Founders Fund Invests in Cannabis Space, Backs Privateer Holdings
January 09, 2015
Founders Fund, a San Francisco-based venture capital firm that invests in sectors including aerospace, AI, energy, health and consumer Internet, has joined a $75 million Series B financing round for Privateer Holdings, a company that makes strategic acquisitions and investments in the cannabis industry. The Series B, which gives Privateer a $416 million pre-money valuation, is expected to close in a few weeks. Founders Fund partner Geoff Lewis reportedly led the firm's investment. The company previously raised $7 million of Series A funding from angel investors at a $25 million pre val in July 2013.
The investment is the first by an institutional VC firm like Founders Fund in a company that deals with recreational cannabis. Although the use of cannabis (marijuana) has been legalized medically in nearly half of U.S. states and recreationally in four (Colorado, Washington, Oregon, Alaska), the pot industry is still being avoided by traditional banks and investors because of its illegality at the federal level. Businesses that have launched since the legalization in certain states have found it impossible to get business loans from banks; and many VC funds are backed by LPs, many of which are government organizations, that likely don't support such investments. Still, as Founders Fund has proved, not everyone is reluctant to invest in this controversial space. And given the massive potential in the marijuana industry, the VCs that get in now could reap very high returns if/when their companies make it big.
To see a list of companies in the cannabis space that have received angel funding, as well as those focused on the medical marijuana market that have received VC backing, click here.