Cannabis Startup, Tech, Entrepreneur & Business News – Direct Cannabis Network https://www.directcannabisnetwork.com Direct Cannabis Network provides the latest cannabis business news on tech, entrepreneurship and innovative companies. Fri, 20 Oct 2017 05:46:58 +0000 en-US hourly 1 https://wordpress.org/?v=4.8.2 https://i0.wp.com/www.directcannabisnetwork.com/wp-content/uploads/2016/12/cropped-ICON.jpg?fit=32%2C32&ssl=1 Cannabis Startup, Tech, Entrepreneur & Business News – Direct Cannabis Network https://www.directcannabisnetwork.com 32 32 122109914 Entrepreneur of the Week: Dr. D of Infinity Brands, Inc. https://www.directcannabisnetwork.com/entrepreneur-week-dr-d/ https://www.directcannabisnetwork.com/entrepreneur-week-dr-d/#respond Fri, 20 Oct 2017 03:30:37 +0000 https://www.directcannabisnetwork.com/?p=13418 Each week we highlight entrepreneurs in the cannabis industry for our viewers to learn more about the leading cannabis executives of our time. This week, we highlight Dr. D, Founder of Infinity Brands, Inc. Dr. D provides extensive knowledge in organizational leadership. He earned his law degree from Thomas Jefferson School of Law, specializing in […]

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Each week we highlight entrepreneurs in the cannabis industry for our viewers to learn more about the leading cannabis executives of our time.

This week, we highlight Dr. D, Founder of Infinity Brands, Inc. Dr. D provides extensive knowledge in organizational leadership. He earned his law degree from Thomas Jefferson School of Law, specializing in transactional law. Dr. D. earned his Doctorate of Management and MBA from the University of Phoenix.

Dr. D. has consulted and closed transactions valued at over $500,000,000 and advised on over a $1Billion in mergers and acquisitions as to the effects against human capital resources, bottom line results, and post-merger restructuring.

In our interview with Dr. D, we asked a variety of questions to gain further insight into Infinity Brands, building a business in the cannabis industry and much more!

First off Dr. D, congratulations on being featured as this week’s entrepreneur of the week! Can you please share with our readers about Infinity Brands, Inc.?

Dr. D: Infinity is a sales, sourcing, and service organization created to influence people in the cannabis sector to professionalize the manner in which we do business by modeling and molding processes, procedures, and protocols common with other industries to the cannabis industry.

What ignited the spark in you to start to launch your business?

Dr. D: We saw a need to source oil for companies and bring a cohesive operation to an otherwise fragmented market.

How are you helping the cannabis industry in a positive way?

Dr. D: The cannabis industry is fraught with a backdoor mentality for operations and transactions. As an industry, we are helping companies realize that upfront and open transactions created a greater source of deal flow, removal of sales troughs, and simplification of expectations. As an organization, we have sought to help people with relief from inflammation and pain. Our first sponsored clinical trial began this month.

Who is your role model, and why?

Dr. D: Governor Brown. He has been instrumental in recognizing the need to open the doors to cannabis and its derivatives while maintaining the need to be cognizant of public protection. He is aware of the need to see globally but act locally. He understands the balance between business needs to remain in California while ensuring a reduction in unemployment. While I don’t always agree with his business policies, the majority of his leadership is sound.

What would you say are the top three skills needed to be a successful entrepreneur?

Dr. D: Inspirational Leadership, Use of numbers, Ruthless compassion.

Where did your organization’s funding/capital come from and how did you go about getting it?

Dr. D: We bootstrapped and created strategic partnerships.

If you could talk to one person from history, who would it be and why?

Dr. D: Franklin Roosevelt – implementing the new deal, ending prohibition, strategy during the conflict. I would want to know what he felt was most instrumental in being elected to four presidential terms and the type of leader he felt he was.

How do you stay balanced?

Dr. D: Exercise. Make time for family. Know that there are days that work consumes every moment, but then offsetting that time with enough ‘zen’ to recharge.

What is the best piece of advice you can give to others looking to launch a company in the cannabis industry?

Dr. D: Be sure that you are ready for adversity and have plan after plan to overcome it. Starting up a new business comes with pitfalls due to other’s greed, unscrupulous conduct, and ulterior motives. Being able to ferret out those who are only about themselves versus those who are genuine isn’t easy, but with practice, perseverance, patience, passion, and persistence, the marathon will be won. In addition, be an inspiration for others – do what you say, and say what you mean.

What’s the hardest part of founding and running a startup?

Dr. D: Working with multiple personalities and recognizing that a leader cannot please everyone, and when the tough decisions are made knowing that others will be displeased is when true character is found. Leaders are not made when the road is easy. Leaders are made out of the trials and tribulations that confront them. Leaders stay focused on the vision and direction even when no one else can see it.

Is there anything that surprised you about being an entrepreneur in the cannabis industry?

Dr. D: Yes…the complete lack of professionalism. With the number of brands already in the space, I am consistently let down by the lack of mutual respect for time, money, and honesty. I am equally surprised, however, at much of the camaraderie that is enjoyed among those wanting to adhere to the upcoming rules and regulations.

Being a founder, we are bound to make a mistake or two, what is one mistake you made that turned up being one of your biggest learning lessons?

Dr. D: I allowed my values and integrity to be blinded to the bad acts of another. I won’t mention their name, but the result was a complete setback in my life. I have literally started over from nothing. What I discovered is that there is nothing to fear in starting over in life, no matter what age, but that new opportunity, second chances, and a positive way of doing things, despite what others have done to you in the past, is amazing and wonderful when fully embraced.

What book has inspired you the most?

Dr. D: Ayn Rand – The Fountain Head and Atlas Shrugged – the message that being objective means to let loose of emotion as part of the equation to decisions. Logic and understanding are best in making business decisions. Let others be who they are, do not judge, and recognize that association with anyone must be based upon who they are today, not based on one’s past, but what they proclaim for the future.

Excluding yours, what company or business do you admire the most?

Dr. D: Apple – while I do not use Apple products, I recognize them for their innovation, adherence to ideals, and ability to recover from their demise during the late eighties.

How can we as an industry continue to make a positive difference in society?

Dr. D: Recognize that not everything is about money and money isn’t a measure of success. Helping others must be part and parcel of what any of us seek to achieve. This is why we are sponsoring studies in the relief of pain and inflammation.

Thank you, Dr. D! It was so great being able to feature you as this week’s entrepreneur of the week. Do you have any final insights for our readers that you would like to share?

Dr. D: I believe that when people can put the needs of others above their own, only then can one truly be successful. This doesn’t mean sacrificing your integrity or personal goals, but that doing things with the goals of others in mind will lead you down the right path of long-term success. My motto is simple: Make a positive difference in the lives of others such that your life is also positively impacted.

For those looking to learn more about Infinity Brand’s Inc., click here. Find them on instagram: @infinitybrandsinc

Want to be featured? Click here to tell us why you should be an entrepreneur of the week on DCN.

