We’re halfway into the inaugural week of Cannabis Innovation Lab, where Grown In and the nationally renowned innovation hub 1871 are convening industry experts and canna-curious investors with recently licensed Illinois operators and cannabis technology startups from around the world.
Drawing from the captivating conversations we’ve had so far, one main throughline prevails:
It’s difficult to raise money right now!
And this is not just the case for the cannabis industry.
Patrick Rea of Poseidon Garden Venture explained this morning that everybody is going through a necessary “correction,” resulting from the inflated valuations that existed from 2019 to 2022.
Here’s the good news…
This is a prime time to start and accelerate a new business!
Periods of economic contraction are when wealthy individuals and firms know it’s smart to make strategic, long-term investments.
During the mortgage crisis meltdown of 2008-09, Chicago-conceived tech startups like Groupon and Grubhub were going through their formative stages. A few years later, they each amassed billions of dollars in equity value!
While all 39 legally regulated cannabis markets in the United States have unique pathways for entrepreneurs to sell, grow or manufacture consumer cannabis, it’s been acknowledged that:
Illinois, on paper is at the forefront of creating a responsible, respectable robust industry.Charlie Bachtell, CEO, Cresco Labs (an anchor sponsor of the initiative)
“But the devil is in the details,” Bachtell emphasizes.
Chicago has the potential to be a commercial cannabis capital of the world with the following trifecta:
- A high concentration of multistate operators
- Including Cresco, Green Thumb Industries, Verano Holdings, Pharmacann and Grassroots Cannabis (acquired by Curaleaf in 2020)
- Venture capital-backed technology startups
- Including Fyllo, AeroPay (also a sponsor of Cannabis Innovation Lab), leaf.trade, Equilibria and Hoodie Analytics
- Canna-curious consumer packaged goods corporations
However, the progressive legislation, enacted by Illinois lawmakers to extend licensure to entrepreneurs most adversely impacted by the war on drugs, has yet to be implemented with any degree of fidelity. Of the hundreds of cannabis startups that obtained licenses to sell, grow or manufacture cannabis in the state over the last year, less than ten are currently up and rolling.
After approximately two years of litigation, there is a finite amount of money readily available to stand-up these businesses, some of which will invariably become wildly profitable in the coming years.
In these tough times, entrepreneurs owning Illinois licenses need to be realistic about their valuations.Gabe Mendoza, Executive Vice, President of Operations, 4Front
“Back in the day (circa mid-20-teens) people were raising money with a powerpoint deck and financials that were made out of assumptions with valuations… there were just no comparables,” Mendoza said.
Edie Moore, who was part of the group that sold Mission before it operationalized, said trying to raise money for her multiple Illinois retail licenses right now involves finding the right financial partner.
“What we really need is funders who understand that a real partnership includes us,” said Moore, who’s also a founding board member of Chicago NORML. “We’re not just looking for the money. We got into this space to help it grow.”