When Canopy Growth Corp. offered shares on the Toronto Stock Exchange in April 2014, the Canadian cannabis giant made history as the first federally approved to do so. On May 24, 2018, it made history again when it became the first producer traded on the New York Stock Exchange.
Many other cannabis stocks have followed in Canopy’s footsteps on both Canadian and American exchanges. From 2017 to 2019, both public and private capital flowed into the global industry with unbridled enthusiasm. In 2017, investment reached $1.9 billion with an average raise of $6.5 million. By 2018, incoming capital totaled $7.5 billion with an average raise of $16.2 million, and in 2019, investors threw in $10.4 billion with an average raise of $21.3 million. (Source: Viridian Capital Advisors.)
By the summer of 2019, however, a series of red flags and a bevy of underperforming, super-sized companies in the Canadian market shook investor confidence. It looked like the party was over. At an industry conference in December 2019, companies of all sizes were searching high and low for investors without much success or optimism. However, after an unexpected boost from the pandemic and an election during which Congress flipped into the control of a canna-friendly Democratic Party, investors are once again bullish on weed.
Roy Bingham, co-founder and chairman of cannabis market research firm BDSA, said global sales in 2021 are projected to hit almost $20 billion, with the United States accounting for $16 billion. “The impact of COVID-19 has been very substantial and positive for the cannabis industry,” he told Forbes. “For next year, we expect the U.S. market to top $24 billion.”
That’s a lot of cheese any way you slice it. Of course, most of the money is fueling large companies that are branching out across the U.S. and developing brands that will become dominant players for years to come. For cannabis investors, these multistate operators (MSOs) and other large, regional enterprises are the safest bets, which leaves smaller regional and craft businesses in a difficult spot as they seek investment to build and expand their operations—or simply survive.
Amber Senter is one such entrepreneur in the San Francisco Bay area. Over the past five years, she slowly but surely built an impressive resume and portfolio of businesses that includes cultivation, manufacturing, distribution, and retail operations. As a co-founder of Supernova Women (a non-profit organization led by women of color on a mission to empower people of color to become self-sufficient shareholders in the industry), she also has been instrumental in pushing for social equity initiatives in California and across the U.S.
Senter estimates she has made about 150 pitches over the past several years, resulting in fifteen investors in her various business interests. A 10:1 ratio is probably an optimistic goal for most entrepreneurs looking for investment, but Senter chalks up her success to networking at hundreds of conferences and events and her public relations savvy. She is a frequently cited media resource for social equity causes, which has led to calls from investors and larger companies interested in donating to Supernova Women and other non-profit organizations.
“I’ve had a lot of success in networking but also just telling my story, and when you come from a place of authenticity, that’s what folks are looking for,” she said. “I think people look at the whole picture of me… They’re not just looking at Breeze [Distribution]; they’re looking at what I’ve done at Supernova and the progression of what I’ve been doing my whole career. They make that assessment like, yeah, she has a vision and a focus, and she’s been working on this for a while and making some good moves.”
Her advice for entrepreneurs looking for investment includes:
- With new investors, the questions and answers go both ways. Look for people who have something to contribute to the success of your business beyond just the money.
- Investors recognize hard work and people who get results. Have something tangible to show before you go asking for money to fund new projects or scale up existing operations.
- Research potential investors and create customized pitches that are likely to appeal to their interests and motivations for becoming involved in the industry.
- Become involved with programs and projects that will help build a sustainable, equitable industry. Social equity programs and community nonprofits that raise up people of color are a good place to start.
Now that thirty-eight states have legalized cannabis in some form, investors have more reason than ever to believe federal legalization is attainable in the near future. Likewise, support for the legal cannabis industry is at its highest across many demographics, and the pandemic only strengthened the industry and its proponents.
For entrepreneurs, there has perhaps never been a better time to seek investment. The money is out there for companies that can build a strong case for their business plans and ultimate success. One of the notable aspects of the cannabis industry, compared to more traditional businesses, is the story behind the company—its mission and values and the owners’ character and track record—often is just as important as assets, profit-and-loss statements, and revenue projections. That’s something every entrepreneur should keep in mind as they build their company and investor pitches.
“People are always investing in the person,” said Senter. “They’re investing because they believe the person can pull it off. When you can convince them of that—and you’ve got this really cool story behind [your brand] and maybe it interweaves you and your passions and your work—that’s a winning combination right there.”