As marihuana becomes more popular worldwide with legalization, so do cannabis startups. So let’s take the opportunity to check what the state of these plant-centered businesses is and the entire new industry they’re building into 2020 and beyond.
Moving in use allowance from medical to recreational across diverse territories has been a key changing factor for cannabis startups without a doubt. This change is actually the perfect example of a profitable startup opportunity being raised thanks to external legal factors across a particular location, and how that can be a great lead for a successful startup.
Now, is the investment in firing up a cannabis startup as lucrative as it sounds? Let’s find out.
$2.3 billion is the latest figure given by Business Insider as the amount of funding VCs brought to the U.S. table last year, for the cannabis industry only. This means a $0.8 billion increase from the prior calendar year.
Bear in mind that cannabis startups in most U.S. locations have been dealing with slow responses to changing legislations. Boston, as an example on the East Coast, had a couple of years of delays since its first talks of legalization. Either because of legal or political reasons, or even practical licensing and implementational ones, it took more than a year before their first shop could open doors. The truth is states and cities, along with their respective operational bodies, have to get ready to welcome masses of new recreational buyers in select locations.
California’s case is a bit different in this sense, and that’s partly why there’s about 40% of VC investment in cannabis startups being geared inwardly in this state.
Speaking of Cali, we need to bring up the news in regards to one of the most promising cannabis businesses in the U.S. Founded as part of the first companies of its kind in the Golden State back in 2014, Eaze is a private company in series C of funding. It announced considerable layoffs, however, as a means of seeking financial stability.
Having once been one of the first to raise big bucks in the pot world, and with a total raised exceeding $160+ million, this startup is now facing hard times staying in the business apparently due to leadership issues that are coupling with business model failures and banking hardships.
The lesson here is that, whether dealing with commercial marihuana or not, every startup still needs to keep its fundamentals in check. So, let’s go over what you need to consider if the cannabis business is tempting you.
With everything we’ve mentioned above, the only remaining considerations to starting a cannabis business would be to plan ahead of time really well before making any crucial moves.
If cannabis becomes your main product for retailing, for example, there’s a setback to it being illegal at a federal level. In terms of funding, for instance, you might not be able to resort to the same financing options with big banks as other companies would.
So make lots of room to do research and truly consider whether investing your time, efforts and capital in the marihuana business is the next best step for you in your startup career.
Weigh its pros and cons thoroughly, get legal and financial counseling, and make sure you take into account how common business options differ from those in the cannabis world.
If you decide to go up for it, however, look out for VCs interested in the booming cannabis industry for your funding, if needed.