Founders Fund is betting big on marijuana.
Peter Thiel’s venture capital firm today announced that it has made a multi-million dollar investment in Privateer Holdings, a four-year-old Seattle firm that we first wrote about back in October 2012.
Privateer owns and operates a handful of marijuana-related companies, from Leafly — a strain resource app that won GeekWire’s App of the Year award — to Tilray, a Canadian-based brand of medical marijuana.
Founders Fund Partner Geoff Lewis told GeekWire that his firm wasn’t looking to make an investment in a marijuana-related company, but said this “ended up becoming something we are passionate about doing.”
Lewis first heard about Privateer after a friend showed him Leafly, and soon after met with the company in Seattle about 18 months ago. Founders Fund then spent time learning more about Privateer’s startups and found that they differed from most other marijuana-related companies.
Lewis explained that most competitors — from grow operations to dispensaries to edible makers — largely fall into two camps. The first are those that have what Lewis called a “gold rush mentality” with a short-term vision that are trying to make money quickly. The second are incumbents who have historically operated illegally.
Privateer, meanwhile, showed Founders Fund that it had a long-term vision with the right mindset.
“From a professional strategy vision, we think this team stands apart,” Lewis said.
The investment from Founders Fund is part of Privateer’s Series B round, which is set to close next month and could near $100 million. Founders Fund wouldn’t disclose the specific amount it is investing, but did note that the firm is not leading the Series B round.
Brendan Kennedy, CEO of Privateer Holdings, said his company is honored to have financial backing from a well-known and respected VC firm like Founders Fund. Privateer had previously only raised money from angels and family offices.
“We would be proud to have an investment from Founders Fund if we were in any industry, but to have an investment from them in this industry — it’s a monumental event,” Kennedy said. “It makes us proud of what we’ve accomplished over the last four-and-a-half years and makes us excited going forward.”
Kennedy also noted that having Founders Fund invest is an important milestone for the cannabis industry as a whole. He said the investment marks the first time a major institutional player has placed capital in this industry.
“It’s a key event as this industry transitions from a state of prohibition to a state of legalization,” he said.
Privateer has had quite the journey since debuting nearly five years ago. Raising money was initially difficult for the company, as investors were often wary of putting their funds toward marijuana-related ventures.
But with more states legalizing cannabis and an overall growing acceptance of marijuana use, the money has started to flow in. Privateer, which in November debuted a cannabis brand called Marley Natural, raised a $22 million Series A round in 2013 and will have brought in more than $100 million when the Series B round closes.
Lewis said that Founders Fund, which was the first institutional investor in companies like SpaceX and Palantir Technologies, isn’t worried about any potential backlash that could result from investing in the marijuana industry.
“For us, what we care about is finding really talented entrepreneurs solving massive problems,” he said. “Typically what we’ve found is that if you focus on making great investments in great people — even if others question the investment — in the long run it ends up speaking for itself. We saw it with SpaceX and many people thought it was really weird. Over time, that investment has proven itself out. People don’t think we’re crazy anymore. In the case with Privateer, we decided to focus on substance as opposed to the potential reputation stuff.”
