In an exciting, evolving and sometimes volatile industry, it’s helpful to share ideas and hear from other business leaders in the thick of the California cannabis market. That’s when you get validation for or get wind of trends that your cannabis company needs to be aware of. And that’s why I thoroughly enjoyed CannTech 2019, held at The Pearl in San Francisco on May 7.
Promoted as Silicon Valley’s first annual technology summit focused on the cannabis industry, CannTech (Cannabis Technology Summit) brought together around 150 founders and CEOs as well as 100 investors and was hosted by DCM, an early-stage venture capital firm. I’m appreciative of DCM co-founder and partner David Chao for curating this event and bringing together cool companies, entrepreneurs and investors for an exciting afternoon. Speakers included Bharat Vasan, CEO of vaporize company Pax; Gunner Winston, CEO of Dosist, maker of medical vape pens; and Jim Patterson, CEO of marijuana delivery company Ease.
Several themes stood out during the talks, which covered everything from managing growth to branding, fundraising and regulatory concerns. When you’re in a market that is undergoing such rapid change, it’s a must to stay on top of what’s going on around you and take in expert advice that can help you stay above the fray.
Bring Predictability to the Business
What are investors looking for when they’re evaluating cannabis companies? In the end it’s predictability. They want to see a strong founding team with management experience delivering on their promises. Since there are so many new entrants, investors aren’t expecting or insisting that the company founders have extensive cannabis experience. Real strength is being able to bring predictability to the business. With a solid financial foundation in place, such as accounting systems and processes to produce reliable, accurate financial reporting, plus accurate financial models and a thoughtful business plan, a company has some of the essentials for ongoing success.
Prepare for Radical Change
In the early stages of a company, preparation especially matters. Setting up a solid brand, having a strong corporate culture and planning for the unexpected were repeated recommendations at this conference.
It’s a crowded market, and the companies that stand out have a much better story to tell. As products become commoditized, branding becomes a key differentiator—in fact, participants at the event emphasized that the brand is a key long-term value driver. To better understand what the brand evokes for customers, it was recommended that companies actually interact with their customers in the retail environment to research it further. Also worth developing early on is the company culture—it can be a challenge to maintain it amid rapid growth. Event speakers suggested building the kind of company culture that will endure through it all.
Know The Regulatory Environment
Cannabis companies have so many regulatory hurdles to manage. How to make sense of everything going on? They’re dealing with discrepancies between state law and federal law, tax rules that only affect cannabis companies, and rules at the local level. It was recommended to pay attention to legislators and regulators all along the regulatory chain, from the local to state to federal levels. Otherwise, there’s a risk of being surprised by a rule change.
Paying attention involves being aware of the competing interests of the different government entities (many companies are finding out how the hard way when running into product delivery difficulties). To ensure compliance, companies can bring in specialized expertise to stay on top of it and utilize the latest technology tools made for the industry to manage their deliveries and inventories. By working closely with pros who understand the regulatory environment, with loads of experience working through the needs of investors and clients, as well as the latest technologies, companies can bring better predictability to the business. Some companies have also become involved in lobbying, with an intention to educate regulators about the business and keep the focus on regulated access.
Attention Given to Precise Effects
There’s a clear movement away from strain-based products toward effect-based products. The promise of these new products is to produce precise effects. There is a focus on delivering consistent quality, which companies that are striving to offer “medical grade quality” prefer. Encouraging microdosing was also discussed for more granular and controllable use.
Trends are constantly shifting in every business, but there’s an even faster speed in the cannabis industry. Companies on solid financial footing are best positioned to keep on top of the market and be flexible with the changing times.
A tech CEO after new markets, Dave Roberson leads the charge at Kukuza Associates to help cannabis companies of all sizes reach their full potential by having expert finance at their fingertips. He enjoys working with fast-moving companies in all segments (growers, extractors, manufacturers, distributors, retailers) across the Western U.S. He previously was senior vice president for Hewlett-Packard Co. and president and CEO at Hitachi Data Systems, where he also held the titles of COO, CFO, CIO and general counsel.
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