Katelyn Baker
Well-Known Member
San Francisco - With a measure to legalize marijuana on California's November ballot, entrepreneurs and investors are rapidly lighting up the weed economy.
An ecosystem of startups is expanding to grow, harvest and deliver an expanding array of marijuana-related products and services that are expected to follow legalization. Though it's still a no-go area for big institutional funds, top-tier investors like Peter Thiel and Sean Parker are among those pouring millions into "cannabusinesses," from online marketplaces to ecommerce and compliance software to production and manufacturing.
In 2015, Thiel's Founders Fund poured millions into Privateer Holdings, a private equity firm that acquires and invests in cannabis brands. The accelerator 500 Startups backed Eaze, a mobile app that handles cannabis prescriptions and delivery; and last year, Y Combinator made its first cannabis investment in Meadow, a San Francisco-based software firm that offers point-of-sale software for dispensaries in addition to cannabis delivery logistics.
"You will not find another multi-billion dollar market, that's growing at the same rate, that doesn't have big institutional investors playing in it," says Troy Dayton of Arcview Group, a leading cannabis investment and research fund based in San Francisco. "Last year we saw people start to write bigger checks, bigger investors come to the table. And we're seeing that continue."
Driving it all is the Adult Use of Marijuana Act (AUMA). The initiative, which landed on the ballot through a successful signature-gathering campaign, would create a statewide licensing system for marijuana sales and would permit legal personal use.
It would also create, almost immediately, the nation's largest cannabis market.
Medical marijuana has been sold in California since 1996, and Dayton estimates that legal cannabis market at $2.7 billion as of last year. And when, not if, wider adult use is legalized — at least according to broad consensus and the 60 percent approval that AUMA polls — that market is poised to explode to $6.6 billion as of 2020. By contrast, the cannabis market in Colorado, which legalized recreational use in 2014, is estimated at $1 billion.
"Economically, this is an opportunity that's right here, USA-made, and that could be exported throughout the world," said Dale Skye Jones, executive chancellor at Oaksterdam University, the Oakland-based cannabis trade school. "This can be an ecosystem of opportunity where everybody wins."
Until now, that ecosystem has thrived despite a quagmire of legal and regulatory constraints affecting virtually everyone in the supply chain: Still operating in the shadow of federal prohibition, marijuana businesses have been shunned by the banking industry, meaning most work with cash only. They are also banned from marketing on platforms like Facebook and face lingering social and institutional stigmas hampering everything from fundraising to partnerships.
Just this week, the Nasdaq rejected an application from MassRoots, a Denver-based social networking platform for cannabis users, to list its stock on the exchange. MassRoots said Nasdaq was concerned that it would aid in the distribution of an illegal substance.
"Because of the lack of structure, we don't have access to the same resources that other companies do," said David Kram, founder of EMRLD, a cannabis ecommerce platform. "Everybody in this industry is an inherent activist, because you have to be."
That view is widely shared among cannabis startup founders, investors and longtime advocates like Debby Goldsberry, executive director of Oakland-based Magnolia Wellness and co-founder of Americans for Safe Access.
Under existing medical use regulations, cannabis businesses have operated under the threat of federal crackdowns — like the 2012 raid of Harborside Health Center, the nation's largest dispensary, and a 2014 raid of Oaksterdam University — meaning that a dispensary operator's main responsibility was "preparing your staff and patients for the war on drugs," she said. "The new law will provide us a tool, but we have to pick it up and use it. Our mission has to change."
AUMA will create a statewide, tiered licensing system — with 16 types in all — that will offer priority licensing to existing operators in good standing. That offers some hope that existing cannabusinesses won't be drowned out by new money and interests.
But whether AUMA will lower some of the most significant barriers that cannabis businesses face remains uncertain. The federal government has made it clear that marijuana remains illegal under federal law, though it has taken a hands-off attitude so far in states that have a working system to regulate legalized weed.
"The federal government has agreed to stay out of states only under the condition that they are highly regulated," said Aaron Herzberg, an attorney and partner at CalCann holdings.
While the AUMA law can't itself force banks to begin working with cannabis companies, Fiona Ma, head of California's Board of Equalization, has pledged to create a statewide credit union to help companies process credit card transactions and simplify tax payments for the estimated 75 percent of cannabis-related business that don't pay state taxes. According to estimates by California's Department of Finance, it could help the state generate more than $1 billion in new revenue.
Local law enforcement attitudes in California vary as well, and under AUMA, municipalities will retain the authority to ban dispensaries and cultivation.
A brave new world of regulations will force the industry to evolve quickly. But it will also bring "credibility, accountability and a change in public perception," said Kram, who started EMRLD in 2014 with the confidence that cannabis would be legal nationwide in a few years.
"We'd need to build into the tax structures what's it like for a recreational patient versus a medical patient," said David Hua, CEO of Meadow. "People realize that it's a big market that already exists, and the question is: How should it exist in this new world of regulation?"
With the election still months away, that sense of confidence in the system is already altering the playing field for the "entrepreneurs opening businesses, investors investing in them, and regulators better understanding the industry," added Jones. "It's also the impression that California will give the rest of the nation.We're the sixth largest economy in the world. In that sense, this will be the harbinger of things to come."
