Venture Investing in Cannabis Technology Companies

Investor Insight: Shri Ganeshram, San Francisco, CA

Being in the business of the cannabis industry is a multi-dimensional experience. There are many different players involved, there are countless variables, and it’s a business that is not for the weak-willed or faint-of-drive. We, at Cashinbis, are dedicated to providing you unparalleled insight into this captivating industry and giving you the story behind every face. And as we are sure you already know, there are always two sides to every story; this one is no different. You’ve met the entrepreneurs and their innovations, now it’s time you meet the people who are taking those innovations to the top: The Investors.

Entrepreneurship is not about having a brilliant idea and sitting back and waiting for the funding to roll in; Get to work and get the ball rolling! This ‘word to the wise’ is just one of the many that we gathered from Shri Ganeshram, founding partner of Fresh VC. A man who started his own business at the ripe age of 17 is a force to be reckoned with and a voice to listen to in regards to investing in the cannabis industry.

How did your entrepreneurial journey begin?

When I was 17, I caught the Silicon Valley bug, dropped out of university at MIT, and started my first company, FlightCar — a car-sharing service that operates at airports, enabling travelers to rent out their cars to others traveling.

What was the motivating factor for you to invest in the cannabis industry?

Our first investment in the industry is a technology platform that enables patients to receive medical marijuana to their door in under 10 minutes. What attracted us to Eaze first and foremost was the fact that the medical and recreational marijuana industries are so large and the business was bound to grow which is an important qualifier for any venture investment. Beyond that, Eaze not only met, but exceeded our other investment criteria. We saw a great founder and CEO in Keith McCarty, a disciplined team that’s demonstrated a clear executional ability and immense knowledge within their domain, and fantastic growth and customer retention.

One thing many first-time entrepreneurs struggle with is raising money. How would you suggest someone to overcome this problem?

Many people sit and wait for money to come, thinking that’s the first thing they need to get off the ground. Nothing gets venture capitalists more excited than an already working business with good growth metrics and a dedicated team. What does that mean? Do the most you can before going out and raising money. Quit your jobs, invest your savings in your business, get your hands dirty, build your product, and launch (or do as much as you can without funding) before you ask someone else to take a bet on you.

Nothing gets venture capitalists more excited than an already working business with good growth metrics and a dedicated team.

What is your best advice to cannabis entrepreneurs when they pitch their project to you?

The cannabis industry is in its infancy and is legally sticky; this meaning that there’s a lot more red tape involved in the businesses of this particular industry. Know the potential legal repercussions of starting your business and be prepared to talk about them with me. Also, the most important part of a business is growth and development; be prepared to discuss how you’ve grown your business thus far, what your customer retention and usage is like, and how you plan on finding more customers. Finally, it’s important for most venture capitalists, including myself, for you to be able to prove that your business can viably be worth $1 billion and a rough idea of the steps and numbers involved in getting there.

Can you share your thinking on how to identify a company as a great opportunity?

Growth and market size are the two traditional qualifiers for most of our identification process and are standard across the industry. The other two questions we ask at Fresh VC are “Would we work for this founder?” and “Does the founding team have the technical skills to grow this startup into a large business?”. It all starts from the founder and how he/she delivers, decides, or executes the tasks from the top all the way down to the employees.

What are the key ingredients in building a successful start-up?

A-grade talent, laser focus on growth, love for your customers, and a great sense of product.

How does the role of the founder evolve as a company goes from seed to early growth to later-stage scaling?

At the early days, the founder is a builder, but as a company grows it’s important that the founder evolves from micro managing to macro managing. They need to hire a team of members that can be trusted to take care of their delegated role in the business.

What is your new knowledge in regards to investing in the cannabis industry?

It’s interesting (and great) how excited investors are about the “green rush”. There’s definitely a lot of entrepreneurs and a lot of investors excited about the market. The one bad thing about the excitement is that this can lead to bad returns if investors aren’t careful in doing their due diligence or aren’t qualified enough at investing. The good thing is that most good teams and ideas will be funded, which is awesome for entrepreneurs and consumers alike.

There’s definitely a lot of entrepreneurs and a lot of investors excited about the market.

As an investor, what are some of the key things you wish cannabis entrepreneurs knew?

I hope most are careful about the legal lines they’re reading. This is a sticky industry and the legal implications surrounding cannabis are a lot harsher than those around things like homes and car-sharing, so be extra, extra careful.

What needs to happen in order to create a billion-dollar company in the cannabis industry?

We need to continue to see legalization across the states, especially in the recreational sector of the market, which has massive growth potential.

How do you decide between shutting down, keep funding, or selling your start-up?

It’s usually the other parties and forces in the market that make this decision for you. 🙂

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