Cannabis Companies Planning to Raise Capital from Equity Investors in 2023

Some thoughts for cannabis companies planning to raise capital from equity investors in 2023.

1. Have a plan to not only deploy the capital but also include in that plan a set of established KPIs to achieve from this capital raise. A pie chart on a slide is no longer good enough.

2. Validate the assumptions behind your plan. Be conservative with these assumptions. Raising capital to fuel unattainable growth leads to failure in the cannabis industry. THIS IS NOT TECH. If you’d like to see some examples…you’re not paying attention.

3. Ask yourself, is this investment needed? Does it add immediate shareholder value? If it does, plow forward and be relentless. If not, I suggest waiting out another 6-12 months and reassessing. If you are one of the few who planned ahead or have a plan for 12-18 months that is cash burn neutral, why raise money now?

4. If you don’t have customers who love at least one of your products or otherwise can demonstrate revenue growth, go back to the drawing board and build something that has one or the other. This isn’t 2019 (or 2021).

5. Stop giving equity to advisors and service providers so early on. Unless this advisor comes with an investment in your business or a significant asset to contribute to the business, do your best to avoid compensating your team of service providers in equity. And if you do, make sure that equity vests or is otherwise granted over a period of no less than 4 years. They shouldn’t get better deals than your future employees will.