The venture capital industry has not made much of a dent in the cannabis business. Yet.

It’s pretty clear why. This is a risky business for a risk adverse group of people betting that the funds they invest will pay off down the road.

But.. the road is a bumpy one.

At a recent Viridian Capital Advisors investment summit in New York, Scott Greiper, president of Viridian, said that he didn’t know a venture capital company that has actually made an investment. “I know individuals at these companies have made investments, but not the funds themselves,” he said. “It’s kind of strange. Because venture capitalists invest in early stage growth market, and the cannabis industry is an early stage growth market.”

It’s not just the federal illegality of cannabis that is causing venture capitalists to circle the opportunity, and then pause to re-evaluate. It’s the fact that there are different laws in every state. If someone wants to invest in the cannabis business, they have to understand that the growth of that company, if it’s in the cannabis touching side, can’t go national. It can’t cross state lines and begin the process of creating a national brand, and thus, more revenue.

There is also the issue that no one at the venture capital firm is a sector specialist. The industry is too new for that. That leaves more uncertainty to deal with, more risk, and more money at stake, even within the relative safety of subsectors where a venture capital firm may already have some expertise – software development, real estate and security.

Avis Bulbulyan, founder of Bulbulyan Consulting Group, sees things a little differently, with a sort of glass half-full perspective. “The investors who invest in cannabis are not that many,” he confirms. “But there is no shortage of capital available, whether it’s private equity or whether it’s a growth stage deal. Or whether it’s individual investors coming in,” he says. “Look at cultivation. In that amount of space, you can only produce a certain amount of product. So a lot of these investors are not just looking at the industry and the opportunity as much as they are looking at the individual groups. Because at the end of the day it all comes down to execution.”

One way for people wanting to participate as a low-risk investor is through online financing, or crowdfunding. Kevin Provost, executive officer of Greenhouse Ventures, LLC, talked about it during the NY investor summit. “In 2009, there was not the opportunity for companies, either established or startups, to raise capital online in an equity financing or even a debt financing capacity,” he says. “Obama passed the Jumpstart Our Business Startups (JOBS) Act in 2012 to change some of these regulations and make it a little easier for growth stage companies and small and medium-sized ventures to raise up to $50 million from both accredited and unaccredited investors.”

Roughly two percent of Americans are accredited, which means that they are worth more than a million dollars in value outside the value of their home. The JOBS Act gave the remaining 98 percent the ability to participate in the wealth creation process. But it took time for those changes to be implemented. In fact, 2017 is the first time all parts of the act are fully enacted and companies now have a different way to raise capital. “We entered the space because we are alternative finance guys that saw an industry underfunded by venture capital, and saw ways for some growth stage companies to seek an alternative route,” Provost says.

Crowdfunding has started off with the ancillary businesses in the cannabis industry, letting investors make investments of $50 to $100 or so. But that will change as the industry matures. “I think there is tremendous opportunity for peer-to-peer financing and equity funding in the alternative financing landscape,” Provost says.

He says that crowdfunding as a whole industry will surpass venture capitalism this year if it hasn’t already. “So if you asked venture capitalists are they worried about crowdfunding, the answer is no,” he says. “But, it’s never going to go away. We are going to see arguably the crowdfunding market double in this year, and by 2025, it will be about $100 billion industry, which is going to be double what the cannabis industry will be if you are looking at common cannabis projections.”

The coming intersection of traditional and alternative financing with cannabis, he says, is going to be a “fascinating kind of venn diagram (intersecting, overlapping circles)” to keep an eye on for the next few years.

Still, even as alternative financing works its way up from the background, some venture capitalists are making careful inroads.

Institutional investors, using college endowments or pension funds, are generally dodgy about getting involved in an industry that sits in a grey are between state legality and federal illegality. Not so, Bulbuyan says. “There a lot of them,” he says. “What they are doing is, since they can’t come in through their entity, they will go in as an individual new entity. The wine and spirits guys are doing this.”

Greiper pointed out to that 15 small private equity funds were represented at the international medical cannabis conference in Pittsburgh last weekend. “You are also seeing very very large funds, $10, $20, $30, $40 billion, who are not investing in this space, and they won’t until the schedule changes,” he says. “But the senior portfolio managers of those funds are investing in this space, some very openly, most others under the radar. Why they are reluctant to get fully involved comes down to reputational risk for these larger institutions, and the stigma of working in the cannabis industry.”

Bulbulyan agrees, adding that the more the industry goes mainstream, the more regulations change, the more investors will be jumping in. “Once it gets rescheduled, to schedule two or three, I think that is just going to open up the floodgates,” he says. “Even the other investors that are getting involved today into the market, the whole rescheduling is part of their exit strategy. But you’re also going to see a lot of the institutional capital, a lot of the big companies, the big pharmas, the big alcohols, the big tobacco, jumping into the space because then it looks a lot easier to invest in.”