Jacob Redmond
Well-Known Member
As marijuana prohibition falls in state after state, cannabis sales are shifting from street corners to storefronts and opportunists are lining up to cash in on what some say is the biggest investment opportunity since the dot-com boom.
Investors of all varieties are starting to look at marijuana as less of a stoner's fad and more of a serious business venture. The industry totaled $2.66 billion in U.S. sales in 2014, up 74 percent from $1.53 billion the year before, according to the ArcView Group, a cannabis-industry investment network. Experts expect billions more in future growth.
Business insiders predict the market will expand to many times its present size as more states legalize medical and recreational marijuana. The cannabis trade has not only brought in millions for dispensary owners and cultivators, it's also created a thriving ancillary market, created jobs, and boosted property values, marijuana advocates say.
But challenges persist for the kind of high-risk, high-reward investment that cannabis calls for. No industry since post-Prohibition alcohol has come close to having had a harder time getting off the ground, from strict regulation and heavy taxation to a lack of investors and banking services.
"A lot of people look at the cannabis industry and say, 'Oh my God, it's so much harder. [There are] so many barriers,' " said Troy Dayton, CEO of the ArcView Group. "Well, some people see endless problems. Other people see endless problems disappearing fairly soon and see this as a great investment."
Dispensaries and cultivators are not the only ones making money. Jamie Perino, the CEO of Colorado-based Euflora dispensaries, said the three-store chain has so many customers, the company wants to open more outlets in Colorado and across the country.
Perino estimated that Euflora, dubbed the "Apple store" of pot for its tablets next to every product displaying information about potency, strains, and more, brings in 2.5 million visitors a year at its downtown Denver location.
A security guard greets each customer. Workers give them a scanner to note products they like, an idea inspired by Target wedding registries.
Perino isn't a marijuana enthusiast, but the financial opportunities were too good to ignore after Colorado legalized marijuana in 2012. Dispensaries opened in 2014. After working in the building industry for 15 years, Perino made the switch.
"There were CEOs, CFOs, from pharmacy, banking, real estate," Perino said. "People were leaving their jobs to get into this industry, and I think that if they are getting into it, maybe they know something I should know."
Colorado took in about $79 million from taxes and fees on the marijuana industry in fiscal 2015.
Ancillary businesses also have found moneymaking niches. Cultivators need high-wattage lights to grow cannabis indoors. States have contracted seed-to-sale tracking systems to stem the black market. Limousine companies shuttle clients from dispensary to dispensary.
J.B. Woods, co-owner of Greenpoint Insurance Advisors L.L.C., is based near Denver but brokers insurance for dispensaries nationwide. It's necessary for companies storing pot by the pound and cash by the bundle. A few states "have made it really very clear that insurance is an important part of the licensing process," he said.
The danger spawned by an all-cash industry has spawned a secondary security market. Companies provide cameras, alarm bells and guard dogs.
Dan Williams, CEO of Canna Security America, a consultant, said employee theft makes up to 90 percent of missing product and proceeds. Businesses often require workers to don pocketless suits when trimming weed and search employee bags.
"A lot of people, they know that the cameras are there, but they don't necessarily think anyone watches them," Williams said. "They just think they're going to get lucky. And oftentimes they do."
An Industry Matures
When the ArcView Group first started hosting conferences to connect marijuana businesses with early investors, the events reinforced stoner stereotypes, CEO Dayton said.
He described a ragtag lot who cared more about smoking weed than making money off it. Many presenters looked uncomfortable in suits and floundered through pitches.
At first, investors didn't exactly flock to marijuana. Until September 2013, ArcView allowed only ancillary businesses the chance to pitch. Dayton said that at the time, they believed companies with direct contact with the plant posed too much risk. ArcView events now draw sharply dressed professionals who whip through presentations with precision - a reflection of the maturing industry, Dayton said.
From Hawaii to New Jersey, 23 states and Washington, D.C., have approved medical marijuana, with Alaska, Colorado, Oregon, Washington state, and D.C. allowing recreational marijuana as well.
The tide has flooded the market with entrepreneurs who must distinguish themselves. Innovators have come a long way from the joints they rolled in high school parking lots. There are hookahs and bubblers, volcano vaporizers and percolated bongs. Consumers slurp down THC-infused ice cream and gnaw on gummy bears that aren't made for children. They slather on lotions permeated with marijuana oil and dollop out droplets of cannabis extracted with alcohol.
With only $9,000 of her own savings, Hilary Dulany in 2013 started Accuvape, a vaporizer manufacturer that now supplies more than 250 retailers.
Dulany, a cannabis consultant on the side, said the glitz and glamour were in dispensaries, but so is the competition. "People don't understand that there's so many ancillary businesses out there," she said. "There's so many holes in the market."
