Growing Your Cannabis Company From Seed to Success

It’s tough starting a company from scratch. It’s even harder in the cannabis industry, with ever-shifting federal regulations and the stigma that accompanies operating a “weed” business.

The U.S. legal cannabis industry is on track to hit $25 billion by 2025, according to the latest forecast from cannabis analytics firm New Frontier Data.

The research and data firm recently revised industry sales projections, predicting that the $8.3 billion U.S. medical and recreational marijuana industry will grow at a compound annual growth rate of 14.7 percent, to an estimated $25 billion by 2025.

With enormous growth and many having to create models and processes from the ground up, this industry is not for the faint of heart. Fortunately, a variety of support services have emerged to help cannabis entrepreneurs move their businesses towards success.

What is an incubator?

Business incubators have become quite common in the United States and around the globe. These organizations are geared towards speeding up the growth and success of startup and early stage companies. Because the cannabis industry is riddled with challenges, several cannabis-specific incubators have cropped up, and may be the best path forward for a company looking to raise capital in this space.

Growing Your Cannabis Company From Seed to Success

Why should I consider a cannabis incubator for my business?

Like a moth to a flame, the cannabis industry has garnered its fair share of attention in recent months and years, driven by those seeking the next big boon. It’s a modern-day Gold Rush.

Ben Larson, co-founder and managing partner at Gateway Incubator, launched the company in 2015 in Oakland, after recognizing some major obstacles standing in the way of those seeking success in the space.

“Outsiders are coming into the cannabis space, but they often don’t possess a true understanding of the plant or the business acumen required to grow a sustainable and profitable business in this industry,” said Larson. “We also often meet with existing company operators who don’t understand how to scale their company in this very complex space. Growing from one jurisdiction to another can be extremely complicated due to restrictions and regulations.”

With marijuana being such a multifaceted industry, companies like Gateway and other incubators can help to put an entrepreneur’s mind at ease.

Leafwire recently had the opportunity to speak with four leaders in the cannabis space who have created businesses specifically to nurture entrepreneurs hoping to make their mark. These companies are intimately familiar with the ins and outs of the space, and have helped countless entrepreneurs grow their businesses from seed to success.

Canopy Boulder

Canopy Boulder is a self-described seed-stage business accelerator focused on ancillary products and services in the legal cannabis industry.

Patrick Rea, CEO and co-founder at Canopy Accelerator, likens Canopy’s 16-week mentor-driven “boot-camp” accelerator program to that of “securing a micro-MBA in your own business, studying marketing, sales management practices, venture finance, financial modeling and more.” Canopy provides mentees with capital, access to a considerable network of industry leaders, and acute industry knowledge, in return for an equity stake of up to nine and a half percent.

Canopy Boulder mentors including Steve DeAngelo (Harborside)Emily Paxhia (Poseidon), Daniela Vergara (Agricultural Genomics Foundation), Keegan Peterson (Wurk), Alain Bankier (New York Angel Group), Jessica Billingsley (MJ Freeway) and Josh Kappel (Vicente Sederberg) comprise countless cannabis success stories.

Growing Your Cannabis Company From Seed to Success

Gateway

Gateway is positioned as “the first Differential Accelerator and investment fund for startups”. The company has taken a personal approach to each opportunity and prides itself on understanding that “every founder and every company has their own strengths, their own needs, and is at a unique place in their trajectory.” Differential Acceleration allows Gateway to focus on the individual business’s needs, and to create a custom path for each partner.

After initially launching two cohorts of startups, (a total of 15 businesses), it quickly became apparent to Larson that “it’s really hard to teach an old dog new tricks.” The initial structured approach taken to building startups was developed and refined by Larson and his partners and applied to the tech world, not cannabis.

After working to refine the process, Gateway now takes a very diverse approach, working with one startup at a time, (as opposed to entire cohorts). This process allows for focus and organic growth. Each company is initially given $50,000 in return for an equity stake of five percent on the company. The partners then work together for several months to complete a seed round. Average seed rounds to date have garnered around $500 thousand in funding.

Larson lists Gateway’s biggest success to date as Trellis, which has grown rapidly and recently raised a $2 million Series A.

Larson warns entrepreneurs against trying to solve too many problems. “Stay focused. Don’t spread yourself too thin.” He also cautions, “Everyone is not an expert. Make sure to ask for referrals before relying too heavily on new partners.”

The Hood Incubator

Co-founded by Ebele Ifedigbo and Lanese Martin, The Hood Incubator was formed to increase the participation of Black and Brown communities in the legal cannabis industry – as investors, owners, workers, patients, consumers and advocates. They believe that individuals who were operating in the underground can learn the appropriate business and technical skills and turn their business into a completely legal one when given the proper guidance and tools needed for success. The Hood Incubator also works with many newcomers to the industry who are experts in other fields like culinary or high-end security, and are looking to segue into the cannabis space.

The Hood Incubator is often referred to as a “pre-seed” accelerator, as they aid those looking to do a deep dive on the cannabis industry while simultaneously acquiring the skills that are necessary to grow a competitive business. While they do not currently provide funding, they do provide copious amounts of experience and connections.

“We tend to partner with candidates with often overlooked skill sets who don’t necessarily match mainstream expectations of what an entrepreneur should look like,” said Martin. “But they can be equally successful given the right guidance and tools.”

The team provides clients with thousands of hours of training, including learning how to make a business plan, financial projections, compliance with all regulations in the cannabis space, and connecting with a network of regulators, consultants and attorneys.

Collaboration Over Competition: It Takes a Village

While not an incubator or accelerator, Cultivated Synergy, located in Denver’s hip RiNo district, is creating a community around the cannabis industry. Cultivated Synergy provides a collaborative work space, community hub, and event venue with flexible membership options perfect for industry advocates, entrepreneurs, and established businesses alike.

Founded in 2016 by Connor Lux and Ryan Tatum, the company is already expanding into Los Angeles and Seattle. “Cultivated Synergy is so much more than a work space,” said Lux. “The value is in the community, and we have created an incredible place for cannabis entrepreneurs to learn, engage and grow. If one of our members needs help or a specific resource, someone will always be there to help make that connection.”

Cultivated Synergy has become well-known in the Denver area for their social events. The venue averages 15-20 events per month, including the tremendously successful “Budtender Appreciation Night” which attracts over 500 guests monthly.

Conclusion

No matter which marijuana incubator you choose, it’s important to consider all factors related to your business before diving in. To stay up to date with important developments in the cannabis industry, be sure to visit Leafwire.com/blog.

 

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Leafwire CEO Peter Vogel

Peter Vogel is CEO and co-founder of Leafwire, an online investment platform that connects investors to cannabis companies that are fund-raising.   Check out their blog here: www.leafwire.com/blog

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