How to Invest in Cannabis Startups • Benzinga

Looking for cannabis Startups to invest in? We’ve compiled some of the best startup investment opportunities for you to consider.

Benzinga’s Favorite Cannabis Startup

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WebJoint

Minimum Investment: $238.14

Open to Non-Accredited Investors?: Yes

When it comes to investing in startups, one thing is true no matter what the industry is: The earlier you get involved, the more money you will make if the industry begins booming. This is one of the reasons that investing in startups of almost any kind has so much allure. Who hasn’t let their mind wander and thought about how much richer they would be right now if they’d bought shares of a startup before it was chic for investors?

As hard as it is to believe, Weedmaps, Leafly and a whole host of other companies that are now leading players in the marketplace were once just startups in need of funding. That means there are other startups out there just waiting for seed money before they become the next big thing. 

Right now, one of the most booming industries for startups is cannabis-oriented businesses. 

Back in the late 1990s, when California legalized medical cannabis, few people could have imagined that 20 years later, there would be cannabis-oriented companies trading on the Nasdaq Stock Market and the Canadian stock exchanges. A number of regulatory hurdles still must be cleared, but as more states legalize recreational and medical cannabis, opportunities for cannabis startups will continue to grow. 

Take 4Front Ventures (OTCMKTS: FFNTF), which was a startup in 2011 and is now trading on stock exchanges in the U.S. and Canada. There is even a real estate investment trust (REIT) — Innovative Industrial Properties Inc. (NYSE: IIPR) — that owns, operates and manages industrial properties for legally licensed marijuana grow operations. Cannabis startups are such a new field that there are almost limitless options to invest in. From straight grow operations and edibles to CBD oil, startup cannabis operations are in full swing. Maybe that means it’s time for you to consider getting on board and investing in a few cannabis startups. 

Why Invest in Cannabis Startups?

When medical cannabis was first legalized in California in the late 1990s, it flew right in the face of federal law. Almost immediately, medical cannabis dispensaries began popping up all over Los Angeles, San Francisco and many other large cities in the Golden State. No sooner did that happen than news stories began running about Drug Enforcement Administration (DEA) agents bursting through the doors and arresting dispensary employees for violating federal law. 

In short, the whole thing looked like it wouldn’t get off the ground. Fast forward 20 years, and 38 U.S. states and the District of Columbia have legalized cannabis on a medical or recreational level. While it’s still illegal to cross state lines or enter the U.S. with cannabis, the federal government has basically taken its hands off the wheel and allowed individual states to determine their own marijuana policies. 

Now, there are even congressional representatives from conservative states pushing for an even more relaxed federal cannabis policy. Former house speaker John Boehner is heading up a lobbying effort on behalf of cannabis legalization. Most recently, U.S. Rep. Nancy Mace (R-South Carolina) introduced the States Reform Act, which would allow the federal government to regulate cannabis sales in much the same way it does alcohol, albeit with a 3% excise tax. 

The legislation may not pass, but the trend is clear. Cannabis legalization has gone from a fringe idea in California to something that even hardcore conservatives are beginning to realize is inevitable. What that means for investors is that there is tremendous growth potential in cannabis businesses and startups of all kinds. 

Think of it like this: How rich would you be right now if your great grandfather owned stock in Seagrams Co. Ltd. the day before prohibition ended? Exactly. That’s why you should seriously consider investing in cannabis startups right now.

Where To Find Cannabis Startups

If you’re fortunate enough to live in a state like California, which is at the tip of the spear on cannabis culture innovation, there may well be some startups you know of personally. If not, you can also check out social media or other local investing groups. However, both of these approaches will be hit or miss. 

One of the best places to find cannabis startup opportunities is the same place you might go to find the best startup opportunities in any field: online crowdfunding platforms. The advantage of finding cannabis startup opportunities on established crowdfunding platforms is that most of these platforms are headed by established financial professionals. That means they’ve more than likely vetted most of the startup offerings and made sure their business models were solid and that the startup itself is on proper regulatory footing.

Specifically, Republic has funded numerous cannabis startups in a variety of cannabis-related fields, including edibles and even dog treats. Republic currently has an intriguing offering called NatureTrak, which markets software designed to help cannabis businesses with banking compliance. StartEngine, another online crowdfunding platform, is currently raising funds for WebJoint, which specializes in cannabis delivery software. 

CannaFunder and Fundanna are crowdfunding platforms that focus exclusively on cannabis startups. Alumni Ventures is another solid crowdfunding platform that sometimes has offerings in cannabis startups.  As you can see, the trend toward legalization or decriminalization of cannabis (or CBD) has created an environment where lots of startups are seeking funding. Best of all, you can find these opportunities relatively easily on several well-established crowdfunding platforms. 

Best Cannabis Startups to Invest in

Benzinga has picked three cannabis startups you may want to consider looking at.

