Retail investors or guinea pigs? – TechCrunch

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There’s a paradox among retail investors: many startup-related deals are out of their reach (partly for their own sake). But laypeople have also become targets of novel schemes, hoping to attract their bets and savings. Are non-professional investors taking on more risk than they should? let’s explore — ann

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I am by no means a stock market expert. But while writing recently for TechCrunch about cannabis and psychedelics startups, I discovered that some early stage companies in these industries are listed on trading markets I had never heard of. I mean, I had heard of “pink sheets” – in “The Wolf of Wall Street”. I just didn’t think OTC would be something that startups would ever use. Seems like needing money for drugs gets you creative!

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I have nothing against innovation, even when it comes to fundraising. But the fact that publicly traded cannabis companies — many of which went public with surging sales more reminiscent of startup metrics than mature company earnings — have seen their market caps plummet is probably no coincidence. And given the time of the hype surrounding their public debuts, it’s hard not to be amazed at how many retailers were burned.

Nor are we just discussing the most obscure exchange. Cannabis companies listed on the Nasdaq, such as Akanda and Tilray, have also seen their value decline.

My perception is that we are seeing a new generation of psychedelics focused companies following in the footsteps of cannabis companies not mere speculation. “There is an unwarranted rush by founders to list their cannabis and psychedelics companies,” VC said Bek Muslimov told me.

Muslimov is a co-founder of a specialized investment firm Leafy Tunnel, and he sees danger in hasty offers. “In this pursuit, founders and management teams bypass private funding markets made up of professional and conscientious investors like VCs or growth capital funds,” he told me in an email.

The problem isn’t that individual investors are missing out on worthwhile opportunities. The problem is that they would have refused to invest at all. Not because they don’t invest in cannabis — few do. But Leafy Tunnel is one of them, which means its point of view matters here.

What Muslimov objects to is cannabis and psychedelics companies going public when they hadn’t met venture capitalists’ criteria for funding. “Unfortunately, this can result in companies with poor business fundamentals and insufficient maturity being listed to tap into retail investor funds.”

Retail investors or guinea pigs? – TechCrunch Source link Retail investors or guinea pigs? – TechCrunch

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