Despite the billboards and bubbler of attention for cannabis businesses, Tyler Autera, the co-founder and COO at Cannalysis, thinks it is one of the hardest times to grow a startup within the industry.
“Regulation and compliance has brought on, in most cases, the need for larger amounts of capital from the start, which can be more difficult to come by,” he told Crunchbase News. “Expenses are higher for legal, licensing and compliance work that is now needed at the onset.”
Regardless, those complexities have brought more mature investment options.
“In the early days, [cannabis investment] was mostly angel investors/high net-worth individuals, small family offices, and small cannabis-specific VC funds,” Autera said. “Now, you see larger and more sophisticated players: large established VCs and institutional capital, coming into the space.” It means there are less people willing to make riskier investments, he added.
In this piece, we’ll get into Autera’s claim of how the investment scene is maturing, and see how that impacts the ever-changing intersection of cannabis and technology.
A Budding Industry
As Savannah Dowling pointed out in our last pulsecheck on this greening industry, a cannabis company isn’t just one that handles the flower or bud; it’s the auxiliary businesses as well. Those include ventures that help with transportation, packaging, regulations, and more. For example, Cannalysis is an accredited cannabis testing facility.
With that nuance out of the way, let’s dive into the numbers.
According to Crunchbase data, funding for cannabis companies has slowed down dramatically from some super giant rounds from 2018. Deal size has also decreased significantly. It is notable that private market reporting lags may account for the quarter-over-quarter decline.
Published: September 19, 2019
Founder & Interim Editor of L.A. Cannabis News