The cannabis industry is currently in a remarkable and unprecedented position. Attitudes toward legal consumption and market penetration are at an all-time high, but this momentum is not necessarily reflected in recent investor attitudes. Although the recent cannabis market downturn does not mean the green rush is over, it does leave many institutional and retail investors wary of who they should give their money to. Many cannabis companies have taken notice and are shifting their public relations priorities from branding to garnering support for fundraising. Up until a few months ago, many companies were vying for placements in Vogue or GQ — now they're asking for Barron's.
Cannabis funding, while still growing, is slowing down during this correction period. Much of this appears to stem from the overall volatility of the industry and startups overpromising on returns. One way cannabis businesses can mitigate this obstacle and continue accessing a steady flow of capital is to bolster investor relations through public relations. Based on what I've witnessed with my own clients in my decade of experience in the industry, having a synergistic IR and PR strategy is one of the keys to cannabis companies at any stage of growth withstanding the test of time.
Reeling In The Narrative
In mainstream industries, IR teams and PR teams often operate in their own lanes and communicate different messages to the company's investors and consumers. This traditional communications strategy is ineffective in cannabis, where the lion's share of investors are retail investors that tend to be more risk-averse and can be spooked by any coverage that they perceive as negative.
Cannabis investing operates in a unique territory and has a stricter set of rules due to its federal status. The industry lacks a significant institutional investor presence because large institutions are prohibited from investing in the sector. As a result, the industry is fueled by a larger number of smaller retail investors who may have more personal interests or ties to certain ventures. Unfortunately, these investors are often less willing to ride out volatility compared to institutional investors, who can afford higher short-term losses.
Over the past months, there has been a noticeable, sobering shift in the narrative of the industry. At the beginning of the legalization movement, many cannabis companies came out with impressive aspirations, but they fell short when it came to meeting actual numbers. Unfortunately, canna-businesses spanning the industry are struggling with this issue. This reality has set in for investors, who are now taking their time with their due diligence.
I believe it's more important than ever for PR to tell the IR story of the company and industry, speaking in a more conservative way and better managing media expectations, so IR can educate investors about the lucrative opportunities still available in the industry.
Gaining Access To Alternative Investors
Successful cannabis business leaders know that constantly seeking out new and alternative sources of capital is essential to both scaling and staying in business. This is where an experienced IR team can bridge the gap for companies and provide the connections and resources to seek out new investments outside of institutions.
IR professionals can help canna-businesses target alternative sources of capital like high-net-worth individuals or family offices that may align with the company's mission or values. It's typically easier for these individuals and offices to invest in the cannabis industry since they aren't handling public money and the regulations that come with it.
When IR teams secure these alternative investments, they should work closely with the company's PR team to control the flow of information. Press releases that involve significant growth figures should be reviewed by an IR professional to ensure that optimal figures and messages are being communicated to investors.
Investor Conferences: The Hottest Ticket In Town
The noticeable proliferation and popularity of investment conferences reflects a new order in the industry. Out of the 106 most important global cannabis conferences and trade shows, approximately one-third of the events are investor-specific, and almost all events have tracks dedicated to raising capital. More companies are starting to understand that attending these events can help them find ways to stay afloat.
A connected, synchronized and knowledgeable IR and PR team can help companies strategize and optimize attendance at valuable conferences. Of course, it can be unrealistic to ask an executive to attend an investment event every week when they have a company to run. This is when a reliable IR presence can step in and build the company's network at these frequent events. Experienced IR teams can also access mainstream investing conferences, deal or non-deal roadshows and one-off day meetings to secure a diverse array of investment opportunities.
Market corrections are common for developing industries. Instead of feeling discouraged by investor attitudes, I believe cannabis companies should strive to find cohesive communications solutions that speak to both consumers and capital investors. Companies that don't already have an IR team should seek the guidance of an IR professional to button up corporate messaging. Regardless of how good a product is, a company's perception and network will often determine its longevity. In this landscape, PR needs to be built with the backbone of IR in order to achieve long-term growth.