I can imagine some of the issues: - Family would frown on it - "Unfundable" - Difficult regulation - Not a "sure" thing
So HN, why wouldn't you do a Marijuana-focused startup?
And I guess illegal industries have high barriers of entry as participants tend to be a bit paranoid.
However, whomever is poised to move the second the industry goes 50 state legal is going to make a huge pile of money
Do they? There's nothing stopping them from doing this right now, which they prove to us by occasionally shutting down some dispensaries. This is just a scare tactic to remind us that they have the power to shutdown dispensaries. Logically (I believe those in real power in government are logical), the government should treat state marijuana dispensaries as controlled experiments. Therefore, their continuing operation lies in the federal government's best interest.
What the government does want is for the state marijuana dispensaries to follow state regulations. The federal government knows they can influence regulations on marijuana dispensaries far more than they can influence the existence of them. Effectively, the government is saying to the state legislatures "you can have marijuana dispensaries, but they better be tightly regulated."
So it's in the best interest of both state and federal governments that the dispensaries follow the regulations set forth by the state governments. A company helping dispensaries follow those regulations will therefore also be in the best interest of everyone.
If your company has dispensary clients in multiple states with separate regulations, and you maintain software for each state's regulations, then you will be in an excellent position when the federal government makes its first official pro-marijuana statement.
Well, except finite federal resources and having other law enforcement priorities besides marijuana dispensaries that are legal under state law.
http://www.wired.com/threatlevel/2013/01/coder-charged-for-g...
Selling weed legally is a logistical nightmare. Not worth it, in my opinion.
Perhaps a risk is black market weed selling for less enough than legal weed that a legal profit can't be made.
If Washington and Colorado both make efforts to punish dealers who don't comply with state law, then that might push the risk-reward balance further to the legal side of things.
Any cannabis related service would have to risk-assess that kind of involvement.
And any attempt to create a "nice" market - avoiding that kind of exploitation by having small growers providing small amounts to locals, avoiding the associated criminality and restricting service to those over the age of 21 would be destroyed by The War On Drugs.
"We" might think it's a good idea, but plenty of people would call it Evil and get support for that viewpoint.
Not to mention that Cannabis is legal as a medical treatment in many states.
Well that's the first problem I thought of. The federal government maintains that it's banned at that level, and that's still an ambiguous conflict that no one's really confronted directly yet. Some local / municipal governments have also banned it inside these states, often only a short time after the state legalization.
The reason I wouldn't do a cannibis-focussed startup is because it seems impossible to predict how you might negotiate this legal terrain. Can you count on your town not to make it illegal again? Can you count on how the state vs. federal disagreement will be resolved? Can you deal with such inconsistency between towns if you have a broad client-base?
No such commitment has been made (not that such a commitment would be enforceable in the first place, or a useful guide to future administration's attitudes, so long as the federal statutes are on the books), what has been circulated is a non-binding memo providing guidance to US Attorney's on DoJ priorities regarding marijuana cases in those states. Note that this administration's Department of Justice previously circulated a similar memo with regard to states that had legalized marijuana for medical purposes, and US Attorneys in those states subsequently undertook enforcement actions (both criminal charges and forfeiture actions) against state-legal dispensaries, and their landlords, in those states -- note that this includes the current US Attorney in Colorado, who prosecuted state-legal dispensaries when that state had legalized marijuana only for medical purposes.
And note that the guidance expressly includes it remaining a priority to prosecute marijuana offenses to the extent that prosecution is useful to prevent drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use, or where officials feel that they are being marketed (not merely sold) to minors, among other cases. This, even within the wording of the guidance, provides a pretty broad opening for prosecuting state-legal activities.
In the US it is, outside of the US, it may not be.
> Washington and Colorado legalized it recently, and other states will likely follow in the future.
A number of other states already have legalized it for certain uses, but no state level action will change that it is illegal under federal law, and the feds have, including under the current administration, carried out enforcement actions against operations that were legal under state laws. There've been a few statements to the effect that this is not a priority, but its still part of the legal landscape.
National legalization, even if for medical purposes only, would open up a clear space for startups, but short of that any startup is creating a massive paper trail of evidence for conspiracy to violate federal narcotics laws (which are expressly included within the scope of the RICO statute as predicate offenses), and both the companies and individuals involved are risking criminal and civil prosecution under both narcotics and RICO laws as well as potential civil forfeiture actions against the assets that are instrumentalities of the legal violations.
All that on top of the usual business risks that come with operating a startup.
Related examples include drones[1], bitcoin, crowdfunding investment[2], self-driving cars[3] and 3D printing[4].
Both Airbnb and Uber have become so big that they can try to work the system and change the regulations in their favor, but smaller companies might have to be more wily. For example, commercial drone activity is basically illegal in the U.S., but I know of one startup that currently develops and flies their technology on manned aircraft with the idea of putting it on drones when they can, and another that resides in the U.S. but is currently focused on customers outside the U.S.
[1] http://www.wired.com/dangerroom/2013/02/drone-regulation/ [2] http://www.crowdvalley.com/2013/05/06/the-secs-recent-no-act... [3] http://www.forbes.com/sites/jimgorzelany/2013/06/03/feds-ask... [4] http://newsfeed.time.com/2013/10/10/how-3d-printed-guns-are-...
1. My startup focused on fostering relationships with producers and distributors, both of whom are hesitant to openly discuss or display their business, location etc in a way that can be easily accessed publicly.
