21 October 2020

Founders Fund Invests in Marijuana-Related Firm

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In another sign of the marijuana industry’s legitimization, a holding company for cannabis-related businesses has attracted an investment from early Facebook Inc. backer Founders Fund, whose co-founder Peter Thiel once blasted Twitter Inc. for what he characterized as its “pot-smoking” management.  Privateer Chief Executive Brendan Kennedy declined to disclose the size of the latest round of funding, but he said a contribution from Founders Fund puts Privateer’s fundraising effort close to its $75 million goal. The company said its existing investors include family offices and high-net-worth individuals.

Despite local and state legalization efforts, the federal government still classifies pot as a Schedule 1 controlled substance alongside heroin, LSD, ecstasy, methaqualone and peyote. As a result, banks are often unwilling to provide services to marijuana producers for fear of prosecution, making capital hard to come by.

Privateer’s operations include a facility run by Tilray that spans more than 70,000 square feet in British Columbia and produces cannabis for delivery to medical patients there. The company says it is the largest “federally legal” cannabis-growing business in the world.

In November, Privateer unveiled its Marley Natural business, a planned line of branded marijuana products including cannabis strains and cannabis- and hemp-infused skin creams and lotions, all with the approval of the late reggae singer Bob Marley’s estate.

With Marley Natural, Privateer likely will look toward consumers interested in both recreational and therapeutic use wherever legal. Tilray is on a short list of five companies for government-licensed growing operations in Uruguay, which in 2014 became the first country in the world to establish a system regulating the production, sale and consumption of recreational marijuana.

Founders Fund, which raised a $1 billion investment vehicle in early 2014, is the biggest venture-capital player to step into the marijuana space, according to data from Dow Jones VentureSource. The marijuana industry generally hasn’t found favor with established venture capitalists.

Groups of individual “angel” investors have previously contributed to the likes of Greenway University Inc., a Denver marijuana occupational training school that closed down in 2011 amid accusations of falsified applications. The smaller Dutchess Capital LLC backs cannabis-enthusiast social network MassRoots Inc. and American Cannabis Co., an advisory and consulting firm for the industry. In addition, High Times magazine has been raising a growth fund with aims of securing $200 million to $300 million, but the fund has yet to announce any investments.

By contrast, Founders Fund’s name has been connected with much bigger startups, as its portfolio includes home-rental service Airbnb Inc., online music service Spotify AB, and Space Exploration Technologies Corp., the space transport company launched by Elon Musk.

Talks were also continuing with Privateer when Mr. Thiel told CNBC in September that Twitter was “a horribly mismanaged company—probably a lot of pot-smoking going on there.” His remarks drew wide attention online and in the media.

Click here to access the full article on The Wall Street Journal. 

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