What Angel Investors Are Looking For in the Cannabis Industry

What Angel Investors Are Looking For in the Cannabis Industry

<![CDATA[Over the past 10 years, the startup nature of the cannabis industry has attracted the angel investor as a key source of early stage capital for emerging private cannabis companies. Although angel investors generally provide smaller amounts of capital than family office or fund investors, the role of the angel investor in the cannabis industry is critical.  This article examines the angel investor in cannabis and how this type of investor has evolved.An angel investor is typically a private individual who provides capital for a business startup that is seeking its first round of funding. This type of funding usually takes the form of equity or convertible debt and us considered the riskiest type of capital due to the very early stage nature of the companies they invest in.  The 12 Business Sectors of the Cannabis Industry—and Which Ones Attract Angel InvestorsIn November 2014, Viridian published the first cannabis industry report that identified the 12 business sectors of the cannabis industry, as shown below. Viridian Capital AdvisorsIn January 2015, we launched the Viridian Cannabis Deal Tracker which tracks and analyzes all capital raises and M&A transactions across these 12 sectors and provides proprietary data on deal structures and terms. By digging into our Deal Tracker data we found that five of these sectors have, in the main, attracted angel investors, while seven did not. The five sectors that attracted angel investors were:Consulting ServicesConsumption DevicesInfused ProductsMiscellaneous AncillarySoftware/MediaWhat are the factors that enables companies in these five sectors to attract angel investors?Low Capex: Startup companies in these sectors require relatively low capital expenditures and as a result lower amounts of startup funding. Since angel investors generally provide lower amounts of capital compared to family offices or funds, these sectors are ripe for angel investment.No State or Federal License Requirements:  These five sectors don’t require state…

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