The Drum Awards Festival - Official Deadline

-d -h -min -sec

The next California Gold Rush flexes its muscles: Will 2016 be the golden year for pot?


By Noel Young, Correspondent

August 31, 2014 | 5 min read

CannaCon, the huge marijuana-business expo held outside Seattle last week, produced this opinion from publisher Greg James : “The pot industry in America is growing like a weed.”

A lawyer shows off his legal pot purchase

And nearby California could well be where a new Gold Rush touches down.

James’s Seattle-based Marijuana Venture newsletter has gone from eight to 84 glossy pages since it launched in March. It is already profitable. “It’s amazing how fast this thing is moving, “James told the San Jose Mercury News.

The legal pot business in the United States is expected to grow this year to $2.6bn from $1.5bn in 2013, according to the ArcView Group, a San Francisco-based marijuana research and investment firm.

In five years, that number could swell to more than $10bn. And if a legalisation measure gets on the 2016 ballot in California - and is successful - the Golden State could soon be entering a Golden Era of commercialised cannabis, said the Mercury News.

The state in 1996 became America’s first to legalise pot for medicinal reasons, but California has yet to approve it for the overall adult population - so-called “Adult use.”

Despite that, it has the largest pot market in the nation.A report last year by ArcView pointed out that California remains the largest state market at $980 million, even without Adult Use regulations," said the report.Once Adult Use is adopted -- which is likely by 2017 -- the total California market is projected to increase dramatically."

What the Mercury News described as “a veritable smorgasbord of professionals and young startups has popped up to feed off and support the pot culture.”

“Lawyers, accountants and real-estate brokers are going after pot clients like hogs to truffles.’

There are security outfits protecting Mendocino County farms and software developers churning out cannabis-news apps and GPS-enabled tools like Weedly to find the nearest pot club. And there are even pot-friendly resorts where the Hollywood set can go to get high in peace, provided they have a prescription.

The Mercury News quotes Cheryl Shuman, the self-styled "Martha Stewart of Marijuana" who has delivered her pro-pot mantra to "Good Morning America" and anyone else who'll listen.

"I've worked with Cameron Diaz and Justin Timberlake, who can't go to traditional dispensaries, so we have a resort outside Grass Valley as a place for them to get away," says Shuman.

"We also have mansion parties in L.A. with chefs from five-star restaurants; it's just like wine-tasting dinners, but you pair different strains of cannabis with the food."

Still, the pot business is a long way from maturity, despite the already impressive amount of cash it's generating, says the paper.

"It's still a sort of fragmented cottage industry, so the laws still have to change and allow for entrepreneurs to push this business forward," says former investment banker Derek Peterson co-founded Blum Oakland, a medical cannabis dispensary, in 2012 and has seen 35 percent year-over-year growth.

David Hodges, who runs the All American Cannabis Club in San Jose, estimates San Jose alone hosts a $60m-a-year medical-marijuana business and that the black market is three times that, for a combined value of about $240m in his city alone.

Peterson estimates the overall legal Bay Area pot market is roughly equal in size to Colorado's, which analysts predict will be about $253m this year.

Nate Bradley, an ex-cop and executive director of the California Cannabis Industry Association, says an estimated 100,000 Californians already are employed in the industry,and that would soar with legalization.

"Once the medical-marijuana industry is legalized statewide, and you legitimize the entire production and distribution of medical cannabis," says Bradley, "the business will explode and the state would collect $400m a year or more in sales taxes."

Eaze is a San Francisco startup that fancies itself, says the Mercury News as "the Uber of medical cannabis delivery," - tapping into into a network of "caregivers" who pick up pot for you at the dispensary and deliver it to your home, sometimes within 10 minutes.

Eddie Bernard runs a pot-focused marketing agency in Southern California that worked with High Times magazine on its first Cannabis Cup competition in America, with awards going to the best pot varieties. He also does "product placement" for the marijuana industry.

Despite all this , says the Mercury News the industry faces years of political and regulatory challenges. At the top of the list are federal laws declaring the possession, sale and cultivation of pot illegal.

This leaves leaving states and the federal government in an awkward standoff. Still, many aspiring business owners are convinced that a pot-based gold rush is upon us.

Former Intuit engineer Ben Curren, believes his new San Jose-based tech startup, Green Bits, is at the right place at the right time, offering point-of-sale and inventory management software for the legal pot industry.

"2016 will be the deciding year," Curren told the Mercury News. "But it's amazing how much stuff is happening in this space right now. If the momentum continues, this is going to be really big."


Industry insights

View all
Add your own content +