The cannabis market is booming. From 2020 to 2021, U.S. sales grew by 40%, going from $15 billion to $25 billion. Experts predict sales will grow even more this year, reaching $32 billion by the end of 2022 and anywhere from $57 billion to $100 billion by the end of 2030.
All of this activity presents some unique and thrilling opportunities for investors. That means businesses like yours have more chances to get financing for growth. However, you’ll need to understand what they care about first.
The Importance of Understanding How Venture Capitalists Make Decisions
At their core, investors and venture capitalists are people who put money into something, often a business, with the expectation of a financial return. Companies in numerous industries look to use investors as a source of capital to grow their operations.
Like other investors, cannabis investors don’t want to give their money to just anyone. Knowing how they make decisions will help you craft a winning pitch.
What Investors Look for Before Investing: 5 Factors That Matter
Here are five things cannabis investors look for before investing in a company.
1. A Great Product With a Competitive Edge
Cannabis investors are generally more willing to give their money to companies offering something unique. They’re looking for products (or services) that distinguish your business from your competitors and give you an advantage. An analysis of your competition and a solid business plan can show you have something that sets you apart.
2. Market Size and Opportunities
A prospective investor wants to know that your company has the potential to attract a sizeable (and stable) customer base and grow to generate significant profits beyond your initial product or service offerings. Before you ask a cannabis investor for funding, be sure to conduct a thorough market analysis and calculate financial projections to include in your presentation.
3. A Cash Value ROI
One of the best ways to demonstrate the potential profitability of your business (and your prospective investor’s ROI) is by working out your financial projections. How much money will you bring in, and how much will you need to spend? These details will give them an idea of how long it will take to see the return on their investment.
4. The Business Management Team and Leadership
While your product (or service) ideas, business plan, and financial details are critical, the people behind them are vital, too. Who makes up your management team, and what experience do they have to make everything happen? Introduce the key members of your leadership and their backgrounds in your business plan. You want your prospective investors to know you have what it takes to turn your idea into a reality and give them the returns you’re projecting.
5. Environmental Impacts of Weed
The growing concerns about climate change are playing a role in how venture capitalists make decisions. While it might not seem like it, the carbon footprint of cannabis businesses is pretty substantial. Investors want to see that you understand the effects of weed on global warming and your plans for ensuring cannabis sustainability. Show them how your business will make a difference.
Is a Cannabis Investor the Right Financing Solution for You?
A cannabis investor can be a great way to fund your business, but you’ll want to explore all of your options before you decide to pursue one. Bespoke Financial offers a range of fast, flexible financing solutions, including dispensary loans, lines of credit, and inventory financing, all of which can help you start and grow your business. Visit Bespoke online today to find out more.
