun the Dopers: "These 4 States Will Reform Their Marijuana Laws in 2013"
"Is Monsanto Ready to Enter The Medical Marijuana War?" (MON)
In the Wake of Colorado and Washington State Legalization, Time to Think About Pot-enomics
Here Comes Crop Insurance For Your Dope
The Audacity of Dope: "Oakland ready to approve four marijuana factories"
6% of all power produced by BC Hydro is used to grow marijuana.
If Farm Investing Conference Agenda Is Any Indication, Marijuana Prices Are Going to Zero
Bread and Circuses: Chicago City Council Votes to Decriminalize Marijuana, 43-2
"The Coming Age of Corporate Cannabis"
"Hedge Fund Managers Smoking Out Opportunities In Emerging Market Of Legalized Weed "
As soon as one 'Uber for weed' startup gets cut down, another grows in its place
"The Geography of Pot Prices"
Attention Homeless Dopers: New Berkeley Ordinance Requires Dispensaries to Hand Out Freebies
Considering the co-morbidity of schizophrenia and pot use and schizophrenia and homelessness this is probably a good idea.
For Berkeley

And many more. Use the search blog box if interested.