Download our coverage overview for Cannabis VC’s, Private Equity or Lenders here

It was only time before the cannabis vertical turned to capitalism. By following the yellow brick road to pot, VCs, private equities or lenders are trying to cash in. Sales have surged to new all-time highs, spiking nearly 160% in the weeks leading up to potential lockdowns and quarantines across legalized states, before coming down to normalized levels. As more states legalize and become online for medical use, the business of marijuana will have more capitalizing influence in the economy of the future. 

Risks for Cannabis VC’s, Private Equity or Lenders

Weighing the pros and cons of the cannabis industry trends is essential before investing. The largest players have even looked into the cannabis vertical. CNBC’s show The Profit, Marcus Lemonis traveled to California to see the hype about the vertical’s high increase in the market over the years. By 2025, the legal marijuana market work 146.4 billion. But taking chances means making sure you are investing and insuring yourself properly.

KEY INSURANCE POLICIES 

 

Directors & Officers / Errors & Omissions Blended Form 

For VC, PE or lenders in the space it is important to purchase a D&O/E&O blended policy. First it is  important to have an idea of what each is: 

Directors & Officers insurance or D&O insurance as it’s commonly referred to as is intended to  cover the directors and officers from investor lawsuits involving mismanagement of company  funds, misrepresentation, For any company who has taken outside investment, this coverage is  important and in many cases required by your board of directors. 

Errors and Omissions (Professional Liability) is intended to provide coverage for a company for  negligent acts, errors or omissions in the providing of their professional services leading to a third  party’s financial loss.  

With this base knowledge in mind, a company who is using third party money to professionally  invest in another company can blur the lines of where a D&O claim would start and an E&O claim  would finish. Because of this, insureds providing these types of financial services should look to  purchase this blended form. 

 

AlphaRoot is a full-service insurance brokerage completely dedicated to strengthening and supporting the cannabis industry. If you’d like to learn about building a risk management program for your MSO, reach out to us at info@alpharoot.co 

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