Pubdate: Wed, 28 Jan 2015
Source: San Francisco Chronicle (CA)
Copyright: 2015 Hearst Communications Inc.
Contact: http://www.sfgate.com/chronicle/submissions/#1
Website: http://www.sfgate.com/chronicle/
Details: http://www.mapinc.org/media/388
Author: Joe Garfoli

INVESTORS WITH HIGH HOPES

Ex-Techies Head for the Next Innovative Sector - Cannabis

Seibo Shen made a lot of money in tech - he was an early employee at 
four startups that were acquired or went public. But for his latest 
venture, he didn't just want to "add another zero to my bank account."

He wanted to rekindle that startup thrill while selling a product he 
truly cared about.

So the 38-year-old San Franciscan raised $500,000 to get into the 
cannabis business. Now, instead of working accounts for months to 
sell software to businesses, Shen is hawking $650 marijuana 
vaporizers for his new company, VapeXhale.

It's a lot quicker to close a deal these days.

"Instead of a 12-month sales cycle, it's the one-puff cycle," Shen 
said, motioning at a glass vaporizer at his company's booth at a 
cannabis-industry investor conference this week in San Francisco. 
"After you try one puff, you're sold."

Fueled by many of the same reasons they got into tech, an increasing 
number of Silicon Valley veterans are investing in the booming 
cannabis market. As the tech market matures, the fledgling marijuana 
industry offers a hint of the old startup days, where innovators can 
write the rules as they go.

And just as techies have long mused, some believe their work will 
change the world.

The tagline for the ArcView Group's high-worth pot investors' 
conference underscored the mood: "Invest in the Next Great American Industry."

A year ago, ArcView, a marijuana data and analysis firm, held its 
gathering in Las Vegas at the D, a hotel where a room goes for $24 on 
a Wednesday night. This week, the two-day conference was at the 
Fairmont, where U.S. presidents have regularly bunked.

Is California next?

There the savviest of investors tried to secure their place early in 
what they believe will be a green gold rush. California voters will 
likely have the chance to legalize recreational cannabis for adults 
on the 2016 ballot, and early polls show strong support.

The marijuana market has boomed 74 percent over the past year to $2.7 
billion, with California - where only medicinal pot is legal - 
accounting for nearly half that, according to a report this week by 
ArcView. If pot were legalized in California next year, ArcView 
projects that "the entire industry could rapidly double in size."

Whiff of success

Inside the Fairmont, it wasn't hard to smell the opportunity. Kevin 
McCarty, the fourth employee at the social network Yammer, was 
seeking funding for Eaze, an on-demand weed delivery service dubbed 
"the Uber for pot." Prowling the halls was Tom Bollich, a co-founder 
of the video game titan Zynga whose new startup, Surna, sells 
chilling systems used to grow marijuana.

Monday's keynote speaker was Justin Kan, the San Francisco 
entrepreneur who recently sold his streaming video game service, 
Twitch, to Amazon for $970 million. Now he wants to get into the 
cannabis business, as he sees "a lot of parallels to the technology 
industry" - like how you can get a lot of grief for being far ahead 
of the curve.

Before Twitch took off, critics said watching other people play video 
games was "a crazy idea," Kan told the crowd. "So I guess I'm a real 
believer in crazy ideas."

Compared with your average tech startup, the cannabis business has 
one huge advantage: There's no lack of demand. "People are breaking 
the law to buy your product," Kan said.

Marijuana's questionable legal status has led to hesitance from 
traditional Silicon Valley investors. Even though venture capitalists 
are famous for taking risks, there is a reluctance to invest in 
marijuana, which the federal government classifies as a Schedule 1 
drug on par with heroin. Many venture capital firms have outright 
prohibitions against investing in "sin" products like pornography, 
alcohol, tobacco, firearms and illegal drugs.

And legal uncertainty remains: Medical marijuana is available in only 
23 states and Washington, D.C., and recreational marijuana is legal 
in only two states, Washington and Colorado.

When he was hunting for investors for his distilled cannabis company, 
Ebbu, former video game industry executive Dooma Wendschuh said a 
potential longtime tech investor "was so worried about the optics of 
it that he wanted to form a separate LLC before he would do anything."

Wendschuh, who co-founded Sekretagent Productions, makers of the 
popular "Assassin's Creed" series, feels no such reticence. When he 
was considering selling his share in the game company, Wendschuh told 
conference-goers, "It was not an easy choice. But the thing that 
pushed me over the edge was the realization that nearly every truly 
visceral moment in my adult life, everything that I am most proud of 
. all involved some form of psychoactives."

Joint ventures

Slowly, the big tech investors are following him into the deep end. 
This month, the Founders Fund, an investment firm started by PayPal 
co-founder Peter Thiel, joined a $75 million round of funding in 
Privateer Holdings, which has several marijuana company investments.

Some tech expats say you don't even have to break the law to cash in 
on the boom.

Jessica Billingsley and Amy Poinsett turned their Web developing and 
IT expertise into MJ Highway, which sells software to marijuana 
businesses. Five years after they started, they have 25 employees and 
more than 1,000 clients in 18 states.

"Our geek skills were very much in demand here," Billingsley said.

As big money moves into what for decades was underground economy, 
ArcView Group President Steve DeAngelo urged the investors and 
entrepreneurs to heed what he considers the longstanding values of 
the pot world: inclusion, diversity and a respect for nature.

"Cannabis is a gift from the hippies, like yoga and personal 
computers," he said.

When people look back at the early days of the marijuana business, 
they should be able to say that "we didn't just create a new 
industry, but we created a new kind of industry," DeAngelo said.
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MAP posted-by: Jay Bergstrom