The Business of Legal Cannabis 2020 student conference was held on February 7 at the Yale School of Management. Here are our biggest takeaways from this annual event, which explores developments in the legal cannabis industry:
Cannabis firms are exploring new financial and financing models.
Cannabis financing firms, such as Privateer Holdings, have found that traditional models of venture capital or private equity have needed to be adapted to fit the changing industry dynamics. One adaptation—restructuring PE holding firms into standalone companies—has had the following benefits:
- Maximizing economic value for shareholders
- Being as tax efficient as possible
- Giving each subsidiary flexibility to develop independently
- Positioning each subsidiary to grow and be leaders in its field
- Supporting subsidiaries with unmatched domain knowledge and shared service capabilities
- Rewarding and incentivizing employees
It’s all about the branding.
Privateer Holdings and other cannabis companies believe that the cannabis industry will eventually be driven and shaped by brands that are aligned to the needs of their customers. Branding’s role is to:
- Eliminate confusion about legal versus illegal sources of cannabis
- Allow professional companies to separate themselves from less scrupulous competitors
- Differentiate high-quality products from low-quality products
- Educate consumers about responsible consumption
But there are still obstacles when it comes to building a brand. They include a regulatory landscape that makes it nearly impossible to build a brand across state lines, because of a lack of standardized regulations.
Tips for breaking into the cannabis space.
- Embed issues of social equity and inclusion into your business model.
- Do your due diligence. There are a lot of shady firms. Talk to as many people as possible to ensure alignment of values/incentives.
- Be aware that the industry is currently experiencing a wave of consolidation, and there is a need for professionals with traditional experience to help firms navigate into legitimate businesses.
- Innovation is crucial. There is a lot of opportunity to innovate and build within the industry.