The cannabis capital complexity continues its roller coaster ride toward full legalization with many important milestones marking the significant progress we have made over the years. Important scientific discoveries, meaningful regulatory changes, supportive capital markets and incredible product innovations have rapidly fueled our industry to a place of public acceptance and support quite unimaginable just a decade ago. We have achieved much as an industry and it remains important to own the sense of pride that accompanies each of our contributions to the global freedom this sacred herb deserves and will once again enjoy.
Along with the many well-deserved reasons for pride, the path to legalization has also often seemed like a tight rope walk at high altitude in a rainstorm while blind folded. Capital scarcity contributes a large degree of ambiguity to the current business environment, and the practices outlined below are intended to shine some light to aid navigation. It remains futile to worry about that which is not in our control, and we thus choose to focus on practical steps businesses can take to maximize their odds of attracting the capital they need.
The following capital raising best practices for cannabis private equity companies fall into three categories: preparing the offering, showcasing it well, and circulating it to many people as possible.
Offering Preparation: The current capital supply-demand imbalance makes it imperative that your business is adequately and entirely prepared with the legal, regulatory and financial documents necessary for deep diligence from a potential investor.
Legal and regulatory documents include:
Financial documents include:
Best practices advise hiring licensed third party professionals to support credibility. This includes having an active securities license with a registered broker/dealer for anyone taking a success fee to help you raise capital.Curated Showcase: As the world has gone digital overnight, so has the investor experience. In-person meetings, site visits, pitch events and conferences have all been forced to go virtual and businesses are limited only to screens and speakers to compete for coveted investor attention. It is thus more imperative than ever that the investor experience be flawless and memorable.
The most common current method of communicating with prospective investors involves a patchwork of software that includes email, presentation software, digital data-rooms and electronic signature tools. Investors find this quilted experience inefficient and opaque, and businesses are well served to introduce a transparent digital experience that is memorable and indicative of an operator’s willingness and nimbleness in adapting to their environment.
Increased Outreach: Today’s capital environment requires that a cannabis business expose its capital raise to far more prospective investors than in the past. Many of the industry’s institutional capital providers are themselves experiencing challenges attracting capital, and many former investors burned by private market repricing or the public equity market malaise are reticent to deploy additional capital given the macro environment. Optimal outreach includes casting a wide net, engaging prospective investors via multi-media tools, and identifying and approaching those most interested and qualified. Smart expansion of your investor outreach across geographies and demographics is not only desirable, but also far easier and more affordable given the minimal cost of virtual travel.
Raising capital is as much art as science with a healthy sprinkle of luck. While there are no guaranteed solutions, the above steps can help maximize your odds of a successful capital raise.
The viewpoints and advice above are born from much experience helping clients raise and invest capital. In this brave new world, MAZAKALI is also rapidly adapting and innovating. We would fall short if we didn’t share what we have been doing in support of these views, and have separated the section below with this as the line between advice and advertisement.
Offering Preparation: The MAZAKALI Capital Advisory Program is a five-phase process for businesses that need professional offering preparation assistance.
Members of our team are licensed investment bankers and we offer securities via our FINRA-member registered broker/dealer and trusted partner Growth Capital Services. A third-party compliance firm oversees our operations for compliance with securities regulations.
Curated Showcase: The MAZAKALI Digital Capital Platform has been built to provide an end-to-end user experience and to replace the patchwork of software currently in use. From your initial outreach to signed subscription documents, our platform delivers a seamless investor experience with transparency and security. Unlimited storage, electronic execution, multi-media rich showrooms, investor accreditation and behavioral transparency are all standard features.
Additional options include Special Purpose Vehicles (SPVs) with our integrated custodian bank and third-party administrators, as well as professional digital asset production via our partner CFN Media. CFN Media produces powerful pitch videos to efficiently scale your message and presence to a broad audience of investors, and our combined digital outreach allows you to identify and attract those most interested. A pitch video and consistent quality digital outreach contribute to the increased likelihood of a successful raise.
Increased Outreach: We are motivated to showcase the cannabis and plant-based medicine (PBM) industries to more investors around the world, and are now sharing our Digital Capital Platform within several international alliances:
Teaming up with Israeli firm CannaTech offers our clients expanded reach into additional international investors and opportunities.
Our ongoing relationship with CFN Media furthers our ability to showcase offerings to a broad investor audience with efficiency and scale.
We invite you into our complimentary Capital Investment Readiness Program, a courtesy offered in conjunction with CFN Media and born of the desire to increase education and awareness.