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Cannabis Startups: Formalize Formalize Formalize! https://www.directcannabisnetwork.com/cannabis-startups-formalize/ https://www.directcannabisnetwork.com/cannabis-startups-formalize/#respond Fri, 20 Oct 2017 02:32:00 +0000 https://www.directcannabisnetwork.com/?p=13415 You have an incredible idea. You know exactly how you’re going to execute it. You’ve started raising capital and building out your prototype.  But….. your cannabis company still does not officially exist. Cannabis Startups require more than time, money, and ideas to flourish – they need a strong legal base. Indeed, new companies consistently falter […]

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You have an incredible idea. You know exactly how you’re going to execute it. You’ve started raising capital and building out your prototype.  But….. your cannabis company still does not officially exist.

Cannabis Startups require more than time, money, and ideas to flourish – they need a strong legal base. Indeed, new companies consistently falter as a result of structural mismanagements. Make sure your company has the appropriate legal infrastructure in place, before the company’s launch, rather than after it has already started to succeed.

The Basic Premise: Limit Liability and Maximize Profit

Our cannabis lawyers often speak to entrepreneurs with incredible ideas but who nevertheless lack the appropriate business acumen to begin the process. The first sentence of each conversation usually starts with some formulation of the following:  “I have a great idea and would like to start working on my business but I just don’t know where to start?!”.  

Launching a new venture can be overwhelming and our cannabis lawyers strive to impress upon our clients the importance of implementing strong legal fundamentals.  Certainly, the most critical imperative of any new business is to limit liability and maximize profitability.  While intuitive, this basic premise must be consciously considered when deciding upon the particular business structure to best serve this objective.

Selecting the Right Business Entity

When launching your new marijuana startup, it is not enough to simply announce that you have launched a company – you must instruct your State government of your intention to form your company in an official capacity. While there are several different types of business structures (with idiosyncratic iterations of each one), the three main options cannabis startups should consider include the LLC, S Corporation, and C Corporation.  

Importantly, the fundamental purpose of establishing a business entity is to limit one’s personal liability.  If the owner of the company performs negligently or issues a product with a defect and a customer is injured as a result, the business entity will be liable (generally) for the damages and not the individual owner.   

Keeping this thought in tow, let’s return to the three most common business structures.  Undoubtedly, the Limited Liability Company, or LLC, is the most popular entity and is renowned for its simplicity, flexibility, and protection; the owners of the cannabis startup are afforded great leeway under the LLC to develop their own rules and procedures, running the business as they see fit.  Unlike a Corporation, LLC is not bound by nearly as many legal mandates.  

Also, a company’s profits are taxed at an individual level, rather than at the company level.  Indeed, known as a “pass-through tax”, the duty to pay taxes runs directly to the owners of the company and not to the company itself. As we shall see, this tax benefit is markedly more appealing than the onerous tax requirements under a C-Corp.

C Corporations are often necessary for those seeking to raise venture capital or obtain funding from angel investors.  Quite simply, if a cannabis startup intends to raise capital in excess of $750k, a C Corp is a must.  C Corporations are immensely powerful in that they can issue several types of stock.  Most commonly, C Corps issue both common and preferred stock, with the latter representing an equity interest with greater financial and managerial rights than the former.

However, unlike an LLC, C Corporations are taxed twice – both at the corporate level and then again as the owners of cannabis disburse dividends company.

Finally, S Corporations, like LLCs, are taxed at the individual level but can issue stock like C Corps.  S Corporations, however, are far more restricted than C Corps in that they can issue only one type of stock and only to 100 stockholders.  Again, if you are building your Canna startup with the goal of rivaling the next Apple, an S Corp will not cut it.

Operating Agreements – Establishing the Contours of the Company

Beyond the legal requirements and restrictions involved in establishing a business entity, drafting operating agreements serve the equally important purpose of setting managerial parameters within the company.  Which founder is responsible for the finances of the cannabis startup?  Which founder is responsible for managing the client base and operations of the business?  Which founder has the capacity to fire employees and does that founder need the other founders’ consent first?

The harsh reality is that interpersonal relationship’s between startup founders often break down and if the mechanics of the day-to-day duties are not sufficiently delineated in advance, havoc may ensue.  Developing a formal structure with agreed upon roles and responsibilities will establish legal boundaries (with legal consequences) between the partners and the company. As always, treat yourself like a boxer and “protect yourself at all times.”

Abe Cohn manages THC Legal Group, a Marijuana Law Firm specializing in the cannabis industry.  Their attorneys assist startups, entrepreneurs and established businesses protect their most prized assets.  Connect with them to learn more.

To stay updated on the latest tech, entrepreneurs and innovative companies in the cannabis industry, click here. 

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10 Reasons Why You Need to Be Cautious About Pesticides on Your Weed https://www.directcannabisnetwork.com/10-reasons-pesticides-weed/ https://www.directcannabisnetwork.com/10-reasons-pesticides-weed/#respond Fri, 20 Oct 2017 02:02:27 +0000 https://www.directcannabisnetwork.com/?p=13410 Pesticides Used in Agricultural Markets Are Not Always Safe for Cannabis. Eagle 20 is an infamous pesticide in the world of cannabis cultivation. The active ingredient myclobutanil converts at the point of combustion, turning into hydrogen cyanide. That means that when a consumer smokes the affected cannabis, they inhale this toxic poison. In high doses, […]

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  • Pesticides Used in Agricultural Markets Are Not Always Safe for Cannabis.
  • Eagle 20 is an infamous pesticide in the world of cannabis cultivation. The active ingredient myclobutanil converts at the point of combustion, turning into hydrogen cyanide. That means that when a consumer smokes the affected cannabis, they inhale this toxic poison. In high doses, inhaling myclobutanil can be life-threatening.

    According to Curtis Landrian of cultivation company Canndescent, “The industry didn’t set out to poison people. The reason that people were using Eagle20 for cannabis is that the vineyards were using it. It’s FDA approved to use on agricultural crops. Cannabis farmers said, ‘If ag can use it, then so can we.’ Then, we learned an important distinction; ‘You don’t light your grapes on fire.”

    “The issue is that no one should expect a weed farmer to understand complex chemistry. The industry needs regulation so that the scientific experts weigh in with facts. We need academia to let us know that we are on the right track.”

    1. The Feds Aren’t Monitoring or Testing Pesticide Use in Cannabis or Its Affect on the Environment.

    In the United States, the Environmental Protection Agency (EPA) determines permissible levels of pesticide residue on food crops. The Food and Drug Administration (FDA) along with the U.S. Department of Agriculture (USDA) are two government bodies that monitor and test for pesticide levels in food crops. Since cannabis is federally illegal, pesticide use on cannabis is also illegal and not regulated by the US government.

    With no federal guidelines governing cannabis pesticides, the states have begun issuing their own decrees for permissible pesticide use. As a result, the rules vary from state to state where cannabis cultivation is legally sanctioned.

