MJBullsPodcast 0007: “What To Know When RaisingCannabisCapital” (Part 2) Legal 9/26/18

MJBulls 0007 What To Know While RaisingCannabisCapital (Part 2) Bob Hoban, Hoban Law 9/26/18

Bob Hoban: [00:00:06] The last 10 percent of getting something closed is as difficult and requires micro level management more so than the first 90 percent combined

 Dan Humiston: [00:00:24] From Buminit media. It's the MJ bulls podcast a show about raising cannabis capital.

 Dan Humiston: [00:00:34] I'm Dan Humiston and On today's show Hoban Law was one of the largest cannabis only law firms in the country's founder Bob Hoban talks about the legal side of raisingcannabiscapital

 Dan Humiston: [00:00:54] Bob thanks for being with us today.

 Bob Hoban: [00:00:55] Good to be here. Dan thanks for having me.

 Dan Humiston: [00:00:57] Yes so for our listeners Bob is the managing partner of The Hban Law group and you advertise that you are the nation's premier cannabis law firm, so you're all in?

 Bob Hoban: [00:01:07] We are all in we've been all in since we've been doing this for darn near ten years now.  that cannabis space exclusively as commercial lawyers and about 50 percent of our business is marijuana related and 50 percent of it is industrial hemp related and increasingly what we do as an international focus. Pretty exciting to be here and we were the first so that allowed us to build a pretty extensive worldwide Cannabis Industry Network .

 Bob Hoban: [00:01:40] You have locations in all of United States in and throughout the world. So you're in Poland and very impressive.

 Bob Hoban: [00:01:47] Yes. We've just been presented opportunities. Our clients we set them up for success and they're the ones that are out there taking the risks and making the moves that we're able to support them. So if a client for example comes to us and says look I got an operation here whether it's marijuana or hemp related and I'd like to take advantage of this growing international cannabis economy. I'd like to do this and you're upright like to do this in Latin America. We just began to build out our network. We like to suggest that we're soon at the center of the world's largest cannabis industry network because we've done same things in so many places. But again it's our clients who lead the way. We're just there to help them provide them with professional guidance and really help them evaluate things because most people in this industry the risk takers. And sometimes they need help evaluating those risks. That's really where we come in.

Dan Humiston: [00:02:44] Mj bulls podcast is about cannabis companies raising capital and just to drill down. Couple of things that our listeners are thinking about raising capital before they start. Where are some of the things that they need to know like. Let me just say for example what type of entity would you suggest that they start off with the LLC. , s corp, c Corp. is that important now or does it matter more at the end of the race.

 Bob Hoban: [00:03:08] I think you've got to go in with a clean structure and the answer to your question what type of entity. A lot of people it can be L.L.C. as a default standard for being an entity because it's flexible. It's basically an entity that can operate small closely held company or it can function as a large company with hundreds if not thousands of employees in multiple places around the country. But it really depends on the where you begin your business here in California if you're in New York if you're in Colorado the answers might be different but it all really depends on what your exit strategy is. So that's kind of one of the things I always say make sure your house is in order before you begin to ask for money. Make sure that you have a leadership team that's capable of executing on your business plan. Make sure that you have successes that you can point to that are not just financial but of course revenue has a lot to do with make sure that your banking is clean and your books and records are clean and that your structure is clean.

 Dan Humiston: [00:04:14] What are some of the things that may need to be concerned about during the race.

 Bob Hoban: [00:04:19] During the race. First of all you don't want to talk publicly about things that you're doing privately if you're a publicly traded company. You have different standards. But most of the companies in this space are not publicly traded companies so it's not wise to run around that that the local social event or in certain circles and say I've got a deal done with so-and-so or so-and-so approached me about investing. Just wait till that deal is done. And a lot of experience comes to bear on the fact that getting a deal closed whether it's dollars in the door or a merger or something like that

 Bob Hoban: [00:04:51] The last 10 percent of getting something closed is as difficult and requires micro level sort of task management more so than the first 90 percent combined. So that's where you really need to be careful about keeping that information close to you and your team and not publicizing them. There are some very large stories in the industry marijuana related businesses that talked about deals before they were done. And guess what happened. One of those deals came to fruition and it left egg on the face of some pretty significant companies in this space to keep it close to your vest. Make sure that everything you said is actually being executed on if you have plans to do something versus you're doing it you're just be doing it better make sure that that is distinguished and upfront with the potential investor because a deal might take several months to close. It might take several months to get that thing in the door. If you're not doing what you said you were doing then that could give the potential that driver or investment group pause because you didn't follow through or you were actually doing what you said you were doing. Integrity matters a lot in this context. And then I think that the last thing that matters when you're in the context of raising capital it comes down to being quick and responsive to the questions that are being asked you about your business that due diligence from the investor. Don't just wait. Don't shrug it off don't think it's a done deal. Don't think you have ten investors lined up behind you need to be responsive because that helps you learn information too because you don't want to just take any money off the streets. You want to take money. That helps you achieve your objectives and where you see the eye to eye with that investor and perhaps even to gain some sort of strategic element of that investment where it's not just money. Were somebody involved with that investment group is going to assist or carry out a role with your business being responsive having open dialogue helps those things occur more easily.

 Bob Hoban: [00:07:06] Let's move towards the post closing and this is one area where I think a lot of companies don't have a game plan in place or they get surprised with just how expensive the post closing is and everything gets involved with post closing. Just making sure that everything is wrapped up. A lot of times I don't. I see where they're not including a lot of that information into their projections and they're not quite prepared for what hits them at closing or post closing. Can you talk a little bit about that.

 Bob Hoban: [00:07:32] Yeah I mean there are there are operational challenges with any business. A lot of people think that if you add money to the business it will solve a lot of the problems. While that might be true but not for a lack of really being deliberate about where that money is going to go etc. And that's the cost you talk about the cost of implementing that Monday the cost of perhaps brokers or referral fees or the like for people that brought that money to the table. You need to bake those dollars into your capital raise if you need you know real simple math if you need it. One million dollars don't go out and raise one million dollars raise one million plus the amount to pay off the brokers and then whatever that cost is to implement that and actually deploy that in your business. That's always challenging because people think well now I've got a million dollars in the bank. I just need to do X and Y and Z. Well have you thought about the cost of the people to carry out those objectives. Has that been baked into the cost. Believe it or not it's not always baked into that capital is so. So those are the post closing things that I think once again you've got to think about not only what you're going to do with the money and why you need the money but how are you going to actually deploy that money internally. And what additional infrastructure does that require. Usually that's baked into the raise. But but not always especially in this industry with you know operators that may not have the depth of experience that you'd find in other industries.

 Dan Humiston: [00:09:10] Well Bob Hobin from Holeman Law Group and all of Bob's information is on the MJ bulls website MJBulls.com.

 Dan Humiston: [00:09:17] Bob I know our listeners really appreciate this advice you've given us thanks for being with us. Thank you very much.

 Bob Hoban: [00:09:24] It's my pleasure Dan anytime. And best of luck with this. I look forward to hearing some more of these podcasts on line as well. Sounds good. Thanks Bob. Thank you.

 [00:09:37] Thanks for listening to the MJBullsPodcast to learn more about today's guest to apply to be a guest. Visit our Web site at MJBulls.com and if you like our show give us a review on iTunes. Today's show was produced by Buminit media. I'm Dan Humiston and you've been listening to the MJBullsPodcasts.