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: High Hopes As Marijuana Blossoms - What To Do With The Nation's Largest Weed Market
Author: Annie Gaus
Contact: Upstart Business Journal
Photo Credit: None Found
Website: Upstart Business Journal
An ecosystem of startups is expanding to grow, harvest and deliver an expanding array of marijuana-related products and services that are expected to follow legalization. Though it's still a no-go area for big institutional funds, top-tier investors like Peter Thiel and Sean Parker are among those pouring millions into "cannabusinesses," from online marketplaces to ecommerce and compliance software to production and manufacturing.
In 2015, Thiel's Founders Fund poured millions into Privateer Holdings, a private equity firm that acquires and invests in cannabis brands. The accelerator 500 Startups backed Eaze, a mobile app that handles cannabis prescriptions and delivery; and last year, Y Combinator made its first cannabis investment in Meadow, a San Francisco-based software firm that offers point-of-sale software for dispensaries in addition to cannabis delivery logistics.
"You will not find another multi-billion dollar market, that's growing at the same rate, that doesn't have big institutional investors playing in it," says Troy Dayton of Arcview Group, a leading cannabis investment and research fund based in San Francisco. "Last year we saw people start to write bigger checks, bigger investors come to the table. And we're seeing that continue."
Driving it all is the Adult Use of Marijuana Act (AUMA). The initiative, which landed on the ballot through a successful signature-gathering campaign, would create a statewide licensing system for marijuana sales and would permit legal personal use.
It would also create, almost immediately, the nation's largest cannabis market.
Medical marijuana has been sold in California since 1996, and Dayton estimates that legal cannabis market at $2.7 billion as of last year. And when, not if, wider adult use is legalized — at least according to broad consensus and the 60 percent approval that AUMA polls — that market is poised to explode to $6.6 billion as of 2020. By contrast, the cannabis market in Colorado, which legalized recreational use in 2014, is estimated at $1 billion.
"Economically, this is an opportunity that's right here, USA-made, and that could be exported throughout the world," said Dale Skye Jones, executive chancellor at Oaksterdam University, the Oakland-based cannabis trade school. "This can be an ecosystem of opportunity where everybody wins."
Until now, that ecosystem has thrived despite a quagmire of legal and regulatory constraints affecting virtually everyone in the supply chain: Still operating in the shadow of federal prohibition, marijuana businesses have been shunned by the banking industry, meaning most work with cash only. They are also banned from marketing on platforms like Facebook and face lingering social and institutional stigmas hampering everything from fundraising to partnerships.
Just this week, the Nasdaq rejected an application from MassRoots, a Denver-based social networking platform for cannabis users, to list its stock on the exchange. MassRoots said Nasdaq was concerned that it would aid in the distribution of an illegal substance.
"Because of the lack of structure, we don't have access to the same resources that other companies do," said David Kram, founder of EMRLD, a cannabis ecommerce platform. "Everybody in this industry is an inherent activist, because you have to be."
That view is widely shared among cannabis startup founders, investors and longtime advocates like Debby Goldsberry, executive director of Oakland-based Magnolia Wellness and co-founder of Americans for Safe Access.
Under existing medical use regulations, cannabis businesses have operated under the threat of federal crackdowns — like the 2012 raid of Harborside Health Center, the nation's largest dispensary, and a 2014 raid of Oaksterdam University — meaning that a dispensary operator's main responsibility was "preparing your staff and patients for the war on drugs," she said. "The new law will provide us a tool, but we have to pick it up and use it. Our mission has to change."
AUMA will create a statewide, tiered licensing system — with 16 types in all — that will offer priority licensing to existing operators in good standing. That offers some hope that existing cannabusinesses won't be drowned out by new money and interests.
But whether AUMA will lower some of the most significant barriers that cannabis businesses face remains uncertain. The federal government has made it clear that marijuana remains illegal under federal law, though it has taken a hands-off attitude so far in states that have a working system to regulate legalized weed.
"The federal government has agreed to stay out of states only under the condition that they are highly regulated," said Aaron Herzberg, an attorney and partner at CalCann holdings.
While the AUMA law can't itself force banks to begin working with cannabis companies, Fiona Ma, head of California's Board of Equalization, has pledged to create a statewide credit union to help companies process credit card transactions and simplify tax payments for the estimated 75 percent of cannabis-related business that don't pay state taxes. According to estimates by California's Department of Finance, it could help the state generate more than $1 billion in new revenue.
Local law enforcement attitudes in California vary as well, and under AUMA, municipalities will retain the authority to ban dispensaries and cultivation.
A brave new world of regulations will force the industry to evolve quickly. But it will also bring "credibility, accountability and a change in public perception," said Kram, who started EMRLD in 2014 with the confidence that cannabis would be legal nationwide in a few years.
"We'd need to build into the tax structures what's it like for a recreational patient versus a medical patient," said David Hua, CEO of Meadow. "People realize that it's a big market that already exists, and the question is: How should it exist in this new world of regulation?"
With the election still months away, that sense of confidence in the system is already altering the playing field for the "entrepreneurs opening businesses, investors investing in them, and regulators better understanding the industry," added Jones. "It's also the impression that California will give the rest of the nation.We're the sixth largest economy in the world. In that sense, this will be the harbinger of things to come."
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: High Hopes As Marijuana Blossoms - What To Do With The Nation's Largest Weed Market
Author: Annie Gaus
Contact: Upstart Business Journal
Photo Credit: None Found
Website: Upstart Business Journal
