Startup Capital Flows as Legal Marijuana Businesses Prepare to Do Business in California

California is poised to soon experience a Green Rush. Like its history of industry formed around the Gold Rush, California entrepreneurs are seeking ways to capitalize on the expansive market created by the legalization of recreational marijuana use. Stat News reports that investors are “pouring tens of millions of dollars” into the budding cannabis industry.

Marijuana Technologies Abound

It is not entirely surprising that much of this startup capital comes from the technology industry. Experienced in the art of setting attainable goals to realize a profitable return on investment, venture capital firms have begun to fund a wide variety of marijuana-related technologies. From cannabis-infused skin patches to impaired driving indicators, to the “PotBot” (a “budtender” app which helps users find the perfect strain for their tastes and needs), the research and development is expansive.

The sheer size of California’s economy leaved open the possibility for countless business opportunities. Just last year, Reuters reported that California had surpassed France to become the sixth-largest economy on Earth. California news outlets such as the Mercury News temper this finding with claims that the costs of living and doing business in California actually place doubt upon that figure, but the fact remains: California has a massive economy, and it’s about to get a lot bigger. Preliminary estimates place the California recreational cannabis industry at between $5 and $6.5 billion every year.

Sustaining Business Growth

Like the Gold Rush before it, it will be easy for the Green Rush economy to quickly dry up once the initial growth of recreational marijuana tapers off. Cannabis entrepreneurs who plan to sustain their business growth must have a plan to do so effectively. Attorneys, accountants, tax professionals, and business advisors can help owners achieve their goals by addressing a wide variety of needs.  

• What is your initial go-to-market strategy? How will that change in the year, two years, five years, and ten years after recreational business licenses are issued?
• Does your business plan include investments in research and development? If not, how do you plan to expand business growth in the coming years?
• What is your target market? How do you plan to corner that market? What can you offer that other cannabis businesses do not?
• Are you prepared for rapidly-changing legal regulations? The regulatory environment for cannabis businesses in California is highly volatile. Business owners must be prepared to adapt to changes quickly and seek legal advice as necessary.
• Will you be able to hold reserves of capital and inventory? If sudden regulatory changes temporarily suspended your business operations, would you have a backup plan to keep your business afloat?
• How do you plan to manage banking and financial services? Federal regulations make it highly difficult for cannabis businesses to access traditional banking services. Carrying cash on hand can be a dangerous and difficult solution.

With successful business planning and adequate startup funding, new cannabis companies can capitalize on the business opportunities presented by California’s imminent sales of recreational marijuana. A cannabis business attorney can help cannabis entrepreneurs access capital, form strategic plans, and build a profitable business from the ground up.

The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Big-name tech investors pour millions into marijuana – both medicinal and not, August 28, 2017 by Charles Piller, Stat News

More Blog Entries:

Preparing the California Cannabis Industry for Recreational Use Regulations,  July 9, 2017, by Cannabis Law Group