It can be difficult to get into the dispensary business - with steep initial investments and time-consuming licensing - but those who try said the potential profit makes the endeavor worth it. Caps on the dispensary licenses limit competition and can provide a big payday.
Nearly two years ago, Illinois approved a medical cannabis pilot program. Dispensaries plan to open this year to serve 2,600 approved patients.
Brad Zerman, who plans to open one of the state's 56 dispensaries, calls it a smart investment. "I'm an entrepreneur," he said. Zerman is also seeking a license in Massachusetts and considering other states. "We're hoping that having been awarded a license from a really restrictive state will help our credibility," he said.
'A Very Long Time'
Social attitudes may be leaning more in marijuana's favor, but many traditional investors have kept their caution.
Boston-based Dutchess Capital, a multibillion-dollar money manager, moved into marijuana in 2012, among the first firms to invest in the field. Managing partner Doug Leighton said it "took a very long time to get comfortable, given the federal government's stance" on a drug that has no medicinal benefits and can't be legally bought and sold.
But the potential profits outweighed the risk. "We did our homework," he said. "But it's weed. We're not going to lose. How are we going to lose?"
Promises of profit have lured entrepreneurs to marijuana, making money has proven anything but easy for many. Steep initial investments sting. Heavy taxes cut into bottom lines. The know-how to navigate complex regulations can separate those who make it from those who don't. For every successful business, many more fail, experts said.
"We've got a room full of banker's boxes with files from businesses who didn't succeed," said Woods, the Denver broker.
Still, experts liken the pot industry today to alcohol just after Prohibition years, full of early adopters trying to corner a slice of the market before bigger players move in.
If the federal government does make marijuana legal, big changes are in store, said Dayton, the CEO of ArcView. He expects other highly regulated industries, like restaurant chains and food manufacturers, to snap up marijuana companies once it's safer to do so.
"Think of the wine market," he said. "Cannabis is just like that. . . . You're certainly going to see some consolidation."
A branding battle also looms, said Michael Swartz, an analyst with Viridian Capital, a marijuana-focused investment firm. The industry is still too young to have the equivalents of Apple, Walmart, or Coca-Cola. But in time, consumer favorites will emerge.
"It's going to be the Bacardi, the Grey Goose. That's where you're going to see the biggest market," he said. "It's going to be about quality, but what's even more important is that brand."
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Cultivating an Industry
Author: Michael Bodley and Clarissa Cooper
Contact: Feedback - philly.com
Photo Credit: Clarissa Cooper
Website: Philadelphia local news, sports, jobs, cars, homes - Philly.com
Investors of all varieties are starting to look at marijuana as less of a stoner's fad and more of a serious business venture. The industry totaled $2.66 billion in U.S. sales in 2014, up 74 percent from $1.53 billion the year before, according to the ArcView Group, a cannabis-industry investment network. Experts expect billions more in future growth.
Business insiders predict the market will expand to many times its present size as more states legalize medical and recreational marijuana. The cannabis trade has not only brought in millions for dispensary owners and cultivators, it's also created a thriving ancillary market, created jobs, and boosted property values, marijuana advocates say.
But challenges persist for the kind of high-risk, high-reward investment that cannabis calls for. No industry since post-Prohibition alcohol has come close to having had a harder time getting off the ground, from strict regulation and heavy taxation to a lack of investors and banking services.
"A lot of people look at the cannabis industry and say, 'Oh my God, it's so much harder. [There are] so many barriers,' " said Troy Dayton, CEO of the ArcView Group. "Well, some people see endless problems. Other people see endless problems disappearing fairly soon and see this as a great investment."
Dispensaries and cultivators are not the only ones making money. Jamie Perino, the CEO of Colorado-based Euflora dispensaries, said the three-store chain has so many customers, the company wants to open more outlets in Colorado and across the country.
Perino estimated that Euflora, dubbed the "Apple store" of pot for its tablets next to every product displaying information about potency, strains, and more, brings in 2.5 million visitors a year at its downtown Denver location.
A security guard greets each customer. Workers give them a scanner to note products they like, an idea inspired by Target wedding registries.
Perino isn't a marijuana enthusiast, but the financial opportunities were too good to ignore after Colorado legalized marijuana in 2012. Dispensaries opened in 2014. After working in the building industry for 15 years, Perino made the switch.
"There were CEOs, CFOs, from pharmacy, banking, real estate," Perino said. "People were leaving their jobs to get into this industry, and I think that if they are getting into it, maybe they know something I should know."
Colorado took in about $79 million from taxes and fees on the marijuana industry in fiscal 2015.
Ancillary businesses also have found moneymaking niches. Cultivators need high-wattage lights to grow cannabis indoors. States have contracted seed-to-sale tracking systems to stem the black market. Limousine companies shuttle clients from dispensary to dispensary.
