Two Marijuana Startups Raising Money Now

A brand-new CBS poll out this week shows support for marijuana legalization is at an all-time high.

A full 61% of Americans now support overall legalization of cannabis. An impressive 88% are in favor of cannabis for medical uses.

We’ve come a long way since the peak of anti-pot propaganda. That same poll showed just 27% in favor of marijuana legalization back in 1979.

To celebrate this ongoing shift, we’re going to look at two cannabis-related startups. Both are raising money on SeedInvest.com.

Due to banking restrictions, neither of these startups directly sells marijuana. But they certainly qualify as “pot startups.”

Let’s get started…

Cannabis Startup No. 1: HelloMD

Valuation: $15 million (pre-money)
Investment page

HelloMD is a multifaceted marijuana startup operating out of California. For now, much of its revenue is derived from “telehealth” operations. In essence, it connects patients with doctors who prescribe marijuana.

These consults are made via video chat, and they’ve proven to be good business, having helped HelloMD generate $1.9 million in revenue last year.

However, much will change for HelloMD soon…

California is on the verge of legalizing recreational marijuana, which means people won’t need a prescription to buy cannabis products.

So HelloMD is pivoting its business (at least, the California part) and now aims to become the “Amazon of Cannabis.” The startup has already lined up 400 retail partners to build a large marketplace of retail products.

It’s an ambitious goal, but it seems to be making good progress. It’s building a large database of cannabis-related medical information, which will still be of interest even after “patients” don’t need a prescription.

The company’s team has guided it skillfully so far, and HelloMD has a large list of customers to help get its new venture off the ground. It will be interesting to see if it can pull off this pivot and become one of the largest online cannabis shopping destinations.

Cannabis Startup No. 2: Leaf

Valuation: $10 million (pre-money)
Investment page

If marijuana is the new gold rush, Leaf is clearly a pick-and-shovel play.

This startup aims to make it easier for folks to grow their own marijuana. This sector of the industry is known as “home grow,” and it’s rapidly expanding.

Leaf’s first product is an automated “grow box.”

Leaf claims its system will have some rather impressive features when it ships in early 2018. These features include…

  • Automatic nutrient dosing
  • Automatic pH balancing
  • Climate control system
  • Drying mode
  • Carbon filter to reduce odor
  • 200-watt advanced LED lighting
  • iOS and Android apps for easy control
  • Locking door controlled by app.

Overall, it’s shaping up to be an impressive piece of hardware.

But is Leaf a good investment? To judge that, we’ll need to do a bit more digging. So let’s take a look at the price point and a few other fundamental factors.

The Leaf system is not exactly cheap, sporting a retail price of $2,990. But according to the company, the machine can produce 12 to 16 ounces of marijuana per year. So for regular users, the machine could hypothetically pay for itself in the first year or so.

I believe the cannabis home grow market will continue to flourish, and it’s big enough to support multiple winners. No concerns there.

On top of that, Leaf has demonstrated early signs of consumer interest. The company recently launched a pre-order sale of its grow system. (Hardware startups often conduct these campaigns to help pay for manufacturing and other costs.)

Over 60 days, Leaf collected 10% deposits on $2.5 million worth of product. This certainly hints that Leaf is onto something that consumers want.

However, there are some other risks we need to consider when evaluating a company like this.

Since Leaf won’t be shipping the product until at least early 2018, there’s a fair bit of manufacturing risk involved here. Hardware products are notoriously difficult to get right. In this case, Leaf is led by a seasoned team with hardware experience.

Still, it’s not easy, and Leaf will likely require further cash injections down the road. The company is currently burning around $140,000 per month.

If it can deliver the promised product in a timely manner and drive costs down over time, I could see this company doing quite well.

Even though neither of these startups knocked my socks off, I have to say it’s refreshing to finally see cannabis-related startups raising money with equity crowdfunding.

Now that they’ve tested the waters, I expect to see more marijuana startups jump in soon. Stay tuned.

Good investing,

Adam Sharp
Founder, Early Investing

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P.S. What do you think about HelloMD and Leaf? Let us know in the comments section below.