NEW YORK (MainStreet) — Private equity firm Privateer Holdings anticipates this is the year Wall Street analysts will begin following the pot sector like it tracks health care, agricultural commodities and technology — now that a Silicon Valley venture capital firm has made a multimillion-dollar investment in legal marijuana.
On the heels of partnering with the family of Bob Marley to launch Marley Natural cannabis products in November, Privateer Holdings announced Jan. 8 a multimillion-dollar investment in its marijuana portfolio by the Founders Fund, a $2 billion venture capital firm established by Peter Thiel, co-creator of PayPal.
“We believe there were dozens of partners at private equity, venture capital and investment firms who woke up two weeks ago in a panic after absorbing the news that the Founders Fund had made such a significant investment in the industry,” said Zack Hutson, spokesman with Privateer Holdings in Seattle. “Other firms now have to scramble to play catch-up.”
“The investment from Founders Fund represents a watershed moment for the legal cannabis industry because it’s the first time an institutional investor has placed capital in marijuana companies,” Hutson says. “Prior to this investment, our investors consisted solely of high-net-worth individuals and family offices.”
Although the Founders Fund is not disclosing the amount of money it is investing, Hutson reveals that when the Series B round closes in the coming weeks, the firm will have raised a total of $82 million.
“Our Series A round was $7 million and our Series B round will be $75 million, which includes a $15 million convertible bridge note plus a $60 million raise,” Hutson says.
The Founders Fund investment in cannabis was led by partner Geoff Lewis, who first contacted Privateer Holdings CEO Brendan Kennedy by email in September 2013. Lewis heads up the Founders Fund investments in consumer Internet companies.
“After a series of phone conversations and in-person meetings in Seattle, San Francisco, New York and at our Canadian facility, the partners at Privateer Holdings and the partners at Founders Fund got to know each other better, conducted due diligence and finalized their investment,” Hutson says.
The investment will be used to bolster the existing companies in its marijuana portfolio, which include Tilray, Leafly and a more recent addition, Marley Natural. “Marley Natural is a partnership between two cannabis pioneers,” Kennedy says. “The Marley family has been an admired voice in the cannabis movement for over 50 years, and Privateer Holdings is the leader in building professional, mainstream cannabis brands.”
The financing will also be used to make strategic acquisitions and investments as well as to launch ventures. “Like us, the Founders Fund is taking a long-term view of the marijuana industry and believes that the end of federal prohibition and the social harms it causes is inevitable,” Hutson says. The Founders Fund was one of the earliest investors in Facebook and backs entrepreneurs behind SpaceX, Spotify, AirBnB and Lyft.
— By Juliette Fairley for MainStreet