Marijuana Business Magazine July 2019

Marijuana Business Magazine | July 2019 52 R aising money in the U.S. cannabis industry today is far different than it was one year ago—and unrecognizable from three or four years ago, when the United States had barely 20 medical marijuana markets, and Colorado and Washington were the only states selling recreational cannabis. Back then, little capital was available to cannabis companies, and the investors were outliers on the risk-tolerance chart. “The risk factors three and five years ago were so much greater, and the types of people investing were different. A few years ago, you were talking about real gamblers, penny stock people. It was a whole different risk tolerance and personality back then,” said Sheri Orlowitz, a former U.S. Department of Justice prosecutor who founded Artemis Capital, a cannabis-focused private equity firm in Washington DC. “Today, you have far less risk,” she added. “There is a ton more legitimate money out there now.” Indeed, while family offices and high-net-worth individuals are still heavily involved in cannabis investing, marijuana companies have a significantly broader selection of investors to appeal to, such as angels, venture capital and private equity firms. Marijuana Business Magazine spoke with cannabis executives behind successful raises, as well as investors and other industry experts to get their insights into raising marijuana money in 2019 and beyond. OPPORTUNE TIME TORAISE CASH These experts agreed now is a good time to raise money—for a variety of reasons. “If you’re considering raising capital for expansion, do that today, while there’s opportunity,” said Cresco Labs Chief Financial Officer Ken Amann, who’s helped the Chicago-based, multistate marijuana operator raise $250 million in private funds in the United States and list on the Canadian Securities Exchange. “I think we’re in a good environment right now,” he added. “There’s plenty of capital out there. People are excited about the growth opportunities, so take advantage of that now, while you can.” It’s also true that many more marijuana companies are competing for that money. Additional investors have joined the space in recent years, and some of them are less willing to take risky bets. Factors such as these affect valuations, deal structures and other aspects that entrepreneurs need to consider when raising capital. In fact, raising capital remains fundamentally difficult—even in the best of environments. Being successful requires planning, strategy and, often, outside help. As more states and countries legalize cannabis sales, an increasing number of investors are willing to enter the space. If your business is about to enter the fundraising stage, you may want to consider: • Now is a good time to court investors, many of whom are excited about the emerging cannabis market. Using the services of an investment firm can make it easier to round up individual investors. • In private equity, there’s a greater emphasis on past performance; in venture capital, investors are more focused on the future. • An increasing number of investors and financial institutions are willing to offer loans to marijuana entrepreneurs who don’t want to give up equity in their companies, but be wary of predatory lenders. • Crowdfunding is one way to connect with smaller investors. There are several types of crowdfunding, and most require copious paperwork. • The Toronto Securities Exchange will accept licensed Canadian marijuana companies, but it won’t take U.S. marijuana firms. Listing on the Canadian Securities Exchange or the NEO Exchange in Toronto can give your business the kind of capital that U.S. companies raising private rounds only dream about. Hustle America Veteran executives reveal when— and how—to court investors Raising Capital By Omar Sacirbey