Why now is the time to invest in marijuana
This is an exciting time to invest in cannabis as a generational wealth creation opportunity. With the legal cannabis industry expected to grow to $100 billion by 2030, the investment opportunities are huge.
Key reasons to invest in marijuana now
Cannabis is a market where consumer demand already exists, but lacks Professional Venture Capital to support business growth. As a result, cannabis businesses are actively looking for investors, which is a huge opportunity for smart angel investors.
Consumer demand already exists
Because of the demand, investors are essentially investing in the transition of the $75 billion (US) per year illicit (“informal”) market to the legal (“formal”) market. In the U.S., legal marijuana sales are expected to reach $23.6 billion in 2021, less than a third of the estimated annual sales in the informal market. Growth is guaranteed as users look to change their buying habits and accept the quality control of the formal market.
Lack of professional institutional venture capital funds
The lack of institutional investors, loan capital, and specialized venture capital in the cannabis industry creates a supply-demand imbalance that results in a buyer’s market.
Today, there are about 35 early and growth stage funds with total assets of about $700 million. In addition, there is some family office capital chasing this space. While angel investors, private equity and venture capital are on the rise, they still represent only a fraction of the funding needed in the industry.
What is the focus of being an angel investor right now?
Savvy cannabis investors are looking for many opportunities. Here are five areas of focus:
1. The cannabis consumer of the future
The future of the cannabis industry is not limited to consumers who have already consumed it. Additional growth will come from consumers who have not yet consumed.
Consider a health-conscious soccer mom who trades her evening glass of wine for a low-calorie, sugar-free, low-dose cannabis drink. Savvy investors are looking for companies that serve these new consumers with innovative product experiences and new formats.
2. Monomorphic or bimorphic operators
Investors focused on high-performing operators with operations in one or two states that could be acquired by larger multistate operators.
The top publicly traded multinational operator (MSO) has been acquiring cannabis businesses across the country while significantly increasing revenue and turning a profit. Tier 2 MSOs are aggressively expanding their reach and M&A is becoming more frequent. All of this adds to more opportunities for cannabis investors.
3. Defensive positions in the supply chain
Investment opportunities can be found throughout the cannabis supply chain, and investors are looking for companies with competitive advantages that cannot be easily replicated.
These companies have developed a unique process, product or service that puts them in a position of being easy to maintain. Such a company may have valuable intellectual property — patents, trade secrets, trademarks or copyrights — ensuring it has exclusive rights to protect its competitive advantage over an extended period of time.
4. Redefine medical marijuana
The medical marijuana market is under threat from both the adult-use market and the pharmaceutical industry, which wants the U.S. Food and Drug Administration to treat cannabis as a drug.
However, smart investors predict that medical marijuana will be redefined and create a growing over-the-counter (OTC) business.
As a result, investors are examining how the repositioning of the healthcare market can create growth and invest Chance.
In the near future, New Jersey, New York, Connecticut, Rhode Island, Pennsylvania, and Virginia will all have open and thriving adult-use markets. High population density ensures that the Northeast will represent the next major cannabis market.
Businesses in these states are scrambling to raise capital, and new brands are about to debut, which will present a huge opportunity for investors.
Cannabis investment opportunities abound
As we head into 2022, all signs point to the time to continue or start investing in cannabis companies. Yes, there are challenges in investing in this space, but growth should outweigh these risks.
Still not sure if now is the time to invest? Think of it this way. The market will grow in the short-term as more states introduce new medical and adult-use programs, and is expected to witness significant growth in the long-term through federal legalization, social normalization, and expanded state programs.
The picture is clear. Now is the time to invest in marijuana.