Today, Alaska and Oregon voters get to decide whether or not they like the idea of allowing their fellow citizens to get high legally.
Specifically, when they head to their polling places, they’ll be asked to say yea or nay to ballot initiatives that would allow wannabe pot retailers to move from surreptitiously making cash deals to opening up regulated storefronts.
Forget about the Gold Rush – that was so 19th century. Say hello to the Green Rush – an explosion of business opportunity that is already underway in Washington State and Colorado, where voters approved similar measures two years ago.
If Oregon and Alaska follow suit, an entire group of entrepreneurs will view 4 November 2014 as the equivalent of a Formula One race official waving a gargantuan green flag.
Long before the new rules come into effect and the first non-medical pot retailers open their doors – a process that will take nine months in Alaska, and until January 2016 in Oregon – a host of startups will be restlessly milling around at the starting line, adrenaline sky high, just waiting for the word “go”.
A fifth jurisdiction – Washington DC – may not be far behind. On its ballots is a measure to legalize possession of less than two ounces of marijuana. If that is approved – as polls suggest is highly likely – the next likely step is for the city’s councilors to find a way for pot to be legally sold (and, not coincidentally, taxed). Ironically, this would be happening right on the doorsteps of federal lawmakers and entities like the Drug Enforcement Administration that adamantly insist that even the medical use of marijuana is illegal.
Every jurisdiction that moves beyond simply approving medical marijuana takes the pot business takes a step further from its black market origins and into the mainstream and gives us a glimpse into an industry in its innovation phase. Because when residents of Washington state and Oregon voted on initiatives two years ago, they didn’t just legalize getting high. Whether or not they realized it, they were setting in motion an entire pot economy.
Every business – however longstanding the demand for its core product – faces a host of challenges when it tries to morph into an industry. Pot, with its amorphous legal position, faces more than most.
Consider banking. For most entrepreneurs, the question of who they have their banking relationship with seems pretty straightforward. Not so if you’re marketing cannabis.
Sure, the federal government began clearing the way for banks to open accounts for and lend money to pot distributors who can legally do business in 20 states and in the District of Columbia. But many marijuana retailers remain outside this network, dealing only in cash, or refusing to talk openly about their banking relationships.
“It’s like asking [someone] what they wear to bed at night,” one Denver retailer told Forbes. “It’s an intensely personal question.”
Colorado has stepped into the void, with lawmakers signing off on a plan for a network of co-operative financial institutions set up by marijuana businesses themselves to pool their money and enter the banking mainstream, enabling them to comply with all kinds of IRS and other rules governing how businesses should be run in the 21st century. (Bonus: employees can now also get paid with checks or direct deposit, instead of envelopes of cash.) Approved in May, this marks the first pot banking network.
Challenges like these only seem to whet the appetite of the real entrepreneurs, in the same way that the chance to explore drove Columbus across the Atlantic Ocean or sent Sir Edmund Hillary up Everest.
One of the big concerns in the pot industry – and something that could end up derailing the state-by-state push for legalisation – is the fact that pot-infused edible treats like cookies and chocolates have ended up in the hands of school-aged children. Meanwhile, baggies are just too easy to get into.
So why not make child-safe marijuana packaging? That’s what Kush Bottles has done – one of a cluster of startups trying to wend its way toward an IPO.
An initial public offering of a company involved in selling a drug that federal authorities still consider to be illegal, even for medical use? What are these guys smoking, you may wonder?
In fact, the idea isn’t new. A host of medical marijuana companies went public years ago, and some – Medical Marijuana and GW Pharmaceuticals – have outperformed the S&P 500 index in the last year, posting gains of 30% and 148%, respectively, against the index’s 14.4% one-year advance. While most of these remain relatively risky penny stocks, they have opened the door for other businesses to follow suit. Already, financiers are flocking to Colorado and Washington state in search of business opportunities.
New financing groups, such as Seattle-based Privateer Holdings, a private equity and ArcView, a San Francisco network of individual investors, have been set up to funnel capital to the nascent industry.
Consulting companies are springing up to advise growers; the pot economy is a boon for Surna, a company that markets climate control systems that growers need. While retailers want secure packaging, they want it to appeal to customers, so there’s an instant demand for anyone from packaging designers to someone who can whip up a new recipe for a pot brownie. Someone with a background in science could carve out a career in plant genetics, modifying cannabis strains to come up with the perfect high.
Even formerly plain vanilla real estate agents are spotting the trend, and re-branding themselves as pot-friendly, helping folks find new homes with space to grow their favorite potted plants out back.
Watching all this unfold is akin to getting a crash course in understanding how an industry functions in its innovation phase, when growth potential is sky-high.
It’s even more entertaining – or depressing – to watch it evolve, for the most part, not too far distant in space from some of the hotspots that witnessed what is arguably the biggest wave of innovation in American history: the digital revolution.
The path from innovation to stagnation is surprisingly quick. IBM’s former CEO Sam Palmisano pledged, hand on heart, to deliver $20 a share in earnings to investors by 2015 – “Roadmap 2015”, he called it. Before too long, employees had begun referring, cynically, to the plan as “Roadkill 2015”, and the company’s business, far from thriving, is struggling, laying off waves of those disillusioned workers.
Finally, late last month, came the word that IBM and Palmisano’s successor, Ginni Rometty, are backing away from the Roadmap/Roadkill plan. That’s what happens when innovation stops working.
Perhaps IBM’s board of directors could offer Rometty a luxury pot tourist trip to Colorado? At the very least, it would offer a welcome respite. At best, it might offer her a reminder of what it’s like to be in the midst of real innovation and entrepreneurship.
