Pubdate: Sat, 30 Aug 2014
Source: San Jose Mercury News (CA)
Copyright: 2014 San Jose Mercury News
Author: Patrick May
Page: A1


Looking around last week at the exhibitor showroom of CannaCon, the 
huge marijuana-business expo held outside Seattle, Greg James had 
something of an epiphany: The pot industry in America is growing 
like, you guessed it, a weed.

"There was everybody from soil companies to grow-light companies to 
lawyers and security and insurance firms to a TV network doing shows 
just on marijuana," said James, whose Seattle-based Marijuana Venture 
newsletter has exploded from eight to 84 glossy pages since it 
launched in March and is already turning a profit. "I'm not sure how 
many of them will survive, but it's amazing how fast this thing is moving."

The legal pot business in the United States, including both the newly 
legalized retail operations in Washington and Colorado and the 
medical-marijuana use now allowed in California and 22 other states, 
is expected to grow this year to $2.6 billion from $1.5 billion in 
2013, according to the ArcView Group, a San Francisco-based marijuana 
research and investment firm. In five years, that number could swell 
to more than $10 billion. And if backers are successful in getting a 
legalization measure on the 2016 ballot in California, the Golden 
State, with its already outsize medical-pot market, could soon be 
entering a Golden Era of commercialized cannabis.

Although the state in 1996 became the first in the nation to legalize 
pot for medicinal reasons, California has yet to approve it for the 
overall adult population, or so-called "adult-use." Despite that, it 
has the largest pot market in the nation, according to a widely 
referenced report last year by ArcView.

"California remains the largest state market at $980 million, even 
without Adult Use regulations," said the report. And "once Adult Use 
is adopted -- which is likely by 2017 -- the total California market 
is projected to increase dramatically."

As marijuana use has become more mainstream, a veritable smorgasbord 
of professionals and young startups has popped up to feed off and 
support the pot culture. Lawyers, accountants and real-estate brokers 
are going after pot clients like hogs to truffles. There are security 
outfits protecting Mendocino County farms and software developers 
churning out cannabis-news apps and GPS-enabled tools like Weedly to 
find the nearest pot club. And there are even pot-friendly resorts 
where the Hollywood set can go to get high in peace, provided they 
have a prescription.

"I've worked with Cameron Diaz and Justin Timberlake, who can't go to 
traditional dispensaries, so we have a resort outside Grass Valley as 
a place for them to get away," says Cheryl Shuman, the self-styled 
"Martha Stewart of Marijuana" who has delivered her pro-pot mantra to 
"Good Morning America" and anyone else who'll listen. "We also have 
mansion parties in L.A. with chefs from five-star restaurants; it's 
just like wine-tasting dinners, but you pair different strains of 
cannabis with the food."

Still, the pot business is a long way from maturity, despite the 
already impressive amount of cash it's generating.

"It's still a sort of fragmented cottage industry, so the laws still 
have to change and allow for entrepreneurs to push this business 
forward," says former investment banker Derek Peterson, who 
co-founded Blum Oakland, a medical cannabis dispensary, in 2012 and 
has seen 35 percent year-over-year growth. He figures that just a few 
of the dispensaries in the East Bay do a combined $50 million in 
revenues each year.

David Hodges, who runs the All American Cannabis Club in San Jose, 
says that while it's hard to get a solid grasp of the industry's 
size, he estimates San Jose alone hosts a $60-million-a-year 
medical-marijuana business and that the black market is three times 
that, for a combined value of about $240 million in his city alone.

By Peterson's estimate, the overall legal Bay Area pot market is 
roughly equal in size to Colorado's, which analysts predict will be 
about $253 million this year.

Even though California's current medical-marijuana industry is 
riddled with conflicting laws and policies that can differ city by 
city, with some pot clubs paying taxes and others not, the business 
is booming with no sign of letting up. Nate Bradley, an ex-cop and 
executive director of the California Cannabis Industry Association, 
says an estimated 100,000 Californians already are employed in the 
industry, either growing pot or servicing suppliers and their 
customers, a number that would soar with legalization.

"Once the medical-marijuana industry is legalized statewide, and you 
legitimize the entire production and distribution of medical 
cannabis," says Bradley, "the business will explode and the state 
would collect $400 million a year or more in sales taxes."

In the meantime, companies large and small are lining up to grab a 
piece of the cannabis action. Eaze, a San Francisco startup that 
fancies itself as "the Uber of medical cannabis delivery," taps into 
a network of "caregivers" who pick up pot for you at the dispensary 
and deliver it to your home, sometimes within 10 minutes.

Eddie Bernard runs a pot-focused marketing agency in Southern 
California that worked with High Times magazine on its first Cannabis 
Cup competition in America, with awards going to the best pot 
varieties. He also does "product placement" for the marijuana industry.

"We did an endorsement deal with Snoop Dogg," says Bernard, "and for 
an FX TV show we placed bongs around the house."

Yet even as more and more entrepreneurs jump into the pot business, 
the path forward is far from clear. Despite strong revenues and taxes 
already being collected in Washington and Colorado, the industry 
faces years of political and regulatory challenges. At the top of the 
list are federal laws declaring the possession, sale and cultivation 
of pot illegal, leaving states and the federal government in an 
awkward standoff. Public opinion on legalization is also split. And a 
sprawling and powerful black market thrives in the shadows, while 
groups on both sides of the legalization debate bicker among themselves.

Still, many aspiring business owners are convinced that a pot-based 
gold rush is upon us. To former Intuit engineer Ben Curren, his new 
San Jose-based tech startup, Green Bits, is at the right place at the 
right time, offering point-of-sale and inventory management software 
for the legal pot industry.

"2016 will be the deciding year," says Curren. "But it's amazing how 
much stuff is happening in this space right now. If the momentum 
continues, this is going to be really big."


$1.5 billion

The 2013 legal marijuana industry

$2.6 billion

Projected 2014 legal marijuana industry

$10 billion

Projected 2019 legal marijuana industry



Billed as the "Uber for weed," and currently available only in San 
Francisco, the app's users choose from available strains to be 
delivered to their doorstep.


An app that compiles archives and data from WeedMaps -- billed as the 
"Yelp for weed" -- it uses GPS to find the nearest dispensaries along 
with relevant reviews.

Green Bits

An attractive point-of-sale system designed specifically for 
dispensaries, it allows the businesses to conduct all transactions 
from its iPad app.
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MAP posted-by: Jay Bergstrom