A $2-billion US fund run by the co-founder of PayPal is to invest in Privateer Holdings, a marijuana company that owns Canadian medical marijuana producer Tilray.

The investment by Founders Fund, which has put its money behind companies such as Facebook and Space X, highlights the growing potential of pot-related business.

In addition to Canada’s expanding medical marijuana business, pot is now legal for recreational use in four U.S. states and the District of Columbia. Another 23 states allow medical use of the drug.

Founders Fund, set up in 2005 by PayPal co-founders Ken Howery and Peter Thiel, is considered a powerful Silicon Valley player, with investments in aerospace, artificial intelligence, advanced computing, health and the internet.

It is contributing to a $75-million fundraising effort by Seattle-based Privateer Holdings. The exact amount of its investment has not been released, but Privateer described it as a "multi-million dollar" participation.

Privateer owns Nanaimo, B.C.-based Tilray, which won a medical marijuana licence from Health Canada last April, as well as the pot information service Leafly.

Bob Marley pot brand

It plans to launch a brand of marijuana and products with the family of Bob Marley called Marley Natural.

Founders is investing in Privateer because it believes Privateer can eventually establish mainstream brands that will be recognized and trusted as marijuana becomes legal and socially acceptable, according to Founders Fund partner Geoff Lewis.

Lewis said he expects recreational use of marijuana soon will be legalized in more U.S. states.

"Public sentiment is there, and it crosses political lines," Lewis said.

States that allow recreational use are still developing a framework to control pot abuse, including driving while under the influence.

There also has been pushback from officials in states such as Nebraska and Oklahoma, which are pushing Colorado to overturn legalization because they say their states are being overrun with marijuana from outside their borders.

Founders Fund is the first big institutional investor to put money into marijuana-related businesses.

Privateer CEO Brendan Kennedy said he believes there soon will be more interest from more professional money managers.

The company’s capital previously came from private investors.  

"One of the important milestones for this business is having access to capital, and significant capital," he said. "There will be a lot of people who wake up [now] and realize they need to look at this industry just as they have looked at other emerging industries around the world."

Privateer will use the funds to expand existing operations and invest in legal and medical cannabis businesses, he said.