Financing Your Cannabis Business

by Travis C | Apr 2, 2019 | Blog, Business

Whether it is seed money or a full blown financial injection, getting financing for a cannabis business has never been more possible.

With the legality surrounding cannabis slowly changing throughout the country, investors with big money are starting to feel more comfortable investing in the growing industry. But compared to other industries, these investors are much more hesitant to invest in just any cannabis business.

Starting a cannabis business in a new legal industry is exciting, and a lot of people are trying to get involved. But seeking the right amount of money, from the right people, isn’t easy for most.

Financing a Cannabis Business

When it comes to finding financing for a cannabis business, you need to know where to look. While there are a few investment groups that focus solely on cannabis businesses like The Arcview Group and others, most are traditional investment firms coming from other industries, looking to invest in a cannabis business.

Obviously the former group of investors is your best bet. This is because the outside firms will most likely be more financially focused (as in, more focused on your finances than the actual business), as opposed to a cannabis investment group that already knows about the industry, and most likely the product you are selling. Outside groups might need more explanation, or get lost in the jargon of the industry.

This is why it is so important to know your audience.

Get Your Pitch Together

Other than your financial records and other essentials, your pitch is probably the most important aspect of getting financing for your cannabis business. If you come out flat in your first meeting with investors, your chances aren’t great, unless your numbers speak for themselves.

Take the time to really study your audience; who the investors are, what they are experienced in, and how you can relate that to your business model or idea. Make your idea relatable and easily palatable, while still being exciting and fresh. Remember that these firms most likely hear hundreds of ideas a day, so you need to make yours stand out as much as possible.

Doesn’t sound super easy? It isn’t.

Get Ready For Competition

While there have never been more investors in the cannabis space than now, that doesn’t really say much. The industry is still relatively small, and only viable in a few states. Unless you are planning on starting a business in Canada where it is completely legal, you’ll be facing some heavy competition.

You’re not the only one who sees the potential of this industry and how fast it is growing. A lot of people are noticing, and hopping onto the cannabis industry boat that can only hold so many.

A lot of people are going to sink from the weight, while only a few will be picked up by the rescue helicopter that is financial investors. Whether you sink with the majority, or get picked up and make it in the industry all depends on your idea, your business model, your experience, and how you present it.

Inside Tips from The Arcview Group

The Arcview Group is one of a select few strictly cannabis-focused investment firms. Arcview has a large membership base of high net worth investors, looking for new cannabis businesses to invest in.

Louis Han is the Director of Deal Flow for Arcview. His job is to analyze every potential cannabis business that reaches out to Arcview, and to decide which businesses get a meeting with potential investors. And he was just on The Real Dirt Podcast.

In his interview with Chip Baker, Louis goes into the daily workings of a cannabis investment firm, how he decides which businesses get to sit down with Arcview investors, and his predictions for the future of cannabis investing. Listen to Louis right now on The Real Dirt Podcast!

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Los Angeles cannabis permit problems

by Travis C | Mar 1, 2019 | 420, 420 News, Blog, Business, Cannabis Law and Compliance, Growing

California had the right idea when they legalized cannabis in 2017. But with incredible delays, lack of resources and a surplus of entrepreneurs hoping to make a name for themselves in the industry, the state and cities like Los Angeles are struggling.

Over four million people live in the city of Los Angeles. It’s no surprise then, that the inhabitants would try to work in the new legal system. But it hasn’t been as simple, or profitable, as originally projected.

California is the biggest state in the country, as well as the largest supplier of cannabis. When the state legalized, it virtually leveled the main supplier in the state; the private market.

Unprepared, Understaffed, Overwhelmed

While strict requirements, exorbitant application fees and an originally-one-man advisory board made the legal industry all but unattainable for smaller growers and farms in the state, the process was made much simpler for retailers. Medical retailers, that is.

In Los Angeles, priority was given to owners of retail medical dispensaries in the application process. Since they already had the location, the storefront and the brand, all that was needed was a transition to the new regulatory requirements for recreational cannabis.

Second in line for application review came those that legally supplied the medical cannabis to the dispensaries in Los Angeles. It makes sense because once the retail locations are transitioned to recreational, they can continue to use the same growers and suppliers, maintaining their business relationships in the new, legal industry, with minimal delay. At least, that’s how it went on paper.

