EXCLUSIVE: Cannabis Leaders Stress Quality Presentations As 'Key Determinant' For Securing Funding

The three biggest issues the cannabis industry faces are the federal tax code 280E, lack of access to banking services, and inaccessibility to federal bankruptcy courts, according to Jennifer Maffett-Nickelman, partner at Thompson Hine.

She kicked off the discussion on how to create fundraising strategies at Benzinga Cannabis Capital Conference held last week in Chicago. Other panelists who shared their expertise on this topic include Tony Schor, CEO of Investor Awareness, Paul Weiss, CEO of PaperPlanes and Michael Villapiano, director at Altmore Capital.

Would the Department of Justice’s proposal to reschedule cannabis to Schedule III resolve all these issues? According to Maffett-Nickelman, no, it would not. It would, however, “reset the tax issue, yes, but it’s unlikely to really have a significant impact on the obstacles under the current banking rules, because it’s still going to be illegal under federal law,” she told the crowd gathered in Chicago. Without federal legalization, the industry has to rely on the SAFER Banking Act. This bill would "erase most of the reasons that have kept banks from jumping into this industry."

Panel moderator Stephen Lenn, Phoenix managing partner at Brennan Manna Diamond, said things are not as bad as they seem. He referred to the 2014 guidance from FinCEN (Financial Crimes Enforcement Network of the Treasury), which made clear that FinCEN wanted banks to service the industry.

"And what I’ve seen is more and larger banks are getting into the business," Lenn said, adding that although it’s slow, smaller banks are still joining.

Read Also: EXCLUSIVE: Cannabis Rescheduling Is Not Cure-All For Industry Problems: Experts Explain How Tax Tactics Could Hurt Marijuana Businesses In Long Run

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Use Your Local Network And Focus On Internal Housekeeping

Schor followed up by saying that even though finding money in cannabis has been a challenge, it's possible to find the right network and use it to find investors. "You don't have to go and spend time in meeting after meeting to find investors. Start locally, use your network." Schor also suggested attendees talk to people around them, as there are independent groups looking for revenue-producing companies at the conference.

Weiss explained that this is a highly bifurcated market with two different worlds. There's a small company world that's incredibly under-resourced in many ways. Very few companies with less than $20 or $25 million of revenue can commit their resources to maintaining their books to be bank-ready. The other world includes larger companies with tens of millions of dollars in revenue and a large balance sheet that can secure meetings and have qualitative conversations. And everything is resourced properly.

Open Mindedness And Partnerships

Villapiano highlighted the importance of open-mindedness in the industry. Finding mutual benefits is the name of the game because money is limited.

Following up, Weiss stressed that partnerships are the key word, "that's what strengthens this industry and that's the future," concluding that "the quality of your presentation, the quality of your financial modeling, and the reality of it is the key determinant to whether you’re going to get the funding."

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Photo by Wendy Davis.