News and Trends / Raising Money

3 Hottest Trends In Cannabis Start-Ups

Top VCs share what's catching their eye as the year comes to a close.
3 Hottest Trends In Cannabis Start-Ups
Image credit: Ronnie Kaufman/Larry Hirshowitz | Getty Images
Guest Writer
Co-founder and CEO of Leafwire
3 min read
Opinions expressed by Green Entrepreneur contributors are their own.

It’s not unusual for top fund managers to get 100-plus pitch decks in a month and to speak with dozens of aspiring entrepreneurs. VCs are on the front-lines of the cannabis start-up scene. For this reason, they have a keen eye for quickly spotting trends in the industry.

Here, then, are a few insights from some of the country’s most respected funds.

Related: 6 Things to Keep in Mind When Fundraising for Cannabis

California is on fire

With the start of recreational sales in California last January, a flood of new cannabis companies has hit the Golden State. No surprise considering that the state is home to 40 million people and an economy that, if a country, would have the 5th highest GDP in the world (even bigger than the UK). California does everything in a BIG way.

This has caught the attention of many VCs, including Matthew Nordgren, Managing Director of Arcadian Fund in Los Angeles. “Based on the size of California and the stage of California’s regulatory environment, we are consistently seeing entrepreneurs launching new businesses across almost every vertical in cannabis," he says. "People here in California can feel the excitement and energy of this new industry and a huge number of them are jumping in head-first."

Related: 3 Hottest Cannabis Trends in California

Brands are making their mark

When states first become legal, its consumers are usually happy to try any product, just to actually purchase cannabis legally. It’s still a novelty.

But as legalization becomes the norm and the industry matures, consumers start to gravitate towards specific brands, choosing their favorites. In this scenario, a strong brand becomes more vital in a consumer’s purchasing decision and a key driver to a product’s success.

What makes a strong brand? Piers Cooper, Managing Partner of Fresh VC, has noticed a focus "on diversity and depth of product offerings. Strong brands have to offer a variety of flavors, dosages, methods of application and continued growth in innovation to keep consumer’s interest in their brand,” he says.

Emily Paxhia, Managing Director of Poseidon Asset Management, agrees saying that, “branded products are exploding in California. But she warns, "If even half of these companies make it past year one, it will be an even more competitive space."

Venture Capital Is Out There

Even though federal regulations have not changed significantly yet, we are seeing states legalizing one by one, attracting new investors to cannabis. This has led to a growing pool of angel investors, family offices and venture capital firms -- while institutional investors are mostly sitting on the sidelines.

As the number of investors increases, entrepreneurs are at an advantage. Explains Nordgren, “Entrepreneurs now have a much larger world of capital to talk with. This can change deal dynamics significantly as more money comes into the space, and entrepreneurs have more options of where to take money from.” This is good news for start-ups, solid models, strong teams, and consistent execution. When you have more investors vying for an investment, you’ll have much more flexibility to impact or control the terms of the deal.

Related: Investment In Marijuana Industry Has Grown 600 Percent So Far in 2018

____________________________________________________________________________________
Please email me at peter@leafwire.com with any questions you’d like us to pose to either VCs or to entrepreneurs who have raised millions and can share their secrets to funding success.
By Javier Hasse
From retailers to growers, producers, and suppliers, there’s a seemingly never-ending list of startup opportunities in this emerging market. In Start Your Own Cannabis Business, marijuana, biotech, and entrepreneurship reporter Javier Hasse introduces forward-thinking entrepreneurs like you to the industry and shares hard-earned tips and success stories from pioneers and visionaries in the marijuana industry.
Learn More

Latest on Green Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to Queue next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to Queue next to any article to save to your queue.

Podcasts episodes coming soon for GreenEntrepreneur.com

There are no Podcasts in your queue.

Click on the Add to Queue next to any podcast episode on Entrepreneur.com to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

Entrepreneur Media, Inc. values your privacy. In order to understand how people use our site generally, and to create more valuable experiences for you, we may collect data about your use of this site (both directly and through our partners). The table below describes in more detail the data being collected. By giving your consent below, you are agreeing to the use of that data. For more information on our data policies, please visit our Cookie Policy.

Name Category
Google Ad Serving, Ad Targeting, Analytics/Measurement, Optimisation
Rubicon Ad Serving
Teads Ad Serving
Nativo Ad Serving
Teads Ad Serving
New Relic Analytics/Measurement
Log Entries Analytics/Measurement
Sailthru Content Customization