Marijuana Investments: Massive Growth or Massive Bubble?

A man smokes a joint during a march calling for the legalization of marijuana at Paulista Avenue in Sao Paulo, Brazil, on May
A man smokes a joint during a march calling for the legalization of marijuana at Paulista Avenue in Sao Paulo, Brazil, on May 23, 2015. Members of the Brazilian Association of Patients of Medical Cannabis and other people marched calling for the legalization of marijuana, either for its medical benefits or for recreational purposes. AFP PHOTO / MIGUEL SCHINCARIOL (Photo credit should read Miguel Schincariol/AFP/Getty Images)

In 2000, The New York Times labeled the dotcom bubble as a "euphoric" time characterized by the period's extreme highs and subsequent crashing lows. The short-lived hyper success of the internet startup age did not die in vain; the phenomenon fundamentally changed technological innovation, business models, investment mentalities and the global financial markets. Now in our post-recessionary age, experts are predicting that similar to internet startups, cannabis will be the next industry to rock the business, financial and investment worlds.

More than 14 million Americans consume marijuana on a regular basis. Legal marijuana sales totaled $2.3 billion in 2014 alone whereas the illegal marijuana market is said to produce more than $18 billion in revenue per year. If we momentarily put aside the legal controversy, the numbers alone reveal that regulated cannabis is a major potential market that remains largely untapped. Despite the federal ban against the drug, there are currently more than 23 states and U.S. territories which have implemented some form of medical or recreational marijuana decriminalization. As more states pass marijuana legal reform, an increasing number of entrepreneurs and investors view the "Green Rush" as a major business opportunity with the potential to transform the pharmaceutical, food & beverage and commercial industries.

Some investors are wary of betting their chances on a product that the federal government still labels as a Schedule 1 substance. The disparate federal and state laws create an environment of uncertainty that make many investors rightfully nervous. Another concern lies in the recent high volatility of certain publicly traded marijuana stock which can be a reminder of the rollercoaster days we saw back in the dotcom heyday. Additionally, instances where cannabis companies released misleading or even falsified information about its employees and/or products has made it harder for investors to differentiate between legitimate operations with clean track records and shady businesses seeking to manipulate investors.

On the business side, one crucial obstacle for the legal cannabis commercial industry remains: most, if not all banks refuse to take cash from marijuana businesses for fear of getting shut down by the federal government. A new bill that proposes to allow legal dispensaries to access the federal banking system may be the solution that cannabis companies are looking for. If federal and state laws are able to strike a balance so that cannabis businesses can truly run like legitimate companies, the legal "Green" industry can further stabilize making it easier investors to determine who the real players in the market are.

Despite the difficulties, an increasing number of investors are doing their due diligence and are willing to entertain the risks associated with legal cannabis. Just last month, the Seattle-based marijuana VC firm Privateer Holdings raised $75 million in a Series B funding round - the largest private investment amount raised in the industry. Privateer Holdings' capitalization may be an indicator of the massive growth to come for the cannabis industry, the results of which may also revolutionize other fringe commercial fields as well (see: LED grow lights, industrial hemp, fuel and energy) . It's important to remember that because of legal prohibition, we still have much to learn about the extent of the benefits of marijuana as a consumer product. Since thorough and extensive cannabis research has been stymied in the past, the plant's potential is untold and the future of the legal cannabis industry may truly be limitless.