Mitchell Kahn knows about building and scaling companies. His most recent startup raised over $220 million and was recently acquired for $875 million.
Mitchell and I got together for an episode of the DealMakers Podcast. He shared with our listeners how he got started as an entrepreneur, what he’s learned about funding and capital, growing a business, plus the serious business of recreational cannabis.
The Ultimate Guide To Pitch Decks
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The Numbers Guy
Kahn knows his numbers. Growing up in middle-class suburban Milwaukee, his father was an accountant. He then went on to run several businesses and was always entrepreneurial-minded.
That laid the early seeds for what has become one of the largest legal marijuana businesses in history.
Mitch was always good at math and actually enjoyed it. He saw it as a good background to build upon and began following in his father’s footsteps in studying accounting. Then he moved to Chicago to attend law school.
While practicing law, it was hard to hold down the other side of what he had learned from his father. The entrepreneurial side. That’s when someone called his bluff and offered him an opportunity to help expand the real estate side of a sports retail company.
During his time there he saw the industry and world go through various cycles. They doubled their number of stores. Though they were ultimately beat out by another competitor who was also expanding fast across the country.
He learned the importance of having the financials to back up rapid expansion. He learned how all businesses are really in the capital game.
Unfortunately, he learned that it often doesn’t matter how great your product and service, company or business plan is. Not if your competition is better at raising capital than you.
Those were powerful lessons that he brought to the table in his own cannabis startup. Their initial raise for three dispensaries in IL was around $5M.
They’ve kept raising as they’ve grown to hold around 60 retail, grow and processing licenses in 11 different states. All together they raised close to $230M for the business in debt and equity.
Storytelling is everything which is something that Mitch was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.
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Important Money Lessons For Startup Founders
In fact, one piece of business advice Mitch Kahn really wants to pass on to other founders is to try and raise more capital earlier. Even if you do it with debt instead of equity.
He suggests using that capital to hire the best possible talent in every area. It will help you grow and grow faster.
Even with all the success, they’ve enjoyed Mitch (for the first time) shared how they almost ran out of money in the middle of constructing a large grow operation in PA.
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They ran into a cash crunch right at a moment when the capital was sparse. Capital markets are always changing. Sometimes it is plentiful. Sometimes there is a drought. They knocked on doors for months before finding the money.
It was a big lesson in raising more when it is available. You never know when the markets will be like when they open tomorrow.
Kahn says he has also found incredible value in aligning incentives with others. Despite, his advisers warned him to only give his two cofounding partners a small piece of the company, they created an even partnership. He says that alignment of interest and a shared focus on the long-term is critical.
That’s especially important when you are in a business that is going to throw curveballs at you every day. And that is every business.
Yoga can help you master your mindset. Though this founder says the single most important thing by far is the people.
That was something it was even hard for money to buy in the cannabis industry until just two years ago. No one wanted to be associated with it.
As laws and perspectives have changed his company was able to attract great talent from Kimberly-Clark, hedge funds and private equity businesses, Abercrombie & Fitch and others.
Finally, he adds the importance of “matching short-term business with short-term capital and long-term business with long-term capital.” Many don’t separate these things, and it can prove catastrophic.
Of Course, It’s Obvious Now
As with most truly amazing startup success stories, the cannabis business is pretty obvious now. It wasn’t just a few years ago.
Even Mitch thought it was crazy when his partner suggested it. People were still getting arrested for it back then. Many are still in prison for it.
The moment he really knew it was right was in a conversation with his father. He was a supreme rule follower. He had even promised to call the cops on his son in high school if he ever found any marijuana.
Then after doing his research, Mitch brought up the topic of this business idea. His father said, “if you can find me some product that will help my arthritis, I’ll take it. I’m in.”
That was the moment Mitch realized that the world and views were really changing. It wasn’t just a great business opportunity, or chance to have fun smoking the stuff.
It was a once in a lifetime chance to lead a whole new industry. They seized on it and started Grassroots. The rest is history. To date, they are still the largest private multi-state cannabis operator.
Listen in to the full podcast episode to learn more, including:
- Why missing out on their first grow license was actually a good thing
- How they decided to merge with Curaleaf
- The truth about business plans
- How to identify new markets with great potential