Gone to pot: 5 PE investors raising capital for cannabis

June 27, 2016 View comment (1)

With either recreational or medical marijuana now allowed in some form in half the U.S. states (plus the District of Columbia), the arc of history is bending sharply toward widespread cannabis legalization. And as you might imagine, that means private equity is taking an increasing interest, with more and more firms raising greenbacks to invest in green plants.

The latest development comes out of Los Angeles, where cannabis-focused management company MedMen has partnered with Wicklow Capital to raise a $100 million PE fund that will pursue strategic investments in legal marijuana. MedMen claims to have helped more than 100 business get up and running since 2009, the sort of baked-in knowledge that’s particularly critical for an industry navigating complex federal and state regulations.

Between MedMen and Privateer Holdings, which in 2015 raised $75 million from Founders Fund to make private equity investments in marijuana companies, PE dollars are streaming into the industry. Here are some of the other financiers focused on cannabis cultivation.

The investors

KIND Financial has two primary offerings for the cannabis industry. The first is Agrisoft, the company’s so-called seed-to-sale software, which allows companies and regulators to track marijuana products through the full chain of custody, ensuring no irregularities or illegalities. The second is a fund that provides investment capital for emerging companies in the space.  

Tuatara Capital was founded in 2014 to invest exclusively in legal cannabis, seeking companies with strong financials that are positioned to transform the industry in one way or another; early investments include Willie’s Reserve, the brand of country singer Willie Nelson. A regulatory filing dated April 20—we're not kidding—indicates the firm has raised more than $37 million for its debut fund.

For the past 42 years, High Times has published a monthly magazine covering all things cannabis. In 2014, the company announced plans to raise a $100 million private equity fund to invest in the industry; while the vehicle is currently inactive, High Times plans to resume fundraising efforts later this year, according to reports.

The marijuana industry is even drawing some more traditional investors looking to expand their strategies. Since its founding in 1996, Dutchess Capital has invested in a diverse array of industries, including energy, healthcare and IT; in 2012, the firm unveiled a new focus on legalized cannabis as a self-described “activist, principal investor.” Among the firm’s investments is a $475,000 early-stage financing of MassRoots, a social network for the legal cannabis community.

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