Lately, my inbox has been chock-full of pitches for weed businesses.
A couple of years ago it was bitcoin/blockchain startups, then came scooters; now, it seems “CannTech” is hitting an all-time high thanks to support from venture capitalists. By the way, I didn’t make up the term CannTech, but it seems just as good as anything else, so I’m rolling with it.
According to data collected by PitchBook, VCs have put $1.2 billion in U.S.-based cannabis companies so far in 2019. That’s significantly more than last year’s record high of $836 million, and we aren’t even halfway through 2019.
At this rate, we can expect roughly $2.5 billion invested in CannTech in 2019, i.e. more capital invested in the space in a single year than has been funneled into the space in the last decade.
What’s going on? A few things. Of course, states are increasingly legalizing medical and/or recreational marijuana. That’s allowed companies like Eaze, a marijuana delivery company, to grow at unprecedented rates. The startup, for example, closed its Series C in December on $65 million and is already fundraising again, this time at a $500 million valuation.
In addition to legalization, VCs, and more importantly, limited partners, have woken up to the business opportunity of cannabis. Soon, gone will be the days of strict morality clauses that dissuaded VC firms from supporting startups focused on weed. The firms that were early to understand the space, like DCM Ventures or Snoop Dogg’s Casa Verde Capital, will reap the benefits.
Speaking of DCM, the firm put on a huge, first-of-its-kind summit this week focused on CannTech: “For three years I was struggling with a lot of pain issues,” DCM co-founder David Chao told the audience. “One day I was playing Xbox with Blake Krikorian [co-founder of Sling Media] and I said ‘you know Blake, I have this pain problem’ and he said, ‘oh, you should try pot.’ And I said ‘why should I do that? I haven’t smoked since college?’ “
Long story short, Chao can thank his friend Blake for making him aware of an exploding market, and he can thank DCM’s scrappy partner, Kyle Lui, for helping the firm score some major investments in the space, like Eaze.
“We were the first Sand Hill VCs to invest in cannabis and everyone started calling me saying ‘you’re crazy, why are you doing this?’ ” Lui said.