Cannabis Investing 101: So You Want To Take Part In The Green Rush
Ever since Colorado legalized weed in 2012 people are seeing green—asking, “Where they should invest in the cannabis industry?” And, they’re right to ask. According to Arcview Market Research legal cannabis sales in 2015 reached close to $7 billion, and are predicting that the overall industry could be worth a whopping $22 billion by 2020, and is showing no signs of slowing down. This past November’s recent election favorably indicates the public’s growing acceptance of cannabis with voters in four states (California, Maine, Massachusetts, and Nevada) approving measures to fully legalize cannabis for adult use; while Arkansas, Florida, Montana and North Dakota adopted medical marijuana programs. Half of America live with some form of cannabis program within their state, whether it’s adult use or medical—and more than 60 million Americans can enjoy recreational weed.
John Kagia, Executive Vice President for Industry Analytics with New Frontier Data, recently helped to author the 2016 Cannabis Investor Study, providing valuable and objective research and analysis of the cannabis industry. When asked about the outcome of the recent ballot initiatives Kagia pointed out the bi-partisan nature of cannabis and how “public support has been growing robustly” in more than half of the United States. “We’re seeing affirmative validation that legalization at large has gained momentum,” says Kagia. “This really is a significant catalyst for growth in the industry.”
What’s beautiful about this entirely new industry is the opportunity to get in on the ground floor. “There are few moments in any generation where you’re literally watching the industry being birthed,” says Kagia. Couple that with cannabis finally ditching it’s social stigma and the time is absolutely on point to dive in and invest.
Where to put your money? Here are several ideas to consider when getting started cannabis investing:
Ancillary Businesses
The 2016 Cannabis Investor Study from Arcview Investor Network and New Frontier Data found investors most interested in ancillary commercial products. Anything ranging from vaporizers to LED lights is considered ancillary because they stay far away from touching the plant. These types of companies are great entry points for new cannabis investors because this class of company face “less scrutiny” and offer less “risk exposure” than those that touch the plant, according to Kagia. Given that cannabis is still not regulated federally and instead is guided by individual state law, it’s easier for ancillary services to expand their business state by state since they don’t face cross border problems—making this type of investment attractive for potential investors.
International Markets
Look abroad to Canada and beyond for investment opportunities. New Frontier’s investment study shows 64% of investors favoring opportunities in Canada, compared with the 57 percent of investors who expressed interest in California’s growing market. The same study also showed Israel as good potential, albeit only 34 percent of investors said they were interested, followed by Spain (20%) and Australia (15 percent). Canadian stocks are a safe bet because unlike the US, their Marihuana for Medical Purposes Regulations program is federally regulated and currently has its eyes on 30+ licensed medical cannabis producers. “So far the Canadian market is well regulated and a national legal market has raised robust interest from a number of sophisticated investors—which will only increase once the government releases their regulations in April 2017,” says Kagia. As for other international markets, Kagia points to Israel with their robust and long withstanding medical program; Australia which just got their medical program off the ground making it the first Asian Pacific country with regulate cannabis; and finally Spain which has piqued the interest of investors who are eyeing it closely for when the market eventually will activate.
Investment Groups
If you have the money to invest, but are unfamiliar with navigating the complexities of the cannabis market—a great place to start are by joining an investment group. Becoming an angel investor allows you to join forces with others who have experience within the space and have already researched, sought out and have teamed up with companies that would benefit from your financial support. “Like Arcview, members get the first stages of due diligence for investment brought to them along with investment targets,” says Kagia. Having an investment group’s expertise at your fingertips provide new investors with a sense of security in their investment, which is a huge benefit especially when the pace of change is so fast in this evolving industry.