It is an exciting time to invest in cannabis as a generational wealth creation opportunity. The legal cannabis industry is expected to grow to $ 100 billion by 2030 and the investment opportunities are huge.
Key Reasons to Invest in Cannabis Now
Cannabis is a market where consumer demand already exists, but is lacking professional venture capital to support business growth. As a result, cannabis companies are actively looking for investors, which equates to important opportunities for smart angel investors.
Consumer demand already exists
Because there is demand, investors are essentially investing in the transition from an annual illicit (“informal”) market of $ 75 billion (US) to a legal (“formal”) market. In the United States, legal cannabis sales are projected to reach $ 23.6 billion in 2021, less than a third of the estimated amount sold annually in the informal market. Growth is assured as users seek to change their buying habits and adopt formal market quality control.
Lack of institutional and professional venture capital funds
The lack of institutional investors, loan capital, and professional venture capital in the cannabis industry creates an imbalance between supply and demand that translates into a buyer’s market.
There are currently approximately 35 start-up and growth funds with a total of approximately $ 700 million AU.M. In addition, there is some family office capital pursuing this sector. While angel investors, private equity and venture capital are on the rise, they are still a small part of what is needed to finance the industry.
Where to focus as an angel investor right now
Expert cannabis investors are looking for many opportunities. Here are five areas of focus:
1. Cannabis user of the future
The future of the cannabis industry is not limited to the consumers who already consume it. The additional growth will come from consumers who do not yet consume.
Think of the health-conscious football mom who swaps her wine glass in the evening for a low-calorie, sugar-free, low-calorie cannabis-infused drink. Smart investors are looking for companies that serve these new consumers with innovative product experiences and new form factors.
2. Single or dual state operators
Investors focus on high-performing operators with footprints in one or two states that are likely to be acquired by larger multistate operators.
Major multi-state public operators (MSOs) have been acquiring cannabis businesses across the country while dramatically increasing revenues and making them profitable. Second-level MSOs are aggressively expanding their footprints, and mergers and acquisitions are occurring more frequently. All this means more opportunities for cannabis investors.
3. Defensible positions in the supply chain
Investment opportunities can be found throughout the cannabis supply chain, and investors are looking for companies with competitive advantages that cannot be easily duplicated.
These companies have developed a unique process, product, or service that gives them an easy-to-defend position. This company is likely to have valuable intellectual property (patents, trade secrets, trademarks, or copyrights) that guarantees that it has an exclusive right to protect its competitive advantage for a significant period of time.
4. Redefining medical cannabis
The medical cannabis market is being threatened by the adult use market and the pharmaceutical industry, which wants the U.S. Food and Drug Administration to consider cannabis a drug.
However, smart investors predict that medical cannabis will be redefined and create a growing over-the-counter (OTC) business.
As a result, investors are looking at how the repositioning of the medical market could create growth and investment opportunities.
In the near future, New Jersey, New York, Connecticut, Rhode Island, Pennsylvania and Virginia will have open and thriving adult operating markets. The high population density guarantees that the Northeast will represent the next dominant cannabis market.
Companies in these states are struggling to raise money and new brands will soon be launched, which will provide great opportunities for investors.
Opportunities abound in cannabis investment
As we enter 2022, all indications are that now is the time to continue or start investing in cannabis companies. Yes, there are challenges to investing in this sector, but growth should outweigh these risks.
Still not sure if it’s time to invest? Think of it this way. Market growth is coming in the short term as more states develop new medical and adult use programs, and significant long-term growth is projected through federal legalization, social normalization, and expanded state programs.
The picture is clear. Now is the time to invest in cannabis.