Pubdate: Sat, 19 Jul 2014
Source: New York Times (NY)
Copyright: 2014 The New York Times Company
Authors: Jack Healy and Kirk Johnson


DENVER - Like the glint of gold or rumors of oil in ages past, the 
advent of legal, recreational marijuana is beginning to reshape 
economies in Colorado and Washington State.

Marijuana is beckoning thousands of entrepreneurs and workers, 
investors and hucksters from across the country, each looking to cash 
in on a rapidly changing industry that offers hefty portions of both 
promise and peril.

At convention centers and in hotel meeting rooms, start-up companies 
are floating sales pitches for marijuana delivery services or apps to 
name-tagged investors who sip red wine and munch on hempseed snacks. 
This year, hundreds of people seeking jobs lined up for blocks in 
downtown Denver, resumes in hand, for an industry-sponsored marijuana 
job fair. Some have traveled far, leaving security jobs in Ohio or 
software jobs in Indiana to move for marijuana, hoping the industry 
has room for them.

"It's the wild, wild West," said Tom Bollich, who moved from the 
world of mobile apps in Silicon Valley to become the chief executive 
of a company based in Boulder, Colo., that builds climate systems for 
marijuana growers.

With marijuana now legal for medical use in 23 states and Washington, 
D.C., and full legalization heading to the ballot in Alaska and 
Oregon, the size of the noncriminal marijuana industry is expected to 
grow to about $2.6 billion this year from about $1.5 billion last 
year, according to estimates by the ArcView Group, a marijuana 
research and investment firm in San Francisco.

Investors in marijuana say there have been as many as 80 
marijuana-related companies trading publicly, though federal 
securities regulators have suspended trading in five of them over the 
last few months and have warned that some of these new firms might be 
fraudulent efforts to dupe investors hunting for the next big thing.

In Colorado's first six months of retail sales, the number of people 
licensed to work with the plant has grown to 11,289 this month - 
slightly less than the number of auto mechanics in the state - from 
about 6,000. (The state points out that not all those people may be 
actively working in the marijuana industry.) Since the first dozen 
stores opened in January, Colorado has issued licenses for more than 
200 recreational marijuana shops.

Tourists have flocked to those stores, making up 44 percent of the 
customers at one Denver shop during a sample week this spring, 
according to the state's first study of demand for marijuana. Tour 
companies and marijuana-friendly bed-and-breakfasts have sprung up to 
serve tourists, too.

In Washington State, where recreational sales kicked off last week, 
the retail industry is much smaller, with as few as eight stores open 
so far. But the ambitions are boundless, with more than 300 licenses 
under state review and an outdoor growing season - perfect for 
apples, wheat and grapes - that could make Washington a national 
powerhouse of production if legalization spreads.

Hundreds of other people have found work on the edges of the 
industry. They sell water systems, soil nutrients, lighting and 
accounting services, like the 19th-century merchants who profited by 
selling picks and shovels to gold miners. There are now dozens of 
marijuana-related mobile apps, marijuana-centric law firms and real 
estate agents, cannabis security experts (it is a risky, virtually 
all-cash trade) and marijuana-themed event promoters offering 
everything from luxury getaways to bus tours. Washington has a rule 
requiring bar-code tracking of every marijuana plant to ensure that 
only licensed, Washington-grown marijuana is sold in its stores. It 
has also created a niche for tech start-ups like Viridian Sciences, a 
software company aiming to help retailers prove the provenance of 
their product should a state inspector or customer ask.

But many have also discovered that selling marijuana, even without 
the specter of being arrested, carries high costs and no guarantee of success.

A heavily regulated recreational marijuana program in Washington drew 
more than 7,000 applications, but many of those would-be growers, 
processors and retailers have struggled from the start. They had to 
find financial capital that state inspectors would approve and lock 
in a legal business location. Then, they had to endure months of 
delays as overwhelmed state workers processed and analyzed an 
oversubscribed applicant list.

"I'm about fed up," said Michael McDonald, a 57-year-old home-repair 
contractor, who has applied for two licenses to grow and process 
marijuana in Bellingham, in northwestern Washington.

Mr. McDonald said the deck was stacked in favor of richer corporate 
players. With banks still so leery of lending in the industry, he 
said, financing choices for smaller entrepreneurs like him are few.

"What's happening is that the only people who are really going to get 
licenses are the ones who have somehow hidden their illegal money, or 
legitimized it, or it's big business backing it, and that's not how 
it was supposed to be," Mr. McDonald said.

Aaron Varney, 38, who directs a nonprofit medical marijuana 
cooperative in Seattle, got a 24th-place slot in the state lottery 
for the 21 retail marijuana locations up for grabs in his city; three 
people ahead of him would have to wash out of the process for his 
number to come up. He wants the industry to succeed, he said, but 
cannot fully silence what he called the selfish voice inside that 
hopes to get in.

"Real close, but not quite there," Mr. Varney said of his waiting game.

Despite marijuana's outlaw reputation and legal status, the industry 
is growing largely because the Obama administration decided last year 
not to oppose votes in 2012 in Colorado and Washington that legalized 
marijuana for personal use and laid the groundwork for statewide 
sales. But regulators at the Securities and Exchange Commission 
warned that the loosened laws created new horizons for fraud, as 
small companies with dubious assets and financial disclosures leapt 
into the over-the-counter trading market.

The agency's actions this spring to suspend trading in 
marijuana-based companies from Colorado, California and Texas were 
still rippling through Weedstock, an investor conference at the 
Westin Denver Downtown Hotel. While some growers and sideline 
businesses are earning enough to even sponsor chamber-music galas, 
investors said that others were leaping into the market with little 
more than hype and shaky business plans.

"Ninety percent are either scams or aren't going to make it," said 
Alan Brochstein, a financial analyst who is carving out a niche in 
the cannabis market.

But many are ready to gamble on marijuana's success. After a decade 
in the military and a career working in security, Sy Alli, 53, moved 
to Colorado to become the director of corporate security for Dixie 
Brands, a company that makes marijuana-infused drinks and snacks. 
Zach Marburger, 28, visited in January to ski and check out the early 
days of legal use of recreational marijuana, and decided to relocate 
to Denver to develop software to connect customers and retailers.

And a few months ago, a 22-year-old mobile app developer named Isaac 
Dietrich and a friend were smoking marijuana in a Norfolk, Va., 
apartment when they realized: There could be money in this. They 
moved to Colorado, where they are working on an app called MassRoots, 
which lets marijuana enthusiasts privately post photos on an online 
platform out of sight of their parents or co-workers. They want it to 
be the Instagram for marijuana users.

"We thought about relocating to Silicon Valley, but they haven't 
backed a single marijuana company," Mr. Dietrich said. "This is where 
everything's happening. We didn't want to be left out."

Jack Healy reported from Denver, and Kirk Johnson from Seattle.
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MAP posted-by: Jay Bergstrom