Pubdate: Wed, 20 Apr 2016
Source: Press Democrat, The (Santa Rosa, CA)
Copyright: 2016 The Press Democrat
Contact:  http://www.pressdemocrat.com/
Details: http://www.mapinc.org/media/348
Author: Guy Kovner

INVESTORS POUR MILLIONS INTO NORTHERN CALIFORNIA MARIJUANA INDUSTRY

As millions of marijuana aficionados light up Wednesday at 4:20 p.m. 
in celebration of "Weed Day," many are blissfully unaware of the 
increasing interest that investors with deep pockets are showing in 
their favorite psychoactive herb.

A green rush is on in the marijuana industry, with legal sales of 
cannabis rising by a billion dollars or more each year nationwide, 
according to one report, and venture capitalists pouring millions 
into marijuana enterprises ranging from computer software and social 
networks to storage bags, vaporizers and insurance.

The economic trend, which has some North Coast pot growers worried 
about competition from corporate giants, is already playing out in 
Santa Rosa, where the City Council voted in February to allow 
commercial cultivation in industrial areas, a move that could greatly 
expand the scale of medicinal pot operations.

Joe Rogoway, a Santa Rosa attorney for the cannabis industry, said 
investors are buying and renovating warehouses intended for marijuana 
cultivation, creating jobs and boosting payrolls that have a ripple 
effect through the local economy.

"There is a significant amount of capital going toward the cannabis 
industry," Rogoway said. The investments range from smaller 
family-owned operations and personal savings to dollars poured in by 
venture capitalists, he said.

The activity has accelerated in the wake of California's recent moves 
to regulate and tax medical marijuana. Industry observers see that 
framework as a potential predictor of the regulatory landscape that 
could take shape should state voters approve recreational pot use 
come November.

Sonoma County could have a significant role in the booming business, 
industry representatives said.

Mara Gordon, founder of Aunt Zelda's, a manufacturer of three 
cannabis-based medical products in Bodega Bay, envisions the county 
as the "medical cannabis center of the world," strategically situated 
between the Emerald Triangle pot growing region to the north and the 
urban Bay Area.

Capital investment is crucial to startups in any business, said 
Gordon, a former process engineer for Safeway. But she's also wary of 
medical cannabis investors intent on a quick buck, a type she refers 
to as "hemp hustlers."

"The last thing we want to become is Colorado, which is basically Las 
Vegas (for marijuana users)," Gordon said. Colorado and Washington 
voters were the first to legalize marijuana in 2012.

The expansion of the industry presents other risks to longtime local 
growers, said Tawnie Logan, executive director of the Sonoma County 
Growers Alliance. She is concerned that businesses with "no 
connection to the community" will buy up chunks of land for pot 
farming and gain a competitive advantage.

One of the marijuana legalization measures vying for a spot on the 
November ballot sets no limit on the size of a growing operation 
effective in 2023, she noted.

"People are salivating over the California marketplace," said 
Hezekiah Allen, head of the nearly 500-member California Growers 
Association, which also wants to protect the current operators of an 
estimated 50,000 to 60,000 farms. "The product is already putting 
people to work in communities every day."

The value of the state's medical marijuana industry has been 
estimated by state officials at $1 billion, though pot investment 
promoters say it is far higher.

Legal sales nationwide hit $5.7 billion in 2015, up from $4.6 billion 
the previous year, according to a market report by The ArcView Group, 
an Oakland-based cannabis investment and research firm. Its website 
touts cannabis as "the next great American industry."

With more states expected to legalize pot this year, sales should 
rise 26 percent to $7.1 billion in 2016, and continue soaring, 
reaching $22.8 billion in 2020, the report said.

ArcView's network of more than 500 "high net worth investor members" 
have put more than $70 million into 111 companies "in the cannabis 
space," said Troy Dayton, co-founder and CEO of the firm started in 2010.

California currently accounts for 48 percent of national legal 
cannabis sales, amounting to $2.7 billion in 2015 and expected to 
swell to $6.4 billion in 2020, when the California's share of the 
national market will have shrunk as more states legalize marijuana, 
Dayton said.

"The trend for investment in California is explosive," Dayton said, 
citing the state licensing system for medical marijuana approved last 
year and the expectation that voters will legalize adult use of the drug.

"Northern California is the spiritual and cultural home of cannabis," 
Dayton said. "This is our time to show the rest of the world how it's done."

Venture capitalists are turning on to the prospective payoff from legal pot.

CB Insights, a New York-based venture capital research firm, reported 
investments totaling nearly $322 million in private cannabis 
companies since 2011, with the vast majority - $215 million - 
invested last year. In 2011 and 2012, a mere $800,000 was invested, 
according to the ArcView report published in February.

"Despite being an industry in regulatory flux, investors continue to 
ramp up their activity in the legal cannabis industry," the report 
said, noting that nearly $94 million was invested in the first 
quarter of 2015 alone.

Gordon, who processes marijuana for her products, said that most 
venture capital investments have been made in ancillary businesses, 
such as grow lights, vaporizers and fertilizer. Recently, she said, 
investors are "touching the plant," putting their money into 
cultivation and handling of the weed itself.

"It's a gray area to be investing in," she said, since federal law 
still classifies marijuana as a Schedule I drug with no accepted 
medical use, along with heroin, ecstasy and LSD.

Investors are typically interested in a "fairly sure thing," rather 
than a commodity "that can be confiscated by the sheriff," Gordon said.

Another marker of marijuana's burgeoning economic status is the "Join 
the GreenRush" job fair set for April 30 at the Regency Ballroom in 
San Francisco. More than 30 cannabis companies will participate, 
offering employment in traditional pot jobs like cultivation and 
trimming, as well as regular business positions in marketing, graphic 
design, customer service and social media management, said Jude 
Widman, the job fair director.

GreenRush, which operates a technology and marketing platform for 
cannabis delivery services, is sponsoring the job fair in celebration 
of its first anniversary, Widman said.

Among the participating companies will be Bud and Breakfast, a 
Colorado-based booking site that connects travelers with 
cannabis-friendly accommodations. The company currently lists 160 
properties in more than a dozen countries on three continents.

Where legal, properties may offer "cannabis provided" packages, such 
as "two joints on a pillow," said Sean Roby, Bud and Breakfast CEO.
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MAP posted-by: Jay Bergstrom