Wherever there are companies with starry-eyed visions of a well-funded formation or a launch capturing massive market share, consultants and other service providers are close behind. They are also available for rebranding a product, repositioning a company, or rethinking a software implementation strategy for entrenched leaders of an established industry. As a professional interested in small cap investing, this is probably not riveting information to you.
What may come as a surprise though is how prevalent this same situation is in the nascent cannabis industry. As a technology consultant with experience ranging from coffee and tea manufacturing to custom DNA synthesis, I have seen a preponderance of projects launched in this space imperiled by issues and concerns that closely mirror those seen in more traditional verticals.
Common Issues Plaguing an Uncommon Industry
A group may have a great vision and plan for execution, but no experience with finance, thus forcing them to follow established “best-practices” or adopt templated documents for attracting capital. This frequently includes a dry, prohibitively long placement memo that's laden with boilerplate language. Investors further down the risk curve are increasingly willing to jump at the multiplier that cannabis can offer. However, they need to be enticed by involvement in a dynamic and exponentially growing marketplace (double digit growth projected for the next decade,) not another routine narrative they can find attached to companies with a more palatable risk profile. There are ways to describe the top-level risk (these companies are still tangentially--at best--dealing with a federally illegal product, after all) while concurrently selling the sexiness of an industry expected to generate revenues three times greater than the NFL by 2020.
Consultants well-versed in raises and risk mitigation messaging can make a direct impact on the success of these fledgling companies. With hundreds of millions of dollars moving into seed and venture level investments, a strategic alignment with someone who can deliver funding may make the difference between a well-constructed failure and a successful launch.
Uncommon Thinking Solving Common Issues
Small, homogenous management teams often struggle to adopt unique business strategy perspectives or to embrace the value of implementing new software. Many companies in formative stages may feel they are too “unique” and informed to need consultants. However, I have found with our clients that a fresh and targeted voice often instigates conversation leading to breakthrough. This breakthrough can be as simple as rewording a tagline or as (positively) disruptive as pivoting to a new demographic in an underutilized sector of their consumer base.
Cannabis companies often believe they are too young or that software solutions aren’t tailored enough to their operational environments to make the time and capital investment worth it. Contrarily, I do not believe there is a situation where a productive, efficient tool or tools cannot be added to a company’s arsenal and improve their ability to communicate, analyze data, or manufacture goods as their application dictates. This will become increasingly important as companies attempt to scale with the expected 3-7 states that will implement recreational regulations over the course of 2016.
The regulated cannabis industry is booming already, and poised for a massive 2016. With it comes the enticement of financial windfalls and fear of inevitable failures. However, as with any venture, there is significant upside to hiring and leveraging people with operational and strategy expertise. This is no different in cannabis, where consultants are constantly combining investors with opportunity, adjusting penetration strategies, and offering process efficiencies for our clients.
Mike Bologna is the Co-Founder of Green Lion Partners, a business advisory/consulting firm in the legal cannabis industry.
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