2019 was the year that saw CBD businesses establish themselves as legitimate players in multiple markets. There are CBD companies that make oils and tinctures, CBD beverage companies, CBD food companies, and others. And the reason for this is simple: CBD may yet prove to be a legitimate alternative for addictive prescription drugs treating a number of ailments and CBD has already proven to be helpful in preventing seizures in children.
However, funding CBD companies remains an issue. The industry has not yet reached a level where most investors feel comfortable investing in it yet and that goes for professional investors as well. Even though the CBD market is predicted to eclipse $24 billion in total sales in the next couple of years, the risks are still tangible and the lack of regulatory direction from the federal government, most notably the FDA, and state governments isn’t helping to reduce the industry’s risk profile.
So what are CBD businesses supposed to do in this climate? After all, they still need to raise money to fund their growth.
Crowdfunding may be what the industry needs over the next couple of years in order to meet its growth goals. One such company pursuing crowdfunding is TruBrain and they recently did an interview with Yahoo! Finance discussing their decision to turn to crowdfunding.
“So far we are loving it. This campaign focuses on turning customers into “Investomers,” which has worked very well for other companies building direct brands. We already have VCs backing us. Some have been very collaborative with TruBrain and continue to take active roles on our Board of Directors. We enjoy this institutional support. But just as we believe that the best brain food shouldn’t be reserved for only a select few, we don’t believe that only the wealthy should have the opportunity to invest in growing companies.”
One of the key takeaways from this interview is that crowdfunding is a great way to get your most passionate customers (literally) invested in your business. With equity crowdfunding, which is what TruBrain is doing, every person who puts in money gets an equity stake of the business. In other words, they own part of the business. Traditional crowdfunding campaigns gave people who put in money some kind of award, which usually is a discount on the product the campaign was built for or something else special.
While it is too early to tell how well similar crowdfunding campaigns will fair we can tell you that TruBrain has raised over $1 million for their campaign. This is good evidence that if a company has the right people on their team, a great product, and a good track record of performance and growth then crowdfunding campaigns can work out wonderfully.
So, will 2020 be the year of CBD crowdfunding? It’s certainly possible and it does look like a good way to raise funds in an industry that is still facing regulatory uncertainty.