February 26, 2024


When it comes to The biggest news of the year for the European cannabis market is what didn’t happen. Contrary to what many expected, Germany is not on the road to legalizing the recreational use of marijuana.Conversely, the EU’s most populous country dilute Develop a law reform plan after liaising with regulators.

Is Germany’s decision and the precedent it sets bad news for VCs investing in European cannabis startups? Not necessarily, and it might even be good news for some. Oliver Lamb, co-founder of Óskare Capital, said Germany’s “push to slow down the legalization of recreational marijuana is a positive for the medical and pharmaceutical markets.”

“Experiments in mixing entertainment and medical care have been conducted in North America and there have been so many hard lessons learned that it would be reckless to ignore them,” he said.

Like other investors, Lamb is wary of the mistakes they’ve made in the U.S.: “The blurred lines between the medical and entertainment industries are certainly not conducive to targeted drug development,” he said.

“It’s critical to learn from the path others have paved for you. In New York, we’ve seen that fail, with only a handful of dispensaries opening and operating with lax enforcement, leading to an open and thriving illegal market,” said Matt Hawkins, founder and managing partner of Entourage Effect Capital.

However, some funds are concerned that the total potential market for legal cannabis on the continent is limited and affected by the German decision. “The drawdown in Germany has made us more hesitant to deploy capital in Europe,” Hawkins said. “The progress in Germany shows that the entire continent will struggle to create a commercial adult-use market in the coming years with a limited TAM.”

Likewise, like other private companies seeking to raise venture capital, marijuana startups are not immune to a global repricing driven by investors. “European cannabis companies remain overvalued,” said Emily Paxhia, co-founder and managing partner of Poseidon Investment Management.

For founders of cannabis-related startups looking to weather the economic slowdown, the advice isn’t all that different from what all entrepreneurs are hearing these days: Survive and thrive. Paxia said this was Poseidon’s motto.

Finding a buyer appears to be a viable option for cannabis companies that know they won’t survive, as consolidation is expected in the coming months. But Lamb warns that whether we’re talking about investments or M&A, we’re in a strong buyer’s market.

Read on to find out where these investors see their next opportunity, how they plan to navigate the post-German decision market, and how best to market them.

We interviewed:


Oliver Lamb, Co-Founder, Óskare Capital

Is marijuana more legal in Europe this year than it was in ours? Conducted our previous survey last year? Are there any key regulatory changes at play?

In medicine, there has been a marked increase in the availability of cannabinoid and non-cannabinoid therapies (i.e., therapies that modulate the endocannabinoid system but do not contain cannabinoids).

There are a number of factors that could explain this shift, including an increase in tailwinds and a decrease in headwinds. Today, we have more and higher-quality clinical data demonstrating the efficacy of these drugs for a variety of conditions, and a growing number of highly qualified teams to bring these drugs to market.

As for the ride, difficulties in patient access have long hindered the prescription of drugs that target the endocannabinoid system (the mammalian regulatory system that responds to cannabinoids and cannabinoid-like molecules, similar to the central nervous system).

However, we are excited to see a number of technologies and platforms connecting physician professionals with patients who need these medicines. One such example is Leva, whose digital clinic is addressing the UK’s severely underserved chronic pain market

In addition, the medical community is increasingly recognizing the applicability of ECS-modulating drugs for certain diseases. At a conference in Berlin this month, one founder rejoiced that a recent GP meeting spent two hours discussing medical cannabinoids. This clearly demonstrates the growing knowledge and adoption of these medicines among physicians across Europe.

Apart from Watered-down plans for recreational use legalizationIn 2022, Germany will import a record amount of cannabis for medical and scientific purposes. Does this divert attention from the fact that: imports are slowing?

While Germany’s decision will undoubtedly be unpopular with companies betting on legislation to go in the opposite direction, such efforts to slow recreational marijuana legalization are a positive for the medical and pharmaceutical markets.

Experiments in mixing entertainment and medicine have been conducted in North America, and so many hard lessons have been learned that it would be reckless to ignore them. Specifically, the legalization of recreational marijuana for medical use in North America can be seen as reducing the incentive for researchers to develop targeted treatments for specific conditions, given the high volumes of cannabis flower distributed through dispensaries. This happened despite the tendency of most physicians to prescribe targeted, licensed treatments that do not require smoking.

The North American approach also blurs the lines between the recreational and medical markets, reinforcing the impression that users of such therapies simply prioritize pleasure while claiming genuine needs.

Not only is this misconception counterproductive for patients seeking proven treatments, but it also distracts from the fact that ECS modulating drugs not only offer far superior side effects compared to traditional drugs such as opioids, but can also treat conditions that are currently untreatable.

The Czech Republic may eventually legalize recreational marijuana use before Germany, but it has a smaller market. Is it big enough to change the status quo and find out what the EU will tolerate?

Peter Lynch once pointed out that if you spend 13 minutes a year on economics, you have wasted 10 minutes. The same can be said for politics. The implications for international regulation are large and varied, and even when you know the outcome well, predicting the timing is equally complicated.

So generally speaking, we don’t bet on regulation. Instead, we invest in what we know: strong teams, innovative science and untapped market opportunities. We choose investments assuming the regulatory environment is as fixed as it is today. That way, if nothing changes, we know they can succeed anyway, and they can benefit further as things continue to open up.

The prediction I do feel confident making is that governments and the medical community will continue to understand the benefits of these drugs.

How has your approach to investing in the cannabis industry changed over the past 12 months? What are your expectations for the next 12 months? Is consolidation possible in that period?

As far as our paper is concerned, not at all. We focus first on Europe and will continue to do so. Likewise, we launched the fund targeting life sciences and deep tech investments in that space, and that remains the same, in large part because our portfolio has performed so well.

The good news is that many U.S. funds are now looking to Europe for the next wave of growth in the sector. That’s an asset because we like to do co-financing and it’s often helpful to have transatlantic stakeholders in terms of intercontinental expansion.

here has Our predictions for this yearwhat we’re producing for 2022 is here.

We are pleased to say that most of our past predictions have come true and this year’s predictions are on track to come true.

What advice do you give your cannabis-related portfolio companies now in terms of retaining or expanding their runway?