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The most significant development in Europe’s marijuana market took an unexpected turn this year. Despite expectations, Germany decided against legalizing the recreational use of marijuana. Instead, the country diluted its plans for law reform following consultations with regulatory bodies.
Now, one might wonder if this decision sets a negative precedent for venture capitalists (VCs) investing in European cannabis startups. Surprisingly, it may not be all bad news; in fact, it could prove beneficial for some. Óskare Capital cofounder Oliver Lamb views Germany’s cautious approach positively, especially for the medical and pharmaceutical sectors.
Drawing lessons from North America’s experience, Lamb highlights the potential pitfalls of a hybrid recreational-medical market. The U.S. witnessed the adverse consequences of blurring lines between medical and recreational cannabis, hampering targeted medication development.
Matt Hawkins, founder of Entourage Effect Capital, concurs, stressing the importance of learning from past experiences to avoid such mishaps. Despite concerns about the limited addressable market for legal cannabis in Europe, influenced by Germany’s recent decision, some funds are not entirely discouraged. Hawkins admits that the scaling back in Germany has made the firm more cautious about investing in Europe. Nevertheless, officials still hold hope for the continent’s ability to create a commercial adult-use market, albeit recognizing the challenges.
Adding to the complexities, European cannabis startups are currently grappling with a global repricing wave initiated by investors. Many consider these companies to be overvalued, prompting caution in the investment landscape.
In this light, Emily Paxhia, cofounder of Poseidon Investment Management, advises cannabis entrepreneurs buckle down and persevere amid the slowdown, with survival becoming the top priority.
For companies aware that they might not endure these tough times, seeking potential buyers through consolidation emerges as a viable option. It is anticipated that mergers and acquisitions will become more common in the coming months. However, the market currently favors buyers, making it a challenging environment for sellers, as highlighted by Lamb.
Ultimately, while Germany’s decision to hold back on recreational legalization surprised many, it has opened up conversations about the delicate balance between medical and recreational cannabis markets. Investors and entrepreneurs alike must navigate these waters carefully, learning from the lessons of the past and making strategic decisions to thrive in this evolving industry. As the European cannabis market continues to develop, key attributes such as adaptation, resilience and foresight will be the essential ingredients for success.
As the approach in Germany shows, the medical side of marijuana isn’t as controversial as the substance’s recreational use. It is therefore no wonder that several entities such as IGC Pharma Inc. (NYSE American: IGC) are seeking to develop pharmaceutical-grade formulations from marijuana compounds, including THC. Such an approach sidesteps the politics often linked to marijuana and follows the clearly defined drug development process.
NOTE TO INVESTORS: The latest news and updates relating to IGC Pharma Inc. (NYSE American: IGC) are available in the company’s newsroom at https://cnw.fm/IGC
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