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KR L PI L AC EL CA TA CHAPTER VII Capital Markets for Cannabis Companies m Private Capital Markets The cannabis industry today is replete with early-stage private companies seeking to raise capital. This capital, whether equity or debt, may be available from (i) “friends and family,” (ii) more formalized groups and networks of “angel” investors, (iii) family offices, (iv) dedicated cannabis investment funds (currently few in number, but growing), and (v) strategic investors. However, because of the legal considerations, traditional institutional investors—most notably the venture capital and private equity communities— continue to be mostly absent from the market. As with most early-stage companies in other industries, many emerging cannabis-related companies are trying to follow the typical progression of raising equity capital, as illustrated in the following chart. Equity Financing Progression for Cannabis-Related Companies Friends and : ? Initial Public r Series B Series C 7 Family Oklering Individual Investors Institutional and Strategic Investors The following table provides a summary of the reported capital (equity and debt) raised by private cannabis-related companies in 2016 and year to date through November 30, 2017. While the table indicates that significant capital is available in the private markets, we believe that the dearth of acces- sible institutional capital makes it challenging for many companies to raise subsequent rounds of financ- ing after successfully securing their start-up capital. In addition, the amount raised per transaction is small and there have been very few announced financings of meaningful size by private companies. While we believe that the data is informative, it is challenging to get accurate and comprehensive data for the number and dollar amount of transactions that occur in private markets within the cannabis industry because of the number of transactions that are not reported. © 2017 Ackrell Capital, LLC | Member FINRA/SIPC 133 HOUSE_OVERSIGHT_024769