A Blunt Business

[Reefa]

Cannabis startups are having a moment. Twenty-seven states, including the District of Columbia, have either legalized medical marijuana or totally decriminalized possession. Outright sale and recreational use is greenlit in Colorado, Washington, and as of next year, Alaska and Oregon.

With regulations easing, and the potential to turn the herb into a lucrative, and very taxable cash crop, a once-shadowy industry is stepping out. And big names in entertainment and venture capital are throwing down. Now, so-called “potrepreneurs” are doing something that would have been unheard of just a handful of years ago: Taking the business mainstream.

By some estimates, over $100 million has been raised to help prop up cannabis startups this past year. And it’s not just pot heads getting involved. Yes, Snoop is planning to build a $25 million fund to invest. But some more more traditional investors have also committed serious coin.

Last week, $75 million was raised by Privateer Holdings, a Seattle holding company led by super VC Peter Thiel. The fund is devoted to all things weed: Creating, incubating and acquiring cannabis companies.

Privateer already owns a Vancouver Island cannabis producer called Tilray, the rating and review site Leafly, and is in the process of developing a line of Bob Marley-branded products dubbed Marley Natural. The move is a big deal because it may help brands and multinationals warm up to the market. And it’s very solid PR since the guy leading Privateer is the co-founder and former CEO of Paypal. That background, plus all this money, is seemingly bringing some legitimacy.

“The more creative you can be, and the more capital you can raise, well, the sky’s the limit,” said Mike Antonucci, a marijuana entrepreneur and the author of Modern Marijuana Living, a guidebook to navigating the industry.

Whether or not you believe in the benefits of the plant, its ability to treat disease, its safety, or even addictive properties, what can’t be denied is the public’s infatuation—and the potential to turn the industry into an economic buoy, now that the government is (mostly) relaxing enforcement.

There are edible companies, dispensaries, and a burgeoning startup scene with everything from marijuana-centric social networks focusing on catering and dating, to Yelp and Google Map services like Mass Roots and Weedmaps. All bring major tax benefits for Uncle Sam, plus the potential to employ thousands to cultivate, produce, sell, and market the crop.

With a healthy demand and clientele, the market is poised. But there are still some legal hurdles to jump. While use and cultivation are now legal in many places, transportation remains a roadblock. Crossing a state line with the herb or its byproducts is a felony. Criminal conspiracy to be exact, as weed is still classified as a schedule 1 drug (alongside heavy hitters like heroin and cocaine).

The real barriers of traversing states’ invisible lines have created a hazy atmosphere for both the banking and financial sectors—a fact that hasn’t helped reverse the stigma that marijuana operations are hoarding or laundering cash.

The truth is, many businesses are stuck in a Catch-22. No banks will take their money, so they’re stuck piling and playing out a stereotype that can more closely mirror the behavior of drug dealers, not legitimate entrepreneurs.

“There isn’t a banking solution,” said Antonucci, who spent two years dealing with this problem at a collective in Sherman Oaks.

For him, the problem was abruptly solved when the city’s Proposition D moratorium forced him to shut down. (The number of dispensaries are now capped, and only those opened before 2007 are left to legally operate).

Challenges like these make it tough to scale. And as for edibles and the flowers themselves, mass production means the FDA, and probably the USDA, will eventually step in. Industry-wide regulations would go a long way to quell fears that medicinal properties remain unchecked. And a prescribed dosage could further help improve the plant’s image.

In the meantime, Antonucci says “hand to leaf” companies can profit. That means ancillary businesses that don’t transport or sell the drug, like marijuana apps and websites, or in his case, books. He plans to release a new title this summer, an opus on pot’s ability to stimulate the economy.

“If you want to know how to grow your own money,” he said, “this is it.”

One entrepreneur capitalizing despite these difficulties, is Isaac Dietrich, the co-founder and CEO of Mass Roots, a social network for potheads.

Dietrich is very upfront about his love for the plant, even noting that he founded the company while smoking.

“I don’t want my grandmother seeing me taking bong rips while scrolling through my Facebook pics,” he said.

While that may not sound professional, the capital he’s raised, is. In the fall of 2013, after proving the concept and establishing a community of more than 6,500 dedicated users, he picked up $150,000 in investment and a $1 million valuation. But it wasn’t easy to convince the corporate sector to pull out their checkbooks.

“I pitched 20 Silicon Valley venture capitalists,” Dietrich remembered. “I got the door slammed in my face many times.”

Despite the criticism, his online numbers didn’t lie. And it was starting to get Dietrich’s service attention. With the site expanding to 100,000 users, the Denver company raised another $450,000 at a $5 million valuation. Things were really looking up. But then an old cliche started ringing true: With more money comes more problems.

In this case, Mass Roots was taken out of the App Store in April of 2014, and user growth plateaued.

So Dietrich rallied his community, and 10,000 Mass Roots members petitioned Apple, praising the social support the app provided. Apple reversed their decision this past February. Now other cannabis-related apps are permitted in the App Store, albeit geo-restricted to legalized states.

Helped by reintroduction into the App Store, and media attention, Dietrich claims the service now has a quarter of a million users.

“Market demand is proven,” Dietrich said. “Now legal, regulated businesses are coming in and proving it can be done. It’s validation that the problems that we’re working on are significant.”

Dietrich predicts that the Thiel investment will send the go signal to multinationals to ante up. He added that there will be more definitive legal closure in the coming 2016 presidential election.

“Eight states will have marijuana on the ballot,” he said. “Candidates can no longer ignore it.”

Politicians will likely be forced to come into the open and enforce broader rules, said Troy Dalton, the CEO of the ArcView Group, an Oakland marijuana think tank and investor network.

Industry numbers are already robust, but if and when changes happen on a federal level, there may truly be a green revolution.

Dalton calls the marijuana market the fastest growing enterprise in America, blossoming from $1.5 to $2.7 billion in the last year, a 74% growth spurt. And he claims ArcView’s 400 plus investors have raised over $40 million for more than 50 companies.

“The next level is institutional capital,” Dalton added.

“It probably won’t show up until federal law changes and allows for legal cannabis transportation from state to state. For a lot of people, it’s an impact investment, like they’re part of history. In this case, it’s more similar to the fall of communism since there’s such a great demand, and people willing to break the law. That’s something very special.”

http://smashd.co/a-blunt-business/

[212eta]

:smoke: :ganja:

[Reefa]

:smoke: :ganja:

:bong: :yes: