Last year, venture capital investments in the cannabis industry grew to more than $1 billion. That milestone has already been surpassed in 2019, new research shows.
As of May 2019, venture capital firms have already set a new investing record, injecting $1.26 billion into 80 deals so far this year, according to new data from MGO | Ello’s inaugural review of private investments in the cannabis sector. MGO | Ello is an alliance between CPA and advisory firm MGO and cannabis-related investment banking and advisory firm Ello. The report used figures from investments data provider PitchBook.
Cannabis is now legal for both recreational and medical use in ten states, as well as the District of Columbia, the Drug Policy Alliance shows. And according to the report, the number is expected to grow, with federal legalization for both medicinal and recreational use seen as inevitable by some.
“We, and most market participants, are cautiously optimistic that a change in federal rules around cannabis is coming within the next one to three years,” said Evan Eneman, chief executive officer of MGO | Ello, via email. “Investments will accelerate if, and when, the federal government legalizes cannabis, and private investors who are either new to the industry or relative veterans are developing bullish investment theses and deploying capital into the industry in anticipation of this change.”
Venture capital firms have taken notice — and as the industry matures, the number of late-stage deals has grown.
MGO | Ello expects the number of late-stage deals to eclipse the number of early-stage deals for the first time in the industry in 2019. Just over $600 million was invested in late-stage deals through mid-May 2019, as compared with $530 million in early-stage deals during the same period, according to the report.
This is compared with 2018, in which $494.3 million was invested in early-stage venture deals, as compared with $430.4 million invested in later stage deals, the report showed.
This article was adapted from Institutional Investor