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Cannabis Startups And The Ghost Of Nancy Reagan

Katelyn Baker

Well-Known Member
Over my career, I've helped build and deploy weapon systems, music videos, mainstream movies, pornography, firearms and sex toys. But when I co-founded Gateway, an accelerator for startups in the cannabis industry, many friends responded by saying, "I never thought you'd do a thing like that!"

If, like my friends, you grew up during the Nancy Reagan "Just Say No" era, the idea that the marijuana industry could be a positive force in society may seem preposterous.

It's not preposterous at Gateway. Twice a year, 10 startups receive four months of mentorship and an investment of $30,000 in exchange for 5 percent. The startups range from payment-processing technology and genetics software to edible brands and distribution businesses.

Like it or not, the rise of the cannabis industry is indisputable. By some estimates, it could reach $100 billion by 2029 in the U.S. alone. But 1980s sentiment lingers, and the path to expansion isn't without obstacles for entrepreneurs struggling to build companies.

Aside from the many legal-related risks directly resulting from federal prohibition, cannabis naysayers also construct barriers through the indirect means of social pressure. Many people confuse legality with morality, and view cannabis as "bad" simply by virtue of the fact that it's illegal in many places. This becomes clearer when considering public opinion of alcohol. Alcohol, by almost any definition, is more dangerous to public health and safety than cannabis. And yet, it's often celebrated and glamorized rather than condemned.

During a Q&A after a recent conference talk on entrepreneurship, an audience member angrily interrogated me about the cannabis industry.

"How can you possibly support people using a substance that alters their brain chemistry?" he demanded.

"Do you drink?" I asked.

"Yeah," he said, "scotch."

This irrational, emotion-based view of marijuana isn't just an inconvenience to those in the industry; it stifles legitimate research into the various medical uses of compounds from this complex plant. When someone asks me about medical uses for marijuana, I am forced to cite anecdotal data more often than would be the case for other industries. Aside from a handful of credible studies, the scientific community has generally shunned cannabis.

The resulting social pressure of the prohibitionists creates hurdles to normal business activities. One of Gateway's early advisers, for example, was privately supportive, and offered to help in any way he could, including through investment.

"Just don't put my name anywhere on it publicly," he added.

He didn't want other business partners finding out about his involvement, for fear that they would stop doing business with him. It's even harder for typical cannabis startups.

Even subversives from within the industry generate flak for new cannabis ventures. These are often legacy black-market players, who for years have been operating illegally and remain comfortable with the concomitant risk. They fear competition from legal newcomers, and in protest even fund opposition to legalization efforts.

Similarly, there are many entrenched players in the legal market who hop in bed with every corruptible local politician they can find in an attempt to construct new regulations that give them state- or locally enforced monopolies, or at the very least build as many hurdles for new entrants as possible. It's Wall Street cronyism, but for cannabis.

Despite these obstacles, I intentionally made the choice to start funding, advising,and supporting cannabis startups because, at the end of the day, none of these naysayers - and nothing they can do - really matter all that much. The obstacles they are desperate to erect are like swarms of gnats buzzing around the space shuttle of market demand, fueled by a cannabis booster rocket.

If you're running a cannabis startup - or thinking of starting one - the keys to success will largely be the same as in any other industry. Here are a few additional rules I encourage Gateway's own startups to follow:

Know the law. I don't recommend using a "cannabis lawyer" for your general legal work. They often don't understand startup issues, especially fundraising. However, you do need their input on business structure and operations to ensure that you're operating within the law, since Silicon Valley startup lawyers are usually unfamiliar with the quagmire and ambiguity of cannabis regulation.

Be "out." You don't have to spend your limited time on cannabis advocacy, but you should at least be supportive and stop hiding in the shadows. Grandma should know.

Work with people who already get it. Don't waste time trying to convince skeptics to accept the cannabis industry to get them to advise or invest in you. Maybe they'll change, maybe they won't; in any case, you don't have the time to squander on them.

As a cannabis startup, there are millions of ways to fail. Most of them will be the same as the ways startups in every other industry fail. Something unique to cannabis is the huge opportunity for success. No other industry is growing as quickly, and if you can break through or work around the barriers and ignore the critics, the potential is enormous.


News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: Cannabis Startups And The Ghost Of Nancy Reagan
Author: Carter Laren
Contact: Recode
Photo Credit: Justin Sullivan
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