    This variance includes testing requirements. In rainy Oregon for example, labs are not required to test for molds or microbiological on every sample as part of regulatory compliance. Anyone who has spent any time in Oregon in November knows that it rains almost non-stop.

    According to testing expert Alex Hoggan, owner of cannabis testing lab ChemHistory in Milwaukie, Oregon, “humidity in the air is an issue relevant to this region and the regulations have adapted to this fact.” He continues, ”This is a good example of where the regulatory bodies have responded to the industry concerns over those of the consumer.“

    ChemHistory subscribes to CannaCheck, a seal of approval to assure cannabis consumers in Oregon that products are tested at the highest standards. The CannaCheck seal indicates that cannabis has been screened for 59 of the most common pesticides mandated by Oregon regulations. “We’ve invested in top-of-the-line instruments to support LC-MS/MS Triple Quad instrumentation,” asserts Alex. “This means that our equipment is extremely sensitive and precise in testing parts per billion, detecting pesticides that would otherwise go undetected.”

    “We’ve come a long way,” says Mr. Hoggan. “Just a few years ago, there was limited regulation in Oregon and no enforcement. Cultivators could shop samples at different labs for the passing results, or worse, bribe labs for desired test results including THC levels or pesticide levels. Labs have unique technical needs in the cannabis industry in terms of maintaining our equipment and calibration. We need uniform standards and certifications to keep a unilaterally consistent testing result.”

    1. Corrupt Labs If Unchecked, Can Endanger Critically-Ill Patients.

    Corrupt behavior on behalf of testing labs is not limited to a few bad seeds in Oregon. This is an issue facing many communities. Regulators across the country are working diligently to create a more level playing field that instills faith in cannabis consumers, safeguards healthy working conditions, and protects those who are ill and seeking pharmaceutical grade medicine.

    While participating in a panel at the 2017 Cannabis Compliance Summit, Reggie Gaudino, Ph.D. and V.P. of Science, Genetics, and Intellectual Property at the esteemed Steep Hill Labs was resolute on the importance of clean, contaminant-free medicine. “We have a filter when we are healthy. Immuno-compromised people don’t have that filter. Can cannabis carry contaminants? Yes. We have a responsibility to make sure that the cannabis is safe for all users, not just the [adult-use] consumer.”

    Related : Lab testing

    1. Cannabis Cultivators Can Legally Use Pesticides Approved By Regulations.

    In Oregon, cultivators are permitted to use any of the 394 products published on the state’s website. They are categorized as an insecticide, miticide, fungicide, or vertebrate repellent. Some of the approved products have active ingredients that sound like chemistry projects, while others have more recognizable ingredients such as rosemary oil or neem oil.

    In California, regulators at the Bureau of Cannabis Control (BCC) are currently preparing to announce regulations in compliance with Senate Bill 94 or MAUCRSA with guidelines generally coming into effect in January 2018 or later. The bill outlines regulations for adult use and medical cannabis respectively. Authorities have not issued a list of sanctioned pesticides as of yet.

    The California Department of Food and Agriculture (CDFA) will be authorized to fold in pesticide controls as a stipulation of cultivation licenses. Once the requirements for the licenses are finalized, the Department of Pesticide Regulations (DPR) will be better able to guide County Agricultural Commissioners regarding the necessary inspections to enforce the regulations. The DPR will also suggest guidelines for permissible pesticide residue levels on processed cannabis products.

    The DPR has stated that the state of California will enforce restrictions on the use of the following:

    • Items outlawed by the Groundwater Protection List.
    • Products not used in edible agriculture considered to be food.
    • Products labeled “DANGER” or “WARNING”.

    As a basic rule of thumb, it is advisable to avoid pesticides where possible. Healthy plants that are nurtured have strong immune systems and can weather basic concerns. That said, cannabis cultivation is a very expensive enterprise that is not scalable. Cultivators will need some protection in the event that there is a threat to their crops. When considering pesticide use, one should ask, “Is it safe for agriculture, is it safe when ignited, and will it support sustainable farming methods?” The answer to all of these questions should be an undeniable “yes”.

    California cultivators can reference a list of active ingredients issued by the DPR that are “exempt from residue tolerance requirements and either exempt from registration requirements or registered for a use broad enough to include use on cannabis.”

    1. Lab Testing May Not Be Enough; Know Your Growers.

    It is worth noting that when regulators issue an approved list of pesticides, some sneaky cultivators may seek out products to use on cannabis that doesn’t show up on lab results. Jeffrey Raber is a Ph.D. scientist and founder of the Werc Shop, a service organization that scientifically supports contract manufacturing and laboratory testing, licensees. “With pesticides, it’s good for regulators to err on the side of caution,” states Raber. “This can be a cat and mouse game where regulators say ‘Don’t use this’ and it’s akin to the situation with performance-enhancing drugs where deviants will seek out what could be dangerous solutions to avoid detection.”

    Consumers can further the industry and add an additional layer of protection by supporting companies with a strong ethos who are truly inspired by a love for this healing plant, not the promise of quick profits.

    1. Pesticide Drift Can Affect Neighboring Organic Farms.

    Alicia Rose of HerbaBuena, a cannabis medicine producer and delivery service collective based in California wine country, is a strong advocate for “beyond organic,” sustainable cannabis cultivation methodologies. She explains that even conscious cultivators face difficulties in bringing a clean product to market due to pesticides already present in the environment.

    Everything HerbaBuena makes utilizes Demeter certified Biodynamic cannabis or holistically sun-grown cannabis farmed without the use of chemicals or pesticides of any kind.

    When it comes to testing for contamination – such as bacteria or pesticide contamination – cannabis is the only industry being tested for contaminants to parts per billion. And while we all agree that both our cannabis and our food should be carefully scrutinized for purity, the challenge is that we live in a world where our air, soil, and water are already contaminated by the long-standing use of petrochemicals and other noxious chemical substances.

    Even when a farm isn’t using these chemicals, agricultural drift and groundwater contamination are rampant and can contaminate organic crops. There are numerous cases where farmers using sustainable, organic and even Biodynamic practices are failing pesticide tests, not because they applied these chemicals, but because the chemical has drifted from neighboring farms.”

    As an industry and as consumers, we need to advocate for best practices that protect the environment. By raising awareness and implementing conscious enforcement strategies, we have a chance to enjoy clean water and pesticide crops for generations to come.

    1. Dispensaries May Not Require Lab Testing of Product.

    Depending on the location, dispensaries may not be required to mandate lab results before selling cannabis product. In Oregon for example, the Oregon Health Authority (OHA) did move to require lab testing and sunsetted the sales of untested products back in March of 2017.

    In California, few dispensaries currently request lab results. In the past year, a number of news outlets have published some very cautionary exposés indicating that California grown cannabis sold in Los Angeles exhibits a frightening level of pesticides. While media outlets do often profit from instilling fear in consumers, until we have more rigorous enforcement standards in place, we should all proceed with caution.

