Financial experts at the CNvest conference held on April 9 in San Jose California gave cannabis entrepreneurs solid advice on Monday. Ben Larson of Backplane Capital said, “There’s a lot of excitement around cannabis but that doesn’t give you an excuse to build a shitty product. Investors want to see companies that are built on actual business models.”
Larson is a serial entrepreneur in the San Francisco area and is a General Partner at Backplane Capital, an early stage venture fund that invests in the cannabis industry. He is also a Co-founder of Gateway, a cannabis accelerator.
Larson told the audience that cannabis companies should be treated like any other company and rather than building a cannabis business, just build a ‘good’ business. He gave four pieces of advice for business owners. The first was vetting relationships. Larson said to get references and dig into backgrounds. “Be skeptical,” he said. “It only takes a phone call to vet someone.” He likes it when a potential investment questions his background.
Then he said he reviews the companies supply chain. “I look for that one slide that says ‘we have control over our destiny.’ Not necessarily supply chain meaning logistics, but where do they get their source of materials or content.
Next was the vision. He said companies need a vision that’s bigger than a given product. Larson though sympathized that bouncing between visions and what needs to be executed today is challenging.
Finally, – capital. Larson said there was a lot of capital interested in the space, but it wasn’t coming in like a fire hose. There is a lot of competition for those investment dollars and that conceded that entrepreneurship is hard.
Ultimately, Larson said he believes in cannabis because he thinks it will become a recession-proof commodity.
Sumit Mehta, is the Chief Executive Officer at Mazakali a firm that provides investment banking, consulting and capital advisory services to the cannabis industry. He is also a consultant for the Arcview Group. Mehta said that for every $1 dollar spent on cannabis there is a trickle-down effect of $5 around the plant. He also believes that the adult-use marijuana market will become 90% of the industry.
Mehta noted that the cannabis industry is only second in growth to the era of booming wifi access. He said that there are 12,000 business licenses in the U.S. and that the industry doubles in size every 32 months.
Still, he said that deal flow was heating up because marijuana is expected to become legal by 2021. Many in panels following Mehta’s presentation quoted him when he advised companies and founders to be ‘true to their stripes.’ Meaning if you’re good at tech, stay with tech, but then apply those skills to cannabis.
Mehta also implored the group to give to organizations that help change cannabis laws.