A new wave of institutional capital is preparing to enter the cannabis industry, prompting warnings from founders who watched previous investment rounds strip control from the operators who built major brands.
Berner, the cannabis entrepreneur behind Cookies, has dubbed these incoming investors "the Chads"—executives who arrive with term sheets and financial engineering but little understanding of cannabis cultivation or culture. His comments come as federal rescheduling discussions and state market maturation make cannabis increasingly attractive to traditional finance.
The reference points to a painful recent history. MedMen, once valued at $3 billion, collapsed into bankruptcy after aggressive expansion funded by institutional money. Flow Kana, the California distributor, lost its founding team's control. Canopy Growth burned through billions in capital while its stock price fell 99% from its peak. High Times itself nearly went under after a SPAC deal gone wrong.
The Pattern
Rolando García, writing in High Times, traced how founder dilution played out across these companies. The pattern typically starts with growth capital that seems necessary for scale. Term sheets include board seats, liquidation preferences, and anti-dilution provisions. Within 18-24 months, founders find themselves reporting to investors with no cannabis experience making operational decisions.
"The ones who arrive with contracts and agendas and no feel for the plant," as Berner characterized them, often prioritize metrics that work in traditional CPG but fail in cannabis. Rapid multi-state expansion. Aggressive wholesale pricing. Corporate consolidation of cultivation facilities. These strategies have repeatedly destroyed value in an industry where relationships with regulators, budtenders, and local communities matter as much as cap tables.
Some founders kept control. Curaleaf's Boris Jordan maintained voting control through a dual-class share structure. Trulieve's Kim Rivers negotiated protective provisions. Green Thumb Industries' Ben Kovler retained decision-making authority even as the company went public.
What's Different This Time
The incoming capital wave has new characteristics. Private equity firms are forming cannabis-focused funds rather than making one-off deals. Family offices are taking direct positions. Traditional venture capital is finally entering after years on the sidelines.
But the structural problems remain. Cannabis is still federally illegal, meaning institutional investors can't use standard leverage or access normal banking. The operators who understand 280E tax implications, state-by-state compliance variations, and supply chain complexities are irreplaceable. Yet term sheets still get written as if cannabis is just another consumer product category.
The market has matured since the last cycle. Total U.S. cannabis sales hit $30 billion in 2023. Multi-state operators are actually profitable now, not just burning cash for market share. That profitability makes companies more attractive to institutional money. It also means founders have more leverage to negotiate.
The Control Question
García's analysis suggests founders need to decide early: take institutional money and likely lose control, or grow slower with strategic capital from people who understand cannabis. The middle path—taking institutional money while keeping control—requires sophisticated legal structuring and willingness to walk away from deals.
Berner's Cookies has expanded to 20 states while maintaining private ownership. The company's valuation has reportedly crossed $1 billion without giving up founder control. But that path required turning down larger checks and growing more methodically than investors typically want.
The next 18 months will test whether this generation of cannabis founders learned from their predecessors. Federal rescheduling to Schedule III would open new capital sources. Banking reform could follow. Each policy change brings more institutional money—and more term sheets written by people who've never grown a plant.
Whether the Chads can adapt to cannabis, or cannabis founders can protect themselves from the Chads, will shape the industry's next phase. The last wave of institutional money left wreckage. This one arrives with the same playbooks.
This article is based on original reporting by hightimes.com.