In reality, the situation isn’t going so smoothly. In February of 2018, the city gave out about 180 temporary permits to allow medical dispensaries to operate recreationally. For the growers and suppliers, the same was to be done by April. Those temporary permits weren’t issued until the end of August.

This shouldn’t be surprising considering the total lack of manpower the Department of Cannabis Regulation had then and now. The directory board of the department started with just one member. Now, over a year since legalization, there are only 13 members on the board. Now imagine those 13 people handling every single application process for the hundreds of retailers, growers and processors.

The picture starts to become pretty clear. As if the city didn’t have enough on its plate, it also included a social equity program in its local laws, aimed at helping repair some of the damage done by the war on drugs.

Los Angeles Social Equity Program

This is where the state of California and the city of Los Angeles could have set a great precedent for new and current legal industries. The city established a social equity program that would give priority to those most negatively affected by the drug war prior to legalization.

People of color in the city were disproportionately arrested for small drug crimes involving cannabis compared to their white counterparts, despite statistical data showing no difference in cannabis use between the two groups. This group and other minority groups negatively impacted by the drug war were meant to be some of the first allowed into the new, legal industry.

Unfortunately that isn’t how it has worked out for Los Angeles. While the social equity program gave priority to these minority groups, the Department of Cannabis Regulation gave higher priority to already-established medical retailers, growers and processors. And with the — to put it mildly — severe lag of the application process, these groups still haven’t had one single approval.

Mind you these are people who do not currently have a business, and want to open one in the recreational market. Many leapt for storefront dispensary locations, despite the low availability. Los Angeles put a cap on how many storefronts can be opened in a neighborhood, in addition to strict requirements for location (e.g. can’t be near schools, other dispensaries, public parks), greatly limiting the options for would-be entrepreneurs.

When it comes to timeframes, the city hasn’t been shy on the issue either;

“Bringing cannabis above ground is an incredibly complex process, and L.A. is doing it on an unprecedented scale,” Alex Comisar, a spokesman for Mayor Eric Garcetti, said in a statement. “Our goal is to do this the right way, not the quick way or the easy way — and we’ve always been very clear about that.”

It’s a rough road ahead

Los Angeles is way behind schedule. It’s a fact. And the local government isn’t doing much to speed up the process. The Department of Cannabis Regulation currently sits at 13 members. Multiple additional position have been filed, but due to the slow city hiring process, anyone new has yet to be hired.

The head of the city council Herb Wesson insists that everything will basically sort itself out. Even with reports of many potential entrepreneurs leaving the city to open up shop elsewhere, Wesson isn’t fazed. “I have no time for folks that want to go somewhere else. Let ’em.”

Instead, as months have passed, industry groups and consultants have complained that many cannabis entrepreneurs are stuck paying steep prices for multiyear leases, after landlords hiked prices on eligible storefronts.

“You had a lot of people who followed the city’s guidance and signed leases,” paying upwards of $10,000 a month in rent, said Larry Mondragon, vice president of zoning and entitlements for Craig Fry & Associates, a consulting firm helping cannabis businesses. “People are holding onto leases, paying exorbitant checks, not even knowing when they’re able to turn in applications to the city.”

Equity applicants are supposed to get a helping hand from the city through “business, licensing and compliance assistance.” But more than a year after recreational cannabis sales became legal, there are no city programs providing such aid.

So far, the only funding the city has approved for social equity is $250,000 for a fee deferral program. Department officials say they now are seeking more than $4 million for the program, hoping to roll out support services, such as business development training, no sooner than July.

Los Angeles needs to step up. California needs to step up. There are a lot of problems in the state with little to no solutions. Something needs to be done at the city level to change that. How, and even if that will be done, is still unknown.

Missouri Medical Marijuana Makes Moves

by Travis C | Feb 19, 2019 | 420, 420 News, Business, Cannabis Law and Compliance, Growing

Over 300 Missouri medical marijuana licenses will be distributed in the state in 2019. Is the state about to pop off?

As of February 7, 2019, more than $3 million medical marijuana license fees have been paid since the state began accepting pre-filed applications a month ago. Over 400 applications have been submitted to the Department of Health since then.

Among those applications, 226 were for dispensaries, 128 were for cultivation facilities and 64 forms for infused product manufacturing.

