\n<\/p>\n
Having the right leaders in place is crucial as cannabis companies move from bootstrapped operations to startups funded by cannabis venture capital (VC).\u00a0<\/p>\n
Seeking cannabis funding may present challenges founders aren\u2019t accustomed to, including working with outside investors who may not be familiar with the industry and finding VC firms amenable to cannabis funding.\u00a0<\/p>\n
Hiring the right leadership to address these challenges, with experience working with venture capital firms in other industries, can help get your business the money it needs to blossom and grow.\u00a0<\/p>\n
Understanding the characteristics and qualities that will appeal to cannabis venture capital companies, so you\u2019re hiring for the right personality fit and <\/em>skillset, not just prior experience, can lead to success.<\/p>\n \u00a0It\u2019s also important that cannabis leaders know how to leverage funding to make the most of their partners\u2019 investments.\u00a0<\/p>\n Venture capitalists understand that funding any bootstrapped startup represents risks.\u00a0<\/p>\n But putting venture capital into cannabis poses unique challenges that are unlike in any other business. \u201cPerhaps the biggest difference is we\u2019re still against federal law,\u201d says Andrew DeAngelo, cannabis activist and leader. \u201cIt\u2019s one reason why a lot of ambassadors are not in the space right now.\u201d\u00a0<\/p>\n While some VCs see this as an opportunity, others perceive cannabis to be riskier than other ventures for that reason. \u201cA lot of people choose to invest in a packaging company, or a tech company, or any company that\u2019s not actually growing, transporting or distributing cannabis.\u201d<\/p>\n That doesn\u2019t mean it\u2019s impossible to secure cannabis funding; it just means leaders need to know how to tell the story of their company well, along with the history of the industry, and give the right investors a compelling reason to take a chance on them.\u00a0<\/p>\n Chris Finelli, Managing Partner at Phoenix Distributors, a sales and marketing as a service company for the cannabis industry, said that cannabis companies may have more success pitching high net worth individuals, family members and those in their network who are already open to cannabis investment.\u00a0<\/p>\n \u201cThe fact that cannabis is still classified as a Schedule I substance shuts off a lot of traditional investment outlets, so you have to [work harder] to find one that is open to cannabis investment,\u201d he said.\u00a0<\/p>\n DeAngelo pointed out that, unlike other disruptive industries where they are producing innovations never seen before \u2014 such as new tech, cannabis has a centuries-long history of use and regulation.\u00a0<\/p>\n Conveying that history and best practices can help inform funders so they can make wiser investment choices. The right leadership can help make that happen.\u00a0<\/p>\n \u201cLeaders that are curious, flexible, have the ability to pivot and have the ability to listen are really important qualities in the cannabis industry,\u201d DeAngelo said.\u00a0<\/p>\n Beyond that, he said that a combination of people from mainstream industries and from cannabis backgrounds can bring the best of both worlds into a company, and VC firms will see that the company has all areas covered.\u00a0<\/p>\n \u201cLegacy cannabis people like me need help from mainstream people,\u201d he said.\u00a0<\/p>\n Cannabis startups do have one advantage over some other startups \u2014 a market in a period of rapid growth. \u201cClient acquisition is going to be easy to come by,\u201d Finelli said. \u201cAnd that\u2019s not always the case.\u201d\u00a0<\/p>\n A rock-solid, well-detailed business plan and a robust financial model can help show investors that your company is in a position to manage and leverage this rapid growth.\u00a0<\/p>\n Finelli pointed out that any cannabis company should have its bases covered with a leadership team that checks all the boxes investors want to see. \u201cThe CEO, the legal team, the CFO, the head of product and the head of marketing should all be in place to execute the bullet points of your business plan.\u201d\u00a0<\/p>\n He added,\u00a0 \u201cI think that\u2019s one of the most glaring things a lot of operators in the cannabis business lack.\u201d\u00a0<\/p>\n If you\u2019re getting ready to step up from bootstrapped startup to seeking first- or second-stage funding, make sure the leaders you have in place fit the perception of what VCs want to see in good business leaders.\u00a0<\/p>\n \u201cInvestors want to see that the founder is highly educated with some sort of advanced degree,\u201d Finelli said, pointing out that most VC firms prefer serial founders. But if that doesn\u2019t describe your company, you can fill in by hiring others into your C-suite who possess that experience. \u201cThey want to see that this isn\u2019t necessarily your first venture, and that you\u2019ve taken a company from formation to either a successful exit or profitability.\u201d\u00a0<\/p>\n How your C-suite puts their knowledge and experience to use is crucial.\u00a0<\/p>\n \u201cIf I\u2019m an investor, I want a team that understands the product, understands how to raise money, and understands how to deploy it so it\u2019s not being wasted,\u201d DeAngelo said.\u00a0<\/p>\n DeAngelo and Finelli agreed that many legacy cannabis experts may not understand the best ways to interact with the VC firm, and having a few people from a mainstream background on board can help bridge that gap. But, as a founder, it\u2019s up to you to manage VC expectations and steer the conversation appropriately.\u00a0<\/p>\n \u201cI think there are a lot of people in the industry over-promising and under-delivering,\u201d Finelli said. \u201cWhen you\u2019re talking to a founder, walk them through the step-by-step process of how you\u2019re going to get the business cash flow positive. It\u2019ll lead to a better relationship down the road.\u201d\u00a0<\/p>\n Some investors require a bit more hand-holding and communication than others, and it\u2019s important for leaders to understand what different personalities need in terms of insight and transparency. \u201cI want a team that will pay attention to me, the investor, a little bit \u2014 and maybe more than a little bit,\u201d DeAngelo said.\u00a0<\/p>\n While it\u2019s important to choose a team with at least some individuals who can interact well with investors, Finelli warned against choosing your C-suite just because they look good on paper to investors.\u00a0<\/p>\n \u201cThat\u2019s not necessarily going to drive a healthy business,\u201d he said.\u00a0<\/p>\n He suggested bringing on people in key roles, including the heads of your marketing, finance and legal departments, in a consulting capacity first to see if they are a fit within your organization.\u00a0<\/p>\n \u201cIt\u2019s very hard to get a real sense of whether or not the person will be successful in your organization or who they are as a person within a couple of one- or two-hour interviews,\u201d he said.\u00a0<\/p>\n An executive search firm like Y Scouts can help you choose the best leaders for your cannabis company with our unique process that pairs performance-proven and purpose-aligned leaders with your firm for long-term success.\u00a0<\/p>\nChallenges To Seeking Cannabis Funding<\/h3>\n
Build a Diverse Leadership Team\u00a0<\/h3>\n
Start With a Business Plan and a Full C-Suite<\/h3>\n
What Investors Look for in Business Leaders\u00a0<\/h3>\n
Choose Leaders Who Know How To Speak to Investors\u00a0<\/h3>\n
Hire the Best Fit for Your Company\u00a0<\/h3>\n