A lot happened in cannabis between January and March 2020. That’s why the team at Canopy Rivers dove into data powered by PitchBook to examine some key trends at the intersection of venture capital and cannabis.
PitchBook data shows that the number of cannabis deals dropped to 60 in Q1 2020 from 115 in Q1 2019, amounting to a ~48% year-over-year decrease. Median deal size experienced a similar decline, dropping from US$2.0M in calendar year 2019 to US$0.8M in Q1 2020. We think that the decrease in investment activity overall is a result of capital preservation strategies enacted by venture capital investors and, towards the end of the Q1 2020, the economic uncertainty brought on by COVID-19.
While overall deal flow and size decreased, the median valuation of cannabis companies increased to US$57M in the first three months of 2020 compared to US$14.9M in calendar year 2019. While the significant increase is likely attributable to the small sample size of deals completed this quarter (noted above), we believe the calendar year 2020 median valuation will increase compared to 2019 as the cannabis industry matures and later round raises represent a higher proportion of deal flow.
When it comes to specific deals, cannabis marketplace and technology platform Eaze’s US$35M series D raise ranks among the largest deals (by size) that took place between January and March 2020. While Canada and the U.S. continue to drive the majority of venture capital deal flow, the data suggests that more activity could be intensifying in cannabis markets outside North America. Sanity Group, a German company producing cannabinoid-based pharmaceutical and wellness products, completed a US$22M raise this quarter.
This is not an offer to sell or a recommendation to trade in any securities. This information is provided as of the date hereof. This document contains data obtained from third parties that Canopy Rivers has not independently verified. This document also contains forward-looking information within the meaning of Canadian securities law, which is based on certain assumptions. While management believes these assumptions are reasonable based on information available as of the current date, they may prove to be incorrect. Many assumptions are based on factors outside of Canopy Rivers’ control and actual results may differ materially from current expectations. Forward-looking information involves risks, including, but not limited to, the risk factors set out in Canopy Rivers’ most recent Management’s Discussion and Analysis and Annual Information Form. You should not place undue reliance on forward-looking information. Except as required by applicable law, Canopy Rivers assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances.
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