You Don't Have To Raise Funds To Make It Big In The Cannabis Industry
Carving your own path to success will take time. However, bootstrapping instead of raising capital from investors has massive advantages in today's cannabis marketplace.
One of the many ongoing dilemmas that young entrepreneurs with a new business face is acquiring the startup capital to make an impact in their respective industries.
Cannabis is no different.
We’ve seen many dominant industry players fall to the mercy of its investors and advisory boards. Bootstrapping your way to success can certainly take longer, but depending on your vision and goals, it may pose to be the most viable option. Slow initial growth is not the truest measure of success, by any means. The creative control that will be fostered may be the right avenue for stability and long term growth of your endeavors.
Acquiring investors isn’t just about tapping into large pools of capital, but it’s also about gaining insight and expertise to help foster the direction of where your company goes. Since the cannabis industry is so new and uncharted, and the cost so high, it can be incredibly difficult to find the right fit.
Considering to raise capital or not
When taking capital, it’s important to have an immediate plan on how to multiply the money. You never want to be in a situation where the money raised just sits in reserves. It should all be spent on expansion.
It’s not rare to see major industry players close multiple rounds of tens of millions of dollars of funding. Take Eaze for example, who closed a $35 million round earlier this year to launch its verticalization efforts aimed at retail and distribution. But this begs the question: are they raising capital just to stay afloat? This can be a vicious cycle where disruption and mass branding is the goal, but a massive amount of investors control the direction the company takes and not the original founders.
To successfully conduct business there has to be a profit. A business will not thrive if it’s consistently operating at a loss. It’s not sustainable for companies to focus only on raising funds and not enough on earning strategies. Ultimately, they are doomed to fail because taking in more money without the ability to properly make returns just digs a deeper inescapable hole.
Maintaining creative control
As a business starts to blossom, there will continually be new opportunities that arise. Some of which need to be acted on incredibly quickly to make it to market before everyone else does. Having complete ownership among the original founders allows your company to be nimble. You can implement new services, products, processes without advisory board or investor approval.
When a company takes on investors, those investors have a say in what goes because they now own stake in that company. This means that any creative direction must be discussed and mutually agreed upon amongst all owners. Having too many backers can increase the odds of conflict over control and eventually dilute the company’s original objective.
A company that bootstraps will have complete freedom. They won’t need approval or be under constant pressure from investors. They will have the ability to devote energy to bettering the company on its own terms.
Generate revenue as quickly as possible
Any business wants to hit the ground running with the hottest new product, service, or app on the market. But a wise business will quickly optimize based on how the market reacts.
To you, this technology that’s been built might be the freshest out there. But what does the consumer think? By generating revenue early on, success is inevitable whether funds are raised or not. Consider launching a less-advanced version of your product or service. These are often referred to as a ‘Minimum Viable Product or ‘MVP.’ Listen to how the market reacts and optimize accordingly.
Learn to duplicate yourself
Personal investments probably won’t allow one to scale to a 10 person dream team right away. It’ll happen eventually, just add resources as additional revenue is made.
Time constraints and burnout are both very real. The faster someone is able to be trained to help with tasks, the quicker a business is able to scale. When a business arrives at a point where they can hire an additional person, it’s pertinent that they are trained by means that are as hands-on as possible. This will help ensure that operations are performed per the required standards while also diminishing any trust issues that may exist in regards to passing off important duties to another team member.
Carve your own path
Carving your own path to success will take time. However, the aspirations that you have for your company and where you see yourself as a part of it must dictate your decision to raise capital or not.
When Veriheal was just starting, my business partner, Samuel Adetunji, and I were denied many investment opportunities and meetings early on. Whether this was a systemic issue of us being African Americans in a white-dominated space, we can’t quite conclude. What we did, however, was turn this into our primary source of motivation.
Hearing ‘no’ so many times in different ways will get to you if you let it. Your other option is to turn it into a positive and use it to your advantage. That being said, all of those early denials from investors turned out to be the motivation that has launched our company to where it is today. For that, we are humbled by the success, and truly thankful to not have taken a dime of outside investments.
Of course, there is always the lingering threat that a big player could quickly sweep in, spend millions of dollars on advertising, and diminish you. A big holding firm could launch your exact product, service, or technology and render your business obsolete. Resilient entrepreneurs simply cannot operate from this place of fear. Focus on the quality of what you deliver, optimize based on feedback, reinvest in your core products/services and if you get lucky like me, you will see great success.