Why Is Raising Capital So Hard for Cannabis Companies?
Three things stack up. The investor pool is a fraction of comparable sectors, most of the money that did come in was debt tied to physical assets, and years of inflated projections cost the industry credibility. Seth Yakatan sees access to US public equity markets as the unlock.
Capital is hard to raise in cannabis because three problems stack on top of each other, and each one makes the other two worse.
The investor pool is a fraction of comparable industries
Seth Yakatan put a number on it in 2024: "the biotech universe of investors is maybe 1,100, and the cannabis universe of investors is maybe 100." That is an order of magnitude. In Seth Yakatan: Are you Ready for the Next Wave of M&A in Cannabis, he said what has worked is having a physical asset: most of the initial money into cannabis was some type of real estate secured loan or collateralized paper. He also said companies above about $10 million in revenue find it much easier to raise, because they have proven their model or seem more viable.
Federal illegality pushes everyone toward debt
With US exchanges closed, Yakatan said almost every cannabis company has had to list on a junior exchange or reverse into a vehicle, largely through Canadian public equity markets, which he called robust but immature and inefficient. Tony Schor made the same point from the deal side in late 2024, in Hard Questions for Cannabis Founders: Tony Schor on Creative Capital and M&A Strategies: public markets are limited, very little of the capital raised has been equity, and a lot of acquisitions come with debt attached, which is part of why deals take so long. He said creative ways to secure capital often come through partnerships. Yakatan's view of the unlock is access to public equity on Nasdaq or NYSE, whether that comes with Schedule III or full federal legalization.
The industry burned its own credibility
A small pool and a debt heavy market would be survivable if the money that did come in had been handled carefully. Often it wasn't. In Why Cannabis Companies Must Face Reality, Make Hard Choices, and Follow the Data ft. AnnaRae Grabstein, host Bryan Fields called it "financial pornography" in the projections cannabis companies created, models that assumed any company could walk into a market like Illinois and take 10% share. Grabstein's answer was that companies not fulfilling their financial models need to get out of denial, accept the realities of the market, and right size the company and the plan.
What this means if you're raising right now
Do not compete for the same hundred checks with a growth story built like the last decade's pro formas. Show a model that functions: Yakatan counted six or seven models with the capacity to generate positive net operating income before interest and taxes. Validate your instincts with data, as Grabstein put it. Partner before you borrow. And follow Schor's order of operations: start raising locally, in your own town and state, before going outside that network. The investors left in this sector have seen the inflated version already.
Related questions
What would actually fix cannabis capital access?
Seth Yakatan said in 2024 that the catalyzing change is access to public equity in the US capital markets, on Nasdaq or NYSE. He wasn't sure whether that comes with Schedule III or full federal legalization.
Why has so much cannabis money come in as debt?
Yakatan said most of the initial money was real estate secured loans or collateralized paper, so a physical asset made raising easier. In late 2024 Tony Schor said very little of the capital raised had been equity, which is part of why deals take so long.
How should a cannabis company approach fundraising now?
AnnaRae Grabstein said in 2025 that companies missing their financial models need to get out of denial, right size the company and the plan, and validate their instincts with data. Schor's advice was to start raising locally, in your own town and state, before going outside that network.