What with state after state following the example set by Colorado and Washington and moving to legalize marijuana usage (or at least the medical usage thereof), opportunities are flourishing for would-be entrepreneurs.
However, with a murky legislative framework and the continued anti-marijuana position that is standard at the federal level, things can be difficult.
But a new avenue toward marijuana entrepreneurship has opened up by way of marijuana delivery. It’s not exactly pizza delivery, but there are parallels.
Nurse Nancy Medical Marijuana Delivery, based in Seattle, will deliver medical marijuana to your door all seven days a week between 10 am and 2 am. As CBS (Seattle) notes, the service caters to all Seattle city residents, and subscribing is free.
Still, demonstration of government-issued ID, authorization for the use of medical marijuana, and payment in cash are necessary to avail of the service. Nurse Nancy can deliver within 30 minutes and offers four kinds of marijuana.
Nurse Nancy is an example of a new business model rapidly emerging within the nascent marijuana sector. The state of Washington features several similar companies, all of which also require compliance with identification and permit rules. Nonetheless, such businesses are bound to come up hard against the federal government, which continues to view marijuana as an illegal narcotic drug.
Certainly, the Justice Department and even President Obama have stated the government isn’t exactly going to run after sick people using medical marijuana. But what’s at risk is the business operations—and potential expansion—of those who grow the drug, process it, and commercialize it through various means. In short, what’s at risk is the future growth of the embryonic marijuana market, medical and otherwise.
This is an especially piquant point given that states are increasingly prone to relax, reform, or otherwise modify legislation to allow medical (and, in some cases, recreational) marijuana usage. Would-be entrepreneurs in this sector may well find themselves caught between a permissive state and a stubborn federal administration.
Washington, for example, will have its Liquor Control Board feature new marijuana-focused regulations, which are set to roll into effect starting this September. That state will also see legal recreational marijuana sales begin from 2014, which is probably going to help businesses like Nurse Nancy grow exponentially.
For now, such delivery services are restricted to medical purposes only, as King5 indicates. Recreational marijuana may only be sold in stores, with full state legislative certification. However, it’s quite likely that once the state allows for fully legalized use of recreational marijuana, other businesses will crop up to cater to the recreational crowd.
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From an investor’s point of view, this isn’t a great time to get involved with businesses that directly come into contact with marijuana—whether that means growing, processing, or directly commercializing the drug and derivative products. The reason’s obvious—an unfriendly regulatory environment at the federal level.
On the other hand, it’s certainly clear that marijuana is well on its way to becoming a significant business sector. Consider that as of 2011, the medical marijuana sector was estimated to be worth $1.7 billion.
Given the national push toward legalization and the number of states quickly signing on to legalize medical marijuana within state limits, expect the sector to balloon to a $9 billion industry within the next five years or so. That means there are plenty of prospects for the savvy investor.
In Washington, Privateer Holdings—a private-equity firm—has already raised $5 million from more than 20 investors. Privateer acquired Leafly, a medical marijuana product review site, back in December last year.
For 2013, that company anticipates sales of $3-$4 million. That’s big for a company that, at the time of Privateer’s acquisition, was not making any revenue at all.
Understanding the relevant laws governing marijuana—medical or otherwise—at both the state and federal levels are absolutely essential. It’s also a good move to remain on the periphery of things.
Consider businesses that are working on software for product supply chain tracking, for example. Or consider companies manufacturing security systems being supplied to the plant growers and processors.
Banking and legal representation for these direct-contact businesses remains a problem, and it won’t go away anytime in the near future. That’s why any prospective investor needs to consider the nuances of the marijuana sector at present.
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