The spirit of the JOBS Act is strong, though its flesh (that is, its actual implementation) is weak. However, the spirit of that 2012 enactment may have just created an important new conduit for the movement of cash into the growing legal cannabis industry in the United States.
The Act, known as the Jumpstart Our Business Startups Act, signed into law by President Obama in April 2012, came into being in large part to encourage crowdfunding, the specific subject of its Title III. Crowdfunding itself, the practice of raising money for entrepreneurial ventures from large numbers of people, often in small amounts per person, a practice generally these days accessed via the internet, predates the JOBS Act, but Title III tries to achieve the act’s titular “jumpstart” by virtue of making this easier.
Daniel Broderick, writing as an HSBC contributor in Forbes, recently estimated that the size of the crowdfunding market jumped over $5.1 billion in 2013.
One Industry at a Time
In that context, CrowdFund Connect seeks to bring small and medium sized startups from a number of industries to its widened investor base, one industry per platform, one platform at a time. The legal cannabis industry has recently received its time, and now its platform.
Randy Shipley, the cofounder and chief executive officer of CrowdFund Connect, recently spelled out the company’s history. He said that CrowdFund Connect began life with the name SocialGravity, an integrated platform-as-a-service (paas) that aimed at connecting donors with non-profits via crowdfunding. Shipley and his partner, Vincent Pitetti, shifted their focus in late 2012, soon after the JOBS Act became law and crowdfunding became a mainstream investment strategy. Shipley and Pitetti incorporated CrowdFund Connect with its present name in 2013.
Shipley said that “the sites that we’ve launched” under this umbrella since that time, “haven’t really used the JOBS Act since that has yet to be implemented by the SEC.” They make use instead of earlier legal and regulatory mandates to the same crowdsourcing end, though acting in the spirit of the unimplemented law.
In May 2014, Shipley and Pitetti launched Healthios Xchange, a marketplace for private equity in the healthcare space, as their first such venture. In the months since, this site has raised more than $350 million for 40 companies.
Their next launch, Alchemy Global, exists for those who want to raise funds for, and of course for those who want to invest in, the sports and entertainment worlds. They have a “really extraordinary” group of advisers at Alchemy, Shipley said, including Greg Norman, who was regularly found at the top of the world rankings of pro golfers in the late 1980s and through the 1990s, and who is almost as well known for his entrepreneurship. The list also includes Boris Becker, one of the greatest tennis players of recent decades: Becker won the men’s single title at Wimbledon at the age of only 17, in 1985.
Some 60 companies have put up their profiles already, Shipley said. “That’s more than we expected, but the key isn’t the quantity, it’s the quality of the deals available through the platform.”
The Role of Canna Champions
In order to address the issue of quality, CannaFundr has introduced what it calls its “canna champions.” The champions will, in the words of the website, “curate and lead investment opportunities while they provide ongoing mentorship and coaching for the top growth companies in the industry.”
The champions will have relevant investment experience. One of the initial groups of champions “used to manage a $250 million hedge fund.” Others have worked in private equity companies or venture capitalism firms.
Accredited investors working through CannaFundr’s platform will participate in a cannabis fund, or syndicate, that will receive preferential deal terms. A Champion, vested in the success of all parties—the issuer, the syndicate itself, and the investors therein—will lead each syndicate.
Shipley seems genuinely excited by the convergence of two developments, the growth of crowdfunding and the new above-ground status of the cannabis industry. They are America’s new great investment frontiers.
He said he is not concerned by what, to some potential investors in the field, is a nightmare scenario: that a conservative new government, perhaps coming into control of the executive branch in January 2017, will decide to enforce the federal laws in such a way as to squash all the state experiments on which the industry depends.
“Public opinion has shifted to the point where I don’t think you’ll see any new president wanting to do battle to bring back prohibition,” Shipley said. The world is different because of the jobs created by the legal cannabis industry, the taxes it pays and the public’s understanding that cannabis is “less dangerous than many products that are sold regularly in the marketplace.”
CannaFundr is headquartered in Chicago, Illinois, with offices in Florida, Michigan and New Jersey. For more information, readers should visit www.cannafundr.com or contact Randy Shipley at (312) 957-8553. Follow CannaFundr on Crunchbase, Facebook and Twitter.
*Panther Media, parent company of MJINews.com, has a strategic partnership with CannaFundr.