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Sand Hill Road Joins Private Capital Flooding Into Marijuana Startups

The Wall Street of venture capital has been slow to invest in cannabis but that is clearly changing.

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The news last month that Bob Marley's son, Damian Marley, and a Los Angeles-based venture capital company have purchased High Times magazine for $70 million is the latest in a string of large private investments in the cannabis industry.

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How large? The total of private capital moved into the cannabis business reached almost $2 billion between January 2016 and April 2017, according to cannabis business analysts New Frontier Data and Viridian Capital Advisors. More than $730 million was raised in the first four months of 2017 alone.

This comes despite vague threats from members of President Donald Trump's administration, and Trump's continued silence on the issue, that have led some to fear a federal crackdown on the marijuana industry.

Related: New Study Finds Cannabis Reduces Seizures In Epilepsy Patients

Silicon Valley moves in.

Up until the last couple of years, much of the VC money came from outside Silicon Valley. Groups such as Casa Verde Capital, a Los Angeles-based fund backed by Snoop Dogg, and Oakland-based Gateway have stepped in to fund marijuana tech companies.

While venture capitalists on Sand Hill Road pride themselves on backing cutting-edge startups, they have been cautious given marijuana's illegal status at the federal level. However, that's changed in the past two years. Deals in the past couple years involving both marijuana and tech include:

  • San Francisco-based Founders Fund, co-founded by Peter Thiel, investing in Seattle-based Privateer Holdings, which focuses on marijuana businesses
  • Y Combinator investing in Confident Cannabis, a company that creates software for marijuana-testing labs, and Meadow, which provides software for dispensaries and delivery services. Y Combinator helped fund development of Airbnb and Dropbox.
  • DCM Ventures, with offices on Sand Hill Road for two decades, investing in San Francisco-based marijuana delivery company Eaze.
  • Sand Hill Angels Inc. recently put $200,000 in Tradiv, a wholesale marijuana online marketplace.

With one-third of all the investment capital in the world coming out of Silicon Valley, these investments indicate an important shift for the marijuana industry.

High Times and L.A.

The High Times deal shows how investors, particularly in California and Colorado, are not waiting around to see what the Trump Administration will do, similar to how states and cities are moving forward with the Paris climate accords without federal government backing.

Oreva Capital led the deal to purchase 60 percent ownership of High Times. Based in Los Angeles, Oreva is run by Adam Levine, the former chief executive officer of social media site Bebo. Oreva typically works in turnarounds, buyouts, growth and capital restructuring. In addition to High Times, Oreva has investments in Fatburger and Boxlight.

Related: 5 Lessons Entrepreneurs Can Toke on From Tommy Chong

In addition to Marley, the group of investors included Snoop Dogg and Denver Relief, the marijuana dispensary chain based in Colorado, according to the San Francisco Chronicle.

High Times had recently moved to Los Angeles, leaving its long-time home in New York City. At the time the move was seen as another sign that California in general and Los Angeles in particular are becoming the capitals of the marijuana industry.

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