In the cannabis business, to create competitive advantage you will have to be something innovative and never done before. The good news is that this is an emerging market and there are not any specific indicators you can point to as proof of concept in most cannabis business sectors. This alone allows for a unique competitive advantage, however; if you are not careful you can miss the mark with gaining investor attention.
Here are three keys to showing investors your know how to create competitive advantage.
- Propose a Sustainable Idea
Startup entrepreneurs must know their sustainable advantage. It is nice to use fluffy language like “first to market,” but the corporate strategy must be deeper than that. It is critical that you can deliver something that is innovative and tests the current market in the way of taunting other competitors to rise to the challenge.
One way of doing this is showing that you have a firm grasp on sustainability. Perceiving and discovering new ways to better current products or improve on existing ones, is the art of innovation. Thus sustainable shift happens when the current market can’t figure out a way to compete or is unable or unwilling to respond to keep up. This provides savvy companies with the opportunity to capitalize on early adopters and economies of scale by providing a proof of concept that will stand the test of time. If your current cannabis business is doing any of the following you are most likely working with a business strategy that is sustainable and scalable and will gain investor attention:
- Your company is performing better than most competitors in the industry
- Your company is performing similar activities as your competitors but in an innovative and more efficient way
- Your company has adopted and implemented a business strategy that proves to only be stronger over time, capitalizing on strengths that helped you to overcome the barriers to entry as a startup, but will generate barriers of entry to others, based on your traction and growth
- Build Thick Walls for Competitors
In the cannabis industry, you will have competitors all around you. As you know everyone is trying their best to cash in on the Green Rush, but smart entrepreneurs are going to propose successful sustainable projects that show they know how to crush the competition. More often than not, investors will pass on your project because you have spent a good amount of your time within your pitch deck and or business plan focused on competitive strategies that your competition could easily replicate or imitate.
For example, if you conclude that a definite competitive advantage you have is that you will be able to cut costs by reducing human capital, this can be easily copied and implemented. However, if you are adopting a strategy that will be hard to imitate, you are effectively building thick walls for your competitors. Below are some ways to build walls in the cannabis industry, thus creating lasting competitive advantages.
TEAM: Build the strongest strategic partner network possible, rely on those who will help you to move the needle and offer an impenetrable force. This could be your leadership team and or your sales pipeline, regardless make sure it is something that no one else in the industry has on their side. The team will provide a profile of core competencies that show why you will win the competitive edge not only in the here and now, but in the future.
BRAND: Be on-guard and ready to pivot as the market calls for new and innovative approaches to your current offering. This flexibility will prove to your customers that you are a brand that cares about their needs and are willing to solve their pain points. The quicker you can respond to the demand of customers, the better.
Just know that some other company is looking at a way of capturing your current market just by improving on what you are already known for doing best. Your brand is a profitable asset, and therefore it should be treated as such, however, be careful not to fall into the trap of showing an investor that you love your brand.
Instead, show data and analytics that prove customers love your brand and this will strengthen your wall of competitive advantage.
PROPRIETARY INNOVATION: Companies with the most durable walls and extreme competitive advantage are those who have beat out their competition with intellectual property and or protected proprietary innovation. With the current state of the cannabis business, this proves to be a bit more difficult to master unless you have a technology and or invention that can be patented. The good news is that patents are being issued and those entrepreneurs that brave the process or have braved the process have proven to provide their company with a very valuable asset.
- Be Focused and Realistic
I have heard investors often say, “this business plan lacks focus,” meaning they are not sure how the path will be paved to success. The best way to clear up this confusion is to provide investors with a clear activity map that shows distinctly how you will get from startup to exit. The map must address your company value and competitive advantage along the way by listing activities that continue to build your brand and customer following.
However, extreme caution needs to be executed in showing unrealistic scale and or too many lines of business as this will decrease investor’s confidence. There is a fine balance between “we can do it all and we will do it all in one year”, compared to “we will win at the project we are most focused on and we will continue to win in all other areas of business because of our proven ability to focus.”
By taking the initial step of showing investors that you know how to create sustainable competitive advantage by proposing ideas that will stand the test of time, building thick walls that the competition will have a hard time climbing over or going through, and maintaining a laser-like focus on the activities on your roadmap, you will be well on your way towards gaining investor confidence and closing the deal.
Jay Hunter is the Founder and CEO of Green Cure Capital, Inc. Playing to the strengths of his business skills across multiple industries, including large corporations, medium to small business and commercial real estate. Jay amassed a team of business professionals, including tapping into the knowledge and craftsmanship of over a thousand cannabis industry experts and strategic partners under the Green Cure Capital brand, who vet and identify potential investment opportunities. Jay is a contributor of articles that focus on investment, real estate, structured finance and deal evaluation for the cannabis industry.
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