Eastcoasterdam Gardens

Eastcoasterdam Gardens is committed to providing the adult-use market with high-quality artisanal cannabis flower and non-solvent products.

The Company: Eastcoasterdam Gardens is a fully integrated cannabis production and extraction enterprise in northern Massachusetts. With over 40 years of cannabis industry experience in various areas, the startup is committed to offering high-quality artisanal cannabis flowers and other related solventless products.

Eastcoasterdam Garden’s core team includes business professionals with experience in cultivation, microbiology, molecular biology, manufacturing, distribution, sales, legal and business development. For the past decade, the company has been intensely active in the recreational cannabis industry, cultivating solid strategic partnerships in distribution, marketing, the press and regulatory channels.

Investment Highlights: Eastcoasterdam is looking for investors to build and launch the EastCoasterDam Gardens Cultivation Facility & Brand in Massachusetts.

The investment campaign will allow initial investors to join in the success by receiving an annual percentage of Eastcoasterdam’s gross revenue as the company grows. The startup aims to build out and expand the project.

View offering on Mainvest

Apex Noire

Apex Noire has been developing its cannabis retail shop go-to-market strategy for over 2 years, establishing partnerships through appropriate regulatory channels and aligning with key stakeholders to deliver the most successful launch possible.

The Company: Apex Noire is Boston’s first full-service experience cannabis retail shop, located in New England’s extensive tourist hotspot. Apex Noir is a black-owned business with a diversified management team with experience in regulatory, financial, retail and operational aspects.

Investment Highlights: Apex Noire’s goal this year is to process its provisional license while running its investment campaign, allowing everyone in Greater Boston to participate in the startup’s success. Apex Noire has a Provisional License and is working towards getting its doors open.

View offering on Mainvest

I&I Rose Garden

I & I Rose Garden LLC is looking for funding to open the world’s first cannabis vegan bakery and apothecary. 

The Company: I & I Rose Garden has blossomed into a progressive, vegan Black woman-owned cannabis lifestyle brand since its establishment in 2017.

The company aims to provide the thoughtful consumer with delectable vegan cannabis goods and high-end experiences. In addition, I & I Rose Garden’s purpose is to help diversify the cannabis industry’s landscape and consciously transform the market to include, represent and empower women of color.

Investment Highlights: With federal legalization on the horizon, Massachusetts’ cannabis market could be worth $1.35 billion and more. I & I Rose Garden LLC’s objective is to take up, educate and boost the whole range of cannabis wellness.

The company plans to establish several revenue streams and satisfy unmet consumer demand for thoughtfully produced vegan cannabis products by wholesaling a focus range of products to dispensaries and providing a unique customer experience in our own shop.

View offering on Mainvest

Choosing Which Startups To Invest In

It’s one thing to have a lot of options, but it’s another thing entirely to know which of those options to choose. The good news is that the fundamentals of investing in cannabis startups are basically the same as investing in any startup. It all starts with due diligence.

When you look at an offering, don’t just focus on something that seems cool or trendy, such as a neat-looking edible or a CBD product with a cool package. These are still businesses, which means you’ll want to focus more on the numbers presented in the prospectus than anything else. 

What is the minimum investment? How long is the hold period? Do the founders of the startup have a successful history in cannabis businesses? Does the startup have products it can sell in states that have legalized both recreational and medical cannabis?

Once the due diligence is done, you still have to think about risk. Even though the long-term outlook for cannabis is good, it could still be several years away from legalization. So, if your chosen startup depends on legalization, your risk level automatically goes up. The best way to manage that risk is by adopting the same strategy smart investors use when investing in anything: diversification. 

You would probably be better served by spreading your bets around and putting small amounts of money into several startups than you would by going all-in on one particular company that strikes your fancy. 

Will Cannabis Startups Spark a Revolution or Flame Out?

There can be no doubt that the future of the cannabis industry looks bright. However, you must keep in mind that’s because federal drug policy has preemptively served to snuff out the future of any cannabis-oriented business for basically the last 100 years. That certainly seems like it’s about to change — if even on a state level.

What all that means for you as an investor is that there will be a lot of startup opportunities in cannabis. If you’ve made the decision to invest in cannabis startups, you still need to take a calculated look at the underlying fundamentals of the business and figure out how much risk you can tolerate. When you’ve made that equation and you still like what you see in a cannabis startup, make your bets and hope for the best. 

The key thing to remember is that you’ve got to focus on the nuts and bolts of the business and not just the cool factor that comes along with saying you own shares in a cannabis startup. Even when Tommy Chong was selling his custom bongs, he was still running a business that was focused on turning a profit. The same holds true when you are investing in a cannabis startup. It’s about making money, not being cool or hip. If you let that mindset be your guide, there is no reason your investments in cannabis startups won’t turn a smoking profit for you.

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