Photos: Four most important factors in a marijuana business investment
Nigerian Nightmare at Weedstock. Display provided by Max Montrose.
Photo by Amber Taufen
The inaugural Weedstock, a three-day conference at the Westin Hotel-Tabor Center, examined the investment opportunities that have opened up in the cannabis world. The event featured numerous securities-and-exchanges experts offering tips for prospective investors -- and many, many prospective investors looking for information and leads.
At one breakout session, analyst Paul Cohen gave advice about what investors should look for when they're thinking about sinking money into a cannabis business. Cohen launched "Paul Cohen's Marijuana Hub" on his website (cohenresearch.com/MarijuanaHub.pdf) at the conference and claims to have made two million dollars through his cannabis investments thus far. Here are his four most important qualities in a solid cannabis investment.
Number 4: Disruptive technology
Cohen believes disruptive technology is a huge potential money-maker -- and that applies across any industry, he says. A disruptive technology is a game-changer, a product or technology that literally has the ability to change the entire market -- either the focus of the market or how it operates. Finding a company that has a disruptive technology is a large predictor of financial success for cannabis investors, he said, and anybody with a line on an organization with a disruptive technology up its sleeve would be well-advised to invest. Number 3: Solidity of company
Cohen encourages potential investors to take a broader view of organizations -- and he said the solidity of a company has to do with the its organizational structure, its legality and the past experience of its owners and operators. Many investors might believe that it's impossible to find solidity of company in cannabis investments. After all, they're federally illegal, so the legality of any business of this type is iffy at best. But as many industry experts at the event pointed out, that's also why it's currently such a lucrative industry; only those investors willing to take the risk are going to reap the benefits. Continue for more important factors in a marijuana business investment. Number 2: Cash
Cohen noted that there's a lack of cash in many publicly traded cannabis companies, adding that many of them struggle to raise funds. While that seems obvious (banks clearly aren't dealing out loans to dispensary owners), it also seems like a bit of a chicken-and-egg conundrum, because dispensaries seeking an investor are almost by definition short on cash. The key is to find dispensaries that might be seeking finances to expand but are currently financially stable. One desperate for an infusion of cash is probably not a safe investment, in Cohen's view. Number 1: Management
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Cohen feels that management is paramount -- and he also said it's "sorely lacking in this industry." Marijuana is a business like any other, and the ability of the owners and managers in any given dispensary to manage their product inventory, staff members and customer service can make or break a business (and, of course, a business investment). Cohen strongly advised cannabis investors to visit the dispensaries, ancillary services or other places in which they're looking to invest and examine the level of professionalism and management oversight and ability. Organizations with solid management are much safer investments than organizations with no management to speak of.
From our archives: "Photos: Top eight products from the Cannabis Business Summit."