    1. Cannabis Extract May Have Concentrated Levels of Noxious Pesticide.

    When manufacturers use extraction methodologies such as CO2 for example, if pesticides are present in the flower, the end result contains a concentrated and more lethal level of pesticide. If the extract is then used to make edible goods, those products also contain pesticide. And if the extract is inhaled via vaporizer or dabbing, the user could be in grave danger. In the very least, one might actually mistake the psychoactive effects of the pesticides for THC. To eliminate concern, the flower must be tested prior to extraction and the final extracted product must be tested again.

    1. There Are Alternatives to Toxic Chemicals: Organacides.

    In their marketing materials, Big Time Gardens proclaims ”Why to use green cleaner in flower when you can use Big Time Exterminator, and it won’t damage your extracts?” Big Time specializes in natural enzymatic pesticides that dissolve the exoskeleton of pests. Their Exterminator product ia 25b exempt and is said to work on various species of mites, aphids, molds, and mildew and is non-toxic.

    Austin Sherman, a sales rep with Big Time explains, “The Exterminator product references a type of biomimicry. Pests molt their exoskeleton and then secrete an enzyme to release the now-excess baggage. Big Time utilizes this enzyme known as chitinase for their organacide formula.

    Austin, who once drank Exterminator to prove it’s safe, says the product is okay for plants, people, and pets. The only downside he says “repetitive contact with bare skin will dry your skin out. Big Time Exterminator should be administered by applicators wearing proper protective equipment including long sleeves, pants, gloves, and safety glasses.” Organacides such at this can be used in conjunction with other natural solutions.

    1. The Best Approach Is An Integrated Pest Management System.

    Lady Bugs, ground cover, probiotic compost teas, and earthworms, are all part of what can be a symbiotic ecosystem for cannabis gardens that may improve plant health and prevent pests from taking over. Cultivators can keep an eye on plants by turning over leaves and examining their plants for any signs of pests before they become a problem. With care and attention, this approach can work for larger industrial scale operations as well.

    To stay updated on the latest tech, entrepreneurs and innovative companies in the cannabis industry, click here.

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    Here’s Why, Who and When to Hire a Chief Financial Officer https://www.directcannabisnetwork.com/hire-chief-financial-officer/ https://www.directcannabisnetwork.com/hire-chief-financial-officer/#respond Fri, 20 Oct 2017 01:37:48 +0000 https://www.directcannabisnetwork.com/?p=13405 One of the challenges for cannabis founders is determining the most capital-efficient way to build our their management team. Typically, a company starts with the founder(s) and then adds “revenue generating” headcount (positions like trimmers, budtenders, or manufacturing labor).  However, once a company has a viable product, meaningful revenue, and an established distribution and supply […]

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    One of the challenges for cannabis founders is determining the most capital-efficient way to build our their management team. Typically, a company starts with the founder(s) and then adds “revenue generating” headcount (positions like trimmers, budtenders, or manufacturing labor).  However, once a company has a viable product, meaningful revenue, and an established distribution and supply chain, it is time to consider the need for a corporate function like a Chief Financial Officer (“CFO”).  

    WHY do companies need a Chief Financial Officer?

    One of the key benefits to having a CFO for strategic finance contributions is driving the processes and data necessary to run your business based on quantitative rather than qualitative metrics.  Financial data is critical to making data-driven decisions on how to run your business and to determine how well your business is running month-after-month.  If you have investors or are looking to raise capital, you’ll be expected to have financial projections and provide informed and accurate financial updates.  Finally, financial governance and planning are critical, especially in a regulated industry.

    A CFO can perform the following types of duties:

    • Business planning – proforma and other quantitative elements for your business plan
    • Financial projections
    • Operating budget and cash forecast
    • Key performance indicators and management dashboard
    • Balance sheet management – management of debt and equity positions and terms
    • Pricing model
    • Strategic (3 and 5 years) planning
    • Mergers and acquisitions
    • Investor materials and investor relations
    • Liquidation strategy – distributions

    WHO would make a good Chief Financial Officer?

    A CFO is typically going to be a business professional with a relatively traditional (finance, economics, business) education.  You’ll need a seasoned leader that loves opening Excel first thing in the morning, knows the industry best practices, and can interface and instill confidence with your partners and investors.

    WHEN should I bring on a Chief Financial Officer?

    Historically, mainstream companies have waited to hire a CFO until they had significant ($100M+) revenue or were about a year out from an IPO.  However, in an underdeveloped industry with so many legal landmines, limited access to financial services, and complicated accounting and regulatory requirements, the need for a CFO is accelerated.

    Determining whether it’s time to bring on a CFO should start with a few basic considerations.  The first consideration is whether you have raised outside capital. Most companies that have raised at least $1M will start to feel internal or external pressure to hire a CFO for tactical as well as strategic input to their business.  If your company is self-funded, you should start by considering the depth of your business background, knowledge, acumen, and how much you enjoy the back-office elements of running a business.  

    CFO talent is expensive – $200-300K per year – any in many cases you “get what you pay for”.  Most start-up companies cannot afford this type of overhead until they have brought their product to market and are generating significant revenue.  This situation can put a founder into a catch-22: Not generating enough revenue to justify a CFO, but needing the CFO skill set in order to make strides in fundraising and move towards profitability and scale.  In these cases, it can be tremendously beneficial to bring on a strategic investor or advisor that has a significant finance background and a willingness to assist with some of the days to day management of the company.  If that isn’t an option, there are “outsourced” CFO services.  I decided to start my CFO consulting business to fill this specific need in the cannabis industry.  

    If you find the right part-time “consultant” CFO you’ll find a flexible, efficient, and extremely beneficial offering that will help you propel your business.  The CFO should be able to turn “data” into “information” that can help you make informed, strategic business decisions.  He or she can set up business metrics that will allow you to run your business efficiently and effectively and ensure that capital is optimized and the finances are prudently managed.  Other considerations for whether or not you need a CFO include the size and scale of your expenses, a number of transactions you are running, and the complexity of your business model.

    Please feel free to reach out to me if you have any questions about hiring a CFO, the types of duties of a CFO, or for a complimentary evaluation of your business plan.

    To stay updated on the latest tech, entrepreneurs and innovative companies in the cannabis industry, click here.

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    KIND Financial Launches First Seed to Payment Solution in Canada https://www.directcannabisnetwork.com/kind-financial-canada/ https://www.directcannabisnetwork.com/kind-financial-canada/#respond Thu, 19 Oct 2017 08:25:49 +0000 https://www.directcannabisnetwork.com/?p=13400 Kind Financial has announced the launch of their new software solutions called KIND “Seed to Payment”. This software is currently only available in Canada for all licensed producers, related businesses, and the government. History of KIND Financial David Dinenberg founded KIND Financial in 2013, initially calling the company KIND Banking. KIND Financial is the technology […]

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    Kind Financial has announced the launch of their new software solutions called KIND “Seed to Payment”. This software is currently only available in Canada for all licensed producers, related businesses, and the government.

