Nine U.S. states voted on marijuana-related ballot issues to legalize medical or recreational marijuana in the 2016 election cycle. Eight of the nine initiatives passed with recreational cannabis receiving approval in California, Maine, Massachusetts and Nevada.
This will certainly mean big business for those states and for the cannabis industry across the board. Sales of legal marijuana totaled $7.1 billion in 2016, according to ArcView Research reports, but could reach as high as $20 billion by 2020 with the additional states that approved ballot initiatives and existing states that have approved medical marijuana such as Maryland, Pennsylvania and Hawaii.
The following are the ventures I believe could be the most profitable for companies and investors:
Commercial Real Estate
Real estate is both one of the greatest challenges and biggest opportunities for cannabis businesses and investors. While identifying space can be a challenge, financing improvements such as lighting, ventilation and irrigation systems is often a more immediate struggle for business owners. At the same time, this has become a highly lucrative investment opportunity for investors and, in many cases, a win-win for both parties.
I’ve seen examples of investors purchasing properties identified by marijuana business owners and then leasing the spaces back to the businesses. In certain scenarios, investors may provide financing for tenant improvements and equipment purchases for the marijuana business. In some cases, these mortgages become assumable, which allows the business owner to purchase the real estate from the original investor and grow the long-term value of the asset.
Social Networks
Companies like WeedMaps, MassRoots and Leafly have all gained popularity by connecting businesses to customers and/or creating a more inviting experience for users. Social platforms like these are seeing valuations not only in the millions, but in some cases, the hundreds of millions of dollars. Both users and business owners are asking for more options to connect with each other and the still-growing industry is ripe for online innovation.
Hospitality
Customized experiences for marijuana users are gaining in popularity. From cannabis-focused hotels with consumption lounges to private party bus operations designed to take travelers from the airport to ski slopes and resort towns, destination-based offerings seem to be growing.
Voters in Denver recently passed Initiative 300, allowing social-use clubs where people can consume marijuana they bring into the establishment. No purchasing will be allowed under the law, making it a strictly BYOC — bring your own cannabis — experience.
Food and Health Products
Hemp and cannabis have been incorporated into food products for quite some time, but the introduction of CBD into food and health and beauty products is a relatively new offering that has big growth potential.
As more states legalize some form of marijuana use, expect the explosive growth to continue for the fastest-growing industry in America. There is nearly unlimited opportunity in this emerging business sector for savvy entrepreneurs and private investors looking for financing and investment opportunities.
Scott Jordan is the director of business development for Dynamic Alternative Finance. He was called a “marijuana money man” by The Cannabist and has arranged more than $25 million in loans and equipment leases for cannabis business owners in the past two years. He has been interviewed by local TV and radio stations, authored numerous articles and has been a featured speaker at national conferences. He can be reached at s.jordan@dynaltfinance.com.
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