Marijuana Business Magazine May-June 2019

May-June 2019 | mjbizdaily.com 95 have predatory investment practices, according to multiple California MJ industry sources, to the point where it’s something many are warning about. This is an area where both entrepre- neurs and investors must be careful, Lencho said, because this often is new territory for both parties. “I would approach it as if it was experimental surgery you’re going into for the first time. Feel comfortable asking for references, referrals. Really get to know this person and what they’re about,” she said. “They shouldn’t be offended by you asking for other investments they’ve worked on. Do your diligence.” But at the same time, don’t be afraid to take on investors. That’s what Domingo is doing. “It’s advantageous for me to take a small piece of the pie rather than have none of it,” Domingo said. Look at Options Beyond Plant-Touching Businesses More advice from Domingo and Katz: Don’t get into the marijuana space thinking it’s going to be all fun and games. Take a deep breath and evaluate other options. “Companies trying to get in, I tell them, ‘Don’t,’” Domingo said. “I tell them to look at ancillary businesses. Don’t just look at the plant-touching side.” That could include what Katz is now doing with the Emerald Exchange, acting as a professional conduit for growers and manufacturers in Northern California. And Domingo has been do- ing MJ-related consulting and software work while setting up his new operation in Sacramento. The reality is, there will be many companies that are technically ancillary (or non-plant-touching) businesses that end up making far more money in the short term than actual purveyors of cannabis. Such companies don’t have as much problem finding banking access, don’t have to observe the 280E provision of the federal tax code that cuts into the profits of plant-touching firms and generally don’t have to worry as much about overregulation and red tape. Weedmaps is a great example, as are KushCo Holdings and LeafLink and plenty of other ancillary companies. And there are going to be a lot of ancillary services needed by growers, retailers and other licensed operators. John Schroyer covers California for Marijuana Business Magazine. Reach him at johns@mjbizdaily.com . Cannabis Business Brokers Experts in all aspects of buying and selling marijuana businesses Cannabis-Business-Brokers.com CA License #02064427 Tel Karen : 949-280-3092