The fierce competition for capital in the fragmented and quasi-legal cannabis industry has given rise to hope this week for the CannaVest conference of the National Cannabis Industry Association.
"In the future, we expect considerable growth," said Roy Bingham, managing director of BCD Analytics, at a roundtable. "I can not think of an industry of significant size in which we trust this type of growth rate, except when we return to the beginnings of the Internet."
According to BCD and Arc View Market Research, total legal cannabis spending in 2018 reached $ 12.2 billion. Businesses expect spending in 2019 to reach $ 16.9 billion and $ 17.1 billion, respectively. Leisure sales are expected to fuel most of the market growth, compared to sales of medical products.
The expected growth will be much easier for companies already present.
"The barriers to entry into regulated cannabis are extremely high: capital barriers, barriers to expertise," said Michael Dundas, CEO of Sira Naturals, at Yahoo Finance. "After starting our business – and we started as small as you can be – it felt very, very difficult."
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"Capital in the cannabis industry is quite expensive because you do not have the option of using traditional banking means," said Paul Penney, general manager, senior research analyst, Northland Capital Markets.
Scott Fortune, Equity Analyst at Roth Capital, said his company was beginning to consider potential financing from California companies looking for investment opportunities, although it uses a measured approach as marijuana is classified as illegal substance by the federal government.
"We have seen this industry begin to mature for years, but we have been cautious because of the regulatory legal framework," Fortune said.
Smoke Wallin, president of Vertical Companies and CEO of its Vertical Wellness spin-off company, said his companies had raised about $ 60 million, although it decided to separate marijuana and hemp assets in order to avoid obstacles in the market. funding.
"With the adopted Farm Bill of 2018 and the law promulgated by the President in December, this essentially allows us to take all the assets of hemp and CBD, to separate them from the cannabis side, and to really have access to traditional institutional capital and downstream capabilities. road to take this public company, "he said.
"We raised $ 60 million for our business," said Wallin. "But that's it, it's great, but it's a lot of work getting so much money with these little checks."
Access to capital
Dundas's Sira has launched an accelerator program to help small cannabis businesses without a license. The program allows "micro-cannabis" companies to use the company's processing facilities, laboratories and distribution network, and provides them with cannabis raw materials. In October, Sira announced that it would be acquired by Cannabis Strategies Acquisition Corp. (CBAQF), an acquisition company based in Toronto.
The incubator is one of the few workarounds available for novice entrepreneurs needing to reduce their costs and access capital, as conventional lenders remain on the sidelines, respecting the company's needs. federal ban on marijuana.
The biggest hurdles for "plant-related" cannabis companies – those selling plant-derived products, as opposed to peripherals such as Vape pens, software and manufacturing equipment.
"I really think the next big step forward is CBD," said Lisa MC Thomas, Executive Director and Associate Director of Research for Cowen and Company, adding that the caveat "Nothing in this area is simple ".
A sub-committee of the US House of Representatives Financial Services Committee held a hearing on Wednesday to examine access to banking services for cannabis-related businesses.
Yahoo Finance's Jessica Smith reviewed a discussion paper suggesting that federal bank regulators refrain from discouraging, banning or penalizing deposit-taking institutions that serve legitimate marijuana-related businesses.
<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Ask what it would take to" touch the Bobby Burleson, equity research analyst, Yahoo Finance's Canaccord Genuity, told Yahoo Finance's Andy Serwer: "It would probably require a change in the federal law that is visible enough to boost the confidence of banks and investors. the big institutional investors … who do not touch it at the moment. "Alexis Keenan is a NYC-based journalist for Yahoo Finance. Previously, she was producing live information for CNN and was a former litigator. Follow her on Twitter at @alexiskweed"data-reactid =" 34 "> Asked what it would take for" plant-related "cannabis companies to trade on the NYSE or NASDAQ, Canaccord Genuity, equity analyst Bobby Burleson, said Yahoo Finance's Andy Serwer has announced that it is changing the federal law sufficiently to strengthen the confidence of banks and stock exchanges and, of course, large institutional investors … who are not touching it at the moment. "Alexis Keenan is a NYC-based journalist for Yahoo Finance. Previously, she was producing live information for CNN and was a former litigator. Follow her on Twitter at @alexiskweed
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