    History of KIND Financial

    David Dinenberg founded KIND Financial in 2013, initially calling the company KIND Banking. KIND Financial is the technology platform for cultivators, dispensaries, and regulatory agencies, providing them with the tools they need for cannabis tracking and compliance. The software manages the entire cannabis business life-cycle ensuring transactions are safe, secure and remain in accordance.

    KIND Financial has built its voice as a leader in compliance and financial solutions for the cannabis industry, by creating an ecosystem of easy-to-use, end-to-end solutions.

    “Seed to Payment”

    KIND’s Seed to Payment software is a fully integrated e-commerce gateway that enables users to complete the entire process from seed to payment all on one platform. Their platform also has built-in regulatory and security features which include age and identity verification to ensure full compliance capabilities along with offering the ability to work with multiple languages and foreign currencies like the Euro and Australian dollar.

    These news tools will not only give Canadian cannabis businesses a fully integrated e-commerce platform but it also provides them the ability to monitor payments, process credit card transactions and put revenue into banks, which is nearly impossible in the United States.

    What about the banking issue?

    As many of you may know, the cannabis industry faces many barriers, especially when it comes to establishing a bank account, paying taxes, and accepting credit card payments. This issue is not only in the U.S., banks are also shutting down cannabis business accounts in Canada as well.

    By partnering with one of Canada’s largest financial institutions, KIND Financial clients in Canada will now be able to gain access to a bank account and process all payment transactions within a single application.

    By having this capability, clients can now conveniently run their business with ease, while also feeling secure that their entire business lifecycle remains compliant with all evolving rules and regulations.

    The Offerings

    Seed to Sale Tracking and Monitoring

    The KIND Technology Platform works hand-in-hand with cannabis growers and producers to ensure KIND Seed to Payment meets the unique needs of cannabis businesses today.

    Integrated eCommerce and Payment Gateway

    The KIND seed to sale platform provides a fully-integrated eCommerce platform, and a stable, secure, Bank-supported and bank approved payment gateway to process transactions with confidence.

    Government Reporting

    KIND Seed to Payment tracks and stores the information you need for government reporting with a full audit trail of the critical data required to analyze and manage cannabis compliance across your operation.

    Banking Compliance Features

    The KIND Technology Platform stores and tracks the data cannabis-businesses need to ensure complete transparency with financial institutions offering services to the cannabis industry.

    Increased Security

    Data security and privacy have always been a core part of KIND Financial’s business, so it made sense when they partnered with security leaders like Microsoft, back in June 2016. By implementing Microsoft Azure to offer their clients the most advanced level of security. The data is stored in multiple locations in Canada, so their client’s data won’t cross any country lines.

    The Future

    KIND’s Seed to Payment’s foreign capabilities also allows for all Canadian licensees to explore and expand into international trade, without worrying about security or international regulations, explicitly making it easier to expand in Europe and Australia next.

    KIND Financial is not stopping there, in addition to the Agrisoft Seed to Sale and the Seed to Payment, they are currently developing a mobile payment system called KIND Pay set to launch later this year. KIND Pay will accept Visa and Mastercard, include a loyalty platform and other valuable features.

    To learn more visit kind.financial.

    To stay updated on the latest tech, entrepreneurs and innovative companies in the cannabis industry, click here.

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    Sara Gullickson of Dispensary Permits Discusses Regulation, Licenses and Business https://www.directcannabisnetwork.com/sara-gullickson-dispensary-permits/ https://www.directcannabisnetwork.com/sara-gullickson-dispensary-permits/#respond Wed, 18 Oct 2017 18:06:57 +0000 https://www.directcannabisnetwork.com/?p=13391 This month on DCN Talks, Sara Gullickson, CEO of Dispensary Permits joins ut to discuss upcoming regulations, getting into the cannabis industry, and what exactly Sara and dispensarypermits.com are doing for you. Who is Sara Gullickson ? Sara Gullickson is a nationally recognized cannabis expert who has been actively involved in the industry since its inception. […]

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    This month on DCN Talks, Sara Gullickson, CEO of Dispensary Permits joins ut to discuss upcoming regulations, getting into the cannabis industry, and what exactly Sara and dispensarypermits.com are doing for you.

    Who is Sara Gullickson ?

    Sara Gullickson is a nationally recognized cannabis expert who has been actively involved in the industry since its inception. A visionary entrepreneur with a passion for health and wellness, it was natural for Sara to enter the medical marijuana business. In 2010, she established DispensaryPermits.com, a national cannabis consulting firm offering seed to sale services with hands-on support to medical marijuana entrepreneurs.

    Based in Scottsdale, Arizona, DispensaryPermits.com is one of the longest standing medical marijuana consulting companies in the industry. As Founder and CEO, Sara has served clients in competitive and emerging state markets with ten successful license acquisitions, as well as operational and dispensary opening experience from the East Coast to Hawaii. For new dispensary and cultivation licensees, Sara has developed a franchise style model where clients can learn how to operate a fully functional and compliant cannabis facility.

    Sara has personally helped multiple states with their programming and has attended multiple political gatherings to raise medical marijuana awareness, both at Lobby Days in Washington, D.C, and at the Phoenix Capitol.At the forefront of one of the fastest growing industries in the nation, Sara has made it a priority to help other entrepreneurs succeed through educational endeavors and networking events.

    Sara served as a founding member and Chair of Women Grow- Phoenix Chapter from 2014-2017 and was a featured speaker at the 2017 Women Grow Leadership Summit in Denver. She has also spoken at multiple national industry events, including 2017 Arizona Assessors Conference, 2015 MJ Business Daily event in Chicago, and the 2015 Cannabis World Conference & Business Expo (CWCBExpo) in Los Angeles.

    Named an Arizona Trendsetter by Arizona Foothills Magazine in 2016, Sara has also been featured in numerous national media outlets, including: CNN, NBC, Yahoo Finance, Entrepreneur Magazine, National Geographic, Dr. Oz, Forbes, Business News Daily, Phoenix Business Journal, Marijuana Business Daily, Direct Cannabis Network, and others.

    An industry innovator and thought leader, Sara continues to expand her business with the ever-evolving industry. Beyond her work in cannabis, Sara is an avid yogi who has completed 200 hours of Yoga Teacher Training. In her spare time, she personally advocates for new legalization measures and access to alternative wellness solutions.

    What is Dispensary Permits?

    Dispensary Permits provides both dispensary and cultivation application services for medical marijuana applicants across the United States of America, including states such as Arkansas, California, Florida, Hawaii, Ohio and Pennsylvania. Contact us to learn more about our total solutions for the design, development, operation, and optimization of medical cannabis cultivation and production facilities and dispensaries. Dispensary Permits has secured award-winning license applications for clients in 10 medical state processes across the country, creating one of the best track records in the industry.

    CURRENTLY ACCEPTING CLIENTS ACROSS THE U.S. FOR THE FOLLOWING SERVICES:

    • Application and Business Plan Development
    • Facility Design and Development
    • Patient Education and Support
    • Full-Service Cannabis Marketing and Branding
    • Dispensary & Cultivation Training Programs

    To stay updated on the latest tech, entrepreneurs and innovative companies in the cannabis industry, click here.

