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Is it legal in that location ?
The most important thing an investor could look at before getting too deep into any investment or conversation is to understand the legal framework . This should not be overlooked . By studying the rules and framework for what can and cannot be done in each state and local municipality , you ’ ll save yourself a lot of time and avoid investing in a company that while seemingly promising , is possibly operating illegally . For example , investing into a 10-acre cannabis cultivation facility in California , at this point , would be ill-advised , as there are canopy size and plant count restrictions currently in place , with more regulations coming down the pipeline from pending initiatives .
As with any investment ( even more so in the cannabis space ), knowing the local political climate and keeping a keen eye on the future is invaluable . In-depth due diligence in order to understand regulations that are still in progress , but not yet ratified , is invaluable . Seeking out expert advice from cannabis attorneys , like Hoban & Feola Law or due diligence firms such as Gotham Cannabis Associates , that have specific knowledge about what can and cannot be done in certain geographic areas is imperative . By addressing these legal issues first and foremost , you can avoid an investment in a project that will inevitably fail due to legal issues .
Competitive Advantage and Scalability
The second important issue in assessing an investment opportunity is the competitive advantage and / or unique intellectual property in comparison to competitive projects . Assessing the scalability , market lead , and first mover advantage of a particular investment 2, needs to be supported by definitive evidence that the particular market where the products or services are being offered is large enough to accommodate the true growth potential . For example , Speed Weed , a delivery service in California that operates in the Los Angeles area , recently announced a $ 10 million investment . By looking closely at the Los Angeles regulations , you will find that cannabis delivery in Los Angeles is illegal . However , knowing this , the company kept operating and even secured an investment . They now have to shut down operations in the Los Angeles area by June 6th per the Los Angeles city attorney .
It is important to ask if the intellectual property can realistically be protected via a patent application . All proprietary features and competitive advantages of the product or service should be clearly outlined in any of the investment presentations prior to making an investment . Take time to review everything from patent filings , exclusive licenses , distribution relationships , other intellectual property , and the ability to copyright or trademark elements of the target company . If a team has IP and has not taken the time to protect it , how could they possibly plan on protecting your investment ?
Qualify the team
The third issue centers on qualifying the team that will take your investment into this rapidly shifting industry .
• Does the team have background and experience directly working within the Cannabis industry or are they just starting out ?
• If they are new to the industry , are they are utilizing industry experts to help guide them ? How do they source information ?
• What makes the team believe that they can offer a service or product that truly makes them differentiated and important to the industry ?
• Investors need to look at the direct experience of the entrepreneurs and management teams . As the cannabis industry is so new , very few wellversed , experienced teams exist .
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• Question the presenting partners if they understand all of the legal parameters in which they must operate in order to legally perform their business .
• Perform background checks on management so you know with whom you are partnering
Fully evaluate the team ’ s history and prior ventures , their business experience , education , and passion to use your investment wisely . This will help the odds of creating a profitable company that will ensure that the investor gets a strong ROI .
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