Destigmatizing and legalizing cannabis are certainly positives for the industry, but it’s not just an increase in retail sales fueling the sector’s boom. Venture capital investors and businesses formerly agnostic (or even opposed to cannabis) now are pouring money into the industry, fueling much of the growth. With that, many long-term cannabis (and hemp) entrepreneurs are looking to parlay their experience and expertise in the field into profitable businesses.
The entrance of big money into the industry certainly provides a solid jumping-off point for businesses that partner with investors to increase profitability and valuation. However, it could also come back to haunt the seasoned cannabis entrepreneur who enters into a partnership without fully understanding the terms of the agreement.
This is why it is imperative for industry veterans to know how they can protect their stake in a business at the beginning of a new venture and avoid potentially expensive and time-consuming legal battles down the road, should things turn sour.
The strategies presented here can be effective in protecting your stake in a developing business, but remember that big money investors often have a “take-it-or-leave-it” mentality. However, that doesn’t mean a venture capital investor holds all of the power and leverage in the negotiation just because he or she is putting up money. Without your unique skill, product, process or experience—whatever forms the base of the business and sets it apart from competitors—the investment opportunity wouldn’t exist in the first place. If you are critical to the success of the business, you have leverage to steer the deal or walk away if the terms aren’t beneficial to you.
When you’re in the early stages of building a business, it’s easy to get caught up in the euphoria of the new possibilities and future success of your new venture. While developing a vision