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    Massroots Board of Directors Vote to Remove CEO Isaac Dietrich https://www.directcannabisnetwork.com/isaac-dietrich-ceo-massroots/ https://www.directcannabisnetwork.com/isaac-dietrich-ceo-massroots/#respond Tue, 17 Oct 2017 04:17:44 +0000 https://www.directcannabisnetwork.com/?p=13373 MassRoots (OTCQB: MSRT), Board of Directors voted to remove the company’s Chairman and CEO, Isaac Dietrich. With this decision, they have placed Vice President Scott Kveton as the new CEO. The History of Massroots Isaac Dietrich and Tyler Knight founded Massroots in April 2013. The idea evolved because “they didn’t want their grandmothers to see […]

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    MassRoots (OTCQB: MSRT), Board of Directors voted to remove the company’s Chairman and CEO, Isaac Dietrich. With this decision, they have placed Vice President Scott Kveton as the new CEO.

    The History of Massroots

    Isaac Dietrich and Tyler Knight founded Massroots in April 2013. The idea evolved because “they didn’t want their grandmothers to see pictures of them taking bong rips on Facebook.” By July 2013, they launched Massroots in the App store, as a social network for cannabis lovers worldwide. Very quickly Massroots gained traction, reaching several thousand users through Instagram, Reddit, and word-of-mouth.

    Following their rapid growth, they were invited to pitch that September at an Arcview Event. Arcview is one of the largest cannabis investment groups in the country, founded by Steve DeAngelo and Troy Dayton. Isaac met Douglas Leighton, Co-Founder of Dutchess Capital while attending the event which led to Douglas investing the first $50,000 to their $150,000 seed round.

    Going Public

    Those funds allowed Isaac and his team to increase users to 100,000 and to launch a beta version for Android application. By March 2014, Massroots was adding over 20,000 to 30,000 users each month organically. Even with all this traction, VC’s still felt Massroots was too much of a risk, as it was a cannabis-related company. With no private financing available, Isaac decided to go public as a Registration Statement on Form S-1 which went into effect by operation of Law in September 2014.

    Banned on Apple

    By the end of 2014, Massroots made it into the top 200 fastest growing social networks in the IOS App store, which brought attention to Apple and in turn was permanently banned from the store. However, Massroots gained community support and united the cannabis industry against this ban, bringing together cannabis business leaders who authored a policy letter to Apple’s policies along with over 10,000+ users who sent personal emails to Apple. By February 2015, Apple removed the ban and reversed their policy.

    In April 2015, Massroots stock began trading under the ticker MSRT, and on 4/20/2015, Massroots stock traded over $7 million in volume, making it the most active stocks on the entire OTC market. By summer of 2015, Massroots hit over a half million users and finally moved to monetizing their platform making approximately $60,000 in the first few weeks, through advertising.

    Even with this continuous growth, Isaac’s vision to go on the Nasdaq was quickly shut down, when Nasdaq determined that “listing the company could have been seen as aiding distribution of an illegal substance,” Massroots stated. This didn’t slow down their user growth which reached over 900,000 users in 2016.

    When concern turns to doubt

    However, their debt also grew. By the second quarter, MassRoots reported a loss of $1.8 million, up from the same quarter the previous year, when it reported a net loss of $1.4 million. Following the months from July to September, Massroots laid off 40% of their company and defaulted on its debt, according to filings with the Securities and Exchange Commission. The on-going concern began building doubt throughout the year, and many cannabis companies, investors, and analysts started to lose favor on MSRT.

    At the end of 2016, Massroots acquired Whaxy. Massroots looked at this acquisition as an opportunity to expand their offerings, specifically for cannabis businesses. They also recruited Robert Pullar as the Chief Financial Officer to help provide guidance and insight into Massroots’ Financial model to attain profitability.

    Things start to heat up

    This past year, Massroots acquired Odava, a cannabis POS software for $1.75 Million in an essentially all-stock transaction. The vision was to integrate their cannabis user review site marketing opportunities with Odava’s real-time pricing and availability capability, to create an end-to-end marketing offering.

    And a month later, Massroots announced that they would be acquiring Cannaregs, Inc, in a deal valued at $12 million. This is where things started to turn.

    Some members of the company’s board (and supposedly including Kveton) had been unhappy with Dietrich’s decision to acquire CannaRegs, reported Green Market Report. Shortly after this announcement, the stock fell 5% within a week and was trading at .41 cents, down from a 52-week high of $1.18. Over the past few month’s Massroots also had come under question for stock promotion activities, which Isaac denied any knowledge of this action by the company. 

    The Boards Decision

    This past weekend, Isaac began reaching out to shareholders gaining not only their support to keep Isaac as CEO, but to also move towards removing the board, however, it appears the board of directors beat him to it and called a meeting this morning to let him go. After today’s news, the stock has plummeted 22% to .33 cents.

    The company has yet to make any public statements about the news.

    UPDATE: On Wednesday, October 18th, 2017, it has been reported that Cannaregs has pulled out of the deal with Massroots. This decision was after Isaac was abruptly fired by the company’s board. Amanda told Business Insider, “she needed to do what was best for CannaRegs and not be on a roller-coaster ride.”


    Wondering who is on the Board of Directors? 

    • Vincent Keber III of Medical Marijuana Inc. 
    • Ean Seeb of Denver Relief Consulting LLC.
    • Terrence Finch of Massroots, Inc. 
    • Isaac Dietrich of Massroots, Inc. 

    To stay updated on the latest cannabis tech, entrepreneurs and B2B industry news, click here.

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    Entrepreneur of the Week: Windy Borman https://www.directcannabisnetwork.com/entrepreneur-week-windy-borman/ https://www.directcannabisnetwork.com/entrepreneur-week-windy-borman/#respond Sun, 15 Oct 2017 23:16:47 +0000 https://www.directcannabisnetwork.com/?p=13351 Each week we highlight entrepreneurs in the cannabis industry for our viewers to learn more about the leading cannabis executives of our time. This week, we highlight Windy Borman, founder of Green Mile Pictures, LLC. Windy Borman, MST, is a multi-award-winning film Director and Producer, as well as the founder of Green Mile Pictures. Her recent projects […]

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    Each week we highlight entrepreneurs in the cannabis industry for our viewers to learn more about the leading cannabis executives of our time.

    This week, we highlight Windy Borman, founder of Green Mile Pictures, LLC. Windy Borman, MST, is a multi-award-winning film Director and Producer, as well as the founder of Green Mile Pictures.

    Her recent projects include directing and producing the 10-time award-winning film, “The Eyes of Thailand” (narrated by Ashley Judd), and producing “The Big Picture: Rethinking Dyslexia”, which premiered at Sundance and on HBO. Other credits include producing performances for Dr. Maya Angelou and Margaret Cho, directing “The Vagina Monologues”, and writing for Takepart.com and Indiewire: Women and Hollywood.