Missouri Medical Marijuana

Amendment 2 legalizes growing, manufacturing, selling and consuming marijuana and marijuana products for medicinal use at the state level. The state began accepting pre-filed applications in January 2019.

According to backers of Amendment 2, 192 dispensaries will be ready and operational for patients by 2020. The amendment sets up the following fee schedule:

Patient fees are $25 per year;
Dispensary fees are $6,000 initially, then $10,000 per year;
Cultivation fees are $10,000 initially, then $25,000 per year; and
Infused-products fees are $6,000 initially, then $10,000 per year.

The state will issue at least 61 licenses to cultivate marijuana, which works out to one cultivator license per 100,000 Missouri residents, according to the amendment. At least 82 licenses will be issued to makers of cannabis-infused products.

On Pace For A Scheduled Start

While patients will be able to begin the application process for their medical marijuana licenses starting June 4th, those who did not pre-file their business applications must wait until August 4th. After all applications are in, the state has until December 31, 2019 to approve the applications.

It is then assumed that the Missouri medical marijuana industry will be launching in January of 2020. The state governor is committed to the will of people and has given his word to allow the medical marijuana industry in the state to progress unhindered. The state is implementing a system similar to Oregon and Colorado’s medical marijuana programs, and it is moving fast just like Oklahoma’s current program.

The state’s speed of implementation is impressive, but citizens have noticed a serious flaw in an interpretation of the amendment.

Not All Is Well

The Missouri medical marijuana program is moving ahead as scheduled, but people have brought up an issue pertaining to the confidentiality of those applying to work in the industry. I.e. the state has not released any information regarding the identities of those applying.

A section in Amendment 2 requires DHSS to “maintain the confidentiality of reports or other information obtained from an applicant or licensee,” but backers of the Amendment are claiming that tis was not the intended meaning.

Backers of Amendment 2 have said that provision of the legal text is not meant to shield the identities of business-related medical marijuana license applicants from public disclosure. And a week ago, the St. Louis Post-Dispatch sued state government over the issue, asking a judge to order DHSS to release copies of documents submitted with the pre-filed fees.

It looks like Missouri medical marijuana in on track. Sure it has hit some speed bumps, but so has every other state legalizing either medicinally or recreationally. Compared to other states, Missouri is ahead of the pack with its timeline.

It seems that the industry in Missouri will be getting off its feet in a year’s time, but it is definitely too soon to say whether the state can stick to their timeline once the applications start flooding in.

New Year, New Industry

by Travis C | Jan 11, 2019 | 420 News, Blog, Business, Culture, Science & Technology

2018 was a big year for the cannabis industry. 2019 is poised to change the industry even more.

The cannabis industry grew on a global scale in 2018. Not just in the United States, but around the world. More places are starting to accept cannabis as medicine and recreation, with even more planning to get on board in 2019.

While there are plenty of small or local changes to cannabis in the US, here some of the biggest changes in the cannabis industry that came in 2018.

Canada Legalization

Canada legalization of cannabis was a major victory for the industry in 2018. The government of Canada legalized the recreational use of cannabis across the entire country, with local governments still being able to limit the law.

However compared to legalization within some states of the United States, Canada legalization is run entirely by the government instead of private businesses. All licensed grows, manufacturers and retailers are government run. This has had a split impact on the industry as a whole in Canada.

While access to cannabis has become much easier — consumers can order cannabis online, for delivery, directly from a government website — supply currently cannot meet demand, causing backorders, long delays, moldy and stale product, and other problems.

The biggest problem Canada legalization has adversely caused is an increased use of the private market. If they government can’t supply its people but says it can be the only source, people will go to the private market to get the products they want without the long delay and risk of bad product.

Farm Bill and Industrial Hemp

difference between hemp vs cannabis CBD

At the end of December 2018, Donald Trump surprisingly signed the Farm Bill of 2018, also known as the Agriculture Improvement Act of 2018. Among many other adjustments to the agricultural industries in the US, the farm bill also separated the definition of industrial hemp to be different from that of cannabis.

Before the bill was signed, hemp and cannabis were under the same definition, with a sub-definition of hemp being any part of the cannabis plant with less than .3% THC. However, as sub-definition, it was still considered a Schedule 1 narcotic under the Controlled Substances Act of 1970.

