For all of the hurdles that exist in the European market, there is one avenue that has, so far at least, remained remarkably unexplored. That is certainly the case on the financing end.
Yes, European family offices are conservative, and “equity” (at least as it is thought of in the North American sense) remains less interesting in the free for all of public markets among Europeans compared to their cross Atlantic peers.
However, for the right canna-entrepreneur, the most attractive thing about European financing so far has remained largely off the table. Namely tax credits, especially of the R&D and tech kind (although there are other kinds of credits on the table when crossing into related fields.)
Yes, there are rules about this kind of thing (and a lot of regulations). But as a vehicle for helping to offset the risk of evolving medical cannabis projects in particular, the pursuit of obtaining these tax credits has so far remained in its infancy.
It won’t for long.
Where, Why and How Will This Impact Industry Growth?
For an industry that so far has financed its highest fliers via the public equity markets (and exotic financial instruments like reverse mergers), the European financing options now on the table are intriguing, if not much more attractively legit.
Tax credits have already shown up of course. The largest firms from Canada are hip to this game. But increasingly so are the smaller players, and that is where tax credits and other financial instruments and structures here will start to play a bigger difference.
Writing off the construction of a GMP facility may not be entirely “experimental,” yet putting a new drug into it certainly could qualify. That’s especially true with any kind of qualifying research attached.
Right now, that is a siren’s song to a green industry that has frequently been short of cash.
Who Can Use This Kind Of Financing?
The best thing about tax credits is that they operate as a kind of insurance for investors looking for some way to offset the risk of investing in a new market. Cover the investment with a multi-year tax credit just in case? That is, for those who have a need for such vehicles, a no-lose proposition.
The only catch is that entrepreneurs need the right team (experts, including lawyers, and financiers are a must.) This is not something you do at home, or by yourself.
For the latest in Euro-financing strategies, be sure to attend the International Cannabis Business Conference 2020 in Europe in Barcelona, Berlin and Bern!