Global Demand For Cannabis Shows Industry Potential Even As Investments Decline

New Frontier Data released Cannabis Capital: 2023 Industry Market Report. The report, sponsored by Viridian Capital Partners, and based on capital markets data from the Viridian Cannabis Deal Tracker, details aggregate top-line investment activity in the legal cannabis sector and its ancillary markets, as well as overall industry growth.

“Investors are in the process of recalibrating their strategies for the cannabis market. By bringing together two of the most-trusted cannabis industry data companies, we provided an unbiased view of the current opportunities and challenges,” stated Gary Allen, New Frontier Data CEO. “Simultaneously, the report offers a sobering view of the capital markets for cannabis business owners who must adjust their own expectations for outside investment to construct healthier businesses.”

Key findings from the report include:

• In 2021 virtually every sector of the industry received blockbuster investments, leading to over $12 billion in capital raises; a combination of economic headwinds and dampened expectations for federal action shrank North American capital raises to $4 billion in 2022.

• The United States continued to attract the majority of investor capital in 2022, growing as a percentage of total capital raised, from 71.7% in 2021 to 80.6% in 2022.

• The United States drove the majority of M&A activity in 2022, growing from 59% of M&A activity in 2021 to 68% in 2022.

• Cultivation and retail remained the leading sectors for M&A activity at 57% in 2022; however, the cultivation/retail sector represented 70% of the activity in 2021.

• The average size of equity raises decreased 44% from $22.17 million in 2021 to $12.40 million in 2022, whereas the average size of debt raises decreased from $45.72 million in 2021 to $21.48 million in 2022.

Scott Greiper, president and founder of Viridian Capital, stated “Capital investment and M&A activity in the cannabis industry has become more narrowly focused on those states, countries and operators that have proven management teams, business models, and corporate strategy. This report, buoyed by data from the Viridian Cannabis Deal Tracker, provides the insight and actionable data for investors, lenders and acquirers to make smart capital allocation decisions.”

Photo by Jeff W on Unsplash