Checking in On the Cannabis Startup Scene
There have been many changes coming down the road for the cannabis industry. The industry is no longer limited to just a handful of states. Furthermore, the industry is not confined to strictly medicinal sales anymore. That market access shift has been continuing in a rapidly growing basis (slight pun intended). Just this last year we’ve seen California, Massachusetts and Nevada pass measures legalizing recreational use.
Cannabis startups and the players involved are taking it to a next level. We here at EGFS have been steadfast supporters of those businesses and have updates on what we see and where it is likely to be at next. Here’s several big changes to watch.
Big Alcohol Joins In
While Big Tobacco’s investment in cannabis seemed natural to many, the latest big industry involvement is coming from Big Alcohol. When initial versions of medicinal legalization were written in California the only players given a steady ground were the dispensaries. They were regulated and licensed, growers on the other hand were scrutinized and bore heavy risk, often getting cut deeply out of the profits.
A recent ruling in California changes that. Now distributors will have a much heavier share in the business. That change brings together laws negotiated by growers, while underwritten and lobbied for by a former big player in alcohol distribution. With the shift in power to distribution alcohol companies see huge potential to leverage their existing networks.
The corporate style firms needed for the scale that is coming are being assembled. Venture funds are launching just to focus on cannabis market investment alone. With that also comes specialized law firms, real estate agencies, land use analysis teams and other regulatory focused professionals. We are seeing a much more sophisticated element come into the sphere. The black-market interests that sought legitimacy early on are being replaced with MBAs from Ernst & Young or Goldman Sachs.
With bigger players entering infrastructure is booming. You can expect to see spending on larger scale commercial property. We’re not talking a 10,000 sq. ft. space anymore, we’re talking entire city blocks. Armored car sales and mass truck purchase increases have already ramped up. Credit unions are being discussed. Expect to see cities like Oakland undergo drastic and dynamic change.
The biggest change of course will be what happens at the federal level. With a new president, especially this one, all guesses are in play. With nearly two-thirds of the country having some form of legal access already, it would seem likely that nationwide changes are possible during this term. He has publicly supported medicinal legalization in the past. In contrast though his proposed Attorney General Jeff Sessions has spoken vehemently against it as he once said on the topic “We need grown-ups in charge in Washington to say marijuana is not the kind of thing that ought to be legalized.” Time will tell who influences who and in what ways.
With all these changes the time has never been better for those looking to launch a serious business in Cannabis related services. Whether your area of expertise is logistical, legal, financial or otherwise the question is no longer will this be a legitimate and growing market but rather how many billions is possible if your product or service solves the questions and challenges raised by this new frontier.
As always, we are extremely positive on the industry and see tremendous growth, and with that growth the need for strong financial support. To ask us more about how we can support your startup in this field reach out and contact us for a consult.