- REUTERS/Luisa Gonzalez
Welcome to Cultivated, our weekly newsletter where we’re bringing you an inside look at the deals, trends, and personalities driving the multibillion-dollar global cannabis boom. Sign up here to get it in your inbox every week.
A lot happens in a week.
First, a troubling trend: Cannabis companies – from the biggest publicly traded companies to venture-backed startups – have been cutting lots of jobs, close to 600 by my rough count.
On top of that, analysts have slashed their price targets for most of the companies in the sector as we gear up for a big week of earnings next week.
And second, where venture investors once saw green (excuse the pun) in cannabis tech, there are signs that the party is ending. The average deal size for cannabis industry VC-deals has shrunk over the first three quarters of 2019, and there are no signs that the trend will change.
In other news, I moderated a pair of panels at the swanky Luxury Meets Cannabis Conference on Tuesday. It was interesting to see the crossover of cannabis and cosmetics (an industry in which I am no expert), and how investors think there is some value to unlock there.
Here’s what we wrote about this week:
The once red-hot cannabis industry is coming back down to earth.
Over the past few weeks, cannabis companies – ranging from venture-backed startups like Pax to giants like CannTrust – have announced a series of job cuts, amounting to close to 600 laid-off workers in the sector as a whole.
There are unique reasons for the job cuts at each company, but industry analysts and experts say the operating environment for cannabis companies has entered a uniquely challenging phase.
We’re closely tracking the cuts.
Venture funds have poured close to $2 billion into cannabis startups this year. But top investors are starting to get wary as headwinds mount.
More mainstream venture capital is flowing into cannabis-related companies than ever before, but the industry is becoming less attractive as it faces headwinds, investors told Business Insider.
Through September, venture capital firms have already poured close to $2 billion into cannabis-industry startups, according to the data provider PitchBook. That’s up from just $17 million in 2013, right after Colorado became the first state to open its doors to the commercial cannabis industry.
Much of that money, however, has flowed into early-stage companies. For companies later in the growth cycle, there still isn’t much capital available because THC, the psychoactive component of cannabis, is federally illegal and the funds that have the ability to invest large sums into startups are still mostly on the sidelines.
Capital raises, M&A activity, partnerships, and launches
- Acreage Holdings and GreenAcreage announced the closing of a series of sale-and-leaseback transactions amounting to over $70 million.
- Tilray announced it has exported medical cannabis from Canada into the US for a clinical trial led by Columbia University Irving Medical Center.
- Snoop Dogg’s Casa Verde Capital led a $7 million financing round into Bespoke Financial, a lending platform for the cannabis industry.
- Canopy Rivers, the venture arm of Canopy Growth, has entered into a strategic alliance with Kindred, that gives Canopy Rivers’ portfolio companies access to Kindred’s brokerage marketing, and brand-building services.
- DetectaChem has launched a test to differentiate CBD and THC using its MobileDetect app, which will determine if a sample contains more than 0.3% THC.
- Cannabis and CBD company Toast has launched a line of CBD “slices” or cigarettes, that contain no THC or tobacco products.
- Kyle Barich is joining Holistic Industries as Chief Marketing Officer. Barich was previously the head of CDM, a healthcare advertising agency.
- Kevin Sarsany joins cannabis-focused Viridian Capital Advisors from The Spectrum Group, a Washington DC-based consulting firm.
- Dr. Ari Mackler joins Plus Products as the company’s chief science officer. Mackler was previously vice president of clinical development for The Wonderful Company.
Chart of the week
Despite challenges, it’s been a blockbuster year for cannabis venture investment. As of September 30, VCs have poured close to $2 billion into the industry:
- Shayanne Gal/Business Insider
Stories from around the web
Confessions of a legal pot dealer (Toronto Life)
How Sacramento failed to monitor its cannabis storefronts, as the FBI steps in (The Sacramento Bee)
Did I miss anything? Have a tip? Just want to chat? Send me a note at firstname.lastname@example.org or find me on twitter @jfberke.