Time for Cannabis to Elevate their Capital Markets Game
A tough funding environment is showing glimmers of hope.
Interest rates are heading downward, weed firms continue to post solid results and regulatory reform is inching closer to realization. There is also growing awareness among institutional investors that cannabis is an attractive sector.
If one or a combination of these catalysts come to pass there will be a tsunami (for the weed sector) of capital pouring in. Firms will be poised like a F1 starting grid ready to raise money.
Sadly, most aspirants won’t get through the first turn in a good position if their financial house is not in order and they fail to execute.
From a capital markets perspective, MSOs and LP undertake two vital activities: securing debt & equity capital and dealing with (mostly retail) investors.
To be frank, many companies perform poorly on both counts. They remain chronically short of quality, lower-cost capital. And, long-suffering retail investors remain disgruntled and often ignored.
Good news, though. These enterprises can do better without breaking the bank or blowing things up.
I’ve learned some things as a C Suite/Board advisor and road show pitchman. Below are 4 of my lessons:
1. Refine your investor story
- If you don’t have one, create an investor purpose statement.
- Understand your target. Different funders have disparate financial, strategic and emotional needs & expectations.
- Acknowledge and don’t minimize sector realities and risks.
2. Get your messages right
- Some sizzle is ok (and expected) but don’t over promise or over-hype the industry.
- Many weed firms resemble a kludge (a mixture of different businesses, products, strategies and assets) to the outside world. Cogently describe your business and show how it leads to strong financial and strategic outcomes – or proactively explain why your company is not a dumpster fire.
3. Optics matter
- Building trust is key. You need to speak plainly and professionally, and explain why you will be a good steward of their capital.
- Be transparent around your operations and market results, governance and 'use of proceeds'.
4. Execute with excellence
- Get the right people on the funding team and committed to results. Your CEO must lead from the front.
- The ground game (e.g., hustling for meetings, performing funder due diligence and pre meeting prep) really matters.
- Don’t ignore individual investors. One of them could be a big influencer or working for that large fund that you are courting.
Quality capital is discerning and sees a plethora of opportunities. Don’t’ think it will flow to you at good terms just because your financials are top quartile or you have hard-to-get licenses. And remember your investor thesis is sold, not bought.
I can improve your odds of success. Let’s talk.
#capital #funding #capitalmarkets