This story has been updated.
Conferences for entrepreneurs eager to break into the cannabis industry have popped up with astonishing frequency in Philadelphia since April, when Gov. Wolf signed the bill legalizing medical marijuana in the state. Legislation proposing full legalization in the state is under consideration in the legislature.
On Friday, the editors of the Denver-based Marijuana Business Daily are setting up shop at the Marriott hotel in Center City for what it calls its Crash Course. Eight hours of workshops will offer guidance to aspiring players who want to know how the industry works.
“It’ll be a brutally honest look at what you’re in for,” said MBD founding editor Chris Walsh. “You may not like what you see.”
Walsh, who was a business reporter at the now-defunct Rocky Mountain News, has led MBD since 2011. We spoke with him about cannabusiness prospects for Pennsylvanians.
Inquirer: How likely is it that small-time entrepreneurs will be able to claim a piece of the pie?
It looks like you need a huge bankroll to get in the game. To be considered for a growing or processing license, you’ll need at least $2 million in capital,$500,000 on deposit, an and a non-refundable $5,000 application fee. Winners will need to pony up an annual $200,000 for the permit.
The barriers for a dispensary aren’t as high, but applicants still need $150,000 on deposit plus start up costs and $30,000 every year for a permit.
Walsh: In retail and cultivation, if you want one of the licenses you’re going to have to line up investors. The average Joe is going to have a hard time starting a marijuana-related business that touches the plant. People also need to be ready for delays.
Delays caused by what?
Even though half the country has medical marijuana, states are still lookin for a way through this. You may legalize medical marijuana, and on the first day that sales begin there might be only a few dispensaries and grow operations that have actually opened. There may be lawsuits after licenses are awarded. Massachusetts has seen a ton of delays and now has only a half-dozen dispensaries have opened at this point. It serves as a warning. If you want to get into the business you need enough working capital to last a long time.
Are there opportunities for Pennsylvanians who aren’t millionaires?
There’ll be jobs. Remember the cliche about the California Gold Rush — it was the guys who sold the shovels and pickaxes who made out well. You’ll hear that a lot. And prospects are good for lawyers, marketers, specialized real estate agents. You might have a company in Pennsylvania facilitating the sales of glass shelves. There’ll be a need for greenhouses and soil in any new market. There are opportunities for a lot of startups.
Since marijuana of any kind is illegal in the eyes of the federal government, where will Pennsylvania entrepreneurs stash their money?
Banking is up there in the triumvirate of big issues, along with taxes and the status of it being illegal in general. It’s really really hard to get a bank account. We’ve done surveys of Marijuana Business Daily readers, and about 60 percent don’t have a bank account — including the ones that don’t touch the plant. You can run into issues if you have marijuana in your company’s name. A lot of banks don’t see past that.
You have to pay employees and vendors in cash. It means there’s tons of money laying around and that creates some unique challenges to this industry.
Those are some significant hurdles.
I tell people who come to the Crash Course, if you decide by lunch you don’t want to get into the business, attending it was worth your money.
What effect is marijuana expected to have on local real estate markets?
In Colorado, in Denver, all the warehouse districts are full, many of them with green house growing operations. People are becoming more savvy. When a jurisdiction is about to legalize, they’re taking close looks at where to place potential retail dispensaries. In some cities marijuana companies are going where other failing or flailing industries used to set up shop.
Our estimates are between $100 million and $200 million a few years after the first dispensaries open. We take a very conservative approach to everything we present. Some estimate it will be a $30 billion industry (nationwide), some think it’ll be bigger.
It seems to be an article of faith among ganjapreneurs that the feds will decriminalize cannabis soon. How likely is that?
Hillary Clinton has said she’d like to see it rescheduled. Trump is all over the board on everything, so who knows. Congress is slowly coming to see the public support and potential size of the market. The wave has started and it will crash over D.C. They’ll have to change some of the laws, either a federal legalization or gradual rescheduling or some law that lets states clearly decide how they’ll handle this. My guess is sometime in the next five years.
What are the biggest concerns facing the industry?
The fear that it will be rescheduled and Big Pharma, Big Tobacco or Big Alcohol will sweep in and dominate the market.
Pennsylvania has 175 licenses up for grabs. One of the proposed regulations allows for transferring, selling those licenses. Is that common?
You can sell and transfer licenses in some other states. There’s already mergers and acquisitions activity going on in Nevada. They legalized a long time ago, but just started up the industry. Some other states are really restrictive.
There are eight states voting on ballot initiatives Nov. 4 about medical or recreational marijuana. What’s the likelihood they’ll pass?
California has a strong chance. Nevada and Maine also have strong support. Massachusetts is a toss up. There’s been popular support, a coalition of leading politicians are trying to sway it the other way, though. Arizona is a toss up - it does not have strong support.
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