The cannabis industry is a unique investment opportunity with the potential for big returns – if you’re looking in the right places. Consumer demand for cannabis products already exists, and cannabis businesses – both plant-touching and non-plant-touching – are actively looking for investors to meet to fuel growth.
But there is a problem.
There is a substantial lack of institutional investors, loan capital, and while steadily increasing, not enough professional venture capital in the cannabis industry. Companies need access to capital to scale, but finding those funds is challenging.
The good news for angel investors is the absence of those investors, loans, and venture capital equates to a buyer’s market and opportunities for those with capital to place.
In 2021, five key cannabis investment opportunities should be top priorities for angel investors. and venture funds. Despite the risks involved in investing in the cannabis industry, the growth projected for these five opportunities should outweigh the potential risks.
1. Markets in the Northeastern U.S. Markets
The Northeast represents a significant opportunity for angel investors thanks to soon-to launch adultuse programs in Connecticut, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia.
These states have high population densities, and growth of the cannabis market in the region once all adult-use programs are operational is expected to eclipse anything we’ve seen in the past.
2. License Holders Operating in One or Two States
The cannabis industry is all about mergers and acquisitions in 2021, and savvy angel investors should be looking at successful operators with active businesses in one or two states. As larger multi-state operators (MSOs) look for ways to enter new markets or expand their footprints, these high-performing operators are poised to deliver exceptional returns.
3. Medical Market after OTC Repositioning
The medical cannabis market is not sustainable in its current form. With threats from the adultuse market and the pharmaceutical industry, the medical market will need to be redefined in order to survive and thrive in the future. Many experts predict the medical market will shift to an over-the-counter market, which could create new opportunities for angel investors.
4. Companies across the Supply Chain with Unique Processes, Products, or Services
Cannabis companies that have created competitive advantages through their processes, products, or services (or a combination of all three) represent attractive investment opportunities.
These companies can be found across the supply chain with every one of them having one thing in common they’ve established a position in the market that cannot be duplicated and is easy to defend.
5. Consumers Not Yet Buying from the Legal Cannabis Market
In 2021, legal cannabis sales in the United States are expected to reach $23.6 billion while illicit sales are approximately $75 billion. As more consumers move from the illicit market to the legal market, legal sales will increase. When cannabis is legalized for adult-use at the federal level, legal sales will go up. And as the stigma surrounding cannabis fades and more non-users enter the market, sales will increase.
Therefore, angel investors should look at businesses creating innovative product form factors and experiences targeted to the expanded legal cannabis consumer audience of the future.
The cannabis industry needs angel investors now. Private equity and venture capital investments in the cannabis industry are growing, but they represent just a small fraction of what the industry requires. Angel investors are needed to fill the gaps, and those who get onboard now will enjoy the benefits that this industry can deliver as a generational wealth creation opportunity.
About the Author
Jeff Finkle – CEO, The Arcview Group
Named one of the “25 Angel Investors in New York You Need to Know” by AlleyWatch, Jeff Finkle has been a venture investor for ten years, an angel investor for eight years. Jeff is presently CEO of the Arcview Group and Arcview Ventures and co-founder of the Arcview Collective Fund, the first member-managed fund in cannabis. He also serves as Chairman of the Evaluation Committee and Treasurer of the Angel Round Capital.
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