What Investors Are Looking for in Cannabis Startups


Cannabis is big business in this country. So much so that entrepreneurs do not have to come up with an idea for the next ‘big thing’ in order to attract investors. They only need to prove they have the knowledge, skill, and commitment to turn a new startup into a profitable long-term venture. Convincing investors you have what it takes is truly the hardest part of financing a startup.

Interested in giving the cannabis industry a go? If so, take heed of the things listed below. They are the types of things investors look for when entrepreneurs pitch them:

  • 1. A Strong Management Team

Before an entrepreneur ever gets to talking about CBD extraction equipment or lights for a growing operation, they have to assemble a strong management team. That team usually consists of at least two or three people. All of them have some experience in both business and a field related to cannabis, if not cannabis itself.

A growing operation might bring on someone with a proven history in agriculture. A processor might bring on an experienced chemist or pharmacist to oversee THC and CBD extraction. Meanwhile, strong leaders occupy key positions relating to business administration.

  • 2. Equipment and Operational Space

Next, investors want to see that an entrepreneur has plans in place for equipment and operational space. The reasoning is simple: they need to have a good idea of what will be spent to get things up and running. If an entrepreneur and management team have no idea what they will spend on equipment and space, how can they properly pitch their opportunity?

In terms of equipment, Houston-based CedarStoneIndustry recommends never going on the cheap. Growers cannot afford to invest in insufficient lighting that could negatively impact the yield. Processors should not go cheap on THC or CBD extraction equipment, either. Go cheap and quality could suffer.

  • 3. A Commitment to Doing It Right

The cannabis industry is somewhat unique in that any business dealing in THC is technically illegal under federal law. This stipulates that all cannabis startups be built on a commitment to do things right. All I’s must be dotted and T’s crossed in order to guarantee that investor funds are not put in jeopardy.

It is also imperative that startups do things right in terms of the products they produce. Safety is never negotiable. As for quality, there should always be a commitment to produce the highest quality possible. The cannabis space is very competitive. Companies unwilling to insist on quality will find they do not last long.

  • 4. A Willingness to Embrace Automation

Finally, investors are rarely looking to fund small-time, garage-based operations with limited potential. They want to invest in companies with built-in growth and scalability. To make that happen, cannabis entrepreneurs have to be willing to embrace automation. They can start out doing everything manually and on a small scale, but any hopes of attracting investors will require ramping things up.

The thing about automation is that it produces consistency and efficiency. Both are things that investors appreciate. An efficient operation that continually pushes out consistent quality is one that is more than ready to compete in what has become a cutthroat industry.

Are you looking to put together a cannabis startup? If so, you are going to need some investment help. Getting started in the cannabis industry is expensive. Fortunately, there is plenty of investment capital available to this booming industry. It is a matter of convincing investors you and your team have what it takes to succeed. The industry itself takes care of the rest.