Money in cannabis industry
Cannabis is one of the fastest-growing industries in the world. As a boom is being predicted, huge amount of money flows into cannabis industry. The global market is expected to reach $197.74 billion in 2028. With the increasing demand, startups in the sector have emerged. So, they are looking for ways to secure financials to grow their businesses. Thus, venture capitals are more and more interested in the cannabis sector. According to a recent report by Sifted, there are currently over 200 cannabis startups in Europe, with more popping up every day. While the market is not yet as mature as in North America, it is becoming increasingly attractive to investors. However, financing cannabis startups in Europe is not without its challenges.
A report from cannabis consultants (Hanway Associates), in cooperation with a global law firm (DLA Piper), a Swedish fund (Enexis AB) and a London investment bank (Hannam & Partners), shows that VC is becoming more and more interested in this branch. The report uses information from Crunchbase and Seedrs.
What’s the current situation?
Most investment institutions and banks still are doubtful and do not feel secure in this sector. The main obstacle are different regulations in many countries, which makes it difficult for banks to provide funding. The banks are often hesitant to work with companies in an industry that is not yet fully regulated. To overcome this challenge, many cannabis startups in Europe are turning to alternative sources of funding. These are venture capital and private equity. In 2021 venture capitals accounted for the largest share of the volume of investments in cannabis companies since 2008. Even so, the report highlights that the high volume of VC funds in this sector is a relatively recent development. By 2019 investment in cannabis companies largely came from business angels and high-income individuals.
The report also points out that taboos such as cannabis often offer great opportunities for so-called early players. These types of investors more often more take risks in emerging industries and are able to provide relevant funding. Due to institutionalized prejudices only some investors and entrepreneurs are interested, but the ROI can be huge.
Who invest most money in cannabis market? UK and Germany at the front
According to recent data, the UK is the most interesting market in Europe for investments in start-ups related to the cannabis industry in 2021. The British Isles account for more than half of all investments in this sector. Second place takes Germany. The report found that European investments in cannabis start-ups were mainly focused in two main sub-sectors: wellness / cosmetics and medical applications. Investments in cosmetics may be due to the growing interest in CBD products and the fact that recreational cannabis is illegal in most European countries. The presence of CBD-based products is one of the biggest trends in the European cannabis industry. CBD, or cannabidiol, is a non-psychoactive compound in the cannabis plant which has a number of health benefits. As a result, there is a growing demand for CBD products in Europe, and many startups are positioning themselves to take advantage of this trend.
In addition to CBD-based products, there is also a growing interest in medical cannabis in Europe. Medical cannabis is effective in treating a number of conditions, such as chronic pain, anxiety, and depression. This has led to a growing demand for medical cannabis products. Thus, startups in the sector are looking for funds for development and positioning of these products. The report also highlights reforms on the approach to medical marijuana across Europe. It confirms allowance of some type of medical access to cannabis.
Delivery – new trend
Another trend in the European cannabis industry is the rise of cannabis delivery services. With the increasing demand, many startups offer delivery services to make it easier to access these products. This is especially important in countries with limited access to cannabis products. It allows customers to get the products they need without having to go to a pharmacy.
Finally, the European cannabis industry is also seeing the emergence of technology companies that are developing solutions for the cannabis sector. These companies are developing software and technology to help growers, processors, and retailers manage their businesses more effectively.
In conclusion, the European cannabis industry is rapidly growing, and there is a growing demand for funding to support the growth of these startups. While the lack of clear regulation in many countries is a challenge, investors are finding alternative sources of funding to support these businesses. As the market continues to mature, it is likely that we will see more investment in the European cannabis sector, which will help to drive growth and innovation in the industry. According to research, it is not only support from private investors that is accelerating the European cannabis industry. Europe’s governments support innovation in this sector. The more money will flow to cannabis industry from diversified investors, the faster development will be. And as investors are taking advantage of the industry’s chances, it looks like Europe is expanding the market, starting a competition with its American rivals.