Are you owners or are you being owned?

CannaBusiness
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So i seen an IG post today which really made me think about this problem in the cannabis industry i see often…

Whos really the owners? i see people all the time claiming to be owner of cannabis companies and labs… But in reality they own 1 to 10% and have no real decision making capabilities… just an imaginary percentage to steal their ideas…

Do you guys think owners should at least have some sorta equal share? the cannabis industry isnt like other industries ive really studied…

recently ive been asked if i wanted to buy into a cannabis company but i dont think i could without decision making capablilities especially pertaining to management…

Back story… At one point, i had an equal partner in Quality Stainless Parts. I started selling extractors to fund my own extractor… i didnt have a ton of cash so i figured if i sold 5 extractors. I could make enough money to pay for my 1 extractor, oven, etc…

i didnt quite have the money to buy all my own extraction equipment plus another 5 extractors to actually pay it all back. I knew a person that had a ton of material that needed washing and i made the proposition if they paid half of all this equipment and i got half of all their material they needed processing… Id help process it all and split the proceeds from the sale of the extractors. In a month, i sold all the extractors on ebay and i said maybe we have something here… We then took the money and rolled it into 10x more extractors…

I was processing their trim during all this time and doing all the work… not half the work like agreed upon… We got the next 10 extractors and those sold in like 2-3 months and this is sorta where i made my move. I gave them half the money which at the point was more than their whole investment as the profit. Then i offered to pay their whole investment back 100% in full… So for about 6 months they doubled their money and got all their trim ran free… I got the extraction equipment and no hard feeling if or when the business blew up…

I see these people every single week and there is absolute no hard feeling and they are proud what ive done with that opportunity…

Im sure not everyone has stories of clean breaks like this but im sure there are plenty of people that do…

i see a lot of people in this industry getting owned… i see a ton of people getting raw deals in the cannabis industry… a lot of minority owners who worked and gave their magic idea to people and now they are make a living off of it and your barely living…

id love to hear some success stories as well and some nightmare so people can learn from our success and failures.

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This industry is sketchy at best. I want my cut for every introduction and I want nothing to do with it afterwards. I run a service and charge a fee (sometimes a percentage split). I am not too fond of imaginary partnerships. Everyone brings value to the table and I value investors, but after a few recent dealings I don’t think I could sign away all my work to split it down the middle with someone with a stack of cash. I would rather be my own business and charge a service fee.

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When I started Cart Farm, I was filling for a chad that got frustrated and ragequit after our first run, forcing me to refund their original investment. The terms of our original agreement forced them to buy the carts they already sold @$20, allowing me to pay off my equipment and profit enough to buy a second run

My next “partner” was super cautious and forced me to do all the work and most of the investment at times too. Luckily, they had to get all their carts and packaging thru cart farm and I was able to keep things fair by force.

I had several offers or a partnership with cart farm but they all fucking sucked. Even when I do collaborations with other businesses I typically regret them.

I see most cannabis “partnerships” as goofy as fuck in an industry where people are begging you to take on 10s of thousands of merchandise on consignment with no interest. WHAT do you need a “money man” for in cannabis?!

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I was lucky enough to go with $0 in after having failed my first try funding a lab/startup myself, and got a share in that ball park (sweat equity) and got an experience to learn and raise my child at the same time safely as a single parent. I got the opportunity to bring my own brand and business I own 100% along side and get to be in an as legit as possible environment. Honestly my business goal of MW was to gain small shares into other businesses/startups by supporting them with services. I have no hard feelings seeing the numbers and how my slice of a pie is divided. I agreed to that and am thankful to be able to go in and participate whenever I want. I think it is important to retain some sense of independence and my primary business has always provided me that.

My first business partnership never even got in writing and ended up relying off too much of my efforts. I think control is important and respectfully everyone deserves to have their business managed by themselves.

My second business partnership I put in writing, funded and watched my partner not carry any of the weight (literally) after set up for success. My efforts succeeded in it being a wash vs a decent loss.

My most successful product sales launch failed due to having a 50/50 partner not doing anything.

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i could have probably weaseled my way in for a percent of cart farm in the super early days for a small amount of money…ive always told you to own it all and eventually you will see the rewards…

maybe you should be giving me 10% anyways for all the time spent on the phone advising you on all things business…from banking, taxes, importing, customer service, etc…

could you imagine how much harder it could have been without @Killa12345’s alternative personality helping out…imagine the money ive saved you over the last 4 years?

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That’s why you’re good people. Many charge :heart:

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I learned the hard way even if you have a small share you get a vote just the same on most things.

Unless it’s spelled out specifically that you get to vote based on percentage and then still it’s not enforceable on most things, only on the things spelled out in the agreement.

Also this varies state to state

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It’s rough because it’s two parties equally appealing for themselves. Each side has the right to preserve equity but a wise man once said “if you don’t trust the other person, the contract is jack sh%t.”

I’ve been part of some startups where your offered shares with a cliff and investing period. I left early because of the “friction” there, and my buddy stayed and dealt with it. Come to find out one year later the company turned on him and fired him right before his cliff period ended.

On a positive note, all those that were not allowed to play from the start still have opportunities if they want it enough. To start their own brand etc.

