If you find yourself intrigued by the investment opportunities you hear about in the cannabis space but feel unsure whether and how you want to proceed, this is for you. Do you want to go into cannabis investing with your toe or your whole body? How do you test the waters? While there may be no foolproof way to invest, there are certainly ways to optimize your opportunity and manage your risks. Here are five ways to create that safety.
Be Able to Articulate Your Strategy
Hope is not a strategy. Plan, conduct and complete an accurate assessment of your own investing goals in this industry (especially as it relates to your overall portfolio strategy). Do not do this from a closet. Do not do this in under 20 minutes. Talk to your financial advisors so that you can segregate the capital you want to deploy as part of a comprehensive strategy. If you view this as a first step, you can build a foundation for effective management of risk. Don’t skip this step.
It Takes a Village of Due Diligence
Read up on the industry. Find the leaders. Read filings on the public companies you are interested in, and if there are no filings, beware. Do all this, and it still will not be enough. That’s because the industry has so many fast-changing regulations, nuances and gold-rushers, and only a very small percent of ideas will become winners, not because of the ideas, but because of the buttoned-up teams required to jump the hurdles, do the dance, pivot and stay true to shareholder value.
Check Your Magnet
You want to attract professionals who are succeeding in this industry as investors, who have great teams around them, and whose strategies, approach, and culture seem to fit with your worldview. Get to know the players, get to know their stories. Build your team by bringing on people you want to do business with.
Be Honest with Yourself
Know how much time you’re going to be able to dedicate and don’t approach this as a hobbyist. Be a smart investor who finds professionals (not your best friend who swears to know everything about “weed”) to work with, and stay engaged with them. Leverage your time by taking advantage of the expertise and credibility they have to offer. Pedigree doesn’t lie.
LISTEN with Your Other Ear
You know, the ear that lets you hear things you might not want to hear. Many people will be competing for your attention, and money. When you really listen, you’re likely to know the difference between exaggeration, potential, and solid advice. Often, what we need to hear is not what we want to hear. What we need to do is not what we want to do. Learn to do what you want to do least, first. Patience is power.
Leslie Bocskor is an investment banker and entrepreneur focused on the emerging legal cannabis industry. He is the Founding Chairman of the Nevada Cannabis Industry Association and Managing Partner of Electrum Partners, and is working with some of the biggest players in the industry to develop strategies to quickly expand the market for legal cannabis in the U.S. and beyond.