How to Invest in Cannabis Startups

Looking for cannabis Startups to invest in? We’ve compiled some of the best startup investment opportunities for you to consider.

When it comes to investing in startups, one thing is true no matter what the industry is: the earlier you get involved, the more money you will make — if the company and its industry take off. This is one of the reasons that investing in startups of almost any kind has so much allure. Who hasn’t let their mind wander and thought about how much richer they would be right now if they’d bought shares of a startup before it was chic for investors?

Weedmaps, Leafly and a host of other cannabis companies that are now leading players in the marketplace were once just startups in need of funding. That means there are other startups out there just waiting for seed money before they become the next big thing.

Right now, one of the most booming industries for startups is cannabis-oriented businesses.

Back in the late 1990s, when California legalized medical cannabis, few people could have imagined that 20 years later, there would be cannabis-oriented companies trading on the Nasdaq exchange and the Canadian stock exchanges. A number of regulatory hurdles still must be cleared, but as more states legalize recreational and medical cannabis, opportunities for cannabis startups will continue to grow.T

ake 4Front Ventures (OTCMKTS: FFNTF), which was a startup in 2011 and is now trading on stock exchanges in the U.S. and Canada. A real estate investment trust (REIT) — Innovative Industrial Properties Inc. (NYSE: IIPR) — owns, operates and manages industrial properties for legally licensed marijuana grow operations. Cannabis startups are such a new field that there are almost limitless options to invest in. From straight-grow operations and edibles to CBD oil, startup cannabis operations are in full swing. Maybe that means it’s time for you to consider getting on board and investing in a few cannabis startups.

Why Invest in Cannabis Startups?

When medical cannabis was first legalized in California in the late 1990s, it flew right in the face of federal law. Almost immediately, medical cannabis dispensaries began popping up all over Los Angeles, San Francisco and many other large cities in the Golden State. No sooner did that happen than news stories began running about Drug Enforcement Administration (DEA) agents bursting through the doors and arresting dispensary employees for violating federal law.

In short, the whole thing looked like it wouldn’t get off the ground. Fast forward 20 years, and 38 U.S. states and the District of Columbia have legalized cannabis on a medical or recreational level. While it’s still illegal to cross state lines or enter the U.S. with cannabis, the federal government has basically taken its hands off the wheel and allowed individual states to determine their own marijuana policies.

In 2023, the push for cannabis legalization continues to gain momentum in the United States. Currently, 40 states and the District of Columbia have legalized medical cannabis, while 23 states and the District of Columbia have approved it for recreational use. States like Minnesota, Pennsylvania and Ohio are on the cusp of legalizing adult-use cannabis, and public opinion strongly favors reform. A recent poll found that 68% of likely Republican voters support federal cannabis legislation, aligning with bipartisan efforts in Congress to regulate cannabis like alcohol.

Think of it like this: How rich could you be right now if your great-grandfather owned stock in Seagrams Co. Ltd. the day before prohibition ended? Exactly. That’s why you should seriously consider investing in cannabis startups right now.

Where to Find Cannabis Startups

If you’re fortunate enough to live in a state like California, which is at the tip of the spear on cannabis culture innovation, there may well be some startups you know of personally. If not, you can also check out social media or other local investing groups. However, both of these approaches will be hit or miss.

One of the best places to find cannabis startup opportunities is the same place you might go to find the best startup opportunities in any field: online crowdfunding platforms. The advantage of finding cannabis startup opportunities on established crowdfunding platforms is that most of these platforms are headed by established financial professionals. That means they’ve more than likely vetted most of the startup offerings and made sure their business models were solid and that the startup itself is on proper regulatory footing.

Specifically, Republic has funded numerous cannabis startups in a variety of cannabis-related fields, including edibles and dog treats. Republic currently has an intriguing offering called NatureTrak, which markets software designed to help cannabis businesses with banking compliance. StartEngine, another online crowdfunding platform, is currently raising funds for WebJoint, which specializes in cannabis delivery software.

CannaFunder and Fundanna are crowdfunding platforms that focus exclusively on cannabis startups. Alumni Ventures is another solid crowdfunding platform that sometimes has offerings in cannabis startups. The trend toward legalization or decriminalization of cannabis or CBD has created an environment where lots of startups are seeking funding. Best of all, you can find these opportunities relatively easily on several well-established crowdfunding platforms.

Best Cannabis Startups to Invest in

Benzinga picked three cannabis startups you may want to consider looking at.

1. Snowbelt Cannabis

Snowbelt Cannabis is an emerging enterprise situated in Jamestown, New York. With its roots firmly grounded in community involvement and environmental consciousness, the company is poised to become a leading cultivator of cannabis in the state.

