Charles Lloyd: [00:00:02] No more than five years preferably three. And you might even do a one year proforma which we've done we've raised five million dollars for c quadrant with a one year projection as long as that projection is based on some conservative reality it could be one or three years and that's perfectly sufficient.
Dan Humiston: [00:00:28] From Buminit media it's the MJ bulls podcast a show about raising Cannabis Capital
Dan Humiston: [00:00:36] I'm Dan Humiston and on today's show. Part three in our series things to know when raising Cannabis Capital. Charles Lloyd from turning leaf capital advises from an investor perspective
Dan Humiston: [00:00:54] Hey Charles. Welcome to the MJ bull podcast.
Charles Lloyd: [00:00:57] Hi Dan Snyder. Thanks for having me.
Dan Humiston: [00:01:00] So Charles Lloyd is the turning leaf capital's managing partner at today's show. Charles is going to explain what Cannabis investors look for when selecting a deal and how best to position a company when it's raising capital. But before we get to that Charles can you tell us a little bit about yourself. What led you to cannabis and turning leaf Capitol.
Charles Lloyd: [00:01:20] I'm a digital marketer by trade and I fell into this industry last November. So fairly new to it. From a business associate of mine who was raising money for cannabis farm Northern California's Salinas California. Todd Johnson and he convinced me to start raising capital on my own create our first investment pool back in January for C Quadrant an extraction make Lab in California 41000 square foot four story and we've raised capital for cultivation and extraction and now we're working on a financial instrument as well.
an Humiston: [00:01:56] From an investors perspective let's just jump into this from an investors perspective. What are some of the key things that a company should do before they raise Canibus capital.
Charles Lloyd: [00:02:08] When you get to a group like us or a venture capital firm you want to get your ducks in a row. As far as path to a license for sure we understand the legal implications the legal environment that you have. Make sure that's completely vetted out you have a clear path to a license. You already have vetted your team of operators you know who you want to come on board preferably you have a business plan and pro forma but at the very least have a pro forma that is rooted in reality. We've had we've seen a lot of decks come across our desk. The most important piece is a believable pro forma and a path to a license in the legal environment. Those are the two biggest piece and you have those we can then do our calculation as to what percentage of the company we're going to ask for in return for X dollars. How far out should they go with the pro forma no more than five years preferably three and you could even do a one year pro forma which we've done we've raised five million dollars for c quadrant with a one year projection is long as that projection is based on some conservative reality it could be one or three years and that's perfectly sufficient.
Dan Humiston: [00:03:25] When they have their pitch deck together and everything's in place how is the best way to present that to a potential investor.
Charles Lloyd: [00:03:32] But you first have to find them you can find someone that if you find us for example we get hit up or linked to an e-mail hey we've got an opportunity in the cannabis the space that projects very well. Would you like to take a look at our offering materials or our pro forma or our deck. I always say absolutely because you know we will look at really every opportunity that comes across our desk and who knows what could be there. So I think if you're a smart investor you're going to look at every opportunity in space and give it a fair shot.
Dan Humiston: [00:04:07] And once you get a deal that you like and the process begins tell us the do's and don'ts that companies should take the approach that they should take when they're negotiating a deal with a potential investor.
Charles Lloyd: [00:04:19] Yeah. US is kind of a cut and dried situation. We look at the equation. We are not the right fit for every group in terms of being the right capital raising partner. We work it backwards from a believable pro forma in terms of mathematically so let's say you project a profit of 10 million dollars a year. I can tell you right now we're probably going to ask for the yes you wanted 2 million dollars and we're going to ask probably you know 25 percent of the company in terms of equity based on our simple equation of what level of profitability our investors need to have. So they're pretty spoiled in this space they expect us the funding to really good deals with great upside and great potential early returns. You guys like us we're not going to ask for more than what we want in terms of a typical return. So we don't get greedy which is kind of work our equation and we just say hey is this a good fit for you guys and if it is then we start turning over more rocks and we start looking into further say that now you get when to the finish line and getting the deals closed.
Dan Humiston: [00:05:27] And the companies receive their funding. What are some of the things that they should be prepared to provide to their new partner on a weekly or monthly quarterly annual basis.
Charles Lloyd: [00:05:36] What we look for is good communication to our investor group that looks like is a monthly executive summary. What's going on with the business this month. And then a quarterly accounting you know we'd like to see. Yes every quarter. And then just good communication if there's a crisis if there's a problem. Tell us about it in the reports clear communication is key. Our only asset here is our relationship with our investors and we are just looking at your operation. But all the operations we're going to present to them in the future and we don't have credibility we don't have great communication from our operators. We like to set that tone upfront and that expectation upfront and as long as we have great communication let's work together we'll do whatever we can to help you bring out an investor not just for the money but for potential for future down the road.
Dan Humiston: [00:06:27] Yeah. Whether it's interactions or its assistance getting it to the next level and that accounting brings me to my next question is how do you keep your investors happy ending. More importantly engaged throughout this process.
Charles Lloyd: [00:06:41] Yeah I think you have to be responsive as well as you know we have to be responsive. In other words if there's a hitch or there's a problem particularly if there's a problem with timeline on distributions or hey there's a delay here or a delay there those things happen in businesses really how you handle them. That is very important so we meaning Mark and I stay in close contact with the operators. We probably talk to our operators at least twice a month and if there isn't a crisis going on far more often than that and we like to be informed so that we can go to our investors and really understand what the problem is and translated. We like to be very in get in front of every problem. If there is a problem and make sure that they're not only aware of it on an e-mail but we answer their questions verbally and good communication is key. Investors will be patient most of the time and they have to be their is out there it's in play and but you know communication is knowing the business knowing what's going on with that. We had a situation with the cultivation operation recently give you an example where someone went out to the farm and thought they saw spider mites and they thought that 30 percent of the crop yield was going to be affected and so we had to really get out in front of that issue because they sent an email distribution to several other and other investors about this issue and it turned out to be an issue that there really wasn't a spider mite outbreak was kind of a misdiagnosis but you know making sure that we stay on top of that hey are the operators hey guys verify this isn't a problem. How are you dealing with the problem. And is there a problem. Get this report back as soon as possible so you can deal with it. That's how you deal with problems. You get them out in the open and you make sure the investors are informed
Dan Humiston: [00:08:25] we've been talking to Charles Lloyd the managing partner at turning leaf capital and all their information is available on our MJbulls Web site at MJbulls.com. Charles thanks for giving us this investors insight into raising Cannabis Capital.
Charles Lloyd: [00:08:39] Dan thank you so much for having me today.
Dan Humiston: [00:08:47] Thanks for listening to the mjbulls podcast to learn more about today's guest or 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 is produced by Buminitt media. I'm Dan Humiston and you've been listening to mjbulls podcast.
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