Report: Cannabis Startups Did Not See as Much Green as You Would Think in 2016

Article by Gedalyah Reback, Geek Time

nugs of cannabis pouring out of a jar

Marijuana-related startups have seen a leveling off in funding in 2016, with a late rally in the fourth quarter, according to a report from information service CB Insights.

The CB Insights report implies the industry might be seeing only a temporary slump given the nine legalization measures that passed in the United States in November 2016.  Six IPOs over the last two years from companies like MassRoots and Innovative Industrial Properties (IIP) have buoyed talk of growth. But to limit analysis to the United States would miss out on developments around the world.

“Cannabis funding saw a 9 percentfunding decrease from $225 million in 2015 to $220 million in 2016. Deal flow also fell, down to 96 in 2016 from 106 in 2015, also a 9-percent decrease,” the report explains, both years still well outpacing 2014’s 64 deals worldwide worth only $117 million. What the numbers show though is very few companies breaking out over the last two years. Privateer’s rounds in each of the last two years constitute the largest rounds of their respective quarters. They themselves are an industry-focused private equity investor with only three portfolio companies: Leafly (acquired in 2011), Tilray, and Marley Natural.

Medical cannabis-oriented and Snoop Dogg-backed startup Privateer Holdings led the rally with a $40 million round in December, adding to a $75 million Series B financing round the company announced in April 2015 (but considered a Q1 2015 deal by CB). The other two big rounds in 2016 included cannabis inhaler producer Syqe Medical (Israel) at $20 million (though some report as high as $30 million) and investment management service MedMen (California) at $15 million. The Green Organic (Ontario), therapeutics company Surterra Holdings (Atlanta), and HR tech startup Wurk (Denver) added to the fourth quarter $81 million total observed by CB Insights across 25 deals.

Removing the Privateer deal cuts fourth quarter of 2016 in half to $41 million on 24 deals, still relatively doubling the value of investments over Q3’s 21 deals and $21 million. The true peak of activity was in Q4 2015 when 32 deals produced $71 million in money changing hands. The last quarter of 2016 can be called somewhat of a recovery with 25 deals following three straight quarters ending with fewer deals than the last.

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