Pitching Your Cannabis Business

Finding investors is only one step – now you have to pitch them your business as an investment opportunity.  From prep to closing, the entire process should not take longer than four to five months.

The Stuff You Should Know

• Audience: Why are you pitching to this person?  Look for collaboration with their other investments or show them how smartly this investment will expose them to the new industry.
• Business: Explain what makes your enterprise unique in the cannabis industry.
• Comparable: Study your competition and prepare to discuss their strengths and weaknesses.
• Industry: You have to understand the critical success factors for your industry, and you must become an expert on your target market.
• Needs: How much do you need, and how will you spend it?  If your potential investors like your concept, the subject will come up.
• Numbers: You should be able to speak quickly and confidently about the metrics of your planned operation.  Master the financials and fully capture the data required to explain how much cash you will have to burn through and for what.
• Practice: Practice pitch repeatedly. Tighten up your pitch. Please do it again, and repeat.
• Strategy: Explaining strategy is all about grasp, detail, and articulation.  Spend much time mastering your strategy pitch. Then, concentrate your expression with practical terms and a specific strategy for execution.
• Strengths and Weaknesses: Highlight your team’s competencies and be entirely open about where you need assistance.
• When you meet with your investors, you have to create a sense of urgency.  Time is a deal-killer.  They should feed off your excitement to ward off other options.
• Don’t do this alone – find experienced players to coach and advise you and introduce you to advisors.   Feed on your advisor’s confidence.
• Try local advisors first. Cannabis is a local endeavor, and it will keep travel expenses low.
• Investors often string entrepreneurs along. Do not hang on to investors who offer a maybe or need to ‘talk’ to more people. Go for the no, and go for it fast. Pressure them – it will show them how serious you are.
• Your first ‘no’ should not impact anything but your motivation to pitch to the next candidate. You should pitch to between 100 and 500 people before you are done, so get rid of any thin skin you still carry around.  Keep going.
• Beware of agents remunerated by a p[ercentatge of the money your raise from the investors they bring to you. As a rule, they are less inclined to advise you and will often pressure you to go for deals that are not in your best interest for the sake of commission.
• Get a lawyer, and let him shadow you. He has to review and sign off on all the terms and language of the deal;  your job is to get the investors to say yes.  Your lawyer has to make the deal and clear everything before you sign on the dotted line.

Preparing A Business Plan And Pitch Deck

You need a business plan and pitch deck when you finally meet with your investors.  Make it as short as you can without leaving anything out.  Include these slides in your pitch deck:

• Introduction
• The problem
• The solution
• The business model
• Market overview
• Marketing & selling
• Cost and pricing model
• Competition
• Team
• Social impact
• Competitive advantage or critical success factor
• Conclusion
• Appendix

Negotiations

Once your investor says yes, the real work begins. First, you must make the best deal for your company.

Negotiating is not a science.  You have to adjust your approach to fit with whomever you are dealing.

The Negotiating Agenda

• Ownership equity and valuation
• Money invested
• Distribution of revenue
• Financing type
• Voting rights
• Board seats
• First refusal rights for next round
• Payback period
• Your job responsibilities and participation in the venture
• Your claim to the real estate, when applicable.

Negotiations 101

The purpose is to create a win-win for all parties. Unfortunately, sometimes you have to leave money on the table to create a long-term business relationship. As you negotiate terms, make sure that you set precedents for future deals. You have to understand every aspect opf the agreement fully.

• Before you start, you need to know what you want.
  • How much money do you need?
  • How do you want to value the same?
  • Research similar deals before you sit down with investors.
• You have to find out everything you can about your investor before you can create common ground. Create a human connection.
• Remember, the negotiations might be turned over to other people at a certain point, for example, when you get your term sheet.  At this stage, it is typically turned over to the lawyers to hash out the details.

Tools and Techniques

If you start high, you will have enough to ‘give up’ as you go along. The other party wants to feel that they have won a few rounds too.  Done well, this will bring you right to where you want to be.

• You have to understand the other party’s position before you can make logical arguments against it. You will need particular reasoning to explain why you should get something the investor has never given up, ever.
• Do not be stiff – use humor to break the tension. People want to deal with others who make them feel good. Humor is often the emotional bridge that ties people together.
• People like dealing with those who are like them – hence, use shared language to seem familiar to them. For example, learn the lingo of your industry and the financials to create more common ground.
• Never bluff. If they call you out, your deal is dead, and your credibility is shattered. Instead, negotiate with a positive attitude and always in good faith.  If the other party believes that you are pulling the wool over their eyes, negotiations will sour, and it could kill the deal.
• You have to ask questions continuously until you have the complete picture of all the aspects you are still negotiating.
• Never argue for your limitations, and never for the other side. Instead, shoot, and see what happens. Never come in low to make a deal seem like a ‘no-brainer.’  Negotiate, and show your confidence.
• Be patient – negotiations are emotionally intense. No one will develop faith in you and your idea and hand you a lot of their money if you do not show patience.