The owners ended up being the landlords instead of the businessmen they wanted to be. So if costs are high to start you can utilize another company that can’t figure it out. :saluting_face::muscle:

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Real estate is hard to not want to go to

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I believe I offered to both buy my parts from you and also offered investment, but you set me strait on how corny it is to give another man most of your dream just so it can happen faster. I cannot tell you how effective that piece of advice alone was.

Each and every time I call I know I’m getting the best of the best answers (except stock picks) and the best solutions to my issues, even if they sting at the moment. I see so many empires crumbling now that could have been avoided had they had access to your phone number

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He is the reason alone, why I saw you. Dude breaks barriers and is a spotlight for how to be your own startup in this industry. My respect for him is the only reason I hold a candle for you too.

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100% investors to fast track the dream sounds good but it’s predatory and often their expectations on investment returns are borderline usury

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I had a lab i owned outright for a few years that i ran by myself and when the market went to shit i put everything in storage . I had put half down on a 200k machine. i couldnt come up with the rest on and run my farm on the side at the same time so the down payment sat for almost 3 years. When i was in between farms after my lease expired jan2022 i got half my investment refunded and put that down on a new property and now im building it out to fit the new profit margins and regulations for 2023. Its a win considering the hardships im not going into. Stay focused and evolve . Hard work pays off .

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valuable anecdotes you can see & learn from here

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34 posts were merged into an existing topic: Pointless banter

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Thanks for sharing, it’s good that you came out whole on that deal.

Equity and debt investment have their advantages and disadvantages. Equity investment has the hard trade off between ‘it’s not my money so if this crashes and burns I’m good’ and ‘am I getting fucked’. When I was younger and had no operational experience or money, my team was looking for equity for pitifully small amounts of money, >$20,000, for r&d and a production run (medical device). Equity can work well for a brand new business that has no sales channels, business model or connections where there’s a high risk of failure, or if your equity partner brings something other than money to the table (industry knowledge plus sales and marketing usually are the best since sales should be your first focus), but other than that it seems more like parasitism than a partnership.

Debt financing is best if you have a working business model. My business just took a 250K loan at 8% for raw materials, but we had the sales channels to sell everything that we could buy. It would have taken us 6 months to have that amount of capital on hand so for 20K-40K (interest cost for 1-2yrs) we were able to skip 6 months ahead of our growth curve, tripling revenue. An equity investor would have wanted between 2-15% which would have been 90-675K if we made 4.5M bottom line in 1 year; they are whole in 0.5-3 years, but you have to keep paying them every year.

I think a lot of people get screwed on their deal as well if they are experienced in the industry, but not with fundraising. 50/50 is not a fair split between ideas and capital. 5-20% depending on investment size is what I would take; if your above 10, your doing more than just paying bills.

To me, a partner who just invests capital is dead weight after the first profitable year. However, to the one who took the risk goes the reward. If your business or idea is good enough and you believe in it, it’s probably best to take out a loan if you can get the initial cost and collateral. This is a safe bet if you have industry knowledge, but if you don’t, equity isn’t as ugly.

Personally, my golden rule is ‘know thy shit’. I prefer to not have investors (current situation) and it makes things easier since we can figure out how to spend money best (raise, r&d and doing cool shit). Knowing how the industry works (compliance, the process, COGS etc) is what guides my team and that’s hard enough to keep up with. Investors who are there for the money get in the way of that.

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great insight @Neutral…

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Don’t have time to write an essay on this question, but here’s a good example to learn from: https://mjbizdaily.com/ousted-co-founders-sue-leaders-of-marijuana-tech-company-dutchie/

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So I have a very specific and recent discrepancy that maybe some of you could weigh in on.

I bought a centrifuge for 4600. I asked a buddy if he would want to invest some money into it because I still had some other expenses to cover for the month. He ended up throwing down 1500. When it came time to talk about the terms, he was busy with a family emergency so we waited to talk in person. When he got here, I told him he could take 5% of everything I run through the centrifuge or he could take 2k cash.

He was upset when he heard 5%. In his mind he thought he put in 30% of the investment. I tried to explain that the centrifuge will operate on splits with various farmers and extractors, and we will be keeping 25% of their product including the waste fraction. So take that 25% and multiply by 30% and you get 7.5%.

So my offer had increased to 7.5%.

It took awhile to drill this math into his brain and why it was fair and I got pretty frustrated.

Then when he realized I didn’t want to sell any of the product for him he got even more butt hurt. I explained to him that making isolate in the centrifuge is one thing but formulating it into products have their own costs and I’m not going to eat those costs for his products.

It all was a giant headache explaining this to him and seeing his facial expression act like I was screwing him over. (I wipe my ass with 1500 on a good month)

Fast forward to the day he was going home. I felt rushed and annoyed and I told him it would be best if I just gave him the cash. It had been 2 weeks since his investment. I told him that I could give him 2k now. He said he wanted 3k return. I told him that’s crazy and that it would take a few months for me to give him that kind of return on his money. I agreed to the deal because I don’t have time to argue with people. I told him I’ll have your 3k but you just cut yourself out of any future investment opportunities.

Seems like it was a cheap lesson for me to learn. Fuck investors.

Definitely curious what you think @Killa12345

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Why would you ask for any less than a 6 figure investment? Anything less than that is “grind for a year” territory

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