Just because you have a cannabis license, it doesn’t mean you’ll succeed. And although things have gotten easier from a financing perspective for cannabis, that doesn’t mean more cannabis companies will succeed.
That’s the hard, straight news coming from yesterday’s Grown In Cannabis and Capital Summit, where about 200 people registered and logged in to watch 17 cannabis investors and finance experts dole out deep insights at a rapid fire rate.
“A lot of people look at cannabis as a lottery ticket, and that’s just not the reality,” said Salveo Capital’s Michael Gruber in a morning session on venture capital. “I think entrepreneurs need to understand, you need to get a license, but after that is all the heavy lifting.”
“You need to know your financials cold,” followed up Supercritical’s Kerry Jordan, “and have those numbers available and know what they mean.”
Again and again, panelists iterated that execution and business fundamentals are the key to success.
“Growing weed is not easy!” said valuations panel moderator and MGO Accounting Director Barbara Webb.
“Everyone thinks it’s easy to do,” agreed Brian Schinderle, from Solidium Capital Advisors. “Because, ‘We hired some master grower from Colorado.’ It’s very difficult to value early stage companies because of that.”
And then, when it comes to figuring out the value of a cannabis license, it goes right to business fundamentals, said Jeff Matthews, of Ackrell Capital.
“It will be more of a buy versus build. If I’m looking for someone to buy the license, how much will it cost me to do the work, put in my application, and what other capital would be required to create a newly licensed business? I’d weigh those two points and come up with whatever value it would be,” Matthews said.
An hour later, in a panel on “Raising Cannabis Capital”, Greg Fodell, Director of Business Development for PharmaCann almost repeated Jeff Matthew’s point.
“It’s really understanding what the value proposition is for the business,” when you’re considering investing in that business, said Fodell. “Do you have captive demand? Did you think about the market opportunity? Or the team and competitive advantage from a product perspective?”
Later, in a “Reflections After The Sale” panel, Kara Wright, who sold her stake in Illinois dispensary and cultivation licenses, and is now building new cannabis businesses, said that circumstances around starting a business have changed dramatically in just five years.
“The first time, we were talking to personal networks we had,” said Wright. “Nobody knew anything about cannabis. People were just interested in something new. None of us were real investors. We didn’t have context on what a good investment was. We had one investor who asked about production and value of the business. Now we’re seeing smarter investors. Now that we’ve seen people who have lost and made a lot of money, we see smarter investors who want to know how we’re going to spend every dime. They want to know that we understand the business and know the outcomes and how we’ll make money. It’s becoming more formalized and institutionalized in nature.”