Raising Private Capital in the Cannabis Industry
By Charles Alovisetti, Elliot Choi, Sahar Ayinehsazian
Sep 18, 2020
Despite its promising trajectory, raising private capital continues to be a challenge for the nascent cannabis industry. While some of the recent sluggishness can be attributed to the economic environment caused by Covid-19, much of the difficulty surrounding cannabis fundraising predates the pandemic and is rooted in the complexities of constantly fluctuating state regulatory frameworks.
Even in the face of a challenging environment, there are proactive steps cannabis companies can take to maximize the chance of a successful raise. First, they must get the basics right, as there is a smaller margin for error in this highly regulated industry. Second, they need to understand capital sources for the cannabis industry and how they differ for plant-touching versus non-plant touching businesses. Third, they need to determine the structuring and identify regulatory issues at the outset and make a game plan for how to best address them. Finally, businesses need to anticipate and prepare thorough responses to regulatory questions commonly asked by investors.
Reproduced with permission. Published September 2020. Copyright © 2020 The Bureau of National Affairs, Inc. (800-372-1033). www.bloombergindustry.com.