ANALYSIS: Entrepreneurs are rushing to cash in on canna-business

As more regions legalise the crop there are going to be some big business opportunities

ANALYSIS: Entrepreneurs are rushing to cash in on canna-business

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At the end of last year the term “budtender” was a contender for the Oxford Dictionaries Word of the Year. It lost out to “vape,” the term used for inhaling from an e-cigarette or vaporiser (more on those later), but the fact that the job description of “a person who serves customers in a cannabis dispensary or shop” has made its way into common vernacular is testament to the drug’s prevalence in modern day life.

Further proof came when Alaska and Oregon became the third and fourth states to fully legalise the sale and consumption of cannabis in the United States - the drug could be legal by the end of next week in Washington DC.

23 states in the union are now enforcing drug policies that go against federal laws which completely outlaw the drug. Medicinal usage has been introduced in Canada and Israel, while Uruguay has also fully legalised the herb.

Marijuana leglisation in Colorado and Washington led to a ‘green rush’ as entrepreneurs moved to start everything from small grow-shops to cannabis confectionery companies, cannabis-friendly ski chalets and cannabis cookery schools. In Colorado the ‘canna-business’ economy employs over 10,000 people and is hoping to clock sales of over $1 billion (€796 million) this year alone.

With this much money floating around, and a spreading feeling that the tide of public opinion has changed in the US - many are predicting a truce in the War on Drugs (regarding cannabis anyway).

Investors are currently jostling to position themselves to take advantage of a potential further softening of drug laws.

Going global

Marley Natural is one of the first brands to publicly announce its ambitions to become a global cannabis brand. The company is being backed by Privateer Holdings, a New York private equity firm who specialise in “strategic investments in the cannabis industry” and hope “to acquire and create mainstream brands, professionalising the cannabis business landscape through the power of private enterprise.”

The company cleverly got the Marley family on board to licence the use of Bob Marley’s image to promote their brand. They also have a logo designed by Heckler Associates, the same company who came up with the Starbucks’ ‘mermaid’ logo and design all of the coffee-giant’s packaging.

Marley Natural has a slick website that feels like a mix between a mainstream beer company, a high-end fashion retailer and an NGO.

There is no ‘about page’ but there is a ‘mission’ statement which calls on users to join its ‘social movement’ to help them: “Champion Bob’s voice and his insight to help people realize the positive potential of cannabis for the mind, body, and spirit ... to help undo the suffering and injustice of cannabis prohibition around the world.”

The brand hopes to have established a global presence by the end of 2015.

High tech

Far away from cultivation farms and smoke-shops, many of Silicon Valley’s best and brightest have been looking for a slice of the legal drug market.

Startups are engaged in an arms race to make the best vaporiser. These products use the same mechanics as e-cigarettes. The idea is that vaporising can stimulate the drug’s psycho-active chemicals without over-heating the product.

Using a vaporiser is appealing because it is discreet and avoids the lung damage associated with smoking the drug – often with tobacco in European countries.

Users are also willing to splash out a lot of cash to get the latest, snazziest pieces of hardware.

Adam Bowen and James Monsees both have master degrees in design from Stanford University and are behind the company Ploom. Their flagship vaporiser, ‘The Pax’ retails at $249.99 (€199). In a previous life Bowen did design work for Apple.

Mark Williams is the co-founder of Firefly, he is also a former developer from Apple and worked on the team that built the Mac OS X operating system. His company designs high-end vaporisers that almost look like flash drives, or some sort of smart device.

These companies have been snapping up some of the industry’s best graduates who are shunning jobs with the traditional tech giants to come work on these projects.

There's an app for this

There has also been a boom in weed-related apps, including a number of social networks set up by companies who mirror the likes of Yelp and Instagram. Some serve as cannabis's answer to the craft beer app Untapped - allowing users to track and rate the different strains of the drug that they try.

This year Colorado even had a cannabis tech startup summit which offered funding for the three projects that were voted as having the most potential.

The winners reflected the nascent state of the industry - first prize went to an app called ‘CannaRegs’ which aims to keep all those involved in the business up to date on marijuana laws and regulations. Second place was given to ‘CraftedHere’ – an online directory aimed at tourists which lists cannabis dispensaries. While in third place was ‘Cannabrokers’ – a company which facilitates wholesale transactions between producers and dispensaries.

Budding businesses

There are a few key regulations that are stopping smaller firms dominating the legal market in the US at the moment. One is a fundamental issue that these individual states sit within a federal structure where the sale of the drug is illegal. This means that product cannot be trafficked from one state to another; all the marijuana sold in a state must be produced there.

Cannabis dispensaries are obliged to grow at least 70 percent of the product that they sell. Cultivators have to directly sell 70 percent of the crops that they grow. This has stopped companies from specialising in the areas that they excel in.

Another issue is that many banks have to abide by federal legislation, under which dealing with companies selling marijuana is illegal. This means that even setting up a basic bank account can be difficult for these businesses, not to mention getting a loan or any other type of financial assistance.

However, these are problems in the legal states - states with loose ‘medicinal’ laws operate in an even greyer legal area.

So... what’s next?

This is definitely a ‘watch this space’ industry. Right now the legal framework for these companies to go legitimate and expand is not there, but companies are starting to gamble that that time is coming.

It seems that public opinion, even in traditionally conservative states in the US, is moving towards decriminalisation or legalisation.

Right now the industry is in a legal 'no-man’s land' but if the changes to legislation do happen, the potential growth for companies who get in early is massive.