EXCLUSIVE: How To Raise Enough Capital To Finance Your Cannabis Business

While there exist stereotypes that venture capitalists are there to crush dreams, it seems that cannabis-oriented VCs are helping business founders' dreams come true.

Despite getting a bad rap from time to time, they tend to think about being constructive funding partners, says Emily Paxhia, founding and managing partner at Poseidon Investment Management.

Paxhia led a conversation with leading executives in the cannabis space at the Benzinga Cannabis Capital Conference on April 20 at the Fontainebleau Miami Beach.

Don't Settle When It Comes To Investors: Karson Humiston, founder and CEO of cannabis hiring platform Vangst, emphasized how important it is to have a good personal relationship with business partners.

"It's really like a marriage," she said, adding that "you're going to be spending a lot of time with your partner as you build a business through ups and downs."

Humiston said that business founders should ask themselves what they are looking out for out of capital partners and then go out and find them.

Vangst kicked off 2022 by securing $19 million in financing through a Series B funding round, led by Level One Fund with participation from previous investors.

Having a wide range of investors participating has been a "part of our secret sauce," said Humiston, one of the women who has been dominating space for years.

"There no shame" in leaning on investors and advisors for advice, Karson added. "Knowing what you don't know is important" for business founders.

Raising Enough Money To Fuel Growth: Luke Anderson, co-founder of Cann said that businesses should be careful to take money from people who will actively help fuel growth, promote the brand and bring new capital.

"If someone that you want to work with is offering you more capital – take it," he said.

Given the unpredictable nature of the cannabis industry, it is crucial to have a trusted partner that will jump in and provide support in tough times. Being transparent builds trust between partners, which leads to making the ability to solve problems easier, Anderson explained.

The cannabis-infused beverage company recently confirmed a $27 million Series A funding round coming from fresh institutional capital, existing investors like Imaginary Ventures doubling down, and a roster of new celebrity investors, including Nina Dobrev, Adam Devine, Zoey Deutch, Jordan Cooper, Sara Foster and Rosario Dawson.

However, saving resources and not leaning into growth at all costs is vital, Anderson continued.

"The growth is sort of overstated, and it's also not cheap," he said. "Your ability to pick good Revenue versus bad revenue is the most important piece of these last couple of years."

Wurk CEO Scott Kenyon said that what was once bad revenue could become a good revenue in time.

"It's okay to stop doing one thing for a bit of time and then come back in there when you or your organization are ready," he added.

The cannabis-focused human capital management company raised $11 million in a funding round in 2019. Last year it closed an oversubscribed $3.5 million Series AA round of financing, completed entirely by existing investors.

Commenting on pursuing non-endemic revenue streams, Kenyon said that having the fundamentals down is a prerequisite.

"It's okay to have strikeouts, but let's go look for those home runs," he said. "You're not going to hit a home run if you're not willing to strike out. So, don't be scared of striking out."

Photo: Courtesy of Towfiqu barbhuiya on Unsplash