The reggae classic “Smoke Two Joints” advises us to light up in the morning, afternoon and night to feel all right. Cannabis startup investors could add another reason: It’s better than thinking about your portfolio performance.

While many sectors have seen less investment recently, the declines in cannabis dealmaking started earlier and have been particularly steep. Funding to the space actually peaked about five years ago, per Crunchbase data. Since then it’s been up and down, though mostly down.

For perspective, we charted out annual investment to North American cannabis-related startups for the last nine calendar years. We began in 2016, when Californians voted to legalize recreational marijuana, joining other Western states in what many expected would usher in a boom for venture-fundable entrepreneurship in the space.

As you can see in the chart, the narrative didn’t turn out as hoped. The most heavily funded companies of the boom period — including familiar names like Dutchie, MedMen, Pax Labs and Eaze — mostly haven’t raised fresh funding in years.

On public markets, meanwhile, cannabis has been a notoriously poor-performing sector. Marijuana-focused ETFs launched in boom times now mostly trade at a fraction of their former highs. Industry bellwethers like Tilray Brands, known for medical cannabis, and Canopy Growth, which offers branded cannabis products, are both unprofitable and trade far below their peaks.

No shortage of products

Of course, consumers haven’t given up on pot. With the rise of edibles, vaping and other consumption methods, there seems to be an ever-growing supply of alternatives to the classic two joints.

In addition to products containing THC, the compound that delivers marijuana’s famous high, entrepreneurs have been drumming up markets for other cannabis-based offerings. This includes startups working with CBD, a nonaddictive, nonimpairing cannabis compound that many associate with improved well-being.

However, investments haven’t panned out as hoped. Dozens of companies tied to CBD, which is effectively legal to sell in the U.S., picked up multimillion-dollar rounds in the past five years. Like the broader cannabis space, however, funding has slowed and most haven’t raised new financing in the past couple of years.

A splintered market

Cannabis investors see opportunity for stepped-up growth should the U.S. government move to legalize marijuana. For now, states continue to loosen restrictions. As of about a year ago, 38 states allowed medical use of cannabis products, while another 24 had laws allowing some recreational use.

Certainly there’s a sense that political winds are still blowing in a direction favorable to legalization, or at least decriminalization. Last week, none other than Vice President Kamala Harris tweeted that: “Nobody should go to jail for smoking weed.” Several bills in Congress aim to legalize or loosen restrictions.

But just because something is legal doesn’t mean it will produce enviable venture capital returns. In the case of cannabis, investments that once looked capable of lighting up the market have instead left backers largely burned.

Illustration: Dom Guzman