    In our interview with Windy, we asked a variety of questions to gain further insight into her mission, launching Green Mile Pictures, LLC and more!

    First off Windy, congratulations on being featured as this week’s entrepreneur of the week! Can you please share with our readers about Green Mile Pictures?

    Windy Borman: Green Mile Pictures has produced “Mary Janes: The Women of Weed”, a groundbreaking, feature-length documentary film that follows female ganjaprenuers (who we call “Puffragettes™”). The film premiered at film festivals in October 2017.

    What ignited the spark in you to start to launch your business? Or how did your idea evolve?

    Windy Borman: I’ve always been intrigued by social issues, especially gender equality, social justice, environmental protection, education, and empowerment. When I moved to Colorado in 2014—the same year recreational use of marijuana became legal—and started meeting successful women in the cannabis industry, I knew I was perfectly positioned to tell these female entrepreneurs’ stories and inspire domestic and global audiences about how gender parity, social justice, and environmental sustainability lead to greater success for all.

    I would love for our readers get to know a little bit more about you. Who is someone that you look up to or would consider your role model?

    Windy Borman: Anyone who is fighting for gender parity, social justice, and environmental sustainability.

     How do you stay balanced?
    Windy Borman: I love making and producing films, communicating with the fans on social media, and overseeing all aspects from interviewing, editing and marketing. To stay balanced I try to do yoga or exercise in the mornings, and reflect or meditate at night. Mid-afternoon dog walks are also a great excuse to get out in the sunshine for a few minutes.
    If you could talk to one person from history, who would it be and why?

    Windy Borman: Dolores Huerta. She’s an organizer, activist, feminist, rebel, and mother of 11. I’d want to know how she did it all! I’d also want to tell her Thank You.

    What book has inspired you the most?
    Windy Borman: I re-read “The Alchemist” by Paolo Coelho every few years.

    How are you helping the cannabis industry in a positive way?

    Windy Borman: Women are changing the face of today’s fastest growing industry – cannabis. In “Mary Janes”, I share how they’re also changing the world.

    On your journey as an entrepreneur, I am sure you have some great insight for our readers, what is the best piece of advice you can give others looking to launch a company in the cannabis industry?
    Windy Borman: It’s the same advice I’d give an entrepreneur in any industry: stop waiting for permission. If you have a good idea, do your research and get started. If you wait to be invited, you could be waiting for a long time. The cannabis industry is big enough for everyone. Whatever skill set you bring, there is room for it here.
    Where did your organization’s funding come from and how did you go about getting it?

    Windy Borman: We raised our funding through a combination of equity investments, donations, sponsorships and one (1) crowd-funding campaign.

    What’s the hardest part of founding and running a startup?

    Windy Borman: There are always peaks and valleys. Keeping yourself and your team motivated during the times when you feel the world is against you can be a challenge. I’ve learned it’s okay to take a break and do something you love to refocus and re-energize. Stepping away usually brings clarity to the situation and the way forward becomes clearer.

    Is there anything that surprised you about being an entrepreneur in the cannabis industry?

    Windy Borman: I thought the film industry was crazy until I learned about the cannabis industry. You have to have resilience and a sense of humor to get through the constant challenges the industry, the regulations and the government throw at you.

    Being a founder, we are bound to make a mistake or two, what is one mistake you made that turned up being one of your biggest learning lessons?

    Windy Borman: I have my timeline, and the Universe has its timeline. The Universe always wins. Whenever I push too hard and things don’t line up, I’ve learned to pause and ask, “Why is this so difficult right now?” Usually, it comes down to a timing issue. When you’re in sync with the Universe, you can flow with it. Accepting the Universe’s timeline has been my biggest lesson, and each film I produce reminds me to accept it.

    Excluding yours, what company or business do you admire the most?

    Windy Borman: Companies that are committed to ethical business practices, gender parity, social justice and sustainability always get my vote.

    How can we as an industry continue to make a positive difference in society?

    Windy Borman: Cannabis already is making a positive difference in society. We are changing the conversations about environmental sustainability, ending the war on drugs, the prison-industrial complex, and the destructive domination of Big Pharma.

    We are changing the business model toward corporate social responsibility and changing the face of entrepreneurship to include women, people of color, people from the LGBTQ community, veterans and people of different abilities. This will change the wealth disparity and put wealth in the hands of disenfranchised communities. We’re already doing this–and we need to keep doing it.

    We can’t sacrifice these values as a new wave of funding comes into cannabis. They are going to want to do business under the Old World male paradigm and we must resist.

    Thank you, Windy! It was so great being able to feature you as this week’s entrepreneur of the week. Do you have any final insights for our readers that you would like to share?

    Windy Borman: You can’t talk about cannabis without including gender equality, social justice, and environmental sustainability. We’re at a critical point with women demanding more parity in all aspects of society, the Black Lives Matter movement, record-setting global temperatures for the second year in a row, and over half the states have legalized some form of marijuana.

    These are the conversations we need to have as a country—and as a world—if we’re going to solve the major issues facing humans as a species. “Mary Janes: The Women of Weed” synthesizes them.

    For those looking to learn more about Green Mile Productions LLC., click here.

    Want to be featured? Click here to tell us why you should be an entrepreneur of the week on DCN.

     

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    Floris Capital- A San Diego Equity Firm Launches $40M Fund https://www.directcannabisnetwork.com/floris-capital-equity-firm/ https://www.directcannabisnetwork.com/floris-capital-equity-firm/#respond Fri, 13 Oct 2017 08:43:11 +0000 https://www.directcannabisnetwork.com/?p=13347 Floris Capital Management, LLC, (“Floris”), a new San Diego based equity firm, has launched a $40 million fund focusing on legal and regulated areas within the cannabis companies. The Floris Focus… Floris will invest in cannabis companies located in any state that allows cannabis, whether recreational or medical. Many of the companies will be startups […]

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    Floris Capital Management, LLC, (“Floris”), a new San Diego based equity firm, has launched a $40 million fund focusing on legal and regulated areas within the cannabis companies.

    The Floris Focus…

    Floris will invest in cannabis companies located in any state that allows cannabis, whether recreational or medical. Many of the companies will be startups less than three years old or companies that have recently landed regulatory approval to operate.

    The fund will focus on strategic investments in six primary legal and regulated areas including; cultivation, branding, manufacturing, real estate and other ancillary related businesses. By diversifying the fund, it not only reduces risk but this allows for an opportunity that will enable cross-market leveraging between the portfolio companies which can increase the chance of success amongst all portfolio companies.

    Skip Motsenbocker, president of Floris Capital, stated, “This is an important distinction as the ancillary space, we believe, has become overcrowded, and our multi-sector approach represents both a better diversification strategy and anticipated return on investment”.

    The Fund 

    The fund will make a total of 12 to 18 investments over its five-year investment life. Floris will provide funding, financing and/or capital primarily in the form of equity investments.The investments would typically range from $1 million to $5 million. The stake in each company would be based on many factors and various metrics the team utilizes to evaluate each opportunity.

