Cannabis is exploding. Not literally (at least not with my clients). But the cannabis industry… wow. It’s officially one of the fastest growing markets in the world. In just North America, spending on cannabis is expected to grow from $9B in 2017 to $42B in 2027. Worldwide, it’ll hit nearly $60B.
So, it’s hot. And you know what happens when markets get hot… investors want in. I work exclusively with cannabis companies as an outsourced general counsel, or as board advisor, and in these roles can tell you there are no shortage of investors, new and experienced, wanting to get into cannabis. Who can blame them? While no industry is foolproof, cannabis is a good bet right now.
But the thing about this space is the extreme complexity. I tell founders, executives, and especially investors to do very thorough research before jumping in. Here are three things anyone considering investing in cannabis needs to know.
See the business for yourself
Cannabis is very much a supply chain business. Some businesses cultivate, some process and package, some are retailers, some are wholesalers, some develop the tools, some just distribute, and some do many of these things under one roof. It is imperative that you understand clearly what you’re investing in, because the laws that regulate that business will vary depending on WHAT the business does. If you think you’re investing in a cultivator, and find out they’re also a retailer, you could be facing certain liabilities you didn’t know you had to prepare for.
I advise all potential investors to visit the business in person, a few times, and get to know it well. Check out the facility, talk to the key employees, learn as much as you can about the product(s). Also, research and ask about competing businesses in the same area, including reviewing available competitive licenses. You need to know what your investment will be up against.
Cannabis is not an investment you want to make blind, you very much need to see and evaluate the physical business before making a decision.