With friendlier regulatory frameworks around the cultivation and consumption of cannabis in countries like Canada and US states like Arizona and Colorado, the cannabis industry will continue to evolve. As such, the next focus for your canna business may be how to find cannabis angel investors. Read on to find out how.
The Importance of Cannabis-Specific Investors
An angel investor is a high net-worth individual who offers startups or small businesses seed money to support their goals. These goals include scaling the business, expanding into new markets or cities, and kickstarting a new product or service.
Despite its massive potential growth, the cannabis industry is plagued with numerous challenges. These include legal challenges pioneered by the lack of regulation at the federal level in the U.S.
At the same time, the cannabis industry is high-risk, so banks and financial institutions refrain from doing business with cannabis-focused companies. For example, it’s challenging to secure loans as a cannabis startup founder.
But this is where cannabis-specific investors come in. These investors look for solid marijuana companies to invest in, eliminating significant funding challenges canna businesses face.
Similarly, cannabis angel investors are industry experts with industry-specific knowledge and networks to support budding founders, help them grow, and expand their business networks.
Top Cannabis Angel Investors and Firms to Consider
Whether your cannabis-driven project is still at the ideation stage or you’re already bootstrapping a startup, there are many cannabis angel investors and venture capital firms you can consider for funding.
We highlight some of the established marijuana-focused investment firms below.
KEY Investment Partners
KEY Investment Partners is a private equity firm with angel investors focused on the cannabis industry. The investment firm started operations in 2018, and it targets high-growth companies looking for strategic guidance and capital.
In other words, KEY doesn’t fund new startups of cannabis businesses at their earliest stage. It focuses on market-leading canna businesses seeking guidance and capital to scale or expand their product or service offerings. Some of the companies in KEY’s portfolio include Leaflink, KindTap, and Grassdoor.
CanopyBoulder is another reputable cannabis angel investment firm with different programs for seed-stage startups in the industry. The investment firm has a rich history in the marijuana space, investing millions of dollars in different cannabis companies despite the market challenges.
It’s important to note that CanopyBuilder focuses on marijuana businesses with ancillary products and services. It also offers mentorship to startup founders to support their goals and visions.
Entourage Effect Capital
Formerly known as Cresco Capital Partners, Entourage Effect Capital (EEC) is a leading cannabis investment firm. The company was founded in 2014 and has been investing in cannabis companies seeking funds to scale and navigate federal legalization.
In other words, Entourage is a growth-stage focused investment firm looking for bootstrapped marijuana startups. However, it has a separate arm called Arcview Ventures Seed Fund for early-stage cannabis startup funding.
Over its 9+ years of investing, Entourage Effect Capital has deployed over $140 million to 60+ portfolio companies. EEC’s unmatched investing record is what makes it stand tall among the top cannabis investing firms to consider for your startup.
Key Attributes Cannabis Angel Investors Look For
There are numerous businesses seeking funding from investors, and to ensure they back the right marijuana company, cannabis angel investors consider some key factors. So, when thinking of how to find cannabis angel investors, you want to have your business ready for the opportunity.
The first factor cannabis angel investors consider is the business structure. These include things like the company’s operation model and investment readiness. A company without structure cannot stand the test of time, even with a fat investment check. Investors understand this, so they first ensure the house is in order.
Similarly, investors usually release seed funds to businesses they believe have a strong leadership team with enough experience. Founders are essential parts of business success, so their dedication, experience, and grit matter in the grand scheme of things.
Finally, cannabis angel investors fund businesses to make money. So, they consider the startup’s short and long-term profitability before deploying funds. Ensure your financial records are in order because investors use them for ROI projections.
Steps to Attract Cannabis Angel Investors
When considering how to get cannabis angel investors for your business, you must put the right measures in place to make your company attractive to them. However, you should understand that each angel investor has specific qualities they seek in cannabis businesses before releasing funds.
Nonetheless, here are some pro tips to help you.
The first method is to bootstrap your startup to achieve sustainable growth. Only a few companies experience sudden growth at the ideation or early stage. So, as much as the idea may be good, investors are more likely to invest in an existing business with a cash flow record.
Keep Financial Records
Investors will want to know your company’s financial health before funding it. Ensure you keep records from the first day of operations to provide them with your real financial health.
Build an Attractive Pitch Deck
The pitch deck is the first impression you give investors about yourself. Before sending your pitch deck to an investor, put in effort to make it attractive. Don’t forget to ensure the deck contains major details, including your unique value proposition (USP) that sets you apart from competitors.
Also, ensure your valuations are realistic and not overhyped. This is important because many new startup founders unintentionally overestimate their valuations due to excitement and other factors.
Develop Your Management Team
Ensure you have a formidable management team leading your business operations, especially across marketing, branding, and finance. If necessary, hire a consultant and send your top decision-makers on development training.
Network and Connect
As a business owner, the importance of expanding your professional network cannot be over-emphasized. Networking offers you the opportunity to pitch your business to potential angel investors and build a solid reputation.
So, attend networking events as much as you can and connect with people when there.
Questions to Ask Potential Investors
Your cannabis business may need investors. But don’t forget investors also need you. Without viable companies to invest in, cannabis angel investors will not exist. So, when thinking of how to find angel cannabis investors, you must ensure you get the perfect investor for your canna business.
Below, we highlight some questions you can ask an investor before taking their seed fund.
1. How much is the seed money?
Try to determine how much the angel investor is willing to dispense at the time and the size of their current fund. However, big funds aren’t always better. Request just the amount enough for your company at the time.
2. What is the investment period for the fund?
Every investment has a timeline, and angel investors have investment fund managers, who make investments from time to time, typically every 3 to 6 years. Determine the same for your fund.
3. How experienced are they in the industry?
Determine the investor’s track record in the cannabis investing space. Find out about their portfolio, years of experience, business network, and overall track record to understand how to maximize them for your business.
4. What other services do they offer their portfolio companies?
Usually, investors bring more than money to their funded businesses. Understand your angel investor’s offerings. Are they also strategic investors who will offer advice and network benefits in addition to their capital investment? Are they passive investors? Get answers to know if they fit your immediate needs.
My Final Thoughts
As the global cannabis industry continues to evolve amid regulatory issues, it’s important to note that various investment opportunities exist for your cannabis startup. Cannabis angel investors continually find solid businesses to offer capital and strategic support. So, if you’re looking to scale, it’s time to consider how to find cannabis angel investors for your business.
We’ve provided tips to make your business attractive to investors in this guide. Having the perfect angel investor can elevate your startup to the next level. However, it’s essential that you do due diligence and search thoroughly before bringing a cannabis angel investor on board.
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