Although investors are becoming more active in the marijuana industry, businesses still need deep pockets to maintain operations and state compliance. Some types of businesses in the industry struggle a little more for funding than others.
“The funding needs in this industry are strong, as there’s a huge influx of startups each year,” the Marijuana Business Factbook 2017 mentions.
Breakdown of funding need by business type:
- Testing Labs – 60% looking now, 20% expect to seek funding later this year
- Infused Product Manufacturers – 40% looking now, 15% will seek funding later this year
- Wholesale Cultivators – 39% looking now, 11% plan to seek funding this year
- Tech & Product Companies – 35% looking now, 13% plant to seek funding this year
- Dispensaries and Rec Shops – 39% looking now, 5% to look for funding later in 2017
- Ancillary Services Firms – 18% looking now, 6% will seek funding later this year
The Factbook also says, “Many existing companies are looking to expand locally and even across state borders as the industry evolves, which often requires a cash infusion.”
A multitude of factors play a role in a type of business requiring additional funding. In some cases, more supply than local demand is often a factor.
For cultivators, much of it comes down to efficiency, as the Factbook states: “Turning a profit comes down to a cultivator’s ability to produce high-quality products with an extreme level of efficiency, but the costs of building a facility to meet these needs are substantial. Many growers are also switching to or incorporating greenhouses and therefore need a substantial investment at the outset.”