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STARTUP

No Access to Funding? Your Cannabis Start-up Can Still Win. Here’s How.

Cannabis entrepreneurs overcome traditional obstacles from funding to permits. Here’s how.

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BY Cathy Huyghe - 27 Jan 2018

PHOTO CREDIT: Getty Images

The cannabis industry and the wine industry have a love-hate relationship. We share landscapes, particularly in the Northern California counties of Mendocino and Sonoma. We share (read fight over) labor to harvest the crops. And, particularly since voters legalized recreational cannabis in California in November 2016, there's been a lot of buzz over whether cannabis will elbow into wine's share of consumer choices for a "chill out of choice."

As an entrepreneur in the wine and tech space, cannabis has been on my radar for several years. I've been particularly aware of the obstacles that cannabis entrepreneurs face, such as securing institutional funding when their revenue is entirely in cash, and the setbacks in crop production caused by the devastating wildfires last fall.

The creativity of cannabis entrepreneurs perseveres, however. Here's a look at three ways to disrupt an already disruptive industry.

Location

Indoors or outdoors? It's a fundamental question for a startup in this space and, for most consumers with a passing familiarity with cannabis production, the growing environment means outdoors, in small plots or even individually potted plants.

For serial entrepreneur Adrian Sedlin, however, the answer is indoors. The CEO of Canndescent believes that the highest quality, most consistent cannabis can only be grown indoors, specifically in Desert Hot Springs, which was the first city in California to legalize cultivation, has a favorable regulatory environment, offers a predictable climate, and is located two hours from two-thirds of California's population.

"Personally," Sedlin said, "I think it'll be the Las Vegas of cannabis, and we opened the Flamingo."

Sedlin reinforces his company's position in that location by advising the California Department of Food and Agriculture's cultivation committee, and by becoming the first municipally-permitted cultivator south of San Jose.

Enforce the Five P's of Fundraising

Under normal circumstances, entrepreneurs with a good idea and proof of concept can raise a Series A and Series B from a handful of institutional investors. Yet traditional sources of capital are just not available to cannabis entrepreneurs.

Nonetheless, fundraising is an obstacle that they need to overcome in order to scale to any significant degree. It's both challenging and time-consuming.

For Canndescent, Sedlin has raised more capital than any other grower to date in California. He has taken $16 million from over 70 parties across two rounds, ruthlessly applying the five P's of fundraising -- persistent, patient, passionate, prepared and pleasant. "Pressure over time turns coal into diamonds," he said.

Embrace the Love

Like wine, the cannabis industry attracts people who are passionate about the product and are drawn to the lifestyle that surrounds it. The trick, in both industries, is to engineer the leap from passion to viable business enterprise.

Even for entrepreneurs like Sedlin who have a strong track record in building and selling other businesses, passion for cannabis is still the cornerstone.

"This is the first time I'm working on something that I was born to do," he said. "On all levels, it makes all the difference."

It's a reminder for entrepreneurs to check in -- with the universe, with their gut, and with their business plan -- that the work we do is also what we love to do.

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