Silicon Valley is down on weed. Venture firms have mostly watched from the sidelines as the cannabis industry has grown into a multi-billion dollar business.
This isn’t entirely by choice. Venture capitalists themselves love massive new markets with few dominant competitors (recall search engines, mobile apps, and social networks). But most firms have been anxious about cannabis. Many operate under what are known as “vice clauses,” restrictions imposed by backers, usually large institutions such as pension funds, that prevent them from investing in certain sectors such as firearms, pornography, or drugs. Legal questions remain unresolved about how the US federal government will treat marijuana companies despite legalization in a growing number of states. A stigma persists as well: many of who those who have invested in the industry have been reluctant to even disclose that fact.
But that hasn’t fully stopped investment. Since 2012, more that $967 million has been put into 272 companies, according to data compiled by the investment research firm PitchBook.
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