The first cannabis businesses were mostly funded straight from savings or with some help from a rich family member. Today, cannabis companies are raising significant capital and marijuana-focused funds are popping up weekly. Investors poured more than $100 million into marijuana businesses over the last two years (even without consistent access to banking).
All this means that as a cannabis business founder you now have a lot more options for how to fund your business in 2015. Taking control of your funding options and finding the right investors will make or break your business. That’s why we’re focusing on how to fund your business for national expansion in our upcoming Leadership Summit and I wanted you all to meet Jessica Geran before she joins us in Colorado this May.
How to Approach Cannabis Investors with Jessica Geran, Dutchess Capital
What’s your experience in finance and cannabis to date?
I am the Director of Corporate Finance for Dutchess Capital. I’ve been with Dutchess for over five years. Dutchess has been around for almost 20 years. Throughout that time we’ve funded public companies on an industry agnostic basis in the small and microcap space, which we continue to do.
Being based in Boston, our attention turned to the cannabis space in 2012 when Massachusetts passed their medical marijuana law. After significant due diligence on the industry, we made our first investment in 2013 in a cannabis tech company called MassRoots. Since then, we’ve invested in 14 additional companies, comprised of a combination of ancillary businesses and companies that actually touch the plant.
What are my options for funding a cannabis-related business?
Most companies begin by bootstrapping it. They rely on savings, credit cards and any early revenue they may generate. Another common early funding method is raising capital through friend and family investors. After that companies will look for angel investors, venture capital (VC) or private equity (PE) firms or list on the public markets in order to raise funds. A year ago there were hardly any investors actively looking to get into the cannabis space. That has started to rapidly change. More and more individual investors and firms are looking at cannabis deals every day.
What do entrepreneurs need to prepare before they start approaching investors?
Entrepreneurs need to have a business plan and pro forma (forecasted financials) prepared. Within the business plan the company must state their value proposition declaring what makes their company different and better than others out there.
How do you prefer entrepreneurs approach you?
It doesn’t matter how they approach me; email, phone, conferences. It just matters that they approach me. We want to look at all opportunities.
How long does a financing deal typically take to complete?
It really depends on what the deal is, how much capital is involved, what the structure is, etc. Some deals are done in a few days, others take weeks. We try to be as quick as possible but there is a lot that goes into properly evaluating each opportunity.
What type of returns do you expect on an investment?
Dutchess doesn’t has an expected return. We are working to build a very strong portfolio of companies that can not only benefit from our expertise and network, but also use each other to scale their businesses so that ultimately we all come out on top, hopefully way on top!
What are the most common mistakes entrepreneurs make while fund raising?
One of the bigger hang-ups we’ve encountered in the industry is inflated valuations. While there is the potential for significant opportunity within the industry, there are still huge risks involved that have to be factored in, far more than most other industries. Another mistake companies are making is stating that they have zero competition. There is always competition. It may not look the exact same, but it’s out there.
Attend our Leadership Summit at The Lodge & Spa at Cordillera in Edwards, CO May 15 – 17 to hear more from Jessica Geran as well as our other speakers.
TOTAL RETREAT COST: $1,750 per person if paid in full before March 1st, 2015.
$1,250 per person for members of companies who sponsor Women Grow, if paid in full before March 1st, 2015.