In today’s competitive world, there are two types of ventures that have really captured the interest of high-end ventures: marijuana and tech start-ups. There is a fast increase in the number of platforms especially for the former type of start-ups. Even Silicon Valley veterans have not been left behind in the financing of hemp. Why all the interest?
1. Potential for growth and innovation
The main reason for the spiking interest in the financing of hashish is the potential for growth and innovation. According to SFGate, the cannabis industry has shown a growth rate of 74% over the last year. It has become a $2.7 billion industry. The state of California accounts for half of the pot industry. If this drug is legalized in this state, the revenue in this industry will easily double.
2. Existing demand
Marijuana financing is further influenced by the fact that the industry is already fuelled by an existing demand. For instance, Founders Fund recently offered $75 million in funding to Privateer Holdings, a firm that has a number of cannabis investments. The Founders fund was started by Peter Thiel, a co-founder of PayPal, one of the largest online money transaction platforms.
Even celebrities have joined the bandwagon to finance this fast-growing industry. One of the celebrities who has done this is Calvin Broadus, Jr., Snoop Dogg. He is said to be putting together a $25 million special fund with the sole purpose of investing in hashish startups.
3. Correct timing
The timing is indeed right for investment in this upcoming industry. There is venture funding from different sources. The startups in this niche are referred to as potpreneurs. One of the largest marijuana startups, Leafly, which offers a platform for the review of various strains of hashish, has raised more than $12 million in marijuana funding from over 100 individual investors. This company is licensed by the state of Minnesota. According to CrunchBase, there were about 30 venture investments in marijuana startups.
There are already a number of states that have legalized cannabis. If more states follow this trend, there will certainly be an increase in funding in this potentially lucrative industry.
Despite the potential for growth and innovation in this industry, there are a number of challenges:
Marijuana financing could be affected if there is a reduction in the number of states that legalize this drug.
Since cannabis is still illegal at the federal level, money earned from cannabis cannot be banked. The growers and vendors have a lot of cash on hand, which increase the risk of theft. However, an entrepreneur founded MPS international, an armored-courier service. MPS is designed to serve legal marijuana dispensaries which need to transport pot and cash. According to MPS CEO, Michael Julian, some of their clients make between $200,000 and $300,000 monthly. They have nowhere to keep all the money. This is where MPS comes in. It transports and securely stores all the green. Most of the employees in MPs have a background in law enforcement.
Another way MPS helps potpreneurs is by removing the smell of bhang from the money. They literally wash the money. They use a machine that removes the molecules of hemp to ensure that it does not have the smell of cannabis.
Marijuana financing is on the rise, and this trend is likely to continue. In a few years, the pioneers might be billionaires.