Medicinal Cannabis Industry Overview
In 2016 medicinal cannabis was legalised allowing patients access to the drug. Since then, cultivators, manufacturers, distributors, pharmacies, and clinics have built a $550m industry, helping over 300k patients annually. This is a significant increase from 2018, when only 292 patients were prescribed medicinal cannabis. The result is that in the first half of 2023 there were over 1.5 million units of medicinal cannabis sold in Australia. This growth is predicted to continue, increasing a further 62% from 2023-2024.
To capitalise on this growth new, innovative businesses have emerged and grown to fill demand and bring this medication to more patients. These businesses are across the value chain including genetics,
cultivation, manufacturing, wholesaling and distribution, clinics, and dispensaries.
With export growth, decreasing stigma from patients and doctors, and growing pressure for legal progress in the space, the cannabis industry is expected to continue its rapid growth. Investors have seen this and want access to investments where they can participate in the exciting growth that is yet to come in the industry.
How Can Equity Crowdfunding Help Cannabis Businesses?
Access to Capital
Equity crowdfunding opens a new channel for accessing funds to help your company grow while avoiding the need to undertake an IPO on the ASX before your company has achieved sufficient scale. Venture capital funding is not always accessible, often coming with unfriendly terms while debt financing is difficult to source for young companies.
Attracting New Patients and Customers
When equity crowdfunding, you advertise your raise to garner support. This advertisement is two-pronged as it advertises to investors and patients, pharmacies, and doctors. This allows medicinal cannabis businesses to advertise, something that regulation does not usually permit. Publications tend to pick up the raise, spreading the word about your business to new customers, suppliers, and institutional investors. This legitimises your brand which has lasting effects beyond the campaign.
Brand Ambassador Effect
There is a world of mouth/ brand ambassador effect when you raise, resulting in gaining thousands of small investors, that is, the ‘crowd’, that promotes your products to your target market. This accelerates your growth as a cannabis business, especially if you are involved in distribution, manufacturing, or clinics. Having pharmacies and patients invested will generate brand loyalty in a world with over 800 products to choose from.
Why Cannabis Businesses Suit Equity Crowdfunding
The popularity of cannabis equity crowdfunding campaigns in Australia has gone from strength to strength since the first campaign in 2019, with several campaigns breaking equity crowdfunding records.
Why is this?
The potential growth is extremely exciting! The market is growing extremely rapidly, and adoption has only just begun. For retail and sophisticated investors investing via crowdfunding is an opportunity to get a piece of the pie. For a market that is growing at a run rate of 62% YoY, with innovative individual players growing at multiples of that, getting in early could lead to a substantial return.
People are passionate about cannabis and its medicinal applications. Almost every person knows someone in their life experiencing anxiety, chronic pain or has been impacted by cancer. The number of investors, patients, and supporters is only going to grow. As stigmatisation begins to lessen and education about medicinal cannabis climbs, more and more people are believing in the cause.
Cannatrek: Case Study
In December 2020 Australian medicinal cannabis leader, Cannatrek, successfully completed its equity crowdfunding offer via OnMarket. The company raised their maximum target of $2.5 million from 720 investors in 2 weeks.
Renewed positivity around the medical cannabis industry, global legislative change, and a successful campaign that garnered extremely strong interest in the expression of interest stage all contributed to the success of the campaign.
24 hours into the offer going public Cannatrek announced a large distribution contract with a German partner. This strategy led to a number of PR opportunities and renewed momentum. Cannatrek built initial momentum through its patient/ customer database, inbound enquiries, and publications including the AFR, ABC, Ausbiz, BusinessNews Australia, SmartCompany, Reddit, Herald Sun, Australian Jewish News, and more.
To close interested investors Cannatrek hosted a live virtual tour that connected their audience, raising 500k in 5 days, reaching the maximum limit.
Read more here.
Why Your Cannabis Business Should Raise with OnMarket
OnMarket is an investment platform that assists clients raise capital through equity crowdfunding, IPOs, placements, and private/ wholesale raises. We guide you through your capital-raising journey and help you in any way we can along the way.
We have worked with several cannabis businesses including Cannatrek, Little Green Pharma, ECS Botanics, THC Global Group, Emerald Clinics, Cronos Group, CannPal, Creso Pharma, and Althea.
Our difference in crowdfunding is we hold your hand throughout the process to ensure your best chance at having a successful raise. To learn more about the process behind crowd-sourced funding, access our library of resources, and review success stories from others who have successfully raised via crowd-sourced funding, click here.
You can also contact Issac Newbold, at issac@onmarket.com.au to learn more about how to use equity crowdfunding to support your business’ next phase of growth.
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