2. Legal fees. I tried to set up everything as legitimately as possible through a lawyer as well as keep him on retainer in case I ended up in any trouble with the law. Massive overhead.
3. Saturation and fear. At the time of my efforts there were two major shifts in the West Coast market. The first was a flood of growers both indoor and out that greatly reduced the value of anything that was not of the absolute highest quality. The second was the crackdown on many major players in the game; people saw that old names in the MJ industry were getting raided and prosecuted and started to either withdraw or severely limit their business relationships.
Basically until everything is legalized at both the state and federal levels it will continue to be very difficult and expensive to try to revolutionize this industry.
Prime Minister Harper announced that legalization is coming in the next 10 years, tops. We have 6 months before the new regulations are in place, which open the floodgates for corporate cannabis providers. We're currently in a cannabis gold rush right now, so I figured this would be a great time to start a Cooperative that courts illegal growers into becoming legal ones, if just to prevent clogging the courts with people trying to produce medicine for sick people.
We've gotten a lot of support from Health Canada, too, as it seems that there's a massive contingent within that's unhappy with MMAR (the previous regulations) going away. We haven't even sought outside (public or semi-private) funding yet, because we haven't had to. :)
we have a website with a fantastic (imo) domain name, but we're keeping it quiet until we're closer to launch. hoping to pimp it here when it's ready.
While we've met many people looking for a legal loophole to commit crimes, we're only really interested in those people willing to be in harmony with the government's new MMPR program, and are focused on growing medicine for sick people.
We understand there's a massive Blue Ocean of legal consumer cannabis product opportunities that will be opening up here in ten years, but weeding out (sorry) the criminal element is of paramount importance to us before even thinking of expanding our scope to cover those markets.
Marijuana production / distribution / etc is illegal under federal law. The DEA (a federal agency) could come after you -- and would, if you get big enough -- even if it's legal in your own state.
About 15 years ago, I did some work with a guy who ran online pharma websites. He made a mint in the business, but it wasn't without it's bumps.
This was before the online pharma boom, and before the Feds really got involved. He ran a website where users filled out questionnaires, which were then reviewed by a doctor (no really, an actual doctor), who then wrote a prescription, which was then filled by a pharmacy.
One day, the men in the black suits came knocking. Right now you're probably thinking that everything above was clearly illegal and this guy is screwed, but that turned out not to be the case. He and his partner sat in jail while the Feds figured out exactly what they were doing wrong. They had good, detailed records of every "patient", and because selling medication over the internet was so new, there weren't a lot of laws that covered exactly what the requirements were.
In the end, the two owners spent about 90 days in jail, and had millions of dollars seized by the government. The Feds dictated that they could continue to operate their business under a handful of conditions:
1) They could no longer operate their own pharmacy.
2) They could no longer directly employ the doctor reviewing prescriptions, and the doctor must be paid regardless of whether a prescription is written.
3) They could not sell any drugs of a certain classification (controlled?).
There was some specific class of controlled drugs they couldn't sell, but I can't remember what it was.
This guy, and his family, ended up in the press with their name slandered all over the place. They ended up moving out of state to escape the aftermath.
I'm sure plenty of people are lined up ready to judge the guy, but I knew him. He was the kind of guy who gets shit done, and he ran an above-board business considering what they were doing. That's the only reason he's not still rotting in a cell.
So, the moral of the story is, these kinds of businesses can be very profitable, but they're not without risks. This is an entirely different kind of risk than what an investor is willing to take on. We're not talking capital risk, we're talking criminal prosecution. Those are the risks when you operate in a legal gray area. Don't get me wrong, someone has got to do it, otherwise there will be no progress, but you should go in with eyes open.
You must not live in California. In LA, it seems like there's a dispensary on every other block. And lots of people defended their right to be there when the city tried to limit their number.
A lot of people have no experience with marijuana, or experience limited to partying in high school and college. There's much more to it than that which society at large has not yet realized. Modern strains with high CBD combined with carefully controlling your dosage and using smoke-free delivery systems such as vaporizers and tinctures make taking it a much cleaner, less offensive affair. Not all marijuana has to blow your mind; it's quite practical to control your dosage and type to just give anxious people clarity of mind, help uneasy people sleep better, and a hundred other applications.
I know lots of people who wouldn't take drugs or smoke a joint, but when I show them a neatly packaged high cbd lozenge which will help them get right to sleep and have no hangover effects are most intrigued.
I bought a Pax vaporizer and it's amazing, and made by a San Francisco startup. It's a tremendous product.
I don't smoke weed. Never have. But I don't see anything immoral with a marijuana based company. In fact, providing a legitimate means for people to buy weed would take a lot of money away from violent drug criminals. So you'd likely be doing society a service.
If I was to work on a startup in this field I would focus on the consumer end of the business and only in a supplemental way, like a review site. What you don't want is a business with a warehouse full of pot or a lot of bills owed from producers/retailers who are used to being threatened and have no incentive to pay you.
How does one either surf (or conquer) the matter of "taste" in weed? What happens when -- by analogy -- someone makes the weed version of "Sideways" and you're the guy holding the weed version of merlot?
if you can produce good shit, there will be a market for it
but the real startup opportunities (for now) are not in mass production
For example my fantasy business plan for Washington, the easiest way to get started, would have been to establish a "Dutch coffeeshop" brand, with Cannabis Cup winners and other famous strains. It's easy to go out and buy the genetics which already have an established reputation.