The cannabis industry is booming, and with it comes a changing landscape for investors. As more states embrace cannabis, investors are adopting a more traditional approach, viewing these businesses through the lens of profitability, reputation, and regulatory compliance. This shift towards traditional business metrics is shaping what makes a cannabis company attractive to investors.
Sahar Ayinehsazian, a partner at Vicente LLP and a speaker at the upcoming Benzinga Cannabis Capital Conference, provides insight into the qualities that pique investor interest in this evolving market.
Financial Stability and Scalability: The New Mantra
Investors are becoming more discerning, expecting cannabis businesses to demonstrate the same level of financial success as established companies. Ayinehsazian emphasizes the importance of solid financials and a track record of profitability. Investors want to see proof of past performance, assess potential for future growth, and understand any existing liabilities or tax issues that could impact the business’s trajectory.
Scalability is crucial for long-term success. Investors are looking for companies that can grow efficiently and profitably, ultimately leading to substantial returns on their investment.
Regulatory Compliance: A Top Priority
Navigating the complex regulatory landscape is a major challenge for cannabis businesses, and investors are taking notice. Ayinehsazian points out that investors are meticulously evaluating a company’s compliance with state and local regulations. They want to ensure licenses are valid, potential regulatory issues have been resolved, and any existing issues are transferrable to the investor upon acquisition.
The regulatory framework varies significantly across states, creating additional complexity for investors. They want to understand if the business operates in a highly competitive state with valuable and limited licenses or in a market where licenses are more readily available.
Types of Investments: Seeking Growth and Distress
Ayinehsazian identifies two distinct investor categories. Some investors are drawn to distressed assets, seeking opportunities to turn around struggling businesses. Others are looking for healthy companies with strong potential for growth, aiming to take them to the next level.
As the Benzinga Cannabis Capital Conference approaches, industry leaders and investors will be closely watching these trends unfold. The future of cannabis investment will likely be shaped by the continued focus on financial stability, regulatory compliance, and scalability.
