Documentation, Business Planning, Raising Captial and Team Creation
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This document provides information on organizational documents, raising capital from investors, and financing for a new cannabis business. It discusses what to include in articles of organization filed with the state, as well as operating agreements that lay out how the business will be structured. Regarding raising capital, it describes pitching to angel investors and venture capital firms, and the use of convertible loans. It also briefly mentions financing options for equipment and real estate.
Documentation, Business Planning, Raising Captial and Team Creation
- 1. Documentation, Business Planning, Raising Capital & Team Creation September 22, 2017 Cobo Hall Detroit, MI
- 3. What do I need to send to the State? Articles of Organization (Form through the state) Procedure: ◦ Submit proper form to state and wait for return documents. ◦ Receive your assigned ID number ◦ Use ID Number for any additional filings (i.e. to get an FEIN)
- 4. What is included in my Articles of Organization? • Name of Corporation (Use LARA Entity Search) • Name a Resident Agent • Resident Agent is the individual that will accept service of a lawsuit if you were ever to be sued. • Name of Organizers • Number of Shares (Corporations Only) • Can include other items like dissolution agreements or distribution of assets.
- 5. Operating Agreements What is an Operating Agreement? ◦ Clearly lays out the way a business will be structured and operated. ◦ Governing document for business disputes. What should it include? ◦ Choice of Law Provision ◦ Choice of Forum Provision ◦ Arbitration clause ◦ Triggers- What if someone commits a crime? What if they leave the business? ◦ Buy out provisions
- 6. Investors- Raising Capital Investors • Get Funding for Equity- trade off • Begins with Angel Investors • Venture Capital Infusion by Venture Capital Firm as business grows • Both Angel investor and venture capital groups forming for cannabis industry • Private Equity- as businesses mature • Give Up Control of Business
- 7. • Identifying the amount of money your project needs • Identifying what you are willing to give up for that money • Money plus • Loans vs. Equity • Proof of Funds
- 8. Pitching Investors Pitch Deck • Gives a glimpse of business • No need for NDA at this point • Take with you • Prefer face to face with small group • Print out vs PowerPoint- Do not email • Set agenda day before with investors • Overview of financials • Executive Summary • Business plan without the nuts and bolts
- 9. NDA/ENRA Pitch went well…. • Sign Non-Disclosure or Exclusive Negotiating Rights Agreement • Both allow for confidential information to be exchanged • ENRA is NDA on steroids, basically getting engaged and working towards a formal agreement. • ENRA allows for negotiations just between the parties, while a general NDA may allow outside negotiations
- 10. Convertible Loans/Interest • Investors loan company money • Get paid back a certain percentage • Reserve the right to convert some of the debt to equity • This can be important especially if out of state investors though no out of state restrictions for Michigan • Used to get better terms for the loan ie lower interest rate
- 11. Equipment and Real Estate Financing • Loans/Mortgages • Hard to get with new business • Might have to personally guarantee • Could do option of Land Contract • Finance equipment through equipment dealers
- 12. Thank you! (248) 541-2600 cannabislegalgroup.com