ACKRELL CAPITAL CHAPTER VII Capital Markets for Cannabis Companies m Capital Markets Overview Hundreds, if not thousands, of cannabis-related companies are seeking to raise capital—thus pre- senting investment opportunities for sophisticated investors who want to participate in the cannabis industry. Investors have their choice of investing in the more than 300 publicly traded cannabis-related companies, or in the significant number of private companies raising capital. Investors may also choose among stock markets (both within the United States and internationally), type of security (equity versus debt) and type of company (companies across all segments of the industry are raising capital). It is important to note, however, that most of the cannabis-related companies that are raising cap- ital—even publicly traded companies—are in early stages of development, have de minimis revenue and are not profitable. More than 85% of the publicly traded cannabis-related companies have annual revenue of less than $5 million, and less than 5% have annual revenue greater than $25 million. Most investors in the cannabis industry today are retail or individual investors. While an increas- ing number of family office and strategic investors are now participating in the cannabis industry, we believe that many institutional investors (most notably the traditional venture capital and private equity communities) will not invest in the industry until more companies in the industry mature and the legal environment becomes more favorable. Cannabis-related companies raised more than $2.0 billion in the public and private markets in 2017; however, except for a few transactions of notable size, many of the financings were small (less than $5 million), which provides further evidence that the capital markets are being driven primarily by retail investors. Without traditional institutional investor support, a funding gap exists in the indus- try: companies are seeking to raise more ca