Pubdate: Sun, 16 Nov 2014
Source: Los Angeles Times (CA)
Copyright: 2014 Los Angeles Times
Contact:  http://www.latimes.com/
Details: http://www.mapinc.org/media/248
Author: Evan Halper

A GREEN RUSH FOR CANNABIS CAPITALISM

Pot Hedge Funds and Others Join the Frenzy to Turn Legalization into 
Financial Windfall.

HENDERSON, Nev. - The frenzy in the cavernous Green Valley Ranch 
Resort ballroom might have passed for any confab of entrepreneurs 
pitching their business plans to pokerfaced angel investors - until 
an organizer took the podium for a public service announcement.

Please stop smoking weed out by the parking lot, he implored. Hotel 
security did not approve.

The gathering last week of several hundred Wall Street types, tech 
industry disrupters, agricultural enthusiasts and assorted others 
shrugged and went back to the business at hand: leveraging the 
legalization of marijuana into a windfall.

The pot business is exploding. The devotees and Deadheads toiling 
away since states started legalizing medical marijuana nearly 20 
years ago now must compete in a radically different business culture.

The rapid spread of laws permitting recreational pot is enticing 
hedge fund managers, venture capitalists, software developers and 
many others to get in on what inevitably is being touted as a green rush.

They are particularly motivated after Oregon, Alaska and Washington, 
D.C., this month joined Colorado and Washington state in legalizing 
recreational pot, with California and others girding to follow in 2016.

"There is a massive potential," Emily Paxhia, who co-owns the new pot 
hedge fund Poseidon Asset Management, told the gathering. "It is 
untapped. It is just sitting there below the surface and it is ready 
to come above ground."

The inventiveness of the new entrepreneurs was on full display here 
at the "shark tank" conference organized by the ArcView Group, a San 
Francisco firm that helps deep-pocketed investors find promising 
cannabis startups.

Humboldt County, meet Silicon Valley.

Several entrepreneurs armed with PowerPoints had gotten involved only 
months ago. They included data wizards who talked of "disrupting " 
the industry with apps to make ordering God's Gift or Fogg Kush for 
home delivery as hassle-free as buying dinner on GrubHub, the online 
food delivery service.

A former NASA scientist hawked next-generation grow technology. Plans 
for a cannabis soda that promoters said could be as ubiquitous and 
consistent as CocaCola were unveiled, as were plans to open "the 
nation's first private membership [country] club to support the 
cannabis lifestyle."

Hallway chatter was rich with talk of convertible notes, rates of 
return, incubators and other investor jargon.

In the late afternoon, everyone stopped working and engaged in a 
group yoga stretch.

"It is important we acknowledge the relentless work we have been 
putting our bodies and our minds through," said Jessica Dugan, who 
led the session. "In order to maintain our sector's growth, it is 
important to have some kind of mindfulness practice."

But it was all business when pot market analyst Patrick Rea unveiled 
the first "seed-stage mentorship-driven accelerator" for f ledgling 
cannabis-related firms.

Those who cared to fund the program were promised a stake in each of 
the dozen or so startups it guides through a three-month boot camp in 
Boulder, Colo., and infuses with $20,000 cash.

"We will surround them with mentors, pressure test their business 
plans and help them get their financials in order," Rea said.

With all the regulatory and political uncertainty around marijuana, 
it is one of the riskier sectors in which to launch a company.

But you wouldn't know that talking to John Strickler, a longtime 
management consultant in established industries who decided three 
months ago to move his career to cannabis. Now he works for Ebbu, a 
Denver startup seeking to parse the chemical components of pot with 
unprecedented precision.

"What we are trying to do is create different feelings depending on 
what mood you want to be in and how you want to feel," he said. "We 
have an 'energy,' a 'create,' a 'bliss,' a 'chill' and one other one. 
What was it? Oh yes, 'giggle.' How could I forget 'giggle'?"

The "artisanally distilled" feelings would be sold in the form of 
liquid vapor, dissolving strips "similar to Listerine strips," gel 
caps or pre-rolled joints.

"Want to stay out late with your friends?" an Ebbu brochure asks. "We 
have an Ebbu for that. Want to focus on creative pursuits? There's an 
Ebbu for that too."

During the conference, entrepreneurs buzzed from table to table in 
several rounds of "speed dating" with some 200 members in the ArcView 
network, each of whom pledges to invest at least $50,000 in the pot startups.

Most stuck around for a few days to attend the colossal Marijuana 
Business Conference & Expo at the Rio resort off the strip in nearby 
Las Vegas, where 142 companies promoting products such as Peanut 
Budda Buddha cannabis candy bars and FunkSac child resistant pot 
pouches tried to lure business.

Some of the more popular booths were staffed by models in slinky 
dresses. More than 3,000 people attended. Last year's conference drew 
700 people.

Not everyone is on board. Pot critics say the thirst for high returns 
has the marijuana industry starting to resemble Big Tobacco, with 
profit-hungry companies using the kind of marketing imagery and sales 
tactics that entice children and glamorize drug use.

Regulators are also concerned.

In Washington state, officials banned nonresidents from investing in 
pot businesses - though some have already found work-arounds, such as 
having out-of-state partners spin off into separate companies that 
lease real estate back to their colleagues permitted to work directly 
with the pot.

There was no shortage of ambition at the conference. There was, 
though, a scarcity of diversity.

Social justice activists bemoan that after decades in which 
minorities were jailed at astoundingly lopsided rates for using and 
selling pot, the money to be made in legalized marijuana seems to be 
headed toward affluent whites.

"There are no Hispanics here," said investor Silvia Orizaba, a rare 
exception. "It's all whites. So I have to invest with the whites."

Orizaba, a Chicagoan who says she has invested nearly $5 million into 
cannabis-related companies since 2008, is seeking to draw more 
Latinos into the business through a nonprofit she runs.

"This industry has gotten so far," she said. "But we need to get 
minorities involved to move further."

ArcView's founders, whose involvement in the cannabis business 
predates the days when there was big money to be made, are struggling 
to keep the new players focused on the political and social concerns 
that drove legalization and spawned the industry.

They implored investors to pledge big donations to several advocacy 
groups that gave presentations at the conference. The response was 
fairly muted.

So by late afternoon, ArcView cofounder Troy Dayton tried a more 
direct appeal. Help these groups with their political campaigns, he 
said, and maybe next time you come to Nevada you won't have to worry 
about being arrested for lighting up in the hotel parking lot.

Said Dayton: "That is another reason to make sure you donate to legalization."
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MAP posted-by: Jay Bergstrom