We get it: the benefits of insurance for your agriculture or cannabis business can easily be overlooked when you’re just getting started. There are a million other items on your to-do list, like acquiring licenses, growing product to sell, finding investors…oh, and making money.

Most new founders consider insurance as a “CYA” move so if something goes seriously south, you have a multi-million dollar line of credit to cover legal fees, damages, etc.

But did you know there are some other ways that insurance for agriculture and cannabis startups provides some attractive benefits that go beyond the worst case scenario?

Here are a couple of examples:

 

1. Insurance is attractive to investors

While early stage cannabis investors are hardly risk averse, they do work diligently to control and mitigate risk (which is why there’s often a tedious but necessary due diligence phase).

One trait that can attract new investors and tip the scale in favor of a deal?

How well the company understands and recognizes the importance of risk management. Founders who are on top of purchasing insurance appear more legitimate to possible investors because they show a certain level of maturity and savvy–both qualities that allay many investors’ fears.

Figure it this way: insurance for your cannabis business or ag business will be required (depending on the state) as soon as the deal is sealed anyway. For instance, directors and officers insurance requirement are generally a boilerplate term for institutional rounds nowadays. D&O protects the personal assets of the directors and officers. And if the VC takes a seat on the board, this requirement is guaranteed to be in place. (Key person insurance is often required as well.)

 

2. Insurance paves the way to new partnerships

Especially in Ag-tech & Cannabis, business investors aren’t the only ones that require proof of insurance. If your company is b2b, SaaS, e-commerce, manufacturing or internet of things, you can be sure that your clients, retailers, suppliers and vendors have some pretty substantial insurance requirements.  

Whether you’re selling software to medical dispensaries, merchandise via Amazon or consulting expertise to wishful license holders, liability coverage will usually be required.  

And when you hire more personnel and want to move into your new office, your landlord will require proof of insurance too! The standard terms for these contracts generally required at the very least general liability.

We’ve seen a substantial number of deals almost fold because the ag-tech or cannabis startup was caught off-guard by necessary insurance requirements.

The takeaway: having coverage in place beforehand not only prevents these sticky problems from occurring in the first place but benefits your business by making it appear more attractive and proactive.

 

Leave a Reply

Your email address will not be published. Required fields are marked *