Investing in Cannabis 2.0 – How has investing changed in just one year?

What a difference a year makes.  Twelve months ago we were working with our first cohort of companies coming through the Cannabis Capital Summit and we found that the experience was very different from the tech, life science, health care and consumer goods companies we typically work with.

We found that most of the companies were not ready for funding in 2014. Cannabis-Capital-Summit-Logo

There were several reasons for this:

  • In the first year of cannabis investing, there was a ton of euphoric investment being made in just about any company in the industry with the presumption being that it would become the next Budweiser or Marlboro. With so much cash chasing these companies, the bar was set low for investment and just about everyone had all the cash they needed.
  • The people in the business were not business people. Some of the entrepreneurs said they had been “in the business” for fourteen years, etc.  Clearly they weren’t following normal business and venture capital type work during that time!  One entrepreneur explained in March that he hadn’t finished his proforma because “he had been at Burning Man”.  Our response was that Burning man was last August – more than seven months earlier.

This year we’re seeing much more solid and investable companies.

There are several reasons for this:

  • We have had a year to build out our networks and get to know people in the industry and seek out quality deal flow.
  • Accelerators like Canopy have come onto the scene. These programs help entrepreneurs with sector expertise put together the business components they need to scale and succeed.
  • Seasoned business people have joined the industry. We have several businesses with C-Level management with Harvard MBAs this year.  These people could be doing high end work in just about any industry, yet they have chosen to work in cannabis.  Their passion, combined with business experience, makes for a great combination.
  • Finally, the euphoria is leveling off. With a year of “actuals” under our belt for financial performance, we’re seeing that the huge opportunities of the cannabis industry are still out there, but that it will take some time and a lot of hard work to get there.

Nobody’s going to get rich quick – but quite a few people will definitely be getting rich.

 

To learn more about the trends and opportunities in the cannabis industry – attend the Cannabis Capital Summit, June 16th at the Holiday Event Center, just off Speer and Federal in Denver.  Register at www.cannabiscapitalsummit.org

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