The farm bill separated industrial hemp from the traditional cannabis definition, and created a federal definition of industrial hemp, being the same definition as before, but off of the controlled substances list. This has opened up the possibility for a massive hemp and CBD industry to develop.

While it’s too soon to say where the industry is headed — it will most likely be a year before the new bill takes full effect — the Farm Bill and legalization of industrial hemp means big things for the future of the cannabis industry.

First Year of California Legalization

california legalization needs to be controlled by farmers

California has a population with over 10 million more people than the second place contender, Texas. It was expected for the legalization of cannabis in California to expand the already developed marketplace in the state to great new bounds. However the new laws in place have had almost the opposite effect.

The cannabis marketplace in California was already the biggest in the country, despite the majority of growth occurring in the private market. It was inevitable, then, that the new, legal market would work its hardest to eradicate this competition.

Extremely limited licenses available to the highest bidder resulted in hundreds of farms and private operations having to shut down, simply by not being able to afford a legal license. This was the case for a large portion of the cannabis community in California, opening up the door for larger companies with more capital interests to enter the market.

With the biggest companies buying as many licenses as possible, the OGs of the industry are left with little options. Either continue to operate in the private market and hope to get a license before getting caught, or leave the industry in California.

It’s been a tough year for a thousands of growers across California, and 2019 most likely won’t prove to be much different. Despite its flaws however, California will still be a huge legal cannabis marketplace, and most likely surpass all other states, with the end result being the eradication of the private market entirely in the state.

An Eventful Year

2018 was a year full of surprises. Colorado passing Amendment X, The Farm Bill, California’s industry revelations and more. This year had its ups and downs, it’s issues that split the community, but overall the industry is in a better place than it was a year ago.

More states have legalized both recreationally and medicinally, cannabis is more acceptable in social culture than ever before, and more people are learning about the lies they were told during the drug war movement. Some are already saying 2019 will be the year of weed, while others think the bubble is bound to burst any day now.

We’ll just wait and see what’s in store for cannabis in 2019!

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2018 Farm Bill Explained

by Travis C | Dec 18, 2018 | 420 News, Blog, Business, Growing

The 2018 Farm Bill has passed the House and Senate. After Trump signs, Industrial Hemp will be federally legal.

UPDATE: This article was written just before Trump’s signing. The article has now been updated to reflect the new status of the 2018 Farm Bill.

The 2018 Farm Bill has been signed by Donald Trump and passed into law, making Industrial Hemp federally legal. You might be thinking that it already was legal due to the 2009 Farm Bill, but not in the way you think.

This new bill (legally titled the Agriculture Improvement Act of 2018) differs from the 2014 Farm Bill in a few ways. The biggest difference being the new definition of Industrial Hemp being added.

2014 Farm Bill

Five years ago, the 2014 Farm Bill was passed, which defined Industrial Hemp as, “the plant Cannabis Sativa L., and any part of such plant, whether growing or not, with a delta-9 THC concentration of not more than 0.3% (on a dry weight basis).”

The 2014 bill also distinguished between marijuana and hemp for the first time. The laws enacted by the 2014 Farm Bill allowed for the cultivation of industrial hemp for research purposes, as part of an agricultural program, or as permitted by state law.

Also allowed under the previous bill was the study of the “marketing of Industrial Hemp”. The vagueness of this clause allowed states to set up agricultural pilot programs that also permitted commercial sales of industrial hemp. However, interstate commercial activity is not expressly permitted under the 2014 Farm Bill.

The 2018 Farm Bill changes that too.

2018 Farm Bill

The 2018 Farm Bill drastically alters the current legal landscape governing Industrial Hemp production in the United States.

First, the 2018 Farm Bill defines “hemp”as any part of the plant, “including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not,” with a THC concentration of not more than 0.3% THC on a dry weight basis. The 2018 Farm Bill also amends the CSA (Controlled Substances Act) to exclude “hemp” from the definition of “marihuana.”

The 2018 Bill also creates a specific exemption in the CSA for THC found in hemp. These expanded definitions and corresponding exemptions from the CSA could also apply to imported hemp. Meaning the new bill will allow for the importation and exportation of industrial hemp to and from the United States.

