Jacob Redmond
Well-Known Member
With a wave of funding flowing into the cannabis business sector, amidst a growing wave of legalisation worldwide, are Asia-Pacific (APAC) economies and legislators missing out on the economic dividends, due to faulty assumptions on the part of legislators?
In 2014, US investors injected US$104.5 million in capital into the cannabis business (canna-business) space, acquiring stakes in cannabis and cannabis-related companies. According to the findings of New York-based research firm CB Insights, investment into the cannabis space peaked in Q4 2014, growing at a rate of 941.5 percent when contrasted with the previous year.
Since Q1 2013, there's been a surge in deal volume and investment capital being injected into the cannabis business space. Firms such as Leafline Labs and Aphria, both of which produce, supply and distribute medical marijuana, secured funding of $12.4 million and $6.2 million respectively. Meanwhile, Mediswipe, which deals in compassionate care technology, secured $1.1 million in funding.
More recently, in January 2015, Peter Thiel's Founders Fund co-invested in a $75 million Series B round led by Privateer Holdings, a private equity firm with a portfolio containing cannabis information resource Leafly.com, New York-based recreational cannabis company Marley Natural, and Canadian medical marijuana grower and e-commerce site Tilray. PharmaCann, a Chicago-based group of medical marijuana cultivation centres, raised $20 million.
The move by Founders Fund marks the first major brand-name VC investing in the cannabis sector. However, the focus is on firms in the Midwestern US and Canada, rather than marijuana hubs like Colorado and California. US states like Alaska, Colorado, Oregon, Washington and Washington, D.C. are legalising recreational use, with another 24 states legalising medical use.
Internationally, Jamaica, Uruguay and Netherlands have legalised marijuana to varying degrees, while Spain is noted as another destination where private consumption is legal. Purchase and sale of cannabis, as well as possession and consumption in a public place are illegal. However, growing the plant on private property for personal use, and consumption by adults in a private space, is legal.
Steve DeAngelo, co-founder and president of marijuana angel investor network The ArcView Group and Harborside Health Center, a major US medical marijuana dispensary, says Arcview brokered $17 million in deals with 34 companies since launching in 2010. In his view, the increased dealflow indicates both the robustness and investment potential.of the cannabis industry.
"In the beginning of this industry, our biggest challenges were legal, but we solved many of those challenges. After we figured out the legal landscape, many of our challenges were financial to help scale up and professionalise the businesses. Today, investment is not really a problem. If you have a good team and a good idea, you're in a good position. There is a phenomenal amount of investment interest" said DeAngelo.
The Economic Case For Legalization
Drug legalisation has been gaining traction in the US, with a growing international community seeking to engage and persuade the governments. The New York Times published a piece calling for the repeal of prohibition. Dr Jeffrey Miron, an economist based in Harvard University, has studied drug policy extensively, publishing a 2005 report that was endorsed by the late Milton Friedman, George Akerlof and Vernon Smith — all Nobel Laureates in the field of economics.
The most crucial arguments for legalising drugs are simple: Legalising production, distribution and consumption of specific classes of drugs destroys the black market for drugs. Ending drug prohibition has a direct impact on government budgets, often incurring more benefits than costs.
Legalisation of drugs eliminates the involvement of organised crime in the trade, while generating revenue for the government via taxation, reducing the costs involved in enforcing prohibitionist laws and ensuring a safe, regulated supply of narcotic commodities subject to public regulation, government oversight and economic barriers.
Drugs are part of parcel of human society, a narcotic commodity with a demand for its used present in almost every society. The two most common social narcotics — tobacco and alcohol — are ironically legal, despite the lack of any major health benefits and their comparative addiction potentials and harm. In fact, alcohol is more lethal than many illicit recreational drugs.
Legal social drugs like alcohol and tobacco (nicotine) are far more addictive than many illegal or restricted psychedelic drugs like marijuana*Edit* and others*. In fact, marijuana is as addictive as coffee, a very common social drug. Its the fact that they are legal commodities traded in an open market ad subject to public regulations that inhibits their abuse. Many restricted drugs are less harmful and addictive than legal ones.
While prohibition is intended to control drug abuse and addiction, minimising their social and economic harms, prohibition in fact tends to have the opposite effect. Prohibiting a commodity or service results in a black market, which involved organised crime elements. A black market creates a seller's market where demand exceeds supply, with production, distribution and marketing controlled by organised crime. Prices are inflated and profit margins large.
