CANNAINVESTOR Magazine October / November 2016 - Page 60


The Current Financing Environment

Today, the lion’s share of funding for cannabis companies comes from individual investors, with a noticeable dearth of institutional investors. Cannabis is a high-growth sector and growth is expensive. An example of the rapid growth of cannabis is in Colorado, which is already a $1 billion industry.

According to S&P Capital IQ, public and private cannabis companies raised just under $200 million in the second quarter this year with private company financings contributing $72 million of the total, although this number is an under estimate because many financings in the sector go unreported. In addition, compare this to the multi-billions of dollars per quarter in the software industry. According to PriceWaterHouse Moneytree, in the second quarter of this year alone U.S. private software companies raised $8.7 billion, 57% of all money raised by private companies across all sectors in the U.S. “This comparison highlights the fact that the cannabis sector is under-capitalization, a problem that needs to be resolved sooner rather than later”, says Traylor. To put it into perspective the eight sectors that raised the least for private companies financing in the U.S. in the second quarter are shown below, with the seven lowest below $200 million.