    Meet the Management Team

    Skip Motsenbocker

    Skip is the Founder and President of Floris Capital. Before founding Floris, Skip was the managing partner and investment committee member with the RIA SignalPoint Asset Management. He also was on the management team for Potomac Fund Management and worked in private client advisement with Wachovia and Wells Fargo. He has extensive experience in business consulting, brand development and consumer products, providing both Fortune 500 and private companies financial guidance, reorganization strategies, efficiency improvements and team leadership building.

    Will Senn

    Will is Co-Founder and Vice President of Floris. He is also the founder of Urbn Leaf, a chain of branded retail cannabis dispensaries. Will has successfully built eight early-stage medical cannabis businesses, including the largest medical cannabis dispensary in San Diego’s history. Not only does has he navigated permits through the San Diego City CUP process but he also has interest in five licensed dispensaries in San Diego. His depth of knowledge in the cannabis industry is a key component to deal identification and metrics to evaluate potential investments for the fund.

    Tom McNeely

    Tom is the Managing Director of Floris Capital. Tom is a Chartered Financial Analyst (CFA) and a financial services executive well-versed in building capital markets advisory business units. He has executed merger-and-acquisition transactions assisting private companies with purchase and sale options and has years of experience working with private equity firms, investment banks and attorneys on transaction advisory services.

    Advising Team

    The key team members who advise Floris Capital provides expertise in finance, accounting, legal and industry knowledge. They will assist in sourcing deals, vetting deals, along with guiding and evaluating the opportunities that would be ideal for their investment strategy.

    This team includes: 

    Micah Anderson – Cultivator with decades of experience understanding the nuance of farming and grow facilities.

    Mark Piesner, Esq. – Led the largest US cannabis manufacturing facility over the last decade.

    Nathan Shaman, Esq. – Cannabis attorney who represents cannabis businesses in Southern California.

    Joseph (Chip) Dow Sheppard III, Esq. – Activist and advocate for the legal cannabis industry.

    Loni Woodley, CPA, ABV, CFF – Accountant with extensive experience in cannabis

    Are you an entrepreneur wanting to learn more about this fund? Or are you an investor looking to partner with Floris Capital? You can learn more by going to www.florisfunds.com

    To stay updated on the latest tech, entrepreneurs and innovative companies in the cannabis industry, click here.

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    An Investor’s Perspective on the Cannabis Industry https://www.directcannabisnetwork.com/investors-perspective/ https://www.directcannabisnetwork.com/investors-perspective/#respond Fri, 13 Oct 2017 01:43:48 +0000 https://www.directcannabisnetwork.com/?p=13314 About a year ago, when I entered the cannabis industry as an investor and professional, there was no shortage of questions from my friends and family. One of the most common questions was about how to navigate the noise and make informed investment decisions.  Specifically, with the hundreds of deals that are out there, how […]

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    About a year ago, when I entered the cannabis industry as an investor and professional, there was no shortage of questions from my friends and family. One of the most common questions was about how to navigate the noise and make informed investment decisions. 

    Specifically, with the hundreds of deals that are out there, how does a prospective investor separate the good deals from the bad to make prudent investment decisions?

    Due diligence on investment opportunities in the cannabis industry takes a different flavor than in a mainstream industry. However, some of the same basic principles apply.  Investment decisions should be made based on the expected risk-adjusted return on your capital.

    Several topics should be considered when evaluating a potential cannabis investment.  In general, as fundamental economic valuations are not readily available in this industry, investment decisions tend to rely more heavily on intuition and qualitative aspects of the opportunity.  As the industry matures and evolves, investors will eventually have access to formal company valuations, traditional financial and economic models, and more robust documentation, but for now, we have to focus on the following:

    Team

    For me, the number one factor in evaluating investment opportunities is the team.  Given the rapidly evolving nature of the industry, organizations are sure to encounter twists and turns.  It is absolutely imperative that you invest in a team that is well suited for their roles, highly resilient and adaptable, open to feedback, compatible with one another, and incentivized to stick around through the ups and downs.  

    Evaluation

    Next is the evaluation of the product or service being offered by the target company.  The offering needs to solve a real problem or fill a glaring gap.  The problem or gap needs to be profound enough that customers are willing to pay a price that will yield a profit for the company you are evaluating. 

    For B2B offerings, it needs to meet a core need or pain point of the industry, as operators in this sector are not yet ready for the “nice to have” offerings.  There has to be a core, strategic importance to their business and their ability to operate and it must be priced at a level that works with their business model. The solution has to be proven, and the company must demonstrate that they will be a stable presence and able to service their customers on an ongoing basis. The solution must be unique and protectable from an IP perspective as there are scores of aspiring cannabis entrepreneurs waiting in the wings for copycat opportunities. 

    For B2C offerings, if I am in the target demographic I sometimes find it useful to reflect on the brand and the product.  Many operators are happy to give out samples if you ask – you can determine if the branding and product live up to the hype!

    Traction

    For me, the next step is a careful evaluation of the company traction. Has the operator made progress against their plan, pivoted when necessary, shown an ability to raise capital, execute on their business model, and provide appropriate documentation for investors?  As a related consideration, how much cash is being burned each month?

    Legality

    Legal and regulatory concerns are important as well. The current regulatory environment is complicated, and local, state and federal regulations should be considered. It is critical to understand the requisite licensing and then confirm the company’s status or progress towards attaining the necessary licenses to operate.  Furthermore, it should be acknowledged that cannabis is still a schedule 1 drug according to the DEA.  Unless you are willing to sign a contract that says something to the effect of “without regard to federal law” then you may be more interested in “ancillary” or “non-plant touching” opportunities.  

    These companies represent the “picks and shovels” of the industry. Products and services that are sold to operators or consumers because of their relevance to the industry, but without any contact with the federally banned substance.  Many of the deals out there are “plant touching,” most notably cultivation and retail. These can be very compelling offerings, but you have to be willing to stomach the inherent contradictory legal paradigm. That said, the regulatory paradigm is what has lead to the imbalance of supply and demand for capital, so the returns on these “plant touching” deals are often very favorable.

    Deal Terms

    Deal terms are the final point of evaluation.  Operators in this industry generally need to be made aware that the supply and demand for capital are not tilted in their favor at this time. Traditional capital sources are typically unavailable, and even private investors may be risk-averse or morally opposed to cannabis.

    As such, viable capital sources are limited. Operators need to be willing to compensate investors for their willingness to toe the legal boundaries and understand that their financial projections will not translate into valuations at the same multiples that they would command in a mainstream industry.  In addition to valuation, investors should review evidence of governance, liquidation preference, dilution protection, and other financial and non-financial terms.

    The bottom line is that there are great deals to be had in this industry.  There are also many many bad deals.  With a comprehensive, thoughtful, and open-minded evaluation, there can be great strategic partnerships that are fun, lucrative, and will form the building blocks for this important industry.

    To stay updated on the latest tech, startup, and B2B cannabis industry news, click here.

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