The Founders Fund, headed by PayPal founder Peter Thiel, has made a multi-million dollar investment in America's flowering marijuana industry.

After weeks of media chatter, Founders Fund confirmed its investment in Privateer Holdings, the firm responsible for the launch of Marley Natural, one of the world's first global cannabis brands.

The company has not revealed the size of its investment, but it came as part of a second round of financing totaling $75m. Thiel's venture capital firm is breaking new ground as the first institutional investor in the marijuana industry.

The company's chief executive Brendan Kennedy, says the new money will be used to invest in medical marijuana and other legal ventures. He believes the market for cannabis in the US could be worth as much as $50bn.

Privateer Holdings gained prominence as the owner of Leafly.com, a website that allows users to rate and review different types of cannabis and cannabis shops. Privateer also has interests outside the US including Canadian cannabis company Tilray and Marley Natural.

Charlotte Bowyer, head of digital policy at the Adam Smith Institute, commented:

It's great to see a pioneering institution like Thiel's Founders Fund make an investment in the nascent cannabis industry. It is a market which will only grow in size, and the potential rewards for early backers are huge.

Bowyer argues the announcement is a significant advance for the fledgling industry:

Investment like this is a big win for pro-legalization campaigners, and shows that the marijuana industry can move out of the black market to become a legitimate, professionalized sector with potential for tremendous success

Founders Fund is famous for investing in trailblazing companies that challenge the status quo. Their previous investments have included Airbnb, SpaceX, Facebook and Palantir Technologies. Geoff Lewis, a partner at Founders Fund, said the firm researched the marijuana industry and Privateer for 18 months before giving the go-ahead.

Thiel set up the San Francisco-based fund with fellow PayPal founders Ken Howery and Luke Nosek as well as iGoogle founder Brian Singerman.

A well-known libertarian, Thiel responded to a question on the shut down of online drugs marketplace Silk Road by saying:

We're at the beginning of the end of the drug war, but it will still have a lot more casualties before we get to the end of the end.

So far, 23 US states have legalised the use of medical marijuana. Colorado and Washington were the first states to legalise marijuana for non-medical purposes. The first cannabis retailers in Colorado opened their doors last year after a hard-fought battle with regulators and state politicians. In November, a Gallup poll found the majority of Americans, 51 per cent, supported the legalisation of marijuana.

On Tuesday, the Drugs Policy Alliance released a report examining the impact of legalisation in Colorado. According to the report, the state's capital city, Denver, saw a decrease in crime in the first 11 months of 2014 and raised $40m in revenue.