May 30, 2017

U.S.-based investment firm StarGreen Capital announced its plans to invest $100 million within the next year in California’s legal medical and recreational cannabis supply chain.

The firm plans to invest in and provide business development services to all stages of the industry – from “seed to sale”. It will initially partner with cultivators, manufacturers, and retailers to acquire, develop and lease land; to expand operations; and to build commercial brands.

North American consumers spent $6.9 billion on legal cannabis products last year, according to market analyst firm AMR. Of this total, California represented more than 30 percent of the market, with forecasts that the state will see more than 20 percent annual growth through 2021, according to a statement by StarGreen Capital.

“The industry is losing its taint as a drug industry and is becoming a much more sophisticated market,” Scott Greiper, president of Viridian Captal Advisors, a firm that tracks the industry, told Fortune last July.

The advancement of cultivation systems and supply chain technologies, as well as research and development into new strains that could aid in the treatment of various health ailments, are providing more credibility to the market and capturing the attention of seasoned investors, Greiper told Fortune.

Nationwide, New Frontier Data, a cannabis market research and analytics firm, predicted that two dozen states will have fully operational medical marijuana or recreational marijuana markets by 2025, with California accounting for more than a quarter of the country’s total sales, reported The Cannabist.

“We see tremendous opportunities for growth in the next twelve months,” said StarGreen Capital CEO Paul Daneshrad. “Our focus is to invest $100 million in real estate and joint ventures over the next year to help cannabis entrepreneurs in every segment of the industry capitalize on this generational opportunity.”

Despite this significant market potential, the industry faces heady challenges on multiple fronts, including U.S. tax code regulations, a ban on inter-state commerce, a lack of financing from banks, and a need for high security.  Signs are pointing, however, toward expanding legalization and liberalization of sentiment toward the business – a shift reflected in the increased investment activity by a variety of market players.

In November 2015 the Canna Group announced the launch of Sugar Leaf Capital Fund I, which like Salveo, will invest in early-stage, cannabis-related businesses that are generally ancillary to the production or processing of the cannabis plant, including businesses active in chemistry, science and genetics, business services, software, grow systems, payments and banking, and agriculture and operations.

In June of last year, full-service legal cannabis management company MedMen announced the launch of its $100 million MedMen Opportunity Fund, followed in quick succession by the July announcement by Seventh Point that its $750,000 friends and family round of fundraising closed oversubscribed. Meanwhile, Florida-based Phyto Partners is in the process of building a $10 million cannabis-focused private equity fund, while Miracle-Gro and Microsoft stepped out of the mainstream by becoming outspoken investors in the space.

Scale in the industry is still difficult to achieve, however, without backing from traditional banking sources. StarGreen is aiming to give entrepreneurs the tools needed to hurdle these challenges – providing institutional level capital and deep expertise in the areas of business operation, commercial real estate, and brand development.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.