Earlier this year, Peter Thiel caused a stir when he accused Twitter’s management of being high on pot.
He later backed away from his comments, saying, “You could smoke a lot of pot and still have a great company, if the business model is as robust as Twitter’s.”
And Thiel would know, because, as it turns out, he’s investing in a marijuana startup.
Thiel’s Founders Fund is leading a $US75 million Series B round in a cannabis startup, Privateer, at a $US425 million pre-money valuation, according to documents obtained by Business Insider.
Privateer was founded in 2011 and it’s positioning itself to be the leader in the weed supply chain, which the company says is currently fragmented, poorly managed, and largely run underground, despite “proven demand.”
It’s quietly bought up another startup in the space, Leafly, which is like Yelp for weed products. In 2013, Privateer launched Lafitte Ventures, which focuses on medical marijuana, and launched Tilray, which mails medical weed to users and generated nearly $US200,000 in revenue last year. Privateer is also exploring a testing facility (Arbormain) in Washington state. The founders may launch their own weed-focused investment fund too, so Privateer can pour money into external cannabis companies.
Medical marijuana is currently available in at least 22 states as well as Washington D.C. Privateer estimates that U.S. weed market could be a $US20 — 50 billion opportunity. Privateer hopes to be the leader across everything from growing and processing various strains of marijuana to supply and shipping it. It also plans to get into the accessory business, selling things like pipes and vaporizers to users.
Privateer is already generating meaningful revenue, although the company is not profitable. In 2014 it expects to generate nearly $US11 million in net revenue, up from $US1.2 million in 2013. Most of that revenue (60-70%) is generated by Lafitte Ventures, and the rest is from Leafly. Privateer expects to reach profitability and generate $US111 million in 2015 and $US440 million in 2016.
Privateer was founded by Brendan Kennedy, Michael Blue and Christian Groh. Kennedy, who is the company’s CEO, and Groh, Privateer’s COO, formerly worked with an affiliate of Silicon Valley Bank. Blue, the company’s CFO, worked for a private equity firm, Herrington.
Thiel and Privateer did not immediately respond to a request for comment.