Medical Marijuana Business Attracts Hedge Funds, Venture Capitalists

Marijuana has been a cash crop for many years in this country. The only problem is that most of that crop had been grown illegally. Now, that medical marijuana is legal in 15 states and the District of Columbia, legalized marijuana has quickly become so popular it is attracting attention from hedge fund managers and venture capitalists, not to mention a whole new batch of entrepreneurs.

Doctors still can’t prescribe marijuana because it is categorized as a schedule one drug like LSD. But they can recommend it and that’s all anyone needs to get a medical marijuana license that allows them to buy marijuana legally in those 15 states, with three more states about join them.

Each license sells for around $130 and some clinics selling the licenses have brought in more than a million dollars in just their first year. The once illegal joint is selling like hot cakes throughout middle America to consumers who no longer have to worry about getting arrested for possession, at least by local or state authorities.

The federal government still outlaws marijuana possession but it’s unlikely someone with a medical marijuana license will be busted by an FBI or DEA agent if caught smoking in his or her own home. In fact, just last year U.S. enforcers promised to leave medical marijuana operations alone if they complied with state law.

That prompted a significant increase in interest among entrepreneurs. Today, there are an estimated 2,400 medical marijuana dispensaries from California to Maine. In Colorado, they outnumber Starbucks two to one.

 

Making a profit, however, can still be problematic. In every state except Colorado, medical marijuana dispensaries must be structured as a not-for-profit, which is not a problem for some. Steve DeAngelo, founder of Harborside Health Center in Oakland, California, told Smart Money magazine that he likes that model because it preserves the business for local owners and keeps big-money players out.

He adds that at Harborside, he uses profits to support in-house charities that offer free pot to people who can’t afford to buy it along with free addiction counseling. But he’s in the minority.

Others see a lot of money in medical marijuana. Even DeAngelo’s not for profit clinic brings in $50,000 a day so he also founded the for-profit CannBe, a management-consulting firm for medical marijuana start-ups.

Plus, there are a growing number of hedge fund managers and venture capitalists who are taking a close look at what is an estimated $36 billion market. They’re also predicting that many states who need cash will continue to relax rules and legalize marijuana for medical use.

According to Smart Money, two hedge funds announced at a recent National Organization for the Reform of Marijuana Laws seminar that they would consider buying any medical marijuana dispensaries available for sale.

A recent Gallup poll found that 44% of Americans are in favor of legalizing marijuana, which is almost twice as many as 15 years ago. It’s still not enough however to change the laws surrounding recreational use. In November, California voted against ending cannabis prohibition all together.

Meanwhile, medicinal use of pot continues to be the acceptable method of allowing marijuana into the mainstream, even as critics clamor that it’s just a legal loophole to get high.

That may be, but the debate over lost tax revenue and expensive jailing for offenders continues to grow louder and that just might be enough of a tipping point to justify a closer look into the financial viability of legal sales.

5 Responses

  1. Legalize and tax it!

  2. legalize it goverment sales would skyrocket

  3. Australia seems to be years behind you guys

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