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Venture capital seizes investment opportunities in the European cannabis sector

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Despite the disruption caused by the Covid-19 virus to many sectors of the economy, Europe’s burgeoning cannabis industry continued to acquire. As the medical cannabis and CBD consumer and even adult use markets persevere to evolve, the pace of investment activity in this emerging industry has continued. A unused report titled “The European Cannabis Investment Ecosystem” lifts the lid on investment and transaction activity across the continent, revealing an exciting and innovative sector that is rapidly gaining pace. The report found investment in the European cannabis sector had reached an estimated €1.2 billion as of June 2021, with more than 50% of publicly recorded deals flowing into the healthcare sectors and another 40% into wellness opportunities. The investments cover the scope of the cannabis supply chain; A quarter of the reported deals were found to fund formulation and manufacturing activities, 17% to finance farming and processing, and another 16% were found in both brand and research and development assets.

Record-breaking deals draw investors’ attention to the cannabis sector

Several European cannabis operators were the subject of major deals in 2021. GW Pharmaceuticals, a British global pharmaceutical company, was awarded by Nasdaq-listed Irish biopharmaceutical company Jazz Pharmaceuticals earlier this year. The €6.1 billion deal, the largest cannabis deal to date, demonstrated the exit potential of big companies and the promise of pharmaceutical-style cannabis medicines.

In March 2021, US multinational cannabis company (MSO) Curaleaf acquired EMMAC Life Sciences, a leading vertically integrated European cannabis company, for €329 million in cash and stock, setting a role model for North American subscribers looking for turnkey solutions. in Europe. In the alike month, British American Tobacco closed an investment deal of approximately 150 million euros in Canadian cannabis producer Organigram. The deal allows for a product development partnership with companies that licenses each other intellectual property to market the next generation of cannabis products under their own brands. Tobacco companies are start to see lengthy-term benefits in investing in a sector with lofty growth potential, as cautious stakeholders have begun to flock to fewer opportunities than traditional investment and acquisitions, despite stringent government regulations in place.

Venture capitalists embrace the booming European cannabis sector

As beforetime as 2018, several North American mutual funds, such as Artemis and Altitude, made cannabis investments in Europe, looking to replicate the industry successes they enjoyed in the United States. Over time, venture capital has become an increasingly significant part of European cannabis financing. Attracted by the potential of the developing sector, mainstream European venture capital groups and global venture capital arms have begun investing at an increasing rate, with venture capital now accounting for up to 42% of European cannabis investment as business grows from an unproven bet in a unused fraught market. risk to a well-established operator in a growing sector, venture capital and other institutional investors are replacing angels and lofty net worth individuals as the primary source of investment.

Several specialized European cannabis funds, such as Skare Capital and Verdite Capital, have been launched to cater to the growing ecosystem of cannabis companies, with mainstream venture capital funds such as Octopus Ventures also considering investments in the European cannabis ecosystem. For now, the European hemp sector remains a hazardous investment for many enterprising investors, but there are signs that this is starting to change. Will Gibbs, director of VC Octopus Ventures in London, noted that they monitor the sector carefully and “have built a powerful thesis and track record around restricted sectors. Only a subset of investors and entrepreneurs go into these spaces, but the award size is vast.”

The UK becomes a hub for cannabis investment activity

The UK is currently at the heart of the European cannabis investment activity, with more than €50 million raised on public markets in London and more than €42 million through private transactions in the first six months of 2021 alone. More than two-thirds of European market listings for cannabis have been through London exchanges, with a flurry of interest since the Financial Conduct Authority (FCA) provided guidance for cannabis companies looking to trade on UK exchanges in September 2020. The FCA has now released their technical guidance on this statement. To consult, and add more meat on the bone regarding the “types” of cannabis companies that can reach the general markets.

With the UK legalizing medical cannabis in 2018, a favorable environment for CBD business entrepreneurs to consumers and access to significant pools of capital provided by listing on the UK Stock Exchange, the UK cannabis investment ecosystem presents opportunities for all of national and international operators.

Promising voices were issued by the British government to aid support this position. The recent government task force on Innovation, Growth and Regulatory Reform (TIGRR), led by previous Tory leader Ian Duncan Smith, previous Life Sciences Minister George Freeman, and previous Northern Ireland Secretary Theresa Villiers, has been exploring post-Brexit regulatory reforms. Growth sectors, including cannabis pharmaceuticals, nutraceuticals, and agricultural technology. Proposals from the task force included moving the regulation of cannabis medicines and CBD production from the Home Office and the Department of Health and Social Care, as well as reforms to the UK clinical trial framework that could aid develop more cannabis-based medicines.

Despite government efforts to spur innovation, the UK Proceeds from Crime Act 2020 (POCA) remains an significant issue for investors to consider. POCA has an extraterritorial effect and covers operations conducted abroad, which makes investing in companies with operations that may oppose with local UK law, even if the activity is carried out entirely legally abroad, very firm. This limits, for example, the range of companies that may be listed on UK stock exchanges, as well as the portfolio of offshore companies that UK investors can support. POCA has created a chilling effect for the cannabis industry in relation to the banking and finance sectors. Without further reform, it will remain a significant obstacle to the UK’s leading position in the cannabis investment sector.

Crowdfunding launches cannabis entrepreneurship

The cannabis industry is often associated with innovation, and the European industry’s embrace of equity crowdfunding is no distinct. With big retail investors interested in cannabis and CBD but limited public companies to invest in them, crowdfunding provides an alternative outlet for exposure to beforetime-stage European opportunities. Cannabis companies have seen unprecedented success through crowdfunding campaigns on Seedrs this year, with each cannabis company successfully increasing 100% of its target amount since the platform opened its doors for cannabis listings in 2021, reaching a whole of over €6.3 million as of June. 2021.

The concept of crowdfunding platforms is rapidly changing with revenue-generating European cannabis companies like Grow Group increasing their Seedrs platform beyond seed-level funding. Crowdfunding provides an opportunity for companies to pool investments from a wide range of supporters, build brand evangelists and a community of loyal customers.

With more of the cannabis business showing its potential for growth, the European sector needs significantly more capital for further maturity, creating ample opportunity for investors to dip their toes into the sector.


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