A Business Model for Marijuana

ith 23 states plus the District of Columbia enacting marijuana programs we are now steam rolling. And what is going to take place next is the final step and watershed moment for the industry.
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How did I end up here?

It's a question I am constantly asking myself. I spend parts of a typical week at what would be standard business activities: attending political events, speaking at business conferences and working with clients as I fly around the country. But then I spend parts of my week inside large warehouses filled with marijuana plants, inside retail stores where the products on the shelves have names like Tahoe OG and Blue Dream and having meetings with electrical engineers who are trying to figure out how to provide enough power in a small warehouse to light up a few blocks of the city. The stigma surrounding the business of pot is definitely weaning, but it's still a very hard shadow to shake. For those of us in this business, it's crystal clear that we are at the intersection of what was once a black market activity that is now making a turn and getting on the road with what will be its big business counterparts.

What a unique situation this industry finds itself in. What other industry has a demonstrated demand in the billions of dollars yet because that demand has been black market until now, the barriers of entry are low and competitive landscape is weak? What has happened over the last 20 years in the business of technology is astounding but they have had such a harder task, they had to CREATE demand to sell their products. As has been demonstrated with each new state that legitimizes the marijuana business there is no creation of demand necessary.

This has not taken place overnight, there have been advocates fighting to legitimize the business of pot dating back well before I was born. It has been a long road and only recently has the hard work, momentum and timing all come together to create the rapid pace at which states are creating this new economy. California legalized medical marijuana in 1996 and slowly over the next 10 years a couple states followed suit. Now all at once Nevada, Illinois, Minnesota, Florida, Maryland and New York are creating marijuana economies. With 23 states plus the District of Columbia enacting marijuana programs we are now steam rolling. And what is going to take place next is the final step and watershed moment for the industry.

The minute that legitimate institutional money begins to flow into our space the transformation will be complete. This industry has gone from underground operators using new confusing laws as a cover to run their businesses, to more complete laws and programs that attracted opportunistic entrepreneurs with unlimited risk tolerance to where we are today. The threat of federal intervention has subsided with Department of Justice memos clearly stating that operators doing so lawfully would not be threatened. States have learned from one another and programs now are only licensing the most upstanding, successful local businesspeople. The last piece is the institutional capital.

Two years ago at a national trade show for marijuana, you would be lucky to find a handful of businesspeople and the entire event would be filled with advocates and connoisseurs. I just spoke at a national trade show in Denver where there were over 1,000 attendees, the vast majority of them businessmen and women. I believe the most important fact was that there were over a dozen representatives from venture capitalists and private equity funds, not to mention all the family office and large angel groups that were in attendance. This is it -- the final piece of the puzzle. With the money comes intellectual capital, a real talent pool, systems and competition. The stigma is definitely waning... our dark shadow is shrinking every day.

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