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How to Secure Investment for Your Cannabis Startup

Cannabis Startup
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Economics

How to Secure Investment for Your Cannabis Startup

Raising money for a new cannabis startup can be a long and intimidating process. These tips will help you secure investment for your business.

In the business world, it seems that popular industries come and go. Certain types of products make a big splash on the market before slowly fading into obscurity. However, when you examine the cannabis marketplace, there’s an overwhelming trend of growth and staying power.

Experts calculate that in 2017 alone, North Americans spent $9.2 billion on cannabis and cannabis-related products, with that figure expected to reach $47.3 billion in just 10 years.

Anyone wanting to claim their share of the pie is likely exploring cannabis-related business opportunities, but many are dismayed by the costs required to get their cannabis startup off the ground. Dispensary licensing and fees can easily cost tens of thousands of dollars and the expense of testing equipment for a new growing operation can seem monumental.

It’s not easy for a budding cannabis business to secure the funds needed to carve out their space in the cannabis world. With the help of Andrew Witkin, founder and president of StickerYou, a successful e-commerce startup that produces customized die-cut stickers, labels and decals for branding businesses, we’ve put together some helpful insights to help you secure investment for your cannabis startup.

Evaluate Your Options

Asking the bank for a loan so you can sell cannabis isn’t exactly a route that most entrepreneurs can take. When it comes to looking for funding options, many have to think outside of the box. Friends and family might seem like a good place to start, but keep in mind that even if everyone you know gave you $500, it might only cover a small portion of the money you’ll ultimately need to get your business up and running.

In most instances, specific cannabis venture capitalists (VCs) are the ideal path to explore, as these companies are well-versed in the industry and can evaluate your business model without any stigmas attached.

Practice Makes Perfect

Your time in front of investors is a make or break opportunity, so it’s in your best interest to be over-prepared. Create a polished pitch deck, or pay an expert if necessary, that clearly illustrates the value you’d offer to the industry. You should know what you’re going to say like the back of your hand while still being able to think on your feet and answer difficult questions.

Dial It In

Although investing in the cannabis industry is a huge priority for many VCs out there, that doesn’t mean they’re just giving away money, either. Businesses that have industry-changing ideas will naturally garner the most attention, so make sure you can clearly communicate your goals during your pitch.

There’s a fine line between wanting to shoot for the stars and proposing an idea that tries to accomplish too much, so narrow your presentation to the things that matter most. A clear and focused business plan is always more attractive than one that tries to meet everyone’s needs all of the time.

Know Yourself

Standing in front of investors asking for large sums of money is nerve-wracking enough, but when it comes time to negotiate, the last thing you want to do is get caught off guard. Unless you’re dealing with someone who so strongly believes in your mission that they’ll simply gift you the money, you’ll likely be asked to give up a portion of the company’s equity.

Angel investors, in particular, often take on huge amounts of risk, so it’s not uncommon for them to want a certain amount of control when it comes to your overall operations. Think carefully ahead of time and make sure you do not give up more than you’d ideally like just because you are desperate for cash.

Try, Try Again

The cannabis market is a tough industry for a number of reasons, including the plethora of seemingly constantly changing regulations along with the sheer number of people who are jumping on the bandwagon. You may not secure investment for your startup after one presentation — or two, or even three — but it’s important to keep trying.

If you have an idea you believe in, putting in the time and work to make it happen will pay off in the long run.

TELL US, do you have an idea for a cannabis business?

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