Cannabis Incubators: An Introduction
While many of us associate the words “business incubator” with the high-tech boom of the ‘90s, in fact the concept is much older. As far back as 1912, Toledo, Ohio advertised its spanking-new Factories Building as a half-million-dollar “Infant Industries Incubator.” But it wasn’t until 1959 and the formation of the Batavia Industrial Center (BIC) in a disused New York warehouse that the era of the formal incubator began.
Banking on the then-novel suggestion that by sharing office space and facilities—and providing critical capital and business advice—the BIC launched a quiet revolution. In 1981, the Catalyst Group brought the concept to the world of tech, where it found perhaps its more potent formulation then to date. Offering clients access to a workspace, payroll and healthcare plans and other essential details, Catalyst founder Nolan Bushnell wanted to allow budding startups to be in business “in 15 minutes.”
Today, the International Business Innovation Association estimates there are roughly 7,000 such incubators worldwide. Ideally, the idea isn’t merely to get businesses set up for work, but to provide a wide spectrum of services to support startups through all critical growth phases of the enterprise. According to the Small Business Association, these include:
- Planning: Turning the spark of inspiration into an actionable business plan
- Launching: Turning that business plan into a reality with crucial registration, filing, and the actual start of business
- Managing: Mastering day-to-day operations, preparing for future opportunities
- Growing: Finding new funding, opening secondary locations, and growing your customer base when business is strong and it’s time to expand
Let’s drill down a little deeper. Some of the services most commonly provided by business incubators include:
- Help with business basics, presentation skills and etiquette
- Networking activities
- Marketing assistance, including market research
- High-speed Internet access
- Help with accounting/financial management
- Access to bank loans, loan funds and guarantee programs
- Links to higher education resources
- Access to strategic partners, angel investors, or venture capital
- Comprehensive business training programs
- Advisory boards and mentors
- Management team identification
- Help with regulatory compliance
- Intellectual property management
This list—while far from complete—gives a hint as to some of the intangible services an incubator should provide. Keep your focus on a few of these in particular: Access to investors and other funding sources, strong and seasoned coaching and mentorship, and other hard-to-quantify (but absolutely essential) services and supports.
With that in mind, let’s turn to the topic of what differentiates a cannabis incubator from any other kind of business incubator, and identify a few key aspects anyone interested in signing on should look for in such a partnership.
The Cannabis Incubator: Industry-Specific Concerns
In some regards, launching a cannabis brand really is just like any other business enterprise. It requires that you have a firm grasp of the marketplace, that you forge an airtight business plan, and that you understand the mechanics of successfully marketing a business.
Of course, there are differences, too. We’ve written a good deal about what sets the cannabis industry apart from others. (And no, we’re not just talking about all the downsides, like the continuing burden of cannabis’ confusing legal status or the overlapping restrictions on cannabis advertising.)
So, what can—and should—a cannabis incubator provide you? Over and above the bare essentials, such as a workspace (unless you’ve chosen a virtual or remote workspace model) and administrative support, here are a number of key areas to consider:
If you or a partner come from a retail background, that’s great news: You already possess many of the skills you’ll need to operate a successful dispensary, among other types of cannabis businesses. But getting first-hand knowledge from a cannabis industry veteran is invaluable. You can—and should!—read all the books on launching successful cannabis ventures you can. But take it from us: Successful businesses are built on successful relationships. Having access to someone who knows the ropes is like money in the bank.
Scientific and Technical Support
Even though the cannabis industry is one built on the image of a pure, minimally processed, and all-natural agricultural product, the reality is that even bringing a simple flower-based cannabis brand to market involves considerable botanical and technical know-how. And while there’s no end of budding backyard growers—some of them exceptionally skilled—wanting to jump into the big leagues, there’s no substitute for a relationship with a seasoned professional who has experience navigating the logistical, operational and regulatory hurdles of running a commercial-scale operation.
Add to this the challenges of creating legally salable edibles, or the necessity for experience with the lab-grade equipment required for processing concentrates, and it quickly becomes clear that running even a small-scale commercial enterprise requires some serious technical support. Be sure that any cannabis incubator you’re considering partnering with has the know-how to help you take your dreams all the way to the marketplace.
