Funding the Future of Cannabis
☰Legal cannabis industry updates from Salveo Capital
Salveo Capital is attending the Marijuana Investor Summit in Denver, Colorado. Managing principal Alex Thiersch will be on hand and the company will have a booth in the exhibitor hall. Stop by booth 730.
Salveo Capital is attending the Marijuana Investor Summit in Denver, Colorado. Managing principal Alex Thiersch will be on hand and the company will have a booth in the exhibitor hall. Stop by booth 730.
“Regulation” is often considered a four-letter word in business circles, but the truth of the matter is that for those of us in the marijuana industry regulation is exactly what we should be supporting. We shouldn’t be pining for a wide-open wild west where anyone can get away with anything they can imagine. We shouldn’t be afraid of codified rules. Statutes protect patients and customers, instill confidence in industry skeptics, and – paired with initiative and foresight – allow decisions to be made by those most qualified to make them. We in the industry must be at the forefront, because if we don’t allow our expertise to inform the law then politics inevitably will.
“Regulation” is often considered a four-letter word in business circles, but the truth of the matter is that for those of us in the marijuana industry regulation is exactly what we should be supporting. We shouldn’t be pining for a wide-open wild west where anyone can get away with anything they can imagine. We shouldn’t be afraid of codified rules. Statutes protect patients and customers, instill confidence in industry skeptics, and – paired with initiative and foresight – allow decisions to be made by those most qualified to make them. We in the industry must be at the forefront, because if we don’t allow our expertise to inform the law then politics inevitably will.
There are snake-oil salesmen in every lucrative marketplace, so it shouldn’t be surprising that the FDA recently issued warning letters to several makers of CBD oil, some of whose products did not even contain CBD. This type of authority to protect consumers is exactly what the industry needs, because we are still at a point where, in the public’s perception, every action reflects on every company. When products are not what they say they are, when strains are not of consistent strength, when people are taken advantage of by opportunists all cannabis businesses are affected.
When we establish ourselves as responsible, reliable, consistent operations, however, the opposite happens. People that once viewed marijuana as the arena of college students and slackers will consider participating; if not as future business partners then as future consumers. Fair, comprehensive rules mean that individual companies operating in the marijuana space are relieved of the burden of reshaping the plant’s image alone. It creates an institutional infrastructure that assures the public that we as an industry are looking out for their well-being.
The result of dragging our heels on oversight is a set of laws based on fear, prominence of old ideas, and ultimately over-regulation. In many of the states with the most recent medical marijuana laws the operating rules are incredibly strict, severely limiting not only who can have access to medicine (approved illness lists have been shrinking in each new state), how many businesses are allowed to operate (number of issued licenses at launch have been shrinking as well), and how patients can consume (several laws stipulate extract- or edible-only), but even how many individual strains are allowed to be grown.
Where marijuana is legal – both for medical and adult use – we must set examples for what a properly regulated industry looks like. We must establish high standards and work with lawmakers to create structures that will make sure every business that wants to work in this space meets those standards.
Colorado has been paving the way in this respect, and Salveo Capital’s senior industry expert Elan Nelson is an active participant in that state’s Marijuana Industry Group. She and MIG have worked to advance consumer safety and industry regulation, testifying on child-safe packaging and comprehensive tax rules among other things, and many states are looking to emulate Colorado’s policies from lab testing to doctor-patient prescription rules. If the rest of the industry shows same level of responsibility then we improve the situation for our customers, our patients, ourselves, and all future states whose legal markets are still finding their way.
We have the opportunity to let science and experience shape the regulatory structure of our industry. All we have to do is take the lead.
The legal marijuana industry is already the fastest growing industry in the United States. The revenue projections from both the growing and selling of cannabis, and from the ancillary industry, are truly staggering, and even conservative projections predict that the legal marijuana industry will be valued in the tens of billions of dollars within the next five years.
The truth, however, is that this industry’s potential, even when compared to some of the great industry explosions in history, is undervalued. Although the “gold rush” and “oil boom” are commonly referenced as comparative markets, none of those industries currently match the immediate growth potential of the legal marijuana market. Given the convergence of medical marijuana, recreational marijuana, and technology we haven’t scratched the surface of how large this “green boom” is going to be.
The legal marijuana industry is already the fastest growing industry in the United States. The revenue projections from both the growing and selling of cannabis, and from the ancillary industry, are truly staggering, and even conservative projections predict that the legal marijuana industry will be valued in the tens of billions of dollars within the next five years.
The truth, however, is that this industry’s potential, even when compared to some of the great industry explosions in history, is undervalued. Although the “gold rush” and “oil boom” are commonly referenced as comparative markets, none of those industries currently match the immediate growth potential of the legal marijuana market. Given the convergence of medical marijuana, recreational marijuana, and technology we haven’t scratched the surface of how large this “green boom” is going to be.
Consider these facts.
One: Legal cannabis is headed in two different directions, each with the potential to be multi-billion dollar industries. Comparisons to alcohol after Prohibition forget that, unlike alcohol, marijuana has very real application in medicine. Pharmaceutical companies are already preparing for the inevitable consolidation that will take place once the federal prohibition on marijuana is lifted. The amount of money that will be made from the medical side of cannabis – research and development of new strains and treatments, new delivery mechanisms, extractions of certain components – might very well dwarf the amount of money made from the regulated adult use market.
And adult use will be a massive market. In 2014 legal marijuana sales in Colorado doubled in the first year of expansion from medical-only to full adult use. It is possible, if not likely, that marijuana will be fully legalized throughout the entire west coast by the end of 2016. California and Nevada are almost certainly passing such bills in 2016, with states like Arizona, New Mexico, and Montana considering laws as well. On the east coast, Vermont, Rhode Island, and Maine will have full legalization bills on the books in the next two years with much of the rest of the northeast corridor following suit soon after.
Two: The federal prohibition on marijuana is ending much quicker than even the most ardent supporters anticipated. Rand Paul, who yesterday announced his candidacy for President of the United States, is the sponsor of a bill to legalize medical marijuana. This makes the legalization of cannabis a legitimate election issue, and not one that a viable candidate can readily oppose. Not when swing states like Ohio, Pennsylvania, and Florida are set to pass comprehensive cannabis laws, and a recent Quinnipiac poll in these states showed over 75% support for medical marijuana. Several other swing states – Colorado, Nevada, Washington – already have recreational or medical laws on the books, and even Ted Cruz and Jeb Bush have both stated that they would not interfere with state marijuana programs.
Three: Underlying both the recreational and medical marijuana markets is the fast-growing ancillary and technology market. This market (often referred to as the “pick and shovel” market) is growing just as quickly as marijuana itself. As state laws are passed and prohibition is lifted, new startups are working quickly to fill the vast infrastructure gap left by marijuana’s former illegal status. These firms are offering cutting edge solutions in a landscape with no entrenched leaders, and together these they could develop into yet another billion-dollar industry.
The legal marijuana market grew by an astounding 74% in 2014, and with legal expansion on the way in many parts of the country that growth is likely to continue. We are receiving funding requests from every imaginable sector – cultivation centers and dispensaries, research labs, pharmaceutical companies, software developers, and the like – as entrepreneurs pair with established business professionals to capitalize on the astonishing opportunity the legal marijuana market presents. In the industry we like to talk about the boom of recent years as a “green rush” but the coming months will show that we haven’t seen anything yet.
