Well, it’s official. California has legalized medical and recreational marijuana with Proposition 64 (along with four other states, Maine, Nevada, and Massachusetts) for the foreseeable future, and with the basic medical infrastructure already in place, the transition should be smooth. California has learned from its mistakes since 1996, and will hopefully be able to make the process as easy as possible for its millions of cannabis consumers. The next question is, where did the legalization money come from, and who stands to benefit the most from California’s recreational legalization? What does this mean for Colorado, Washington, Oregon, and Washington, D.C., and what does it mean for the other four states that legalized or adapted medical marijuana law on November 8, 2016? Let’s take a look into the cannabis investors and innovators who are leading the charge in California’s recreational cannabis market, and who is most likely to profit from the new agenda.
Who Invested in California’s Recreational Cannabis Legalization?
Since medical marijuana has been legal in California for two decades, investors are already present there, and investors from various states are looking into indoor and outdoor cultivation facilities, laboratories for cannabis potency and cleanliness testing, infused product manufacturers, and recreational cannabis stores like those permeating legalized states. Property to place these structures and businesses on has also been in high demand, helping boost economies in some low-income communities (Desert Hot Springs and Adelante) and making real estate even more expensive in areas like San Francisco and Los Angeles. We all know that California is about to make a lot of money from the cannabis industry, and they may even surpass Colorado’s industry some day in the future, but who are these investors, and where are they coming from?
Steve Gormley of Seventh Point LLC (which is focused on acquisition of cannabis industry assets in L.A. County) noted that “Over the past 18 months a number of more traditional investors have come off the sidelines for what we feel will evolve as a historic industry,” but would not name the investors. Essentially, Gormley is indicating that while the usual suspects such as CB Insights (investing $322 million in private cannabis companies over the past five years) are investing, so are smaller companies like GreenRush (a marijuana delivery service) and Bud and Breakfast out of Colorado. Arcview Market Research is the last word on cannabis marketing research (part of Arview Group, an angel investing network for the cannabis industry), and noted that Time’s California cannabis revenue will probably be $6.46 billion by the year 2020. Recreational cannabis will likely have a lot to do with that large number; in 2015, the state’s medical marijuana market made $2.7 billion. Over $2.5 million was raised in 2016 in order to promote California’s recreational legalization proposition; Sean Parker for Facebook and Napster fame contributed $1 million, Drug Policy Action contributed $500,000, and WeedMaps contributed $500,000, according to CNBC.
Who Are the First Recreational Cannabis Companies in the State Likely to Be?
To expedite recreational cannabis purchasing in California, the state has said it is likely to pass legislation that will allow currently licensed medical dispensaries to become licensed to sell recreational cannabis as well. The Mercury News reported that startups based on cannabis delivery and new software for facilities and private growers are in the rise in California, and Carter Laren of cannabis startup accelerator group Gateway in Oakland noted that “There’s a big opportunity to be the next Google of cannabis industry.” Los Angeles and San Francisco are battling for the title of “epicenter of cannabis,” with many people in the California scene indicating that the state will quickly overtake smaller, legalized states like Colorado, Oregon, and Washington in sales. With a population in 2014 of 38.8 million, they may very well be right about that; but that doesn’t mean other states’ cannabis markets will decline at all – after all, if you don’t have to buy a plane ticket to Cali to consume cannabis, why would you?
How Can You Invest in California’s Recreational Cannabis Scene?
There are dozens of marijuana investment firms out there, from Arcview Group to CanopyBoulder, and you can contact any one of them if you’re interested in getting into the business in California. If you have the capital, there are numerous avenues you can take to invest in cannabis companies – or just start one yourself. Organizations like Green Rush Consulting and Canormal offer tips and information that can help you get started. Licensing and startup capital are the biggest concerns for a marijuana dispensary in California or any other state, and innovation, originality and demand are high on the list for other cannabis businesses right now. San Francisco is a hotbed of cannabis software development right now, and Denver’s new cannabis software company Flowhub is poised to change the industry in Colorado completely by helping to streamline and speed up required state processes and data recording that track marijuana from seed-to-sale per state cannabis laws. Eaze, a medical cannabis delivery app, is also a great investment right now.
Advice for Investors in the Cannabis Industry
The Motley Fool, a long-time investing information and advice website, notes that investors need to “Beware of marijuana stock manipulators,” noting that marijuana stocks today are like the wild, wild, west of Wall Street, meaning that they are traded over-the-counter (OTC) and are not regulated by the requirements of major stock exchanges such as NASDAQ and the New York Stock Exchange. It cites “unscrupulous stock promoters” and “pump-and-dump” promoters that rake in investor money and then lose all their value. Questions to ask yourself before investing include why the stock promoter is contacting you for an investment opportunity, whether the source company for the stock is unknown or not, whether the company has recently changed its name, whether you have conducted or can conduct in-depth research on the stock company, and whether you can find positive information in the SEC financial filings of the company that has been audited by a “top shelf accounting firm.” If the answers to these questions check out, then you may have a cannabis investment winner. Just remember that Maine, Massachusetts, and Nevada also offer investment opportunities that may not be as hard to participate in as California’s. Best of luck, and may the green rush treat you well.