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The therapeutic potential of cannabidiol (CBD) for modern medicine was recognised in the 1980s, but it wasn’t until 2008 that the compound was first commercialised by fledgling US-based CBD companies. Fast forward to today, and the CBD market is worth over £390 million in the UK alone, and expected to more than triple in the next five years. For scale, that’s equivalent to the entire 2016 UK herbal supplement market.
Although the European CBD industry is still behind the US, with a population over 1.3 times the size, it will likely take a leading position soon. Customer demand for CBD products has never been higher, innovation is on the rise, and institutional investors are pouring in millions. At Seedrs, our legal and compliance teams worked hard over the last year to navigate the promising fundraising landscape for CBD businesses across the UK and EU. Now, for both investors and startups, that work is paying off.
Keep reading to find out how you can capture the value of a burgeoning market before it goes mainstream.
➤ Age-old medicine, new innovation
CBD, the lesser known compound of the cannabis sativa plant, was first used for medicinal and ritualistic purposes around 750 B.C. It took until November 2020 however, for the Court of Justice of the European Union to rule CBD as a non-narcotic, allowing it to be sold freely throughout the EU. This legal breakthrough set the stage for rapid innovation in CBD products across Europe, which is expected to reach 0.15% of the total health and wellness market by 2028. Consumers are becoming aware of, and embracing, the benefits of CBD – which come without any of the psychoactive effects of its notorious counterpart, tetrahydrocannabinol (THC). The compound has now made its way into serums, bath bombs, soft drinks, snacks, muscle rubs, oils, vaporizer liquids and more.
According to a Brightfield study, 60% of users turn to CBD as a treatment for anxiety, but its benefits are also touted for insomnia and depression, and most notably, childhood epileptic syndromes. CBD is also gaining traction in women’s health. Healthtech Daye, which raised €5M in 2019 from investors including Kindred and Index Ventures, recently launched the world’s first CBD-infused tampon for pain relief. Similarly, femtech Ohne saw 1,200% growth in sales of CBD add-ons to its women’s care subscription service in the twelve months leading up to August 2020. In an interview with Sifted, Ohne founder Nikki Michelsen noted that the brand “won’t be stopping there.”
➤ Money does grow on trees
The UK CBD market’s growth has been accelerated by the Covid-19 crisis, as consumers look to natural health and wellness solutions. According to a study by Alphagreen (which is live and nearly 200% funded on Seedrs), over 8 million UK residents this year bought CBD products, making it a prominent subsector in its own right across many industries, from food and beverage to supplements. The CBD soft drinks market for example, which represents more than 5% of the sector as a whole, is well on target to match the £2B energy drinks category in value.
Despite an uncertain regulatory landscape, institutional investors are not shying away from the CBD proposition. In 2020, Berlin-based Sanity Group, a leading cannabis and wellness brand, closed a €20.1M Series A funding round led by cannabis-focused venture fund Calyx, marking the largest financing round in Europe for a business of its kind. UK-based cannabis data and consulting company NOBL also announced a successful Series A round of €1.48M in January 2020, with participation from leading cannabis investors Altitude Investment Management, Artemis Growth Partners and Enexis AB. Benchmarked on the trajectory of the US market, the outlook for CBD exits is also strong, with World High Life Plc’s recent £9M acquisition of CBD brand Love Hemp and the acquisition of the UK’s largest medicinal cannabis producer GW Pharmaceuticals by Jazz Pharmaceuticals for just shy of €6 billion.
➤ A nascent market on the rise
CBD can be now found in almost every household product you can think of – but that’s just the tip of the iceberg. More and more startups are now cropping up in support of the CBD industry as well, such as UK-based startup Prohibition Partners which consults Fortune 500 companies, leading investors and policymakers on new cannabis market opportunities. In fact, according to Prohibition Partner’s 2020 Report, the European cannabis market is expected to grow at a CAGR of 67.4% from 2021 and reach €3.2 billion by 2025.
Fuelling this growth is Germany, which in 2020 alone treated over 128,000 patients with cannabis solutions. While recreational cannabis has only been legalised in 53 countries to date, experts such as David Kirby, CEO of medicinal cannabis cultivator Avida Global believe that “the new Biden administration in the US and the UN’s vote to reclassify medicinal cannabis, [will] only serve to accelerate globalisation further.” As the market matures, Kirby adds that “producers and manufacturers that have focused on ensuring the total quality of their products, will determine the companies that succeed”.
Since closing Nooro, our very first CBD campaign on Seedrs which raised over £200K from 483 investors, we’ve helped many early stage businesses of the like tap into the power of the crowd. Voyager CBD recently raised nearly £1M from 300 investors (over five times its initial target), and Kloris and Alphagreen (both live now) have raised over £215K and £2M respectively. Backed by major CBD investors Enexis and West Creek Investment, Alphagreen has already earned its title as Europe’s leading CBD marketplace covering over 150 brands in medicinal cannabis and alternative healthcare. CBD craft beer brand Cannabrew also just launched its campaign and is already overfunding its £150K target by more than 130% after just a few days live on the platform. British-based Jersey Hemp, the first British grown and harvested CBD brand is coming soon.
We’re looking forward to supporting even more CBD businesses, and will be paying close attention to the regulatory environment in the years to come. This is a market with huge potential, and now, for the first time at scale, retail investors can share in its growth early on.
To browse live investment opportunities in CBD and more, visit here.