It’s a big month for marijuana legalization, both in the U.S. and abroad. Privateer Holdings is getting ready.
The Seattle-based investment firm today announced a $40 million round as part of a convertible note, bringing total funding to date for the six-year-old company to $122 million.
It’s a milestone of sorts, as this marks the first time a cannabis-related firm has raised more than $100 million.
The firm previously raised a $75 million Series B round from top investors like Founder’s Fund, the venture capital firm started by Peter Thiel, the PayPal co-founder and Donald Trump supporter who has been an early investor in a number of companies like Facebook, LinkedIn, Yelp, SpaceX, and others.
Privateer CEO Brendan Kennedy told GeekWire that the fresh cash, part of a larger Series C round, will be used to expand its existing portfolio of companies, make more acquisitions, and launch new ventures.
Timing is also key to this raise, as California, Arizona, Nevada, Massachusetts, and Maine will vote next week to legalize recreational marijuana. If approved, those states would join Washington, Colorado, Oregon, Alaska, and D.C. as states that sell legal weed. The New York Times reported that the “election may be a turning point for legal marijuana,” particularly if California legalizes recreational cannabis, which experts say “could blow the door open.”
Montana, North Dakota, Arkansas, and Florida will also vote on medical marijuana laws.
There are also potential changes coming abroad. Next week, Australia will start taking applications for medical cannabis producers. Later this month, a Canadian task force on recreational legalization will announce its framework. And by the end of this year, Germany will legalize medical marijuana.
“Over the next 90 days, a number of things are happening at a global level that will change the future of this industry,” Kennedy said.
Investors are seeing this play out, and they want in. Kennedy said Privateer has been approached by a dozen large investment firms over the past several months. That’s no surprise — Bloomberg recently reported that the legal cannabis industry in the U.S. may grow to $50 billion by 2026.
“We’re in the midst a global shift and have been approached by a number of investors over the past six months who see legalization as inevitable,” he explained. “They want exposure to this industry and they wanted to essentially make a placeholder investment — an opportunity to get exposure to the industry at a discount before we know the election results.”
Privateer did not name investors as part of the most recent cash infusion, but plans to announce some when it closes the Series C round. Existing investors include high net worth individuals and family offices.
Half of the fresh $40 million will be used on global expansion, Kennedy noted.
“Our entire focus is on new cannabis brands targeted to different consumer demographics at a really global scale,” he said.
Privateer manages a diverse set of assets, all of which continue to grow their bottom line. Leafly, which is like the Yelp for weed and once paid for a full-page ad in the New York Times, has 10 million visitors per month and is profitable with 80 employees. Tilray continues to produce medical marijuana in Canada and will be profitable on a monthly basis next year, Kennedy said. There’s also Marley Natural, an international company started by Bob Marley’s family that sells marijuana-related products across the U.S.
Privateer employs more than 300 in five countries across its brands, including about 50 that work in Seattle directly for the firm.
Privateer has come a long way since launching back in 2010, when both the medical and recreational marijuana industries looked far different than now. Investors may be flocking now, but it surely wasn’t always that way. Kennedy, a Yale graduate who started Privateer with Michael Blue and Christian Groh, has said in the past that the firm’s $7 million Series A round was the “hardest money” he’s ever raised, given how difficult it was to find investors willing to put money behind marijuana-related companies.
Times have changed, and now, other firms are also trying to get into the industry. But Kennedy said most are having a “very difficult time raising capital.” Privateer separates itself with deeper industry knowledge and a full-fledged staff that includes legal, PR, marketing, finance, and other employees with specific expertise. It even brought on former U.S. federal officials like Dante Tosetti, a former bank examiner for the Federal Reserve Bank of San Francisco, and Patrick Moen, a former criminal investigator for the Drug Enforcement Administration.
As a result, Privateer has been able to live up to its promises to investors and stay consistent with its messaging.
“Investors like a consistent story in a very volatile industry that is moving forward with increasing velocity,” Kennedy said.