No, we’re not talking about the challenges of raising money for your cannabis startup (though you can read about that here). What we’re referring to here is having a relationship with someone who understands the complexities of the financial landscape. Having guidance when you’re securing funding (and quite possibly navigating the finer points of applying for a loan) is essential for any cannabis business. Does a cannabis incubator you’re investigating have a dedicated financial analyst or broker on hand?
Access to Investors
Cannabis incubators provide all kinds of essential services to their startup clients, but one of the most impactful roles they play is as a connector between those companies and the investors who can help take them to the next level. In this sense, a cannabis incubator is a vital gatekeeper, performing crucial vetting of startups on an investor’s behalf. Look carefully at an incubator’s financials: Are they able to deploy capital rapidly to respond to the vagaries and fluctuations of a fast-moving industry? Are they focused on a single sector of the cannabis world or are they diversified among many areas? Understanding what’s in it for cannabis incubators (and the investors they’re able to connect you with) can offer invaluable insights as to how to grow your company.
Whatever area of the cannabis industry you’ve set your sights on, securing a mentor may be the single most impactful step you can take. While the operational, technical, and financial supports we identified above are all crucial, a mentor is something different. While they may impart specific knowledge in any of these areas, their role is typically defined in more strategic terms:
- Offering one-on one guidance and entrepreneurial expertise
- Connecting mentees with personal networks built up over the years
- Offering explicit educational initiatives and presentations to help lift up and empower mentees
It’s tempting to think of mentorship as a relationship that flows from the top on down, but that’s not actually the case. Mentors get something out of the equation too: In addition to bolstering their credentials and experience as industry leaders, serving as mentors gives them a front-row seat to the next generation of cannabis entrepreneurs. They’re building their all-important networks, gaining valuable insights on the future of the industry, and in some cases, even making the leap from mentor to investor.
The Cannabis Incubator: Leading Lights in the Incubator World
As we said earlier, the cannabis industry is beginning to flock to the incubator model. From incubators focused on hemp and CBD to a unique government-sponsored model (hint: it’s not here in the US) to incubators focused on minority inclusion, there’s a large and ever-increasing pool. Here are a few of the standouts.
Without doubt one of the major players in this sphere, Canopy Boulder has a strong track record totalling some 115 cannabis companies. Describing itself as a “venture fund and business accelerator,” the company focuses not just on getting companies on their feet, but connecting them with investors, mentors, and other crucial supports.
Self-described as “The first innovation accelerator and commercialization incubator” in the cannabis world, this well-capitalized group operates by building, acquiring, and partnering with successful businesses “that will benefit from industry restructuring.” In other words, this isn’t the place for mom-and-pop operations to try and pitch. But if you’ve got a bright (and scalable) concept to bring to the table, GHV should be on your shortlist.
Minority Cannabis Incubator
This nationwide network is focused on bringing BIPOC, LGBTQ, veterans and women to the cannabis industry table. Using the Stage Gate system as a conceptual and operational framework, it connects its partners with mentors, angel investors, and advocates for those communities currently underrepresented in the industry.
Cannabis Startup Incubator
A venture from KC Stark—aka the “Steve Jobs of Weed”—this Missouri-based cannabis incubator boasts a strong track record of bringing budding entrepreneurs, seasoned industry vets—Stark opened the nation’s first brick-and-mortar cannabis club in 2013—and mentors. After completing a mentorship program, graduates have access to an exclusive online database and knowledge bank.
Sorry, this one’s a tease. A government-run cannabis incubator? Sounds too good to be true, unless you happen to be located in Israel’s Negev Desert. With the governmental Israeli Innovation Authority providing some 85% for each of the project’s 6 (eventually 30) initial startups, it’s a great example of what a fully legal, government-backed cannabis industry can achieve.
The Hood Incubator
We’ll leave you with a truly inspiring cannabis incubator. This progressive nonprofit dedicates its efforts to “building economic and political power for Black and Brown communities” by supporting their participation in the legal cannabis industry. With programs dedicated to mobilize these consumers, identify opportunities of shared interest within them, and empower them to succeed in the industry as workers, owners, and investors in the legal cannabis industry.