There are many ways to invest in the cannabis industry, but today we want to highlight three important reasons why you should invest in cannabis startups.
Now you may want to stop us there to ask:
“Isn’t startup investing limited to only accredited investors?”
That used to be true, but thanks to new laws that came into effect in 2016 as provisions of the 2012 Jumpstart Our Business Startups (JOBS) Act, everyday investors now have the same pre-IPO access to the hottest startups.
That includes cannabis startups.
The opportunity to invest in cannabis startups is unprecedented.
Like buying stocks, investing in cannabis IPOs, and trading options, startup investing gives you another tool in your investing toolbelt.
That’s why we’ve put together the top three reasons why investing in cannabis startups is a great way to diversify your overall portfolio.
Starting with number three.
Reason No. 3 to Invest in Cannabis Startups: Stay Diversified
Diversification is a pillar of any strong portfolio.
Of course, there are risks when investing in startups. You can’t just pull your money out of the investment. For a successful return, the company either needs to go public or be acquired.
If a stock price goes south, you can at least fairly easily and quickly pull your money out. With a startup investment, that’s not the case.
There’s also a chance the company fails and that you will lose all of your investment. That’s why you shouldn’t allocate the bulk of your portfolio into a bunch of startups.
But if you understand the risks, invest with money that you can afford to lose, want to increase the potential to maximize your returns, and establish a well-diversified portfolio, you should have a reasonable allocation in a few startups.
Your bottom line will be all the better for it.
Now let’s move on to reason number two.
Reason No. 2 to Invest in Cannabis Startups: Get a Seat Next to the Founder
There are a lot more benefits with startup investing than just keeping your portfolio diversified and the potential for big gains.
When you invest in a startup, you’re investing in a small business full of entrepreneurs just like you. And your investment makes you part of that company’s family.
This is true entrepreneurship.
Startups operate on the edge of innovation, and that’s no different in the cannabis industry. And because these companies are so small and in such early stages of existence, you can have a serious impact with your early investment.
Startups use these investments to hire more staff, increase their marketing, buy equipment, and much more.
You become part of the reason why a company can do well.
In fact, many times a startup selects its advisory board members from its largest investors. If your stake is large enough, maybe you could even become a startup board member.
Then you’re really part of the “family.”
Now onto the top reason you should invest in cannabis startups…
Reason No. 1 to Invest in Cannabis Startups: Ground-Floor Opportunities
As we mentioned, investing in cannabis startups can be part of your toolbelt.
For example, investing in IPOs gives you access to a more established company, allowing you to easily buy shares as soon as the company begins trading. That company has reached a point where it is to start building a name for itself.
It has already gone through the bumps and hurdles of being a startup, and it has come out the other side, ready to grow even more.
With a startup, it’s still in the early stages. Ultimately, that startup could fail and go out of business.
That’s why startup investing is not for everyone.
But again, for those who understand the risks, you could make a tidy profit.
That’s the top reason why you should invest in cannabis startups. Startup investing is the epitome of true ground-floor access. Just consider this real-world example from a few years back.
Barry Eggers ran a firm named Lightspeed Venture Partners. One day he noticed how glued his kids were to an app called Snapchat. Lightspeed became the first investor in the startup, but as a member of his local school’s venture fund board, he urged them to place a small $15,000 stake in this startup too.
And that’s just one of many examples how everyday investors have struck it big with the right startup investment.
There will be losers, but a winning investment could be enough to make up for all the laggards and still put you ahead.
The Bottom Line on Cannabis Startup Investing
To get started with startup investing – like Reg CF opportunities – there is a lot to know.
It’s not easy to analyze these companies because many are so new.
You can’t look at traditional metrics like you would with a stock.
That’s why we created this startup investing guide, which gives you the three best ways to analyze a company. And we promise that you don’t need an advanced finance degree to understand what’s going on!
It all comes down to management, branding, and scalability.
Plus, we also show you how to set up accounts to help you get started building up your startup investing portfolio.
6 responses to “3 Reasons to Invest in Cannabis Startups”
April 20 2020