It’s been a week since recreational marijuana became legal in Colorado. After years of lobbying, an historic vote in 2012, and a year of haggling over the details, weed enthusiasts lined up to ring in the new year at the new retail stores. Iraq War veteran Sean Azziriti bought the first bag.
A whole new (legal) industry, with the expectation of almost unlimited growth in the coming years as more states legalize…sounds like the perfect scenario for startups.
That’s what High Times Magazine thinks, too.
The 40-year-old magazine is a staple in toker culture. Besides the print magazine and website, the company also hosts the Cannabis Cup in cities across the United States and Amsterdam. Even during the hottest years of the war on drugs, High Times published issues and continued to host events.
And now they’re supporting startups.
The High Times Growth Fund will raise money to “invest in compelling businesses across all areas of the rapidly growing domestic cannabis market.” The HTG Fund is looking to raise $100 million and wants invest $2-5 million in each company.
“What we are looking to do is provide capital and credit to companies that are established and have grown and reached their potential as much as they can without access to traditional capital markets,” fund managing director Michael Safir told the Denver Post.
He went on to say that fund will consider growers, but the main focus will be on ancillary companies.
“If you are running a cannabis business, you aren’t getting (a Small Business Administration) loan, you don’t have bank accounts,” he said. “It’s hard to grow when you don’t have the tools.”
While the HGT Fund will operate like a venture fund, there are other organizations handling the angel side of things. The Arcview Group operates an angel network for accredited investors to invest in cannabis startups. They estimate the industry growing by 64% in 2014, and that’s without mass legalization at the state level.
All the buzz around marijuana this week tends to forget one thing, though. It’s still against federal law to grow, possess, or smoke it. While it’s assumed federal authorities will turn a blind eye to users and companies within states that have legalized, no one really knows for sure yet. That kind of instability may make it difficult for some investors to take the risk right now.
Of course, more and more Americans are in favor of legalization, making it seem inevitable. Perhaps this is the perfect time to get in the business.