J.B. Woods, co-owner of Greenpoint Insurance Advisors L.L.C., is based near Denver but brokers insurance for dispensaries nationwide. It's necessary for companies storing pot by the pound and cash by the bundle. A few states "have made it really very clear that insurance is an important part of the licensing process," he said.
The danger spawned by an all-cash industry has spawned a secondary security market. Companies provide cameras, alarm bells and guard dogs.
Dan Williams, CEO of Canna Security America, a consultant, said employee theft makes up to 90 percent of missing product and proceeds. Businesses often require workers to don pocketless suits when trimming weed and search employee bags.
"A lot of people, they know that the cameras are there, but they don't necessarily think anyone watches them," Williams said. "They just think they're going to get lucky. And oftentimes they do."
An Industry Matures
When the ArcView Group first started hosting conferences to connect marijuana businesses with early investors, the events reinforced stoner stereotypes, CEO Dayton said.
He described a ragtag lot who cared more about smoking weed than making money off it. Many presenters looked uncomfortable in suits and floundered through pitches.
At first, investors didn't exactly flock to marijuana. Until September 2013, ArcView allowed only ancillary businesses the chance to pitch. Dayton said that at the time, they believed companies with direct contact with the plant posed too much risk. ArcView events now draw sharply dressed professionals who whip through presentations with precision - a reflection of the maturing industry, Dayton said.
From Hawaii to New Jersey, 23 states and Washington, D.C., have approved medical marijuana, with Alaska, Colorado, Oregon, Washington state, and D.C. allowing recreational marijuana as well.
The tide has flooded the market with entrepreneurs who must distinguish themselves. Innovators have come a long way from the joints they rolled in high school parking lots. There are hookahs and bubblers, volcano vaporizers and percolated bongs. Consumers slurp down THC-infused ice cream and gnaw on gummy bears that aren't made for children. They slather on lotions permeated with marijuana oil and dollop out droplets of cannabis extracted with alcohol.
With only $9,000 of her own savings, Hilary Dulany in 2013 started Accuvape, a vaporizer manufacturer that now supplies more than 250 retailers.
Dulany, a cannabis consultant on the side, said the glitz and glamour were in dispensaries, but so is the competition. "People don't understand that there's so many ancillary businesses out there," she said. "There's so many holes in the market."
It can be difficult to get into the dispensary business - with steep initial investments and time-consuming licensing - but those who try said the potential profit makes the endeavor worth it. Caps on the dispensary licenses limit competition and can provide a big payday.
Nearly two years ago, Illinois approved a medical cannabis pilot program. Dispensaries plan to open this year to serve 2,600 approved patients.
Brad Zerman, who plans to open one of the state's 56 dispensaries, calls it a smart investment. "I'm an entrepreneur," he said. Zerman is also seeking a license in Massachusetts and considering other states. "We're hoping that having been awarded a license from a really restrictive state will help our credibility," he said.
'A Very Long Time'
Social attitudes may be leaning more in marijuana's favor, but many traditional investors have kept their caution.
Boston-based Dutchess Capital, a multibillion-dollar money manager, moved into marijuana in 2012, among the first firms to invest in the field. Managing partner Doug Leighton said it "took a very long time to get comfortable, given the federal government's stance" on a drug that has no medicinal benefits and can't be legally bought and sold.
But the potential profits outweighed the risk. "We did our homework," he said. "But it's weed. We're not going to lose. How are we going to lose?"
Promises of profit have lured entrepreneurs to marijuana, making money has proven anything but easy for many. Steep initial investments sting. Heavy taxes cut into bottom lines. The know-how to navigate complex regulations can separate those who make it from those who don't. For every successful business, many more fail, experts said.
"We've got a room full of banker's boxes with files from businesses who didn't succeed," said Woods, the Denver broker.
Still, experts liken the pot industry today to alcohol just after Prohibition years, full of early adopters trying to corner a slice of the market before bigger players move in.
If the federal government does make marijuana legal, big changes are in store, said Dayton, the CEO of ArcView. He expects other highly regulated industries, like restaurant chains and food manufacturers, to snap up marijuana companies once it's safer to do so.
"Think of the wine market," he said. "Cannabis is just like that. . . . You're certainly going to see some consolidation."
A branding battle also looms, said Michael Swartz, an analyst with Viridian Capital, a marijuana-focused investment firm. The industry is still too young to have the equivalents of Apple, Walmart, or Coca-Cola. But in time, consumer favorites will emerge.
"It's going to be the Bacardi, the Grey Goose. That's where you're going to see the biggest market," he said. "It's going to be about quality, but what's even more important is that brand."
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Cultivating an Industry
Author: Michael Bodley and Clarissa Cooper
Contact: Feedback - philly.com
Photo Credit: Clarissa Cooper
Website: Philadelphia local news, sports, jobs, cars, homes - Philly.com
