Cannabis Startups Struggle Amid Rising Competition


Cannabis Startups Struggle Amid Rising Competition

Navigating Financial Turmoil: Marijuana Startups Confront Intense Competition

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These days, it’s hard to turn a corner in New York or Los Angeles without walking smack into a cloud of pungent marijuana smoke. This can create the impression that the industry is booming — both on the coasts and throughout much of the rest of the country where recreational use is now legal.

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Struggling In a Boom

The reality is very different. Marijuana startups, big and small, are burning through cash as they struggle to grow their business, and investors are bracing for a potential wave of bond defaults.

Competition and Licensing

Nearly a decade after the first recreational dispensaries opened in the US, weed companies are facing intense competition as states issue more licenses. Meanwhile, roadblocks to accessing many traditional financing and banking options remain because marijuana is illegal federally.

Federal Legal Restrictions

“When you put it all together, an economy that’s not going great, the industry not doing great and lack of progress in Washington, my base case is that that’s a set for accidents to happen,” said Frank Colombo, investment banker at cannabis investment firm Viridian Capital Advisors.

Investor Caution

Some of the industry’s bigger operators are now tipping into financial distress. Trulieve Cannabis bonds due 2026 change hands for 68.5 cents on the dollar, while rival Curaleaf has 8% notes trading at 78.5 cents. It cost Ayr Wellness a steep 12.5% annually to borrow in 2020. That bond too has slumped.

Case Study: Trulieve Cannabis (CNSX: TRUL)

Florida-based Trulieve is now winding down operations in California, Nevada, and Massachusetts. The retrenchment comes after once-coveted licenses to operate in states that permit recreational marijuana became unlimited, boosting competition and cutting profits.

Case Study: Curaleaf (CNSX: CURA)

Curaleaf, headquartered in Wakefield, Massachusetts, is the largest retail dispensary in the US, and took on debt to fund acquisitions. Now, it’s looking to trim its operations and has exited multiple states.

Case Study: Ayr Wellness (CNSX: AYR.A)

And Miami-based Ayr Wellness faces one of the industry’s nearest-term debt tests. It has more than $200 million of bonds due at the end of 2024 that Fortune said it may struggle to address. Rising interest rates, high taxes, and a lack of access to traditional banking systems give companies like Ayr fewer options.

Dealing with Debt

“The theme right now is everyone’s working with their debt holders to extend their original term without trying to refinance these at higher rates. We’ve seen that across the board,” Fortune said.


In conclusion, the thriving facade of the marijuana industry doesn’t reflect the financial challenges many startups are grappling with. Intense competition, federal legal restrictions, and limited access to banking options have created a complex environment. Industry giants like Trulieve, Curaleaf, and Ayr Wellness serve as cautionary tales of the difficulties faced by companies. Investors and companies alike are approaching these challenges with caution, seeking ways to extend debt terms and navigate the turbulent landscape.


  1. How has competition impacted marijuana startups? Competition has surged due to states issuing more licenses, putting pressure on marijuana startups to differentiate and survive.
  2. What role does federal legality play in the industry’s struggles? Federal illegality hampers access to traditional financing and banking, creating financial instability.
  3. Why are investors concerned about the marijuana industry’s future? The combination of a struggling industry, economic uncertainty, and lack of federal progress raises concerns about potential defaults.
  4. What are some examples of companies facing financial distress? Trulieve, Curaleaf, and Ayr Wellness are notable examples facing financial challenges due to various factors.
  5. How are companies addressing their debt challenges? Many companies are working with debt holders to extend original terms as refinancing at higher rates is unfavorable.