While prohibitionist might cite the dangers posed by such psychedelic drugs, there's been negligible evidence linking it to mental health problems.In fact, psychedelic use has positive implications for improving psychological health. The policy approach of the Netherlands has separated drug markets, allowing greater control, as well as safe and effective drug policy. Portugal's approach of decriminalisation represents another avenue.
Friedman wrote an article for Newsweek in 1972 predicting the many negative consequences of drug prohibition, citing the prohibition of alcohol in the US from 1920 to 1933, which was a failed policy. The legalisation of drugs in US states has crippled Mexican drug syndicates, due to the destruction of the black market, something The Economist predicted in 2012.
Implications
Much of the legislation concerning narcotics, if not most drug policy in the Asia-Pacific, is based on outdated evidence and is not data-driven. In East Asian societies and other locales with a significant ethnic Chinese population, such as Hong Kong, Taiwan and Singapore, the impact of the Opium Wars is felt in contemporary drug policy as well.
Legalising cannabis, as well as other drugs which have shown application in the medical, biotechnology and recreational space has both social and economic benefits. In fact, China's potential to dominate the global cannabis market is often overlooked. More than half of the 600 relevant patents filed with the World Intellectual Property Office (WIPO) with regards to cannabis are owned by Chinese firms.
*Edit* Removed paragraph about other drugs*
Aside from its recreational uses, evidence suggests that marijuana possesses strong medical potential for treating cancers, inhibiting their progression as well as possessing the potential to treat degenerative neurological conditions like brain tumours and brain cancer.
Israel has benefited greatly from it cannabis. Emerging as a major player in the medical marijuana space, despite historically strict dug policies, it could easily leverage on its status as a major global startup ecosystem and significant intellectual capital and business prowess to become a major cannabis business hub.
Legalising these drugs and formulating public policies aligned with prevailing scientific and economic evidence, and allowing them to be driven by data, would be beneficial for countries seeking to grow investment in industry verticals like pharmaceuticals, biotechnology, medical treatment, medical tourism and tourism & hospitality.
The Asia-Pacific is missing out on the growth of a business sector which could drive the growth across a number of verticals, from agribusiness, agricultural technologies and biotechnology to pharmaceuticals. It might be time for the governments of APAC nations to review their drug policies and align them with the evidence.
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Is Asia missing out on the cannabis business wave? - DealStreetAsia
Author: Shiwen Yap
Contact: editor@dealstreetasia.com
Photo Credit: Ed Kashi
Website: DealStreetAsia
In 2014, US investors injected US$104.5 million in capital into the cannabis business (canna-business) space, acquiring stakes in cannabis and cannabis-related companies. According to the findings of New York-based research firm CB Insights, investment into the cannabis space peaked in Q4 2014, growing at a rate of 941.5 percent when contrasted with the previous year.
Since Q1 2013, there's been a surge in deal volume and investment capital being injected into the cannabis business space. Firms such as Leafline Labs and Aphria, both of which produce, supply and distribute medical marijuana, secured funding of $12.4 million and $6.2 million respectively. Meanwhile, Mediswipe, which deals in compassionate care technology, secured $1.1 million in funding.
More recently, in January 2015, Peter Thiel's Founders Fund co-invested in a $75 million Series B round led by Privateer Holdings, a private equity firm with a portfolio containing cannabis information resource Leafly.com, New York-based recreational cannabis company Marley Natural, and Canadian medical marijuana grower and e-commerce site Tilray. PharmaCann, a Chicago-based group of medical marijuana cultivation centres, raised $20 million.
The move by Founders Fund marks the first major brand-name VC investing in the cannabis sector. However, the focus is on firms in the Midwestern US and Canada, rather than marijuana hubs like Colorado and California. US states like Alaska, Colorado, Oregon, Washington and Washington, D.C. are legalising recreational use, with another 24 states legalising medical use.
Internationally, Jamaica, Uruguay and Netherlands have legalised marijuana to varying degrees, while Spain is noted as another destination where private consumption is legal. Purchase and sale of cannabis, as well as possession and consumption in a public place are illegal. However, growing the plant on private property for personal use, and consumption by adults in a private space, is legal.
Steve DeAngelo, co-founder and president of marijuana angel investor network The ArcView Group and Harborside Health Center, a major US medical marijuana dispensary, says Arcview brokered $17 million in deals with 34 companies since launching in 2010. In his view, the increased dealflow indicates both the robustness and investment potential.of the cannabis industry.
"In the beginning of this industry, our biggest challenges were legal, but we solved many of those challenges. After we figured out the legal landscape, many of our challenges were financial to help scale up and professionalise the businesses. Today, investment is not really a problem. If you have a good team and a good idea, you're in a good position. There is a phenomenal amount of investment interest" said DeAngelo.
