CANNAINVESTOR Magazine June 2016 - Page 32

THINGS ALL INVESTORS SHOULD LOOK FOR WHEN REVIEWING A CANNABIS COMPANY By; Nic Easley need to understand in order to effectively collaborate on projects. In this article, we’ll consider five key areas to examine when considering whether to invest or pass. W hile investing in the emerging cannabis industry offers huge potential and payoff, it’s unclear if these opportunities will be a big boom or a bust. Right now we are seeing trends similar to the rapid growth of the tech industry that occurred in Silicon Valley, and many lessons can be learned from previous booms, bubbles, and busts when investing in this industry. Those who understand the cannabis industry have quickly realized there is specific background information investors CANNAINVESTOR Magazine Before examining these five items, there is a dynamic character found in this industry that is imperative to understand. This is the fact that while 24 states hold medical laws and four states allow adult use (in addition to the District of Columbia), there are many unique regulations, ordinances and governing structures specific to each location, in addition to certain federal guidelines that must be followed in order to create compliant cannabis companies. When weighing your options as an investor, first you have to ask yourself what sector of cannabis you are considering. Are you interested in the hands-on side of cultivation, extraction, and retail, or do you want to get into ancillary service industries or ancillary product manufacturing? All aspects involve varying levels of risk that rest mainly on IRC 280E and shifting local, state, and federal guidelines. Once you have determined which part of the industry you’re most comfortable with and understand local and state frameworks, you can make informed decisions on where to legally place investments. The next logical step is to focus on available opportunities and what to specifically look at when analyzing these opportunities. We will discuss this in further depth below.