The COVID-19 Pandemic: Cannabis Becomes A Profitable Business In The United States, Is Seen By Famous Investors

JAKARTA - The legalization of marijuana use in the United States has made marijuana a profitable business commodity during the COVID-19 pandemic. This has prompted industry players and investors to take an eye on this business, especially when the economy reopens.

Data from the National Conference of State Legislatures said that 36 states and the District of Columbia have approved the medical use of marijuana. Of these, 15 states and DC have approved recreational use of marijuana.

This moment is also felt by cannabis-related technology startups, which allow the delivery of potted cannabis plants to your home, growing rapidly, attracting investors. It can provide tools for cultivation to compliance and e-commerce software for industries that are still operating in the gray zone federally.

Marijuana entrepreneurs admit they have to move fast and build their brand, before the entire United States legalizes marijuana, increasing competition as more and more people turn to the business.

“Why would you go to Weedmaps (for a list of cannabis retailers) if you could go to Yelp? Why would you order through this system or that if you can order through DoorDash or Uber Eats ?, ”asked Steve Allan, CEO of The Parent Company (TPCO), told Reuters.

TPCO is not an ordinary company working on the marijuana business. There is the name of the rapper and celebrity Jay-Z behind TPCO as the visionary head. TPCO, which was launched in January this year, wants to consolidate the 'small players' in the cannabis business.

"TPCO has built its own e-commerce technology that can handle everything from business management to retail sales," Allan said.

In one of the largest venture capital deals in the sector to date, Oregon-based e-commerce platform Dutchie announced on Tuesday March 16 that it had raised US $ 200 million in a funding round, giving the company $ 1.7 billion in value. Union.

Dutchie investors include former Starbucks CEO Howard Schultz, NBA star Kevin Durant and DoorDash co-founder Stanley Tang. The company's online marketplace connects cannabis pharmacies with consumers, who can order home delivery.

Reuters has identified more than 90 private and public cannabis technology companies in North America, with total private investment in the first quarter at its highest level in 18 months, according to data compiled by PitchBook and Crunchbase.

In all, investors have poured more than $ 2.5 billion into cannabis tech startups since 2018.

Public investors also piled up. The special-purpose acquisition company, or SPAC, is targeting the broader cannabis industry to raise at least $ 4.3 billion by early 2021, with $ 1.7 billion of which is still waiting to be deployed, according to cannabis researcher BDSA.

The interest comes as shares of publicly traded cannabis companies, many of which are listed in Canada due to being banned from US exchanges, began to rebound after the brutal sell-off in 2019.

The BDSA said that over the past year the sale of legal marijuana for medicinal purposes and for recreation in the United States has increased by up to 45 percent.

"We are still in the very early stages of investing, said Harrison Aaron, investment analyst at Gotham Green Partners, a New York-based private equity firm with a cannabis-centered portfolio.

“We don't want everything to be (completely) legal today, because there is a lot of value in our company. And we want more time to build, "said Lenore Kopko, managing partner at Gotham Green.

Others believe getting into the cannabis industry may not be quick or easy for many big outside players.

"The legislation, regulation and flow of the cannabis supply chain creates complexity that is not built into software built for other industries," said David Hua, founder and CEO of Meadow, which sells compliance and operations software for cannabis retailers.

Cannabis seed funding in the sector has been led by a close network of investors who often co-invest with one another. The network includes Liquid 2 Ventures, led by former NFL midfielder Joe Montana and Casa Verde Capital, founded by celebrity Snoop Dogg.

Another company, Beverly Hills-based Arcadian Capital, has invested in more than a dozen cannabis tech startups. Boca Raton-based Phyto Partners has funded 10 companies, many of them as co-investors with Arcadian.

This network is sometimes followed by other well-known individual investors. DoorDash Tang and Twitch co-founder Justin Kan is among those supporting Oakland-based Nabis, a cannabis online marketplace for pharmacies that also has warehouses, delivery services, and online financing for retailers.

"There is another attraction for investors beyond direct business opportunities, data on new industries. For Arcadian, the burst of data generated by cannabis tech startups, provides a great mechanism for learning more about the industry," said Matthew Nordgren, founder of and managing partner of the company.

Socrates Rosenfeld, co-founder and CEO of Jane Technologies, creator of the e-commerce platform in Santa Cruz funded by Arcadian and Gotham Green, calls this a once-in-a-lifetime opportunity for technology companies, working in partnership with operators in this space to build and redefining how technology and analogue retail work together.