The emerging cannabis industry could be the most lucrative investment opportunity since the Dot Com explosion of the 1990’s. Starting with Colorado and Washington in 2012, and later Oregon, Alaska, and the nation’s capitol in 2014, voters are saying ‘Yes!’ to recreational pot. What was once a counter culture pipe dream, legalization is now poised to sweep across the U.S. like wildfire, as lawmakers embrace the idea (and the potential revenue) from sea to shining sea.
It’s not every day a whole new market opens up, and entrepreneurs and venture capitalists are seizing the opportunity enthusiastically. Long lines of people are fighting for a limited number of retail licenses. College grads, disillusioned with the cubicle life, are turning their grandparent’s old farmland into large-scale growing operations. There’s a new surge in pipes, vaporizers and other paraphernalia. Everyone from restaurants and motels, to insurance agencies and consulting firms, are coming up with new ways to get a piece of the action.
With the market inundated with would-be entrepreneurs and business owners, what should the smart investor look for in this potentially volatile and risky market? Here are 10 things to consider, 10 signs that make the successful start-up operation stand out from the crowd of stoned and starry-eyed dreamers.
1. The Right Blend of Passion & Business Savvy.
Of the vast crowd of people trying to elbow their way into this emerging industry, a large percentage of them are long-time cannabis supporters, who understand pot culture and are passionate about the cause – but they don’t have a lick of business sense. Likewise, there are a good many seasoned entrepreneurs eager to jump on the bandwagon and make some fast money – but they don’t really understand the nuances of cannabis culture, or have any sense of connection and belonging to the movement.
The smart investors are looking for start-ups run by experienced entrepreneurs, who know the ins and outs of running a business, AND who also live the cannabis lifestyle, and can identify with the target market. Those entrepreneurs who have a foot in both worlds are like diamonds in the rough, uniquely poised to take this industry by storm.
2. Consulting and B2B Services.
With so many pot enthusiasts eager to get into the action any way they can, the competition is pretty fierce. Many of the growers and distributors who are blazing the trail are going to fold beneath that pressure, making them a rather risky choice for your investment portfolio. There are some, however, that benefit from all those competing enterprises: the businesses that serve them. There are consulting firms, real-estate agents and equipment retailers that focus on cannabis clientele, and law firms which specialize in marijuana law. These B2B service providers are a smart bet, because they cater to the entire canna-business sector, which is guaranteed to grow and prosper despite those individual businesses which flounder and fail.
3. Knowledge of the Law.
To succeed in the highly competitive marijuana industry requires a thorough and detailed knowledge of both state and federal laws. Look for a business with a lawyer on staff, or maybe a law school drop-out. Those companies who navigate the complex labyrinth of legal codes and court rulings are in the best position to push the boundaries of this emerging industry, anticipate progress, and stay on the cutting edge – without crossing over into criminal territory.
4. Smart Branding.
As cannabis culture comes out from underground, and into the mainstream, the style and the taste of the cannabis user is also undergoing a major shift. Gone are the days of the dreadlocked white kids, unshowered and unshaven and covered with pot leaf emblems. The smart companies are planning accordingly, aiming there branding and marketing at hip, urban professionals. Or zeroing in on a more specific group, like Foria, the pot-infused vaginal lubricant, which is reaching out to today’s empowered and sexually liberated woman.
5. Developing New Tech.
One of the most promising frontiers in the marijuana industry is the technical one. Look for companies who are developing new devices, software, apps and social networks aimed at cannabis users, both recreational and medicinal. Take Massroots for example, an app and social network designed and built with stoners in mind. They make it safe to “talk pot” and share photos of your buds and bongs by protecting user’s identities. They offer suppliers of weed and accessories a unique opportunity to advertise directly to their target market – for which they might be willing to pay quite handsomely.
6. Marijuana Tourism.
A big chunk of the legal pot revenue in the pilot states actually comes from out of state, as stoners across the country pile into planes and rebuilt Volkswagens to come see the promised land and taste the sweet, skunky flavor of freedom. Once recreational pot becomes commonplace, the phenomenon of “cannabis tourism” will largely fall by the wayside. But in the meantime, for those states bold enough to be the first, there is a lot of money to be made catering to out-of-towners. Weed friendly hotels, tour guides, and the like are a smart investment.
There are many who would love to experience the sensation of getting high, without the smoking part. And there are many marijuana smokers who still love to partake in ganja-infused goodies. Companies like Dixie Elixirs & Edibles are glad to cater to both crowds. They are taking the world of cannabis edibles way beyond the stereotypical pot brownies and offering their customers fun and innovative new ways to “get your buzz on.”
One of the most glorious and highly anticipated consequences of legalized weed is being able to get off the couch, get out of the house, and have a stoned night out on the town – without fear of getting busted for it. Look for cannabis friendly restaurants, movie theaters, concert venues and more to really take off in the years to come.
9. Pharmaceutical Pot.
As promising a future as recreational pot might have, the future of medical marijuana may be brighter still. While recreational use is now legal in 4 states (and D.C., kind of), medical marijuana is already available in some form in 23 states. We have barely begun to explore the medicinal potential of cannabis, and as the Schedule 1 stranglehold is relaxed, and pharmaceutical testing really takes off, we will witness the dawn of a new era in which medical pot is available in all 50 states, in a variety of powerful strains customized to treat different ailments with minimal side effects. The U.S. spends more than $300 billion on pharmaceuticals each year. Just imagine how big a slice cannabis can take out of that pie…
While not as sexy and glamorous as running a dispensary, hemp farming is definitely going to skyrocket in the near future. The industrial uses of hemp are limitless. The fiber of the plant is perfect for making all kinds of paper and paper products, as well as cloth and textiles. An acre of hemp is hundreds of times more productive than an acre of forest, three times as profitable as soy, and is more hardy and requires less water than cotton. The oil from hemp seeds have medicinal applications, and an also be used for cooking, lubricant, varnish, and ink. Once the legal restrictions are lifted, hemp will be a life-saver to struggling farmers, a boon to the U.S. economy, and a major victory in the fight against deforestation and climate change.