You’ve heard the analogy: the marijuana industry as the modern incarnation of the famed 19th century California Gold Rush. While there are considerable differences between the two, it’s true there are some similarities. Namely, a boatload of dollars being poured into the respective industries in hopes of collecting a healthy ROI in (relatively) short order. And thanks to a recent spike in such investments, marijuana businesses and cannabis-related innovation are benefitting greatly.
One day, two announcements, $200 million
A perfect example highlighting the uptick in marijuana investments was the $200 million pledged in a single day (May 23, 2017) by two different investors. Marijuana Business Daily (MJBizDaily) noted “the combined $200 million is among the largest amounts of planned cannabis investments disclosed in a single day.” That’s not hard to believe since, as Minyanville reports, “in 2014, 59 cannabis companies raised a combined $104.5 million.”
For the non-math majors out there, that means nearly double the 2014 total was raised in a single day just three years later.
The first $100 million was announced by StarGreen Capital, an arm of the Beverly Hills real estate firm, StarPoint Properties. MJBizDaily says the group wants to inject cash into “a range of marijuana companies, focusing initially on cultivators, manufacturers and retailers.” StarPoint has its strategic partnership eyes out for professional entrepreneurs, “anything with a real estate component” according MJBizDaily, and “is interested in both new and established companies.”
The second $100 million announcement came from the other side of the U.S., by Florida attorney John Morgan, who has a lengthy background as a medical marijuana advocate. Until recently, Morgan claimed he wouldn’t invest in the cannabis industry, drawing a strict line between his activism and business interests. But his late-May announcement represents a pivot, one that could have him setting his sights on licensed business acquisitions, says MJBizDaily.
Investment powers innovation
As more dollars like these make their way into the legal cannabis space, they’ll power innovation by young marijuana businesses. Though the $200 million announced on May 23 seems to be earmarked primarily for cultivation, distribution, and real estate, other investments are stimulating new products and services that will better the industry on the whole.
The same week the dual 9-digit investments were announced, a well-regarded Silicon Valley venture capital firm, Benchmark Capital, broke word that they’d led an $8.1 million fundraising round backing the development of a new cannabis breathalyzer by Hound Labs. The device, currently undergoing clinical trials in at San Francisco General Hospital, will be marketed heavily toward law enforcement agencies and companies in the drug testing industry.
But the Valley, a long-tenured hotbed of innovation, doesn’t have the market completely cornered on fresh, industry benefitting technologies. Just look to Oregon where marijuana businesses are booming with new monies fueling their efforts — between $60-$80 million raised in the six months preceding May 2017 alone.
One of two “for instances” is Phylos Bioscience, a company who, as an Oregon Public Broadcasting writeup put it, “for a few hundred dollars, will outline the genetic profile of any cannabis plant you bring them.” This enables farmers to be sure they’re not trampling on pre-existing intellectual property. And then there’s Oregon CBD, a business founded by two brothers to grow the American hemp market by developing strains that will flourish in any number of climates.
Traditional startup events now stage-sharing with cannabis
Almost every mid-sized and larger metropolitan area celebrates their entrepreneurial culture with some sort of annual startup week. These celebrations usually include networking events, keynote and panel addresses, workshops, pitch competitions and/or demo events.
Many such weeks were born with a strong tech focus, but a few are now carving out space for — or being infiltrated by — young marijuana businesses and marijuana business ideas. Case in point, Canopy, a venture fund and business accelerator in the legal cannabis realm, used the first day of Boulder Startup Week 2017 to feature its own demo day. Ten fledgling businesses presented concepts ranging from cannabis product packaging solutions to automated plant harvesters to marijuana-focused social media platforms.
Cannabis has become such a normalized topic in some locales that even aspiring elected officials are openly addressing matters related to the industry. In Detroit, mayoral candidate Ingrid LaFleur participated in one Detroit Startup Week panel discussion titled, “Politics, Diversity and Advocacy in Cannabis,” and hosted a second event called “The Cannabis Conversation: How the Cannabis Industry Benefits Detroit.”
But will the U.S. win the cannabis innovation game?
In most industries, the United States is viewed as an innovation leader. In the cannabis space, though, the complexities of laws — the plant is federally illegal and individual states maintain their own rules related to it — prohibits the natural maturation of the industry.
Not so north of the border. Canada, while the United States drags its feet, permits medical marijuana nationwide and is moving quickly towards ending recreational prohibition — most expect this to be achieved by July 2018. And while cannabis consumers rejoice in this, streamlined pro-marijuana national laws also encourage increased investment while eliminating barriers keeping marijuana businesses from growing and innovating.
What does that mean? According to The Globe and Mail, “it means that Canadian marijuana-industry players, and those that can establish themselves as such, have a unique opportunity to pull ahead of their competitors in the international marketplace.”
Does that mean Canada will outpace the U.S. in the long run? Only time will tell, but they’re certainly getting a significant head start out of the gates even as American dollars are being pumped into the market at an unparalleled clip.