The Economic Case For Legalization
Drug legalisation has been gaining traction in the US, with a growing international community seeking to engage and persuade the governments. The New York Times published a piece calling for the repeal of prohibition. Dr Jeffrey Miron, an economist based in Harvard University, has studied drug policy extensively, publishing a 2005 report that was endorsed by the late Milton Friedman, George Akerlof and Vernon Smith — all Nobel Laureates in the field of economics.
The most crucial arguments for legalising drugs are simple: Legalising production, distribution and consumption of specific classes of drugs destroys the black market for drugs. Ending drug prohibition has a direct impact on government budgets, often incurring more benefits than costs.
Legalisation of drugs eliminates the involvement of organised crime in the trade, while generating revenue for the government via taxation, reducing the costs involved in enforcing prohibitionist laws and ensuring a safe, regulated supply of narcotic commodities subject to public regulation, government oversight and economic barriers.
Drugs are part of parcel of human society, a narcotic commodity with a demand for its used present in almost every society. The two most common social narcotics — tobacco and alcohol — are ironically legal, despite the lack of any major health benefits and their comparative addiction potentials and harm. In fact, alcohol is more lethal than many illicit recreational drugs.
Legal social drugs like alcohol and tobacco (nicotine) are far more addictive than many illegal or restricted psychedelic drugs like marijuana*Edit* and others*. In fact, marijuana is as addictive as coffee, a very common social drug. Its the fact that they are legal commodities traded in an open market ad subject to public regulations that inhibits their abuse. Many restricted drugs are less harmful and addictive than legal ones.
While prohibition is intended to control drug abuse and addiction, minimising their social and economic harms, prohibition in fact tends to have the opposite effect. Prohibiting a commodity or service results in a black market, which involved organised crime elements. A black market creates a seller's market where demand exceeds supply, with production, distribution and marketing controlled by organised crime. Prices are inflated and profit margins large.
While prohibitionist might cite the dangers posed by such psychedelic drugs, there's been negligible evidence linking it to mental health problems.In fact, psychedelic use has positive implications for improving psychological health. The policy approach of the Netherlands has separated drug markets, allowing greater control, as well as safe and effective drug policy. Portugal's approach of decriminalisation represents another avenue.
Friedman wrote an article for Newsweek in 1972 predicting the many negative consequences of drug prohibition, citing the prohibition of alcohol in the US from 1920 to 1933, which was a failed policy. The legalisation of drugs in US states has crippled Mexican drug syndicates, due to the destruction of the black market, something The Economist predicted in 2012.
Implications
Much of the legislation concerning narcotics, if not most drug policy in the Asia-Pacific, is based on outdated evidence and is not data-driven. In East Asian societies and other locales with a significant ethnic Chinese population, such as Hong Kong, Taiwan and Singapore, the impact of the Opium Wars is felt in contemporary drug policy as well.
Legalising cannabis, as well as other drugs which have shown application in the medical, biotechnology and recreational space has both social and economic benefits. In fact, China's potential to dominate the global cannabis market is often overlooked. More than half of the 600 relevant patents filed with the World Intellectual Property Office (WIPO) with regards to cannabis are owned by Chinese firms.
*Edit* Removed paragraph about other drugs*
Aside from its recreational uses, evidence suggests that marijuana possesses strong medical potential for treating cancers, inhibiting their progression as well as possessing the potential to treat degenerative neurological conditions like brain tumours and brain cancer.
Israel has benefited greatly from it cannabis. Emerging as a major player in the medical marijuana space, despite historically strict dug policies, it could easily leverage on its status as a major global startup ecosystem and significant intellectual capital and business prowess to become a major cannabis business hub.
Legalising these drugs and formulating public policies aligned with prevailing scientific and economic evidence, and allowing them to be driven by data, would be beneficial for countries seeking to grow investment in industry verticals like pharmaceuticals, biotechnology, medical treatment, medical tourism and tourism & hospitality.
The Asia-Pacific is missing out on the growth of a business sector which could drive the growth across a number of verticals, from agribusiness, agricultural technologies and biotechnology to pharmaceuticals. It might be time for the governments of APAC nations to review their drug policies and align them with the evidence.
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Is Asia missing out on the cannabis business wave? - DealStreetAsia
Author: Shiwen Yap
Contact: editor@dealstreetasia.com
Photo Credit: Ed Kashi
Website: DealStreetAsia
