10 Steps To Landing An Investment In Cannabis

There’s no better time to build a business in the cannabis industry — but how do you get the funding? Follow these 10 steps to impress investors and get the money you need get your startup off the ground.

Mar 12, 2015

So you want to raise money for your business? Luckily it’s the pot.com boom and investors are looking for cannabis businesses to invest in right now. The question is what are investors looking for? What should you cover? Here’s your guide to developing a short but impressionable pitch that could land the investment you need.

1. Describe your business in a Twitter headline.

You have 10 seconds to grab an investor’s attention; that is what your headline or first sentence needs to do. For example: “The Marijuana Show is Shark Tank and The Apprentice for Ganjapreneurs.” This ‘headline’ gets people to ask questions or want to see the show. What is your Twitter-like headline? Once you write it, ask friends to give you their feedback. Does it make sense?

2. What problem are you solving?

Investors fund solutions. Share a personal story leading to a unique solution. Consider the ‘Opportunity Size’; cannabis is a multi-billion dollar market with double-digit growth rates – the bigger the solution, the better!

Detail the market size. The number of users, size of transaction, and frequency are all important considerations. Do you fill a gap? How many have this problem you are solving? How many need what you have? Add statistics by a respected third party.

What are you solving and what is the benefit to the consumer? These seem to be the most powerful motivators for why people buy anything: sex, money or power. Alternatively, ‘enlightenment’ makes you feel good, healthy, and/or gives you a higher purpose in life.

3. Demo your product.

Show how your business works in a live presentation or a video. What does it look like? Is it easy to operate? How is it better than other similar products? Is there a fast, dramatic before and after result? Leverage comparisons. Will it save consumers time and/or money? Show investors where their payback lies.

4. Where is your business model?

It’s a dollar matter and financial plans get respect. How will you make money? How much have you sold? Who pays you? Investors love seeing recurring revenue, profit margin, and volume growth. How will spending money make money? Investors want to know that if they invest in you that you will be able to use that money to make more money fast, ideally within a year. Make it clear that you know your numbers and have plans to increase them.

5. What is your unfair advantage?

What are your biggest and best assets? Who is on your team? Investors aren’t only buying into your mission, they are entrusting your team to enact it. Who makes up the executive team and/or board of advisors, and what’s their level of involvement? Ideally, they have startup experience. Do you have intellectual property like a patent or trademarks? These assert legitimacy and lay claim to the ideas you’re selling. Do you have a lot of returning clients? Loyal clients indicate a quality product. Impressive revenue? Spell out why they won’t find your offer anywhere else.

6. Who is your competition?

This is where you want to highlight your sustainable competitive advantage and barriers to entry. How are you better or different then they are? What if somebody does the same thing? In six months to a year – how will you distinguish yourself?

7. How will you market and sell your product?

Outline your marketing and sales strategy, including partnership plans and key milestones. How are you going to use social media, traditional marketing, advertising, mobile, TV, radio, live meetings, trade shows? What is the volume, cost and conversion?

8. What are your financial projections?

Project revenues and expense totals for the next 5 years. What is the valuation of the company? Break even point, burn rate, growth assumptions?

9. Make clear your funding requirements.

What do you need and what equity will you give in return for investment? Show a breakdown of the intended funds. What do you need to spend and how will those efforts make money? Think about it like this: I need this much capital to run operations, this much to pay people I have hired, and this much to acquire customers. How much money do you need to make money? If you have orders you need to fill this should be said early in the pitch.

10. Outline your milestones.

How will their money get you to a milestone? You want to get to a milestone that raises the value of the company so you can raise more money with a higher valuation of your company. What is your exit strategy? What is the time frame on return on investment, ie IPO, merger, sale? What is the rate of return expected for the investor?

You now have the tools to take your dreams into a plan, action, and results. Invest your time in the answers to these questions and it will payoff when an investment opportunity comes knocking! Welcome to the Green Rush!

Mar 12, 2015