A $22 billion investment firm led one of the largest ever funding rounds for a cannabis tech company - here's why it's a big deal for the industry
- Tiger Global Management led a $17 million Series A round in Green Bits, a software platform for cannabis dispensaries.
- It's one of the largest Series A rounds for a cannabis tech company to date.
- Tiger Global's participation in the round is a sign that big money is starting to take the emerging sector seriously.
Big money is getting into the booming cannabis tech sector.
Tiger Global Management, a New York City-based investment firm that manages $22 billion, led a $17 million investment into Green Bits, a software platform for marijuana dispensaries.
It's a sign that mainstream investors are starting to take the emerging sector - which analysts say could generate $75 billion in sales by 2030 - seriously.
Casa Verde Capital, a Los Angeles-based venture fund that focuses on the "ancillary" side of the cannabis industry (that is, tech companies that provide software or payroll services to the cannabis industry but don't actually handle marijuana), also participated in the round.
Tiger Global declined to comment for the story. However, Karan Wadhera, the managing partner of Casa Verde, told Business Insider his firm has recieved a lot of interest from large institutional investors over the last quarter.
"I think this is a testament to both the size and pace of growth in the cannabis industry," Wadhera said. "Six months ago, many top VCs would not be ready to entertain a conversation on cannabis. Now we're seeing firms like Tiger Global ready to invest."
While many VC funds may want to invest in the cannabis industry, their limited partners - typically large, institutional pension funds or insurance companies - don't want to take on the risk as cannabis is considered an illegal, Schedule I drug by the US federal government.
Big money is coming for cannabis tech
Cannabis is legal in 9 states and Washington D.C., though institutional investors have generally been averse to putting money into the space. The rules in the cannabis industry, similar to other emerging sectors like cryptocurrencies, are fluid and constantly changing. Firms that invest in these nascent spaces risk bringing unwanted scrutiny from regulators.
Tiger Global's move to lead a Series A round into a cannabis tech company is a sign that this is beginning to shift. It's likely that bigger hedge funds and investment firms will start investing in cannabis tech companies that don't touch the plant directly and therefore don't come into conflict with federal law, like Green Bits.
Recent political developments, like President Donald Trump assuring Colorado Sen. Cory Gardner that he would support legislation protecting state's rights to legalize marijuana, have served to "de-risk the industry," Vahan Ajamian, an analyst at Beacon Securities said in a note.
Congress is also working to come up with more coherent rules for banking in the cannabis industry and for resolving federal-state conflicts, despite Attorney General Jeff Sessions' opposition to legalization.
"The US cannabis sector will have another year under its belt with no material negative federal developments - and potentially positive ones, providing investors with increased comfort," Ajamian wrote.
The lack of institutional players in the cannabis industry has provided an opening for firms like Casa Verde, as well as a host of other hedge and venture funds that invest solely in cannabis tech companies and understand the complicated regulations involved in the space.
Green Bits wants to be in 'every state' that has legalized cannabis
The Series A round led by Tiger Global brings Green Bits total raised to $19.3 million, which the company hopes to use to expand into new markets.
Ben Curren, Green Bits' CEO, told Business Insider that Wadhera made the introduction to Tiger Global after Casa Verde invested in Green Bits last summer.
"They were really comfortable investing in us because we're really a tech company, like any other they've dealt with before," Curren said. Tiger Global has made a number of venture investments in established tech companies, including Spotify and Wealthfront, according to CrunchBase.
Curren, like the rest of Green Bits' management team, is a seasoned tech executive. He founded and sold a startup to GoDaddy before starting Green Bits with his own money to capitalize on the cannabis space.
Green Bits, headquartered in San Jose, California, plans to use the financing to get their software platform into more dispensaries in states where marijuana is legal, Curren said.
The company's point-of-sale system, which helps dispensaries comply with regulations and drive sales, is already in over 1,000 dispensaries in legal states, Curren said, and he wants to expand Green Bits' business into payments.
Most dispensaries don't allow customers to charge their purchase to their credit card, as most big banks refuse to do business with cannabis dispensaries because of cannabis' federal status.
"We're trying to get Visa and Mastercard in dispensaries," Curren said, adding that his vision for the product would look something like Square, the credit-card processing company.
"We've aligned with some good partners, but it's going to take a couple steps to get there," Curren said.
Green Bits already processes more than $2.2 billion in sales annually through its point-of-sale system, Curren told Business Insider. Like many cannabis companies, Green Bits is setting its sites on dominating California and the potentially lucrative East Coast as more state markets, like Massachusetts and New York, open up.
"Our goal is to be in every state that has legalized cannabis in some way," Curren said. With an investor like Tiger Global, that goal may not be so far away.
Read more of our cannabis industry coverage:
- The rising stars of marijuana's investment scene that everyone from Wall Street to Silicon Valley should know
- The highest-valued marijuana companies of 2017 reveal 2 key insights about the booming industry
- A startup that runs marijuana dispensaries is America's first $1 billion marijuana 'unicorn'
- A hedge fund that focuses solely on marijuana is crushing it
- A New York hedge fund manager moved to Canada and started the first marijuana company to be listed on a major US stock exchange - here's how he did it