Wall Street has been hesitant to invest in marijuana even though signs point to the cannabis industry growing to a $50B business in the next 10 years. Eager businessmen and businesswomen pitched their cannabis ideas to a panel of private equity investors, but it was not as successful as some of the entrepreneurs had hoped. The investors on Wall Street will be hesitant until there is legalization on a federal level. Being that the market is moved by institutional investors and cannabis is still federally illegal, it may take more time for Wall Street to get on board, but the investors still have a high interest level in cashing in on cannabis.
Inside a Brooklyn ballroom, investors smoothed their suits and opened their iPads, preparing for a day of sizing up hungry entrepreneurs and impassioned lobbyists.
One after another, startup founders took to the stage, making their cases for a round of venture capital. There was a building materials manufacturer, a catering company and, as one would expect, the inventor of a vaporizer.
It was high time to monetize pot.
Here at the Investor Pitch Forum this week, hosted by the cannabis industry investment and research firm The Arcview Group, some 200 investors Arcview described as “high net worth” met with dozens of companies looking to cash in on the promising new market of legal recreational marijuana.
Cultivating Spirits, a caterer that pairs organic dishes with fine wines and just the right weed, got the attention of more than a dozen investors. Philip Wolf, who started the Silverthorne, Colo., company in early 2014, melded laid-back Colorado with high-powered New York in a snappily fitted suit and long hair coiffed in a bun.
Mule Extracts, a cannabis-oil extraction company, generated some buzz, too. Chief Executive Officer Rachel E. Kurtz made it through a Shark Tank-style wringer and came out the other end to applause, hopeful of finding an investor at the forum.
It’s a good time to be investing in the space, at least in terms of market expansion. Recreational weed is already legal in Colorado, Alaska, Oregon, Washington, and Washington D.C., and it’s on the ballot in nine states1 in November. If California legalizes it, the industry could triple in size, to $18 billion. Analysts expect it to balloon to $50 billion by 2026.
Investors at the forum constantly and animatedly discussed the legalization efforts, which will have a big impact on their returns. Arcview CEO Troy Dayton stressed the importance of lobbying efforts in key states, including California, and expressed frustration with the Drug Enforcement Administration, which has maintained marijuana as a schedule 1 drug. Such was the animus in the room against benighted drug policy that at one point it took Dayton halfway around the world to the Philippines for a weary, unexpected aside about President Rodrigo Duterte and the nation’s harsh anti-drug measures.
The caution shows the divide between the cannabis movement as inspired by principle and as driven by commerce. It doesn’t make business sense for entrepreneurs and investors to push too hard for federal legalization. As it is, the fledgling industry enjoys protection against the giants of tobacco, pharma, and alcohol.
Investors might be wise to get in on weed before it sweeps the nation. But it has a long way to go before it catches up with the more than $200 billion in revenue that alcohol brings in every year.