Marijuana-related companies raised nearly $13.8 billion globally in the first 11 months of 2018 compared to just $3.5 billion in 2017. Most of these monies are not invested in U.S. marijuana businesses, yet venture capital investment in U.S. marijuana businesses is greater than ever and increasing rapidly, in spite of the U.S. federal prohibition of marijuana cultivation, distribution, sale and use. This paper will summarily discuss the anatomy of the U.S. private venture capital market for investment in marijuana businesses as of March 2019, and the legal issues driving both the reticence to invest on the part of the traditional venture capital community and the willingness to invest by a developing group of mostly small cannabis sector specific venture capital firms.


Public confidence in marijuana investment appears to be growing, probably caused in part by brewing legislative changes, including the U.S. Farm Bill’s federal legalization of hemp in December 2018 and Canada’s federal legalization of cannabis in October 2018. During 2018, investors invested about $9.7 billion in marijuana-related public companies and about $4 billion in marijuana-related private companies. Large alcohol and tobacco companies provided heavy investment in Canadian marijuana companies, for example, Constellation Brands (the international producer and marketer of beer, wine and spirits) invested $4 billion in Canada’s Canopy Growth, Molson announced a joint venture with Canada’s Hydropothecary Corporation and Altria (one of the world’s largest tobacco businesses) said it would invest $1.8 billion in Canada’s Cronos Group. Strategic mergers and acquisitions (M&A), in particular Canadian M&A, has increased public company valuations and expectations in the private investment community that returns will skyrocket, if the United States changes its federal law so as to legalize the production and sale of marijuana generally. Marketplace expectations are reflected in the increasing number of consolidation acquisition transactions, representative examples being announcements in October 2018 of iAnthus’ $835 million deal for MPX and Medmen’s $682 million deal for PharmaCann; and the Canadian Stock Exchange’s November 2018 report on financings whereby 20 new listings in November alone involved capital raises of more than $1 billion and a pipeline of 55 issuers stood in the queue.

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