Unfortunately those convicted of a felony involving a controlled substance are barred from participating in any hemp program established under the 2018 Farm Bill. While lawmakers were hopeful that this would be revised in the final version of the bill, it appears that it wasn’t.

Federal Regulation of Industrial Hemp

The 2018 Farm Bill also amends the Agricultural Marketing Act of 1946 (“AMA”) to allow for federally-sanctioned hemp production under the authority of the USDA. This means the USDA is now the sole federal regulatory agency overseeing hemp production in the United States.

However, states will be able to submit their own proposals to the USDA for state-regulated programs. These programs must stay within the confines of the USDA requirements, including:

a practice to maintain relevant information regarding land on which hemp is produced in the applicable jurisdiction;
a procedure for testing THC concentration levels of hemp produced in the applicable jurisdiction;
a procedure for the effective disposal of products produced in violation of the statute;
a procedure to comply with the statutory enforcement procedures;
a procedure for conducting annual inspections to verify that hemp is not produced in violation of the statute; and
other practices or procedures as the Secretary of Agriculture considers to be appropriate and consistent with the statute.

Should a state decide not to submit a plan for its own regulatory procedures, that state can simply apply for licensure directly through the USDA. In states with approved plans, all those participating in the program must adhere to the state laws that are established.

In addition, the 2018 Farm Bill explicitly states that “nothing in this title authorizes interference with the interstate commerce of hemp.” As such, the 2018 Farm Bill will open up clear legal pathways to interstate transport in the United States.

The 2018 bill also requires the USDA to conduct a study within 120-days of enactment to determine the economic viability of the domestic production and sale of hemp.

With the 2018 Farm Bill now signed and passed into law, it’s a matter of time before the hemp industry explodes. However, the 2014 Farm Bill will remain in effect until a solidified plan is established by the USDA, which will most likely take a year.

So don’t expect to see hemp products popping up at your local grocery store any time soon.

Michigan Marijuana is Legal But You Can’t Buy It Anywhere

by Travis C | Dec 13, 2018 | 420, 420 News, Blog, Business, Growing

Michigan marijuana is now legal for adults to consume and grow. But where can they buy it?

The answer is nowhere. Michigan marijuana is legal for adults to grow, consume, and even “gift” to one another now. Yet there isn’t a single dispensary plan in place yet.

This may read similar to another article I wrote regarding Massachusetts legalization. They had a similar problem establishing a legal marketplace for consumers. While Massachusetts has finally opened two dispensaries for the entire state after two years of legalization, Michigan is poised to move more quickly.

Michigan Marijuana Laws

While Michigan has legalized cannabis for adult use, I wouldn’t go packing your bag for a vacation to the Great Lakes quite yet. Adults can grow 12 of their own plants (twice as many as Colorado) and possess up to 10 ounces in their homes. There’s a line in Proposition 1 that allows adults to “purchase” recreational cannabis. But there is none to buy.

Massachusetts, Maine and Vermont all did something similar. All these states have legalized cannabis for adults, but have no market to legally purchase cannabis. Basically, because of poorly written laws, these states have given a free pass to private market businesses.

Not Getting Stuck

The Michigan marijuana market is ahead of the curve, even if just slightly. Proposition 1 included a mandatory deadline for establishing a regulated market.

A year from now, a plan should be approved and in place to begin legal sales of recreational cannabis in Michigan. An additional rider was included that allows people to apply for licensing directly through the municipality. This acts as an assurance that the local governments stay on track.

To elaborate, Massachusetts had no such deadline or rider in place to ensure a timely roll out of a regulated marketplace. Because of this, local municipalities that did not approve of the state’s decision could refuse applications simply on the basis of not wanting legal cannabis in their town.

Michigan’s rider in Proposition 1 will guarantee that local governments don’t stand in the way of legalization. So while Maine’s governor fights legalization tooth and nail, and Vermont has no plans for a legal market yet, Michigan is already planning ahead.

A Big Step For Cannabis

Michigan is the first Midwestern state to legalize cannabis for adult use. Other states in the region will certainly be watching to see how the market turns out.

For now, however, state residents craving some fresh Michigan marijuana will either have to grow it themselves or buy it on the private market. So for now — even though cannabis is legal — unless you’re growing it, you’re still breaking the law in Michigan. Hopefully that changes soon!