The cannabis industry has expanded in size and scope as more and more states legalize marijuana for medicinal and recreational use. In 2016 alone, the industry brought in $7 billion in revenue. This represented a staggering 30 percent increase over the previous year. That number is projected to increase to over 20 billion by 2020, according to ArcView Market Research.
So, is 2018 the year entrepreneurs should join the cannabis industry? Here’s a quick outline of the current market, along with helpful tips and ideas from industry experts to help you get started:
The Current State of the Industry
The marijuana industry seems to be unstoppably ascending. Medical cannabis is now legal in 29 states, while recreational cannabis is legal in nine. A Gallup poll conducted in October indicated that 65% of Americans support marijuana legalization for both medicinal and recreational use, which opens doors for a plethora of new business opportunities for entrepreneurs.
However, there are still some question marks around cannabis enforcement and regulation. For instance, it remains an illegal schedule I substance according to the Federal government. And currently, the Department of Justice’s Cole Memorandum is the ultimate enforcement document, which states that the federal government will adhere to state laws except in cases which involve selling cannabis to children or dealing with crime.
Most regulators within the industry believe that this enforcement will continue to be the standard regulation at the federal level. Translated, this means the cannabis industry is still mostly uncontrolled and will continue to be the fastest growing markets in the nation for the foreseeable future. There will be more billions up for grabs for entrepreneurs in the coming years. In fact, we can expect to see upwards of 40 states with some form of medicinal law in place within the next 12 – 18 months.
Gaps in the Cannabis Market
According to industry experts, there are specific sectors of the industry that are lacking and ripe for entrepreneurs to make their mark. At the moment, there is basically just retail and wholesale, without much in between.
The first under-fulfilled sector is distribution. One of the biggest business opportunities in legalized cannabis is the development and utilization of an effective distribution model – a FedEx or UPS of the legal marijuana industry.
Another area that’s underdeveloped in the industry is education. Whether it’s educating consumers on marijuana or training employees on the regulations and laws in the industry, this is a big business opportunity that needs to be filled. Then there are the safety education messages similar to what we see for tobacco and alcohol. The development of non-judgemental safety knowledge implementation is paramount to running a safe, legal business. This area is wide open. Opportunities for aspiring startups to get in the game are numerous in this sub-vertical. The cannabis industry is still young, meaning there’s plenty of time for entrepreneurs to come up with new ideas encompassing around education.
As the regulated industry grows, we anticipate a great deal of consolidation. This should be exciting for startups in solution sectors such as biotech, software and hardware. Many small companies make large amounts of capital when their “Mom and Pop” businesses are acquired by larger companies in the industry or mainstream Fortune 500 companies. A few niche sectors we anticipate jumping into the consolidation phase of cannabis quickly include companies in the climate control and lighting systems. If you have a background in tech, the green space or engineering, it makes sense to take a look at your skill set and see if it lines up with this sector of the business.
Cannabis Investors are Gaining Confidence
As the industry continues to grow, the number of interested investors is growing exponentially. In fact, last year, over $1.1 billion was invested in the marijuana industry. Data from January to April 2017 shows a significant shift from debt raises to equity raises within the sector, demonstrating that investors are now confident that the investment in legalized cannabis is a strong one. Investor confidence is one of the greatest market indicators of short-term and long-term growth, and as such, the market appears perfectly poised for quick and mighty growth. According to the Marijuana Business Factbook of 2017, over 95% of marijuana businesses are expecting bigger profits. For legalized cannabis, there will never be a better time than now.
Don’t be left on the outside looking on…