NEW YORK (MainStreet) — Spring 2015 is turning out to be a fertile planting season for many ganjapreneurs in every state where marijuana is now legal. One of the biggest hurdles, however, is getting the right investors to the table. That is what makes deals if not cannabis companies grow.
Like several other similar conferences now sprouting up around the country, the Spring Marijuana Business Conference and Expo, held in Chicago in late May, offers that opportunity. Five cannabis industry entrepreneurs are selected from a pool of applicants, to pitch their ideas in front of a live audience of industry professionals and experienced investors. This is an educational event only. Those who pitch do not win any award. Nevertheless, the sessions are highly popular with all involved and could help the start-ups secure funding.
CannaBusiness Media President George Jage, whose company organizes the expo, describes the purpose of the event as a way to jump start funding for promising businesses in the sector.
"The goal is to provide a range of investment opportunities from tech to retail, ask sizes from tens of thousands to millions [of dollars], business stages from start-up to publicly traded entities, and investment types from debt to equity," he said.
This year, the panel of prominent industry members who will serve as judges includes Troy Dayton of the Arcview Group, Emily Paxhia of Poseidon Asset Management, Douglas Leighton of Dutchess Capital and Tripp Keber from Dixie Brands.
"I've seen more cannabis business pitches than probably anyone so I feel like I may have some valuable insight," Dayton said. "The benefit for attendees is that most people will need to pitch something to someone for money at some point and it's a great way to to see that process live in a compelling setting. It's also an opportunity for me to get in front of potential ArcView investor members or pitching companies."
Kris Krane of 4Front Ventures, a marijuana-focused investment group, is a big fan of this kind of platform.
"This is an industry where access to institutional capital is virtually nonexistent," he said. "It is critical that new marijuana companies find individual or angel investors to cover their start up costs. These start ups may encounter more legitimate potential investors in one day at an event like this than they will in months of raising money in general."
Jage concurs with this assessment.
"There are several investment groups and pitch forums in the industry, but none that put someone on the spot in front of a live audience of thousands of industry professionals and investors," he said. "At the last Marijuana Business Pitch Slam, I saw each of the presenters swarmed with attendees who wanted to speak with them following the sessions."
Julianna Carella, founder and CEO of edibles company Auntie Delores, has successfully raised hundreds of thousands of dollars of private capital through similar presenting exhibitions. "Connecting the right people in this fragmented industry can be difficult," she said. "Other options for funding our companies do not exist in the restrictive banking environment."
These events are not just for start-ups. Auntie Dolores was already operating when Carella sought private investment. She feels that her company's history made it stand out against more recently founded companies with no track record. "It can be exhilarating to pitch a cannabis company to a room full of investors who are not sure where to invest," said Carella. "We really tried to tell our story of how the company began, what we stand for. Many investors feel more comfortable with this than investing in a company with no history or previous revenues."
Dayton, who cofounded Arcview in 2010, sees the impact of these events in a very direct way. "So far, ArcView's investor members have put more than $39 million into 54 companies," he said.
Krane, who has pitched Arcview in the past, noted the positive outcome of the experience after his company, 4Front Ventures, tried to raise money for its investment arm, 4Front Capital.
"The experience led us to meeting many prospective investors, some of whom wound up contributing to our raise, and others who became allies that have proven beneficial to our business and our clients," he said.
According to Jage, however, this event has several purposes beyond just connecting good ganja-related companies with capital, even down the road. He hopes that this kind of process will help professionalize the industry at all levels.
"It is powerful to witness the tipping point that happened less than a year ago," he said. "This is a pivotal shift for the market to have an influx of capital competing for investment in the best and brightest deals in the market and allows the business owners and entrepreneurs more power in the negotiations. My hope is that it will not lead to excessive valuations and keep the stream of investment capital flowing into the market."
--Written by Marguerite Arnold for MainStreet