Pot sales are on the rise as more states vote to legalize marijuana medically, recreationally, or both. And this trend is unlikely to slow down as attitudes about the drug are evolving across the country. As of November 2020, cannabis is legal in 35 states and in D.C. for medical and/or recreational purposes—or both. According to Arcview—a cannabis market research firm—marijuana sales are rising across the country. Legal cannabis sales were $12.4 billion in 2019 and are expected to climb to $46.8 billion by 2025.

38%

The forecasted growth in legal pot sales for 2020, to an estimated $20.4 billion.

So it should come as no surprise that investors smell an opportunity. Legalization has opened doors for many businesses, especially startups dabbling in the data and technology aspects of legal marijuana. Although finding enough marijuana companies in the public equities space may be a challenge for the average investor, venture capital firms and private equity funds are raising hundreds of millions of investment dollars.

Key Takeaways

  • Marijuana is legal in 35 states and in D.C. for medical or recreational use—or both.
  • Legal pot sales rose to $12 billion in 2019 with a growth trend unlikely to slow down.
  • Some private equity and venture capital firms see this as a lucrative opportunity to invest and get in on the ground floor.

Privateer Holdings

Famously backed by Peter Thiel’s Founder’s Fund, this private equity firm became the first in the cannabis business to cross the $100 million mark in fundraising as it closed a $40 million round in 2016.

According to Crunchbase, Privateer has raised $228 million in four rounds of funding as of January 2018. The company made an investment in medical marijuana producer Tilray and acquired two companies—The Goodship, which manufactures premium baked goods and candy with infused weed, and Leafly, a pot-rating service which is often called the Yelp of the pot world.

Tuatara Capital

Founded in 2014, this private equity company has plenty to spend in the cannabis space. In August 2016, The Wall Street Journal reported that Tuatara raised $93 million to invest in the marijuana business, exceeding its own goal of $80 million.

It is the lead investor in singer Willie Nelson’s cannabis brand Willie’s Reserve and also backs TeeWinot Life Sciences, a biopharmaceutical company specializing in the production of cannabinoids. Tuatara also invested 3.3 million into Colorado-based extracts provider GreenDot Labs.

MedMen Capital

This venture capital firm is a part of the larger MedMen group which also dabbles in consultancy services for the cannabis business. For the investment business, MedMen partnered with Wicklow Capital, founded by former GETCO founders.

The company went public through a reverse takeover with OutdoorPartner Media Corporation—an unlisted company based in Canada—in May 2018. It trades on the Canadian Securities Exchange under the ticker symbol MMEN. As of September 2020, MedMed raised a total of $383 million in financing in six different rounds, according to Crunchbase.

Poseidon Asset Management

Poseidon Asset Management was founded in 2013 by siblings Morgan and Emily Paxhia. The fund reported $145 million in assets under management (AUM) as of March 2020. The company invests in areas like agricultural technology, SaaS solutions, and Data Analytics for the pot industry.

Salveo Capital

Chicago-based Salveo Capital is focused on services that support the legal cannabis industry such as licensing and branding, technology, software, financial payments and related services, and agricultural technology. According to the company's website, it also plans to invest in companies that are involved in cultivating and dispensing legal cannabis, as well as those involved in infusing the product.

Casa Verde Capital

This venture capital firm boasts of another high profile backer—Snoop Dogg, who is also the founder. In 2015, the company announced that it was looking for investors for a $25 million fund. According to Crunchbase, Casa Verde made a total of 22 investments, including several rounds of funding to Dutchie, an online platform that connects consumers and retailers in the cannabis industry. The company raised $45 million as of January 2018 and is the lead investor in Trellis, Green Bits, and a Colorado-based pot packaging solutions company called FunkSac.

Phyto Partners

This venture capital fund is focused on data and technology businesses for the cannabis industry. Phyto Partners raised a total of $14 million in one round of funding in June 2018. According to the company's website, the portfolio for the Boca Raton, Florida firm includes data analytics firm New Frontier, growing solutions firm Grownetics, and Leaf, a company that offers growth systems for cannabis. They're also the lead investor in Flowhub, a business management platform centered around the marijuana industry.