Highlighting how marijuana reform provides extraordinary small business opportunities
This morning’s New York Times has this lengthy new article about the modern businesses surrounding marijuana reform headlined “Start-Ups Seize Marijuana Opportunities as Big Companies Hold Back.” Here are excerpts:
When Garett Fortune’s brother was found to have cancer in early 2013, it was so advanced that all he could do was to try to live out the remainder of his life in as little pain and discomfort as possible. That meant taking about 30 pills a day, Mr. Fortune said — until his brother tried marijuana. “I saw him go from 30 pills a day to almost zero,” he said. “It helped his appetite and the nausea. He had a way better quality of life at the end than he would have without the cannabis. It made me a proponent of the industry.”
It also gave Mr. Fortune the idea for a business. With more states legalizing marijuana for medical uses — and, in Colorado and Washington, recreational ones — Mr. Fortune identified one of the industry’s challenges: packaging. The old standby, the resealable plastic bag, was not sufficiently effective, especially for a regulated industry, and Mr. Fortune already owned OdorNo, a company that made odor-proof bags for human and animal waste.
Mr. Fortune proposed a new product, odor-proof and child-resistant marijuana bags, to OdorNo’s advisory board. He expected the members to laugh him out of the room, but they did not. “Every single one of them told me: ‘This is the biggest opportunity on the planet right now. Follow that.’”
In May he licensed out production and distribution of OdorNo, and he and his team began building FunkSac in Denver. Although FunkSac bags are awaiting government approval, Mr. Fortune said he had hundreds of thousands of orders from cultivators, dispensaries and wholesalers. The company plans to begin delivering them this month and estimates it will have first-year revenue of about $2 million. Mr. Fortune said he had been contacted by dispensaries in 17 of the 22 states where medical marijuana was legal. “Right now,” he said, “it’s like drinking from a fire hose.”
To many, today’s cannabis industry resembles a modern-day Gold Rush. Troy Dayton, co-founder and chief executive of the ArcView Group in San Francisco, a network of 250 high-net-worth investors that backs cannabis start-ups, said more than 30 early-stage companies contact it every week. In the last year, he said, the group sent about $12 million in funding to 14 companies.
The size of the legal cannabis industry in the United States, measured by sales of the plant, was $1.5 billion in 2013, according to ArcView, which projects it will reach $2.6 billion in 2014 and $10 billion by 2018 — figures that do not include the growing numbers of ancillary businesses. The entire industry is dominated by small businesses, Mr. Dayton said, both because it is so new and because marijuana’s legality remains murky. Banks, for example, have been reluctant to take deposits or make loans to dispensaries because the drug is still illegal under federal law.
“You can’t have a national business,” Mr. Dayton said, because the laws vary by state. Opportunities for small businesses also exist because the stigma associated with the industry has discouraged bigger companies from getting involved. “You can’t find another industry growing at this clip that doesn’t have any major players,” he said. “That gives the little guy a chance to make a run at this.”…
SpeedWeed, a Los Angeles delivery service, allows customers to place an order online or by phone and have it delivered — depending on traffic — within 45 minutes. Although there are hundreds of marijuana delivery services in Los Angeles, AJ Gentile, a founder, said SpeedWeed was the largest. “Delivery services here are typically guys driving around in their car with a big box of weed,” he said.
Mr. Gentile said that SpeedWeed worked only with cultivators its legal team had vetted and that along with its delivery service, it planned to sell proprietary software to dispensaries nationwide. He estimated that the company had 20,000 legal customers and that revenue would double this year, up from $1.7 million in 2013.
Biological Advantage, founded in April, has a system of products it plans to introduce this month that are applied to a marijuana plant’s soil and leaves to enhance photosynthesis. The company’s chief executive, John Kempf, is also founder of Advancing Eco Agriculture, a crop-nutrition consulting company he started that has invested $400,000 in Biological Advantage. Mr. Kempf said his companies were a bit ahead of the game, anticipating what the market would need. “Growers aren’t yet looking at nutrition as a means for improving the medicinal concentrations in plants,” he said. “But they will.”