Sponsored Content Provided By Signal Bay Inc.
Interested in taking part in Oregon’s upcoming recreational marijuana market? While the entry barriers for dispensaries in Oregon aren’t as high they are in other states, it still takes a sizable investment to enter the business. And to get sufficient funding, companies must be prepared.
Signal Bay Inc. (OTC: SGBY), a provider of cannabis consulting, research, data, operations and laboratory services, is hosting four Oregon application workshops to equip applicants with business strategies that have benefitted from financing and investment education. The first workshop took place in Bend on Dec. 14, 2015, the second in Medford on Dec. 15. Individuals interested in entering the recreational market can still make the third workshop in Eugene on Dec. 16 and the final workshop in Portland on Dec. 17.
On Jan. 4, 2016 Oregon will begin accepting license applications for adult-use marijuana businesses. The Oregon Liquor Control Commission has authority to issue licenses for producers (growers), processors, wholesalers, testing laboratories and retailers. The OLCC will also issue research certificates for those who wish to perform medical or health and safety research.
After answering approximately 100 application questions, an applicant who wants to earn a license has to submit the completed application to the OLCC , along with operating plans that cover security, transportation, employee training, and measures preventing minors from entering the premises or purchasing marijuana. Making this transition will take some investment, but fortunately the investment is likely to pay off quickly.
When recreational dispensaries open, it is anticipated that the total demand for cannabis will increase from 3 to 5 times over current levels. This type of scenario could make many of the existing dispensaries more profitable; however, the large number of anticipated retailers could also result in a crowded market.
The state already has well over 300 medical dispensaries, which are authorized by the Oregon Health Authority. Many of these existing dispensaries, plus many newcomers, plan to join the recreational market.
In the best position, existing medical dispensaries will need to make some changes to meet the more stringent requirements of recreational sales. The new rules that are in place require that marijuana retailers make new investments in features like security systems, inventory tracking, and staff or consultants to manage compliance.
According to Lori Glauser, President of Signal Bay, “For existing operators in the Oregon medical market who are upgrading from medical to the adult use market would need to invest between $20,000 and $100,000 to cover the costs of application and licensing fees, and additional compliance, if not already in place. New entrants to the marketplace can expect to invest $200,000 to open a retail establishment, up to millions to build, license, and start operations of a new state of the art, indoor producer or processor facility.”
One way to stand out is to raise sufficient capital to design and build a great store, a highly efficient grow, or a production facility that makes exceptional products with the best equipment, but what are the best options for funding to make this possible?
Investment isn’t as easy to get as it might seem. Although insiders to this industry may feel as if lots of people want to get into the business, the truth is, there are still a lot of investors who aren’t comfortable investing in cannabis just yet. While opportunities for growth are huge, there are serious concerns coming from investors about investing in a product that is still federally illegal. Lack of access to banking, security concerns and reputational concerns may keep other investors away so funding your cannabis business may take time, but below are several investment options worth exploring.
Dipping into your own savings is the first place to go, but remember that you need to have enough money to survive. Entrepreneurs who can’t afford to pay their own bills won’t be successful in business for long. Be realistic about how far self-funding can go.
Friends and Family
The next step is to go to friends and family, which can be some of the least expensive and most forgiving money you can get. Friends and family money often comes in the form of loans or equity with favorable terms. Plus, larger investors will want to know that the people close to you are willing to invest in your venture.
This is the next level of funding, often raised in blocks of $5,000 – $250,000. Individual investors, such as those who attend ArcView, are seeking great investments. Finding an angel who is aligned with your interests and values, and is perhaps close, can be the perfect infusion of capital; however, keep in mind, angels may only make a handful of investments in the marijuana space, so among all of the companies that are out there, why would they invest in yours?
This type of funding is the practice of raising money for entrepreneurial ventures from large numbers of people, often in small amounts per person. A dispensary applicant in Maryland recently ran a campaign on a mainstream crowdfunding platform to fund its licensing and build-out costs. While some mainstream platforms operate as token crowdfunders, donations acknowledged with a “token of gratitude,” equity crowdfunding rewards investors with securities in the business. CannaFundr is a cannabis-specific equity crowdfunding platform. Regardless of the crowdfunding method, this type of funding allows entrepreneurs seeking capital for cannabis ventures to meet investors excited to enter the industry.
Property and Equipment Financing
The land or equipment you need to start your operation may be more accessible than you think. Investors who can take equipment or land as collateral will be more likely to invest with you, knowing that if anything happens they can take over the equipment, or the land.
Seed Stage Venture Capital
Some boutique investment groups may offer investments of $50,000 – $2 million. These early stage investors tend to take a broad portfolio of investments.
Larger institutional investors can invest around $2 million or more into large established projects. Typically, these players won’t make an investment until the entrepreneur has demonstrated success at a smaller level.
Another option for some is to become a publicly traded company, but make sure you understand the different marketplaces and their requirements before entertaining this route. The majority of public cannabis companies are micro-capitalization companies; accordingly, they currently trade on the OTC Markets because they are too young or small to meet requirements for exchange listing.
If your company decides to go public, consider registering under the Securities Act or the Securities Exchange Act as a means of demonstrating that your company can successfully adhere to strict standards; plus, this helps your investors make informed investment decisions.