As New York's cannabis regulations are being finalized, Snowbelt Cannabis is preparing for the general licensing application process. With an existing hemp grower license secured in June 2022, the company has already begun cultivating high-quality CBD and consumer packaged goods (CPG) products.

The core team, Ashley and Ryan, bring a unique blend of business acumen and agricultural expertise. Their diverse skills are complemented by a robust team of consultants specializing in cultivation, compliance, sales and marketing within the adult-use cannabis industry.

Investment Highlights

Investment in Snowbelt Cannabis offers a unique opportunity to contribute to a venture that prioritizes social responsibility and profitability. With a secure escrow mechanism, the company ensures investor funds are safeguarded until the necessary licenses are obtained. Snowbelt aims to operate in a two-tier system — focusing on production and wholesale distribution — to maximize local economic benefits.

View offering on Mainvest

2. The Honeybee Collective

The Honeybee Collective is a trailblazing, employee-owned cannabis brand committed to fostering community wealth, environmental sustainability and consumer well-being.

The Honeybee Collective is a new cannabis startup deeply rooted in sustainability, community engagement and employee ownership. With a proven track record of growth in Colorado's cannabis market, the company is setting its sights on the burgeoning New York market, one of the most promising and culturally significant cannabis landscapes globally.

Investment Highlights

Investing in The Honeybee Collective provides a unique opportunity through a Crowd SAFE (Simple Agreement for Future Equity) contract. The company is valued at $5 million, reflecting its Colorado success and vast growth potential in New York. Investments offer the chance for equity or cash payouts should the company undergo acquisition, go public or liquidate its assets.

View offering on Mainvest

3. Kahuna Cannabis Co.

Kahuna Cannabis Co. is revolutionizing the cannabis edibles market by offering rapid-acting, delectable freeze pops that stand out in a saturated landscape of gummies and chocolates, meeting the consumer's desire for potency, efficacy and unique delivery systems.

Kahuna Cannabis Co. is a CPG cannabis brand committed to delivering high-quality, rapid-acting cannabis consumables. Their pioneering product, Kahuna Ice Freeze Pops, not only tastes great but also effectively addresses the primary motivations for cannabis consumption: stress relief, pain management and sleep aid. With an exclusive emulsification process, Kahuna Ice offers an unparalleled experience in potency and taste.

Investment Highlights

Kahuna Cannabis Co. is on an accelerated trajectory, having already entered the Colorado market to consumer acclaim and distributor enthusiasm. As of spring 2023, the company aims to expand its retail distribution and presence in multiple states, including New York, New Jersey and Massachusetts. It is also exploring options for capital investment and joint ventures to fuel expansion plans.

View offering on Mainvest

Choosing Which Startups to Invest In

It’s one thing to have a lot of options, but it’s another thing entirely to know which of those options to choose. The good news is that the fundamentals of investing in cannabis startups are basically the same as investing in any startup. It all starts with due diligence.

When you look at an offering, don’t just focus on something that seems trendy, such as a neat-looking edible or a CBD product with a cool package. These are still businesses, which means you’ll want to focus more on the numbers presented in the prospectus than anything else.

What is the minimum investment? How long is the hold period? Do the founders of the startup have a successful history in cannabis businesses? Does the startup have products it can sell in states that have legalized both recreational and medical cannabis?

Once the due diligence is done, you still have to think about risk. Even though the long-term outlook for cannabis is good, it could still be several years away from legalization. So, if your chosen startup depends on legalization, your risk level automatically goes up. The best way to manage that risk is by adopting the same strategy smart investors use when investing in anything: diversification.

You would probably be better served by spreading your bets around and putting small amounts of money into several startups than you would by going all-in on one particular company that strikes your fancy.

Will Cannabis Startups Spark a Revolution or Flame Out?

The future of the cannabis industry looks bright. However, you must keep in mind that’s because federal drug policy has preemptively served to snuff out the future of cannabis-oriented businesses for basically the last 100 years. That certainly seems like it’s about to change — even if only on a state level.

What that means for you as an investor is that there will be a lot of startup opportunities in cannabis. If you’ve made the decision to invest in cannabis startups, you still need to take a calculated look at the underlying fundamentals of the business and figure out how much risk you can tolerate. When you’ve done the calculations and you still like what you see in a cannabis startup, make your bets and hope for the best.

The key thing to remember is that you’ve got to focus on the nuts and bolts of the business and not just the cool factor that comes along with saying you own shares in a cannabis startup. Even when Tommy Chong was selling his custom bongs, he was still running a business that was focused on turning a profit. The same holds true when you are investing in a cannabis startup. It’s about making money, not being cool or hip. If you let that mindset be your guide, there is no reason your investments in cannabis startups won’t turn a smoking profit for you.

Frequently Asked Questions