Cannabis has become one of the most innovative and disruptive industries globally with rapid growth potential, and thanks to a more progressive legislative approach in Europe, investors are now plowing millions into the nascent cannabidiol (CBD) market.

According to CB Insights, in 2019, CBD startups in Europe saw a record level of investmen—34 innovative companies received a total of $128.5 million. Annualized activity suggests funding could continue to rise this year, approaching $150 million. “Regulatory relaxation has been the predominant driver of investment and gained momentum in 2019, as Luxembourg became the first European country to announce its intent to legalize cannabis for recreational use. Investors believe a ‘domino effect’ could follow, as seen previously in North America and Asia,” says Marissa Schlueter, Senior Intelligence Analyst at CB Insights.

A recent report by the Centre for Medical Cannabis estimates that 8-11% of U.K. adults respectively—approximately 4-6 million people—have tried CBD. The market size is estimated at $390 million per year and expected to be just short of $1.3 billion in 2025. This would be equivalent to the entire U.K. herbal supplement market in 2016. 

Non-Regulated Market Is Slowing Growth

Following some hectic and sleepless years in building her previous business—Kry, a digital health platform, Josefin Landgård, company’s co-founder and mother-of-two, realized she had to find the tools to prioritize herself and her well-being. She became obsessed with finding simple but effective health hacks, and that’s when she stumbled upon CBD. “It was love at first sight,” she tells me. “I could wind down easier in the evening and became so much more balanced.” And so, MANTLE was born.

"We did an angel round when launching, and are planning to raise more money this fall. When we presented the opportunity of the fast-growing CBD market to the investors, it wasn't that hard to get them on board. Even if this is a different industry, they had faith in the capacity of the founding team."

Although the CBD industry in Europe is still relatively nascent compared to the U.S., it's estimated to surpass the U.S. as the number one CBD market soon. There are also significant variances between countries. "Scandinavia is far behind countries like the U.K. or Switzerland, partly because of its more conservative regulations," Landgård points out.

CBD And Women's Health

Techstars, a U.S.-based seed accelerator with 30 plus program locations globally, is well known for its progressive approach towards emerging technologies in the healthcare sector. One of its portfolio companies—ohne—women's health startup offering 100% organic tampon subscription and matching CBD oil. “In the last year, we saw an overall 300% growth in monthly revenue and a 1,200% growth in the sales from our newly launched cycle care add-on products," Nikki Michelsen, ohne's co-founder, tells me.

Eamonn Carey, Managing Director at Techstars London, is convinced that what we are seeing is just the beginning of a new emerging trend. "When I first chatted to ohne, they had pages and pages of customer feedback and love from review sites, blogs, social media and email. They'd clearly struck a chord with their users. It's obvious that there's huge potential in this sector - you can see more and more investors looking at everything from CPG and pet food brands through to healthcare across the globe. For me, the key thing that any startup in the CBD world has to demonstrate is that they've built an amazing product that people love and they have a genuine community and a brand with the potential to appeal to a mass-market audience," adds Carey.

Education Is The Key

Born out of Europe’s biggest market for CBD, Germany, Sanity Group has raised a whopping $23.7 million so far. Comprising a wellness brand VAAY, and a pharmaceutical brand Vayamed, its products are sold in beauty stores in Germany, online, and, now, in its physical shop in the heart of Berlin. Earlier this month, VAAY released it's first TV ad in Germany to create new, positive stories around CBD and educate the population about the health benefits of cannabis, be it day-to-day or medical-grade.

When speaking about their latest round of investment ($22 million in Series A, with participation from Cherry Ventures and TQ Ventures, among others), Sanity's co-founders Finn Age Hänsel and Fabian Friede admit it hasn't been so easy to convince investors to write the cheque: "Investors were initially divided on the issue–some were immediately hooked, while others were much more cautious, for example, because of the stigma of cannabis. But they all have one thing in common: they see the extremely high potential. It is a very new industry, however observing the strong developments in the U.S. and in Canada, many investors share our belief that the cannabis sector has the potential to disrupt many other business sectors," they conclude.

When it comes to exits, the European CBD market is not short of success stories here either—last year U.S.-based World High Life Plc acquired U.K.'s CBD brand Love Hemp for £9 million and invested £2 million into the company following the acquisition.

While the (still) unregulated nature of the CBD market in Europe could pose early challenges for the industry, innovative cannabis companies are proving that the real growth is somewhat inevitable—and most possibly very lucrative.