European Cannabis Investment Experiences Record-Breaking Growth In First Half Of 2021; Total Investment in the Sector To Date Hits €1.2B

There has been a boom in European cannabis investment activity in 2021, with a 130 percent increase in private fundraising and a 50 percent increase in public market opportunities in the first six months alone. As of June 2021, total investment across legal European cannabis sectors stands at an estimated 1.2 billion euros. 

A new report titled “The European Cannabis Investment Ecosystem by European cannabis consultancy Hanway Associates, in partnership with global law firm DLA Piper, Swedish cannabis investment fund Enexis, and London-based investment bank Hannam & Partners, with brand-new data provided by Crunchbase and Seedrs, analyzes the European cannabis investment ecosystem for the first time – documenting the scope and scale of major investment and deal flow in the emerging sector.

 
European cannabis investment ecosystem report cover
 

Venture capital dominates European cannabis investment landscape

As European nations come round to cannabis – in the form of medicinal cannabis prescriptions, consumer CBD and recreational reform the European cannabis investment ecosystem is starting to take shape. The first six months of 2021 alone saw nearly 120 million euros raised for cannabis operations through private transactions and 56.5 million euros through public markets. VCs now make up over 42 percent of publicly announced investments, surpassing angel and high-net-worth investors as the most common investor type.

 
cannabis investment activity by investment type
 

Angel, high-net-worth investors, and family offices kick-started the European cannabis sector in its early days. These investors’ higher-risk and personal approach to investment was instrumental in helping cannabis players establish themselves in the industry. Now that Europe is growing into a hub for cannabis-related entrepreneurial activity in its own right, angel investors and family offices are no longer exclusively sufficient sources of capital as companies’ valuations rise. 

VC’s entry into the cannabis investment landscape shows that proof of commercial success despite high regulatory standards and the lure of an expanding new sector can gradually trump bias and reservations that investors may have about the industry. As cannabis edges toward the mainstream in Europe, the industry’s innovative influence across health care, technology and consumer sectors will continue to draw a growing range of investors.

 
European deals by stage of the value chain graphic
 

“We have built a strong thesis and track record around taboo sectors — areas of high unmet need with very established institutionalized biases which means there is typically limited innovation and investment. Only a subset of investors and entrepreneurs go into these spaces, but the size of the prize is massive. Fundraising will probably take longer, but once you have built the momentum you are likely to have a smaller competitor set as well.”

Will Gibbs, Octopus Ventures
 

Record-breaking deals

2021 has been a record-breaking year for the European cannabis sector, signifying major growth in the market. Institutions are beginning to take notice of this development, allowing capital to flow into investment funds that recognize the European cannabis ecosystem’s eminent potential.

Blue-chip corporations are de-risking the sector through major M&As and transatlantic deals, laying the path for competitors to follow in their footsteps. In May, the British biopharmaceutical cannabis company GW Pharmaceuticals was acquired by Jazz Pharmaceuticals at a 50 percent premium. More than 20 years after the company’s original listing on the AIM exchange in London, the 6.1 million-euro deal is the biggest deal in the cannabis sector to date, demonstrating the potential for big exits as the industry matures.

 

Transatlantic investment activity

Multinational European cannabis companies are becoming attractive M&A targets, as North American cannabis operators start to see value in commercial (rather than purely medical) access to the continent. In March 2021, the largest U.S. cannabis multistate operator (MSO) Curaleaf acquired EMMAC Life Sciences, a leading vertically integrated multinational European cannabis company, for 329 million euros in cash and stock. Similarly, Canadian hemp and cannabinoid company Yooma raised just under 12 million euros in a recent post-IPO equity round to acquire four European cannabis companies. Strategic investments into the European landscape from North American operators are likely to continue as the market develops, and the prospect of recreational legalization edges closer. 

However, deal activity does not exclusively flow from North America into Europe: U.K. tobacco companies Imperial Brands and British American Tobacco have both invested into North American cannabis companies to diversify away from nicotine assets, showing that traditional players with conservative stakeholders are no longer able to ignore the growing force of the consumer cannabis sector.

 

Regional investment hubs

Localized European pockets of investment activity have also emerged to supplement growing transatlantic investment flow. The U.K. is rapidly becoming a center of European cannabis investment activity, with over 50 million euros of capital raised on London’s public markets and over 42 million euros through private transactions in the first six months of 2021 alone. In total, London is home to 69 percent of public market activity in the European cannabis sector. A slew of listings in 2021 after the Financial Conduct Authority (FCA) issued guidance for cannabis companies hoping to list on the London Stock Exchange has further cemented London’s role within the European cannabis sector.

 
Investment activity by country
 

In addition to the U.K., Western Europe and Scandinavia are the most active regions for cannabis investment activity on continental Europe. Germany is home to the largest medical cannabis market in Europe at an estimated 309 million euros, with steadily increasing patient numbers and demand. Notably, Berlin-based cannabis startup Sanity Group completed the largest round of cannabis funding to date in June 2021, raising 37.5 million euros for facility and business development. Denmark and Sweden lead the industry with bioscience and high-tech innovations, supported by government institutions and an active base of retail investors with cannabis shareholdings.

“Since 2014, investors have put over $5 billion in known venture capital into cannabis-related companies globally. Although funding seems to have peaked in 2019, Crunchbase data indicates that 2021 venture investment in the cannabis industry is rebounding after a decline in 2020. As cannabis continues to be legalized, it is expected that investments will increase overall in the years to come.”

Gené Teare, Senior Data Journalist at Crunchbase

While Europe’s cannabis sector has begun to emerge later than North America’s, it carries outsized significance in terms of future potential patients, consumers and investment opportunities. ‘The European Cannabis Investment Ecosystem‘ reveals a thriving investment landscape that continues to expand and mature, with bright prospects for operators in this green new industry across the supply chain.

 

Methodology

The report’s primary data source is Crunchbase’s database. Data on investment activity encompasses publicly reported deals information, collected between June 11 and June 20, 2021. The data is unable to capture all investment activity, as a significant portion of deals remain undisclosed.